<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>As filed with the Securities and Exchange
Commission on July 13, 2012 </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>Registration No. 333-</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
</B>Washington, D.C. 20549</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>THE SECURITIES ACT OF 1933</B></P>

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

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LONE STAR GOLD, INC.</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&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 NOWRAP STYLE="font-weight: bold; text-align: center">Nevada</TD>
    <TD NOWRAP STYLE="width: 33%; font-weight: bold; text-align: center">1000</TD>
    <TD NOWRAP STYLE="width: 33%; font-weight: bold; text-align: center">45-2578051</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: center">(State or other Jurisdiction of</TD>
    <TD NOWRAP STYLE="text-align: center">(Primary Standard Industrial Classification</TD>
    <TD NOWRAP STYLE="text-align: center">(IRS Employer Identification No.)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: center">Incorporation)</TD>
    <TD NOWRAP STYLE="text-align: center">Code)</TD>
    <TD NOWRAP>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(505) 563-5828</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;(Address and Telephone Number of Registrant&rsquo;s
Principal</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Executive Offices and Principal Place of
Business)</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><FONT STYLE="text-underline-style: none"><B>Capitol
Corporate Services, Inc.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>202 South
Minnesota Street<BR>
Carson City, NV 89703</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(800) 899-0490</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;(Name, Address and Telephone Number
of Agent for Service)</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copies of communications to:<BR>
<B>Gregg E. Jaclin, Esq.<BR>
Anslow &amp; Jaclin, LLP<BR>
195 Route 9 South, Suite 204<BR>
Manalapan, NJ 07726<BR>
Tel. No.: (732) 409-1212<BR>
Fax No.: (732) 577-1188 </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form
are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
<FONT STYLE="font-family: Wingdings">x</FONT></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of &ldquo;large accelerated
filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b-2 of the Exchange Act.</P>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 21%">Large accelerated filer</TD>
    <TD STYLE="width: 36%; font-family: Wingdings">&uml;</TD>
    <TD STYLE="width: 22%">Accelerated filer</TD>
    <TD STYLE="width: 21%; font-family: Wingdings">&uml;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Non-accelerated filer</TD>
    <TD STYLE="font-family: Wingdings">&uml;</TD>
    <TD>Smaller reporting company</TD>
    <TD STYLE="font-family: Wingdings">x</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">(Do not check if a smaller reporting company)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 12pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

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

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

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 2pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

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

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Proposed</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Proposed</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Maximum</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Maximum</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Amount&nbsp;of</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><B>Title&nbsp;of&nbsp;Each&nbsp;Class&nbsp;of&nbsp;Securities</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Amount&nbsp;to&nbsp;be</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Offering&nbsp;Price</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Aggregate</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><B>Registration</B>&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: left; border-bottom: Black 1pt solid"><B>to&nbsp;be&nbsp;Registered</B>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Registered&nbsp;(1)</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Per&nbsp;Share&nbsp;(2)</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Offering&nbsp;Price</B>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Fee</B>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Common Stock, par value $0.001 per share, <BR> issuable pursuant to the Fairhills Investment Agreement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.15</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,500,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">515.70</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%; vertical-align: top">(1)</TD>
    <TD STYLE="text-align: justify">We are registering 30,000,000 shares of our common stock that we will put to Fairhills Capital Offshore Ltd. (&ldquo;Fairhills&rdquo;) pursuant to an investment agreement (the &ldquo;Fairhills Investment Agreement&rdquo;) between Fairhills and the registrant entered into on April 30, 2012 and amended on June 25, 2012. In the event of stock splits, stock dividends or similar transactions involving the common stock, the number of common shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;). In the event that the adjustment provisions of the Fairhills Investment Agreement require the registrant to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act, the registrant will file a new registration statement to register those additional shares.</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top">(2)</TD>
    <TD STYLE="text-align: justify">The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o) of the Securities Act on the basis of the closing bid price of the common stock of the registrant as reported on the OTCBB on July 11, 2012.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant
to said section 8(a), may determine.</B></P>

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

<!-- Field: Page; Sequence: 2 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; color: red"><B>The information in this
prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.</B></P>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 35%; font-weight: bold; text-indent: -0.25in"><B>&nbsp;&nbsp; <FONT STYLE="color: red">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PRELIMINARY PROSPECTUS</FONT> </B></TD>
    <TD STYLE="width: 65%; color: red; font-weight: bold; text-align: right">SUBJECT TO COMPLETION, DATED JULY 13, 2012</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>30,000,000 Shares of Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><BR>
<FONT STYLE="font-size: 18pt"><B>LONE STAR GOLD, INC.</B></FONT></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This prospectus relates to the resale of
up to 30,000,000 shares of common stock of Lone Star Gold, Inc. (&ldquo;we&rdquo; or the &ldquo;Company&rdquo;), par value $0.001
per share, issuable to Fairhills Capital Offshore Ltd., a Cayman Islands exempted company (&ldquo;Fairhills&rdquo;), pursuant to
an investment agreement between us and Fairhills. The investment agreement permits us to &ldquo;put&rdquo; up to $15,000,000 in
shares of our common stock to Fairhills over a period of up to thirty-six (36) months. We will not receive any proceeds from the
resale of these shares of common stock. However, we will receive proceeds from the sale of securities pursuant to our exercise
of the put right offered by Fairhills.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The selling stockholder may offer all or
part of the shares for resale from time to time through public or private transactions, at either prevailing market prices or at
privately negotiated prices. Fairhills is paying all of the registration expenses incurred in connection with the registration
of the shares except for accounting fees and expenses and we will not pay any of the selling commissions, brokerage fees and related
expenses.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Investing in our common stock involves
a high degree of risk. See &ldquo;Risk Factors&rdquo; beginning on page&nbsp;3 to read about factors you should consider before
investing in shares of our common stock.</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The Date of This Prospectus Is:&nbsp; _____________,
2012</P>

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

<!-- Field: Page; Sequence: 3 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&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: 90%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">Page</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Prospectus Summary</TD>
    <TD STYLE="text-align: right">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>The Offering</TD>
    <TD STYLE="text-align: right">2</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Risk Factors</TD>
    <TD STYLE="text-align: right">3</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Special Note Regarding Forward-Looking Statements</TD>
    <TD STYLE="text-align: right">9</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Use of Proceeds</TD>
    <TD STYLE="text-align: right">9</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Market For Common Equity and Related Stockholder Matters</TD>
    <TD STYLE="text-align: right">9</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Management&rsquo;s Discussion and Analysis of Financial Condition and Results Of Operations</TD>
    <TD STYLE="text-align: right">10</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Description of Business</TD>
    <TD STYLE="text-align: right">13</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Directors and Executive Officers</TD>
    <TD STYLE="text-align: right">21</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Executive Compensation</TD>
    <TD STYLE="text-align: right">22</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Security Ownership of Certain Beneficial Owners and Management</TD>
    <TD STYLE="text-align: right">23</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Certain Relationships and Related Transactions</TD>
    <TD STYLE="text-align: right">24</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Changes In and Disagreement With Accountants On Accounting and Financial Disclosure</TD>
    <TD STYLE="text-align: right">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Selling Stockholders</TD>
    <TD STYLE="text-align: right">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Plan of Distribution</TD>
    <TD STYLE="text-align: right">26</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Description of Securities To Be Registered</TD>
    <TD STYLE="text-align: right">27</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Legal Matters</TD>
    <TD STYLE="text-align: right">28</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Experts</TD>
    <TD STYLE="text-align: right">28</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Available Information</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Index To Consolidated Financial Statements</TD>
    <TD STYLE="text-align: right">F-1</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 4 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>This summary highlights selected information
contained elsewhere in this Prospectus. This summary does not contain all the information that you should consider before investing
in the common stock of Lone Star Gold, Inc. (referred to herein as the &ldquo;Company,&rdquo; &ldquo;we,&rdquo; &ldquo;our,&rdquo;
and &ldquo;us&rdquo;). You should carefully read the entire Prospectus, including &ldquo;Risk Factors,&rdquo; &ldquo;Management&rsquo;s
Discussion and Analysis of Financial Condition and Results of Operations&rdquo; and the accompanying financial statements and notes
before making an investment decision. </I></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Business Overview </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are currently a start-up exploration
stage company in the business of gold and mineral exploration, acquisition and development. We were incorporated in the State of
Nevada under the name Keyser Resources, Inc. on November 26, 2007.&nbsp;&nbsp;Our business was initially operated to acquire an
option to purchase a mining interest in Canada. After a change in control in November 2010, we explored a merger with another company
in order to obtain an option to purchase several oil and gas leases in Nevada. A merger agreement was signed in January 2011. The
then-current management decided not to pursue the merger, and the merger agreement was terminated by mutual agreement of the parties
as of March 18, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 29, 2011, we 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. Following the appointment of Daniel M. Ferris as our
sole director and officer, we changed our focus to engage in the acquisition, exploration and development of gold and silver mining
properties. To further reflect this change in business focus, we changed our name to &ldquo;Lone Star Gold, Inc.&rdquo; on June
14, 2011. In addition, to create a more flexible capital structure, we increased the number of authorized shares of our 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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 29, 2011, we entered into an
investment agreement with North American Gold Corp. (&ldquo;North American&rdquo;) pursuant to which North American agreed to invest
up to $15,000,000 to purchase our common stock in increments of $100,000 or an integral multiple thereof, at our option at any
time through August 31, 2013 (the &ldquo;North American Investment Agreement&rdquo;).</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 30, 2012, we entered into an investment
agreement, which was subsequently amended on June 25, 2012 (the &ldquo;Fairhills Investment Agreement&rdquo;) with Fairhills Capital
Offshore Ltd., a Cayman Islands exempted company (&ldquo;Fairhills&rdquo;). Pursuant to the terms of the Fairhills Investment Agreement,
Fairhills committed to purchase up to $15,000,000 of our common stock over a period of up to thirty-six (36) months.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Fairhills Investment
Agreement, we also entered into a registration rights agreement with Fairhills, pursuant to which we are obligated to file a registration
statement with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;) covering 30,000,000 shares of our common stock underlying
the Fairhills Investment Agreement within 21 days after the closing of the transaction. In addition, we are obligated to use all
commercially reasonable efforts to have the registration statement declared effective by the SEC within 120 days after the closing
of the transaction and maintain the effectiveness of such registration statement until termination of the Fairhills Investment
Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At an assumed purchase price of $0.11325
(equal to 75.5% of the closing price of our common stock of $0.15 on July 11, 2012), we will be able to receive up to $3,397,500
in gross proceeds, assuming the sale of the entire 30,000,000 shares being registered hereunder pursuant to the Fairhills Investment
Agreement. Accordingly, we would be required to register additional 102,450,332 shares to obtain the balance of $11,602,500 under
the Fairhills Investment Agreement. We are currently authorized to issue 150,000,000 shares of our common stock. We may be required
to increase our authorized shares in order to receive the entire purchase price. Fairhills has agreed to refrain from holding an
amount of shares which would result in Fairhills owning more than 4.99% of the then-outstanding shares of our common stock at any
one time.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are substantial risks to investors
as a result of the issuance of shares of our common stock under the Fairhills Investment Agreement. These risks include dilution
of stockholders&rsquo; percentage ownership, significant decline in our stock price and our inability to draw sufficient funds
when needed.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fairhills will periodically purchase our
common stock under the Fairhills Investment Agreement and will, in turn, sell such shares to investors in the market at the market
price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Fairhills
to raise the same amount of funds, as our stock price declines.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Where You Can Find Us </B></P>

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

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

<!-- Field: Page; Sequence: 5; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&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="font-weight: bold">Common stock offered by Selling Stockholder</TD>
    <TD STYLE="width: 50%">30,000,000 shares of common stock.</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Common stock outstanding before the offering</TD>
    <TD>89,341,068 shares of common stock as of the date hereof.</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Common stock outstanding after the offering</TD>
    <TD>119,341,068 shares of common stock.</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Use of proceeds</TD>
    <TD>We will not receive any proceeds from the sale of shares by the selling stockholder. However, we will receive proceeds from the sale of securities pursuant to the Fairhills Investment Agreement. The proceeds received under the Fairhills Investment Agreement will be used for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company.</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">OTCBB Trading Symbol</TD>
    <TD>LSTG.OB</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Risk Factors</TD>
    <TD>The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See &ldquo;Risk Factors&rdquo;.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 6; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>You should carefully consider the risks
described below together with all of the other information included in this Prospectus before making an investment decision with
regard to our securities. The statements contained in or incorporated into this Prospectus that are not historic facts are forward-looking
statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth
in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or
results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all
or part of your investment. </I></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to Our Business</B></P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are an exploration stage company, and
since inception, we have incurred significant net losses and have not realized any revenue from our operations.&nbsp;&nbsp;We have
reported a net loss of $2,504,657 from the date of inception through March 31, 2012.&nbsp;&nbsp;We expect to continue to incur
net losses and negative cash flow from operations 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 our mining operations.&nbsp;The
size of these losses will depend, in large part, on whether we find gold or other minerals in our properties and are able to extract
and sell the minerals in a profitable manner.&nbsp;&nbsp;To date, we have not had any operating revenues, nor have we found any
minerals or developed any mineral deposits.&nbsp;&nbsp;Because we do not yet have a revenue stream resulting from sales or other
operations, there can be no assurance that we will achieve material revenues in the future.&nbsp;&nbsp;&nbsp;Should we achieve
a level of revenues that make us profitable, there is no assurance that we can maintain or increase profitability levels in the
future.</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 prospectus; and (iii) our dependence on the sale of equity
securities to continue in operation. We have signed certain investment agreements with North American, for up to $15,000,000 through
sales of our common stock, and with Fairhills, for up to $15,000,000 through sales of our common stock. However, North American
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: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Ferris and one other stockholder currently
own approximately 34.69% 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: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 7; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Mr. Ferris is our sole director and
officer and the loss of Mr. Ferris could adversely affect our business.</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Since Mr. Ferris is currently our sole
director and officer, if he were to die, become disabled, or leave our company, we would be forced to retain individuals to replace
him. There is no assurance that we can find suitable persons to replace him if that becomes necessary. We have no &ldquo;Key Man&rdquo;
life insurance at this time.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We hold the Concessions through a
Mexican subsidiary, Metales, in which it owns a 70% interest. Therefore, our 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: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a U.S. company, we cannot hold the Concessions
(as defined in Description of business) directly. Instead, Mexican law requires a company formed in Mexico to own the Concessions.
We have invested in Metales in order to comply with the Mexican 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, we could fail to realize revenues from the project.</P>

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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,
our chances finding economically viable mineral reserves are remote.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have no known mineral reserves. Even
if we find gold or silver deposits, we may not be of sufficient quantity to warrant recovery. Additionally, even if we find gold
or silver deposits in sufficient quantity to warrant recovery, we 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: 0pt 0; text-align: justify">&nbsp;</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 <FONT STYLE="color: black">joint
venture between Amiko Kay and Jaramillo (the &ldquo;Joint Venture&rdquo;)</FONT>. If the Joint Venture fails to produce sufficient
revenue to offset the substantial costs incurred in exploration and development of the site, we may lose all amounts invested in
the Joint Venture.</P>

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

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

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

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

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

<!-- Field: Page; Sequence: 8; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

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

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Both La Candelaria and the Mine Tailings
Project are located in the state of Chihuahua, Mexico. Our business operations could be negatively impacted if Chihuahua or other
areas of Mexico experiences a period of social and political unrest. Various areas in Mexico are affected by persistent violence
and crime, which has been well-publicized in the US. 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: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our operations in Mexico may be adversely
affected by factors outside our control, such as changing political, local and economic conditions, any of which could materially
adversely affect our financial position or results of operations.</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The La Candelaria Concessions are mineral
concessions granted by the Mexican government. We hold the Mine Tailings Project in a joint venture with a Mexican national.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Both of these projects are subject to the
laws of Mexico. Exploration and potential development activities are potentially subject to political and economic risks, including:</P>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Cancellation or renegotiation of contracts;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Competition from companies not subject to US laws and regulations, such as the Foreign Corrupt Practices Act;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Changes in Mexican laws and regulations;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Changes in tax laws;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Royalty and tax increases or claims by Mexican governmental authorities;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Expropriation or nationalization of property;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Foreign exchange controls;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Import and export regulations;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Environmental controls;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Risks of loss due to civil strife, war, guerilla activity, insurrection and terrorism;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD STYLE="text-align: justify">Other risks arising out of foreign sovereignty over the areas in which our business is operated.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our business in Mexico is dependent
on our consultants. </I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are almost entirely dependent on the
services of consultants in Mexico to operate our business in Mexico and to advise the Company on matters vital to its continued
viability and success. For example, Adam Whyte is responsible for overseeing the day to day operation of the La Candelaria property,
while Miguel Jaramillo (&ldquo;Jaramillo&rdquo;) operates the Mine Tailings Project. We rely on such persons for advice on matters
such as permitting and environmental compliance, as well as mining operations. In addition, we rely on legal counsel in Mexico
to maintain the registration of our properties, to form our subsidiaries and to advise us on other matters involving Mexican law.
The loss of these persons or our inability to attract and train additional skilled employees may adversely affect our business,
future operations and financial condition.&nbsp;</P>

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


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

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

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

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

<!-- Field: Page; Sequence: 9; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The Assignment Agreement and the
Option Agreement obligate the Company to fund certain exploration costs under the Work Plan. 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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the terms of that certain assignment
agreement (the &ldquo;Assignment Agreement&rdquo;) and the option agreement between American Gold Holdings, Ltd. and Homero Bustillos
Gonzalez (&ldquo;Gonzalez&rdquo;) dated January 11, 2011 (the &ldquo;Option Agreement&rdquo;), if we fail to comply with our obligations
to make expenditures under the Work Plan (as defined in the Description of Business) before January 11, 2014, the Option Agreement
will terminate and we will be obligated to return the Concessions to Gonzalez. If this occurs, we would lose all our investment
in the Concessions.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Title to some of our properties may
be defective or challenged.</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While we believe that we have satisfactory
title to our properties, some titles may be defective or subject to challenge. In addition, certain of our Mexican properties could
be subject to rights of the <I>Ejido</I>, as discussed below.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>In the event of a dispute regarding
title or any other matter related to our operations in Mexico, we might be subject to Mexican courts or dispute resolution entities,
where we would be faced with unfamiliar laws and procedures.</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The resolution of disputes in foreign countries
can be costly and time consuming. In a foreign country we would be faced with the additional burden of understanding unfamiliar
laws and procedures. We would also be faced with the necessity of hiring lawyers and other professionals who are familiar with
the foreign laws. For these reasons, we may incur unforeseen losses if we are forced to resolve a dispute in Mexico or any other
foreign country.</P>

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

<!-- Field: Page; Sequence: 10; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0"><B>Risks Related to Our Common Stock </B></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Since our inception, we have relied on
sales of our common stock and warrants to fund our operations. We have signed certain investment agreements with North American,
for up to $15,000,000 through sales of our common stock, and with Fairhills, for up to $15,000,000 through sales of our common
stock. Such investment agreements grant the investors 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 STYLE="color: black">,
under the Option Agreement, we must allow Gonzalez the opportunity to maintain his percentage stock ownership in the Company until
the date on which we have complied fully with our obligations under the Option Agreement or January 11, 2014, whichever comes first,
so any issuance of common stock or equivalents will result in even greater dilution because of the shares or share equivalents
that will have to be issued to Jaramillo as a result. Finally, Jaramillo is entitled to 600,000 shares of common stock as partial
consideration under the </FONT>Joint Venture Agreement (the &ldquo;JV Agreement&rdquo;) with Jaramillo<FONT STYLE="color: black">.
</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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are subject to penny stock regulations
and restrictions and you may have difficulty selling shares of our common stock.</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our common stock is subject to the provisions
of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934 (the &ldquo;Exchange Act&rdquo;), commonly referred to as
the &ldquo;penny stock rule.&rdquo;&nbsp;&nbsp;Section 15(g) sets forth certain requirements for transactions in penny stock, and
Rule 15g-9(d) incorporates the definition of &ldquo;penny stock&rdquo; that is found in Rule 3a51-1 of the Exchange Act.&nbsp;&nbsp;The
SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain
exceptions. We are subject to the SEC&rsquo;s penny stock rules.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Since our common stock is deemed to be
penny stock, trading in the shares of our common stock is subject to additional sales practice requirements on broker-dealers who
sell penny stock to persons other than established customers and accredited investors.&nbsp;&nbsp;&ldquo;Accredited investors&rdquo;
are persons with assets in excess of $1,000,000 (excluding the value of such person&rsquo;s primary residence) or annual income
exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such security and must have the purchaser&rsquo;s written consent to the
transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt the rules require the
delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market.&nbsp;&nbsp;A
broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current
quotations for the securities.&nbsp;&nbsp;Finally, monthly statements must be sent disclosing recent price information for the
penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the
ability of broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of our stockholders to
sell their shares of common stock.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There can be no assurance that our shares
of common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock was exempt from the
Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict
any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public
interest.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We do not expect to pay dividends
in the foreseeable future.</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We do not intend to declare dividends for
the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business.&nbsp;&nbsp;Therefore,
our stockholders will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares
on favorable terms or at all.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our common stock is subject to price
volatility unrelated to our operations.</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The market price of our common stock could
fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth,
quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions
in the economy and the financial markets or other developments affecting our competitors or ourselves. In addition, the OTCBB is
subject to extreme price and volume fluctuations in general.&nbsp;&nbsp;This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect
on our common stock.</P>

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

<!-- Field: Page; Sequence: 11; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Trading in our common stock on the
OTC Bulletin Board is limited and sporadic making it difficult for our shareholders to sell their shares or liquidate their investments.
</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our common stock is currently listed for
public trading on the OTC Bulletin Board. The trading price of our common stock has been subject to wide fluctuations. Trading
prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock
market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the
operating performance of companies with no current business operation. There can be no assurance that trading prices and price
earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors
may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods
of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Fairhills will pay less than the
then-prevailing market price for our common stock. </I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The common stock to be issued to Fairhills
pursuant to the Fairhills Investment Agreement will be purchased at a 24.5% discount to the lowest trading price of our common
stock during the ten (10) consecutive trading days immediately before Fairhills receives our notice of sale. Fairhills has a financial
incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between
the discounted price and the market price. If Fairhills sells the shares, the price of our common stock could decrease. If our
stock price decreases, Fairhills may have a further incentive to sell the shares of our common stock that it holds. These sales
may have a further impact on our stock price.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Your ownership interest may be diluted
and the value of our common stock may decline by exercising the put right pursuant to the Fairhills Investment Agreement. </I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Fairhills Investment Agreement,
when we deem it necessary, we may raise capital through the private sale of our common stock to Fairhills at a price equal to a
24.5% discount to the lowest trading price of our stock for the ten (10) consecutive trading days before Fairhills receives our
notice of sale. Because the put price is lower than the prevailing market price of our common stock, to the extent that the put
right is exercised, your ownership interest may be diluted.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are registering an aggregate of
30,000,000 shares of common stock to be issued under the Fairhills Investment Agreement. The sales of such shares could depress
the market price of our common stock. </I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are registering an aggregate of 30,000,000
shares of common stock under this prospectus pursuant to the Fairhills Investment Agreement. Notwithstanding Fairhills&rsquo; ownership
limitation, the 30,000,000 shares would represent approximately 25.4% of our shares of common stock outstanding immediately after
our exercise of the put right under the Investment Agreement. The sale of these shares into the public market by Fairhills could
depress the market price of our common stock.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At an assumed purchase price of $0.11325
(equal to 75.5% of the closing price of our common stock of $0.15 on July 11, 2012), we will be able to receive up to $3,397,500
in gross proceeds, assuming the sale of the entire 30,000,000 shares of our common stock. Accordingly, we would be required to
register additional 102,450,332 shares to obtain the balance of $11,602,500 under the Fairhills Investment Agreement. Due to the
floating offering price, we are not able to determine the exact number of shares that we will issue under the Fairhills Investment
Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt"><B><I>We
may not have access to the full amount available under the</I></B></FONT> <FONT STYLE="font-size: 10pt"><B><I>Fairhills Investment
Agreement. </I></B></FONT></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not drawn down funds and have not
issued shares of our common stock under the Fairhills Investment Agreement. Our ability to draw down funds and sell shares under
the Fairhills Investment Agreement requires that the registration statement, of which this prospectus is a part, be declared effective
by the SEC, and that this registration statement continue to be effective. In addition, the registration statement of which this
prospectus is a part registers 30,000,000 shares issuable under the Fairhills Investment Agreement, and our ability to sell any
remaining shares issuable under the Fairhills Investment Agreement is subject to our ability to prepare and file one or more additional
registration statements registering the resale of these shares. These registration statements may be subject to review and comment
by the staff of the SEC, and will require the consent of our independent registered public accounting firm. Therefore, the timing
of effectiveness of these registration statements cannot be assured. The effectiveness of these registration statements is a condition
precedent to our ability to sell the shares of common stock to Fairhills under the Fairhills Investment Agreement. Even if we are
successful in causing one or more registration statements registering the resale of some or all of the shares issuable under the
Fairhills Investment Agreement to be declared effective by the SEC in a timely manner, we may not be able to sell the shares unless
certain other conditions are met. For example, we might have to increase the number of our authorized shares in order to issue
the shares to Fairhills. Accordingly, because our ability to draw down any amounts under the Fairhills Investment Agreement is
subject to a number of conditions, there is no guarantee that we will be able to draw down any portion or all of the proceeds of
$15,000,000 under the Fairhills Investment Agreement.</P>

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

<!-- Field: Page; Sequence: 12; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Certain restrictions on the extent
of puts and the delivery of advance notices may have little, if any, effect on the adverse impact of our issuance of shares in
connection with the Fairhills Investment Agreement, and as such, Fairhills may sell a large number of shares, resulting in substantial
dilution to the value of shares held by existing shareholders. </I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fairhills has agreed, subject to certain
exceptions listed in the Fairhills Investment Agreement, to refrain from holding an amount of shares which would result in Fairhills
or its affiliates owning more than 4.99% of the then-outstanding shares of our common stock at any one time. These restrictions,
however, do not prevent Fairhills from selling shares of common stock received in connection with a put, and then receiving additional
shares of common stock in connection with a subsequent put. In this way, Fairhills could sell more than 4.99% of the outstanding
common stock in a relatively short time frame while never holding more than 4.99% at one time.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This Prospectus contains certain forward-looking
statements. When used in this Prospectus or in any other presentation, statements which are not historical in nature, including
the words &ldquo;anticipate,&rdquo; &ldquo;estimate,&rdquo; &ldquo;should,&rdquo; &ldquo;expect,&rdquo; &ldquo;believe,&rdquo;
&ldquo;intend,&rdquo; &ldquo;may,&rdquo; &ldquo;project,&rdquo; &ldquo;plan&rdquo; or &ldquo;continue,&rdquo; and similar expressions
are intended to identify forward-looking statements. They also include statements containing a projection of revenues, earnings
or losses, capital expenditures, dividends, capital structure or other financial terms.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The forward-looking statements in this
Prospectus are based upon our management&rsquo;s beliefs, assumptions and expectations of our future operations and economic performance,
taking into account the information currently available to them. These statements are not statements of historical fact. Forward-looking
statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance
or financial condition to be materially different from the expectations of future results, performance or financial condition we
express or imply in any forward-looking statements. These forward-looking statements are based on our current plans and expectations
and are subject to a number of uncertainties and risks that could significantly affect current plans and expectations and our future
financial condition and results.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of
these risks, uncertainties and assumptions, the forward-looking events discussed in this Prospectus might not occur. We qualify
any and all of our forward-looking statements entirely by these cautionary factors. As a consequence, current plans, anticipated
actions and future financial conditions and results may differ from those expressed in any forward-looking statements made by or
on our behalf. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented
herein.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will not receive any proceeds from the
sale of shares by the selling stockholder. However, we will receive proceeds from the sale of securities pursuant to the Fairhills
Investment Agreement. The proceeds received from any &ldquo;Puts&rdquo; tendered to Fairhills under the Fairhills Investment Agreement
will be used for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other
purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The sale of our common stock to Fairhills
in accordance with the Fairhills Investment Agreement will have a dilutive impact on our shareholders. As a result, our net loss
per share could increase in future periods and the market price of our common stock could decline. In addition, the lower our stock
price is at the time we exercise our put option, the more shares of our common stock we will have to issue to Fairhills in order
to drawdown pursuant to the Fairhills Investment Agreement. If our stock price decreases during the pricing period, then our existing
shareholders would experience greater dilution.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Public Market for Common Stock</B></P>

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

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">High</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Low</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Third Quarter 2011</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1.40</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; 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: left">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: left">First Quarter 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.66</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.28</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Second Quarter 2012 </TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.23</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.14</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Third Quarter 2012 (until July 11, 2012)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.15</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<!-- Field: Page; Sequence: 13; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Holders</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We had approximately 11 record holders
of our common stock as of July 2, 2012, according to the books of our transfer agent. The number of our stockholders of record
excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.</P>

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

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

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

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 6%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 6%">1.</TD>
    <TD STYLE="width: 88%; 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 STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>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: 0pt 0; text-align: justify">&nbsp;</P>

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 &ldquo;Executive Compensation&rdquo; below,
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: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Our discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and
intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements
as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking
Statements and Business sections in this Prospectus. We use words such as &ldquo;anticipate,&rdquo; &ldquo;estimate,&rdquo; &ldquo;plan,&rdquo;
&ldquo;project,&rdquo; &ldquo;continuing,&rdquo; &ldquo;ongoing,&rdquo; &ldquo;expect,&rdquo; &ldquo;believe,&rdquo; &ldquo;intend,&rdquo;
&ldquo;may,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;could,&rdquo; and similar expressions to identify forward-looking
statements.</I></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Business Overview </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are currently a start-up exploration
stage company in the business of gold and mineral exploration, acquisition and development. We were incorporated in the State of
Nevada under the name Keyser Resources, Inc. on November 26, 2007.&nbsp;&nbsp;Our business was initially operated to acquire an
option to purchase a mining interest in Canada. After a change in control in November 2010, we explored a merger with another company
in order to obtain an option to purchase several oil and gas leases in Nevada. A merger agreement was signed in January 2011. The
then-current management decided not to pursue the merger, and the merger agreement was terminated by mutual agreement of the parties
as of March 18, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 29, 2011, we 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. Following the appointment of Daniel M. Ferris as our sole director and officer, we changed
our focus to engage in the acquisition, exploration and development of gold and silver mining properties. To further reflect this
change in business focus, we changed our name to &ldquo;Lone Star Gold, Inc.&rdquo; on June 14, 2011. In addition, to create a
more flexible capital structure, we increased the number of authorized shares of our 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: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 30, 2012, we entered into a Fairhills
Investment Agreement with Fairhills, which is subsequently amended on June 25, 2012, pursuant to which Fairhills agreed to purchase
shares of our common stock for an aggregate purchase price of up to $15,000,000.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Fairhills Investment Agreement provides
that we may, from time to time during the thirty-six (36) months period commencing from the effectiveness of the registration statement,
in our sole discretion, deliver a put notice to Fairhills which states the dollar amount that we intend to sell to Fairhills on
a date specified in the put notice. The maximum investment amount per notice shall be no more than two hundred percent (200%) of
the average daily volume of the common stock for the ten consecutive trading days immediately prior to date of the applicable put
notice. The purchase price per share to be paid by Fairhills shall be calculated at a twenty-four and a half percent (24.5%) discount
to the lowest trading price of the common stock as reported by Bloomberg, L.P. during the ten (10) consecutive trading days immediately
prior to the receipt by Fairhills of the put notice. We have reserved 30,000,000 shares of our common stock for issuance under
the Fairhills Investment Agreement.</P>

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

<!-- Field: Page; Sequence: 14; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We plan to use the proceeds from the sale
of the common stock under the Fairhills Investment Agreement for general corporate and working capital purposes and acquisitions
or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best
interest of the Company.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On&nbsp;June 25, 2012, we borrowed $50,000
from Fairhills evidenced by a 2% Secured Note (the &ldquo;Note&rdquo;). The Note contains the following payment terms: (a) the
unpaid principal amount accrues interest at the rate of two percent (2%) per annum, (b) the unpaid principal and all accrued but
unpaid interest thereon will be due and payable on December 24, 2012, and (c) any portion of the unpaid principal and accrued but
unpaid interest may be prepaid by the Company, without penalty. Payment of the Note is secured by 3,750,000 shares of our common
stock owned by Daniel M. Ferris, our sole director and officer.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The proceeds of the Note will be used to
make certain payments relating to our mine tailings joint venture in Chihuahua, Mexico, and for general operating expenses.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Results of Operations</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Results of Operations for the Period Ended March 31, 2012
as Compared to the Period Ended March 31, 2011</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not generated any revenue since
our inception.&nbsp;&nbsp;We do not anticipate earning revenues until we have begun to commercially produce minerals from the Concessions,
the Tailings, or other mineral properties that we may own in the future. For the periods below, we had the following expenses:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">For&nbsp;the&nbsp;<BR> Three&nbsp;Months&nbsp;<BR> Ended&nbsp;<BR> March&nbsp;31,&nbsp;<BR> 2012</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">For&nbsp;the&nbsp;<BR> Three&nbsp;Months&nbsp;<BR> Ended&nbsp;<BR> March&nbsp;31,&nbsp;<BR> 2011</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Accumulated&nbsp;<BR> Deficit&nbsp;from&nbsp;<BR> November&nbsp;26,&nbsp;<BR> 2007&nbsp;<BR> to&nbsp;<BR> March&nbsp;31,&nbsp;<BR> 2012</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">General and administrative</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">152,064</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">18,416</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">773,310</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Exploration</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">356,696</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">909,894</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Management fees</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">279,999</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">836,453</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total operating expenses</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">788,759</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">18,416</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">2,519,657</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the three months ended March 31, 2012,
we incurred general and administrative expenses totaling $152,064.&nbsp;&nbsp;This increase of $133,648 was due to increases as
compared to the first quarter of 2011 as follows:&nbsp;&nbsp;accounting and auditing fees of $30,164, professional fees of $57,220,
travel of $2,229, legal fees of $32,237, depreciation expense of $2,340, telephone expense of $5,301, rent expense of $2,696, and
general expenses of $1,461.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, we incurred aggregate costs
of $356,696 related to our investment in Metales and expenditures under the Work Plan, and our Tailings Project as follows: $50,000
to fund the La Candelaria Work Plan and $160,000 to fund the Tailings Project Work Commitment and additional costs of $146,696
incurred in connection with the La Candelaria Project.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the three months ended March 31,
2012, we paid management fees totaling $30,000 to our sole officer and director, and recognized $249,999 in expenses related to
the stock grant under Mr. Ferris&rsquo; employment agreement during the three months ended March 31, 2012. We paid no management
fees in the first quarter of 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Results of Operations for the Year Ended December 31,
2011 as Compared to the Year Ended December 31, 2010</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have not generated any revenue since our inception.&nbsp;&nbsp;For
the years ended December 31, 2010 and December 31, 2011, we had the following expenses:</P>

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

<!-- Field: Page; Sequence: 15; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">For&nbsp;the&nbsp;year <BR>ended&nbsp;<BR> December&nbsp;31,<BR> 2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">For&nbsp;the&nbsp;year&nbsp;<BR> ended&nbsp;<BR> December&nbsp;31,&nbsp;<BR> 2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Accumulated&nbsp;<BR> from&nbsp;<BR> November&nbsp;26,&nbsp;<BR> 2007&nbsp;to&nbsp;<BR> December&nbsp;31,&nbsp;<BR> 2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">General and administrative</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">62,241</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">486,741</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">621,246</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Exploration cost</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">530,925</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">553,198</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Management fees</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">543,974</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">556,454</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">62,241</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,561,640</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,730,898</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2010,
we incurred $62,241 in general and administrative expenses.&nbsp;&nbsp;Our general and administrative fees were primarily for transfer
agent and filing fees and legal, accounting and auditing fees.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2011, we
incurred $486,741 in general and administrative expenses, $530,925 in exploration costs and $543,974 in management fees.&nbsp;&nbsp;Our
general and administrative fees were primarily for legal costs and accounting and auditing fees. Management fees include cash compensation
and the value of the equity compensation paid to Mr. Ferris. Exploration costs include direct costs associated with La Candelaria
of $201,925 and the value of stock issued to Gonzalez of $303,000.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Liquidity and Capital Resources</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following is a summary of our balance sheet as of March
31, 2012 and December 31, 2011:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,&nbsp;<BR> 2012&nbsp;($)</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,&nbsp;<BR> 2011&nbsp;($)</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">150,554</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">215,737</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current Liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,689</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">74,375</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Working Capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">82,178</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143,600</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stockholders&rsquo; Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">272,163</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">214,925</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We had cash of $150,554 as of March 31,
2012.&nbsp;&nbsp;We have committed to fund $450,000 over three years under the La Candelaria Work Plan, and $1,000,000 over the
next two years under the Work Commitment for the Tailings Project.&nbsp;&nbsp;Because we have no revenues from operations, we are
dependent upon obtaining additional financing in order to fund our obligations under the Work Plan, and also to fund our obligations
under the Tailings Project.&nbsp;&nbsp;We have funded our exploratory program to date through the North American Investment Agreement
and other sources of equity financing. We recently signed the Fairhills Investment Agreement, the proceeds of which may be used
for general corporate and working capital purposes, acquisitions, and other purposes as determined in good faith by the Board of
Directors. However, there is no assurance that adequate financing on acceptable terms will continue to be available to us.&nbsp;&nbsp;During
the three months ended March 31, 2012, our sole source of financing was the proceeds of two private placements of common stock
to North American.&nbsp; The net proceeds from those private placements were used to fund our operating expenses,&nbsp;and our
exploration activities under the Work Plan for the Concessions, and Work Commitment under the Tailings Project.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following is a summary of our balance sheet as of December
31, 2010 and December 31, 2011:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,<BR> 2010</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,<BR> 2011</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">9,977</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">215,737</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current Liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">67,636</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">74,375</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Working Capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">233,533</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143,600</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stockholders&rsquo; Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">233,533</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">214,925</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2010, we had a working
capital balance as a result of notes receivable offset by accounts payable and accrued liabilities. As of December 31, 2011, our
cash position has increased because of investments made by North American Gold Corp. (&ldquo;North American&rdquo;) under an investment
agreement, which is described below. We anticipate earning revenues from the Tailings project by the third quarter of 2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 29, 2011, we entered into North
American Investment Agreement with North American pursuant to which North American agreed to invest up to $15,000,000 to purchase
our common stock in increments of $100,000 or an integral multiple thereof, at our option at any time through August 31, 2013.
During this period, we have the option to deliver a put notice to North American that states the number of shares of our common
stock proposes to sell to North American, at a price per share equal to 90% of the volume weighted average closing price of the
common stock for the 20 days immediately preceding the date of the put notice. North American has the right to reject any requested
sale of shares because of negative market conditions affecting the common stock.</P>

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

<!-- Field: Page; Sequence: 16; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The North American Investment Agreement
was amended to allow us to use the net proceeds from the sale of the shares to fund the exploration and development of gold and
silver mining concessions in the La Candelaria project and other projects approved in advance by the Company and North American.
The Company and North American have agreed that the proceeds may be used to fund expenses incurred in connection with the Mine
Tailings Project.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The shares will not be registered under
the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;), but will be issued under an exemption from the registration
requirements of the Securities Act. Any shares issued and sold to North American will be &ldquo;restricted securities&rdquo; and
will be subject to applicable restrictions on resale.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the date of this prospectus, North
American has purchased 1,966,148 shares from the Company, resulting in gross proceeds to the Company (before any wire transfer or
other fees) of $1,150,000. North American owns a total of 2,291,148 shares of common stock, or 2.5% of the issued and outstanding
shares.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are no assurances that we will be
able to achieve further sales of our common stock or any other form of additional financing.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not attained profitable operations
and are dependent upon obtaining financing to pursue any extensive exploration activities. For these reasons our auditors stated
in their report that they have substantial doubt we will be able to continue as a going concern.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We intend to continue to have our outside
consultant assist us in the preparation of our quarterly and annual financial statements and have these financial statements reviewed
or audited by our independent auditor. Our outside consultant is expected to charge us approximately $5,000 to prepare our quarterly
financial statements and approximately $10,000 to prepare our annual financial statements. In the next twelve months, we anticipate
spending approximately $60,000 to pay for our accounting and audit requirements.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have no significant off-balance sheet
arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to
stockholders.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our financial statements are impacted by
the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary
of these policies is included in Note 2 of the notes to our historical financial statements. We have identified below the accounting
policies that are of particular importance in the presentation of our financial position, results of operations and cash flows
and which require the application of significant judgment by management.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are currently a start-up exploration
stage company in the business of gold and mineral exploration, acquisition and development. We were incorporated in the State of
Nevada under the name Keyser Resources, Inc. on November 26, 2007.&nbsp;&nbsp;Our business was initially operated to acquire an
option to purchase a mining interest in Canada. After a change in control in November 2010, we explored a merger with another company
in order to obtain an option to purchase several oil and gas leases in Nevada. A merger agreement was signed in January 2011. The
then-current management decided not to pursue the merger, and the merger agreement was terminated by mutual agreement of the parties
as of March 18, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 29, 2011, we 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. Following the appointment of Daniel M. Ferris as our
sole director and officer, we changed our focus to engage in the acquisition, exploration and development of gold and silver mining
properties. To further reflect this change in business focus, we changed our name to &ldquo;Lone Star Gold, Inc.&rdquo; on June
14, 2011. In addition, to create a more flexible capital structure, we increased the number of authorized shares of our 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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 29, 2011, we entered into an
investment agreement with North American pursuant to which North American agreed to invest up to $15,000,000 to purchase our common
stock in increments of $100,000 or an integral multiple thereof, at our option at any time through August 31, 2013.</P>

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

<!-- Field: Page; Sequence: 17; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 30, 2012, we entered into a Fairhills
Investment Agreement, which was subsequently amended on June 25, 2012, with Fairhills Capital Offshore Ltd., a Cayman Islands exempted
company. Pursuant to the terms of the Fairhills Investment Agreement, Fairhills committed to purchase up to $15,000,000 of our
common stock over a period of up to thirty-six (36) months.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Fairhills Investment
Agreement, we also entered into a registration rights agreement with Fairhills, pursuant to which we are obligated to file a registration
statement with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;) covering 30,000,000 shares of our common stock underlying
the Fairhills Investment Agreement within 21 days after the closing of the transaction. In addition, we are obligated to use all
commercially reasonable efforts to have the registration statement declared effective by the SEC within 120 days after the closing
of the transaction and maintain the effectiveness of such registration statement until termination of the Fairhills Investment
Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At an assumed purchase price of $0.11325
(equal to 75.5% of the closing price of our common stock of $0.15 on July 11, 2012), we will be able to receive up to $3,397,500
in gross proceeds, assuming the sale of the entire 30,000,000 shares being registered hereunder pursuant to the Fairhills Investment
Agreement. Accordingly, we would be required to register additional 102,450,332 shares to obtain the balance of $11,602,500 under
the Fairhills Investment Agreement. We are currently authorized to issue 150,000,000 shares of our common stock. We may be required
to increase our authorized shares in order to receive the entire purchase price. Fairhills has agreed to refrain from holding an
amount of shares which would result in Fairhills owning more than 4.99% of the then-outstanding shares of our common stock at any
one time.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have two subsidiaries: Metales HBG,
S.A. de C.V. (&ldquo;Metales&rdquo;) and Amiko Kay, S. de R.L. de C.V. (&ldquo;Amiko Kay&rdquo;). Both companies were organized
under the laws of Mexico.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We own 70% of the issued and outstanding
shares of stock of Metales. Our President, Mr. Ferris, is the sole administrator of Metales. As sole administrator, he assumes
the duties of a Board of Directors. Miguel Robles, our attorney in Mexico, and his associates have limited duties for the day-to-day
operation of Metales.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We own 99% of the issued and outstanding
membership interests of Amiko Kay. Miguel Robles owns a 1% ownership interest to satisfy Mexican law requirements of being at least
two owners.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our current corporate structure chart is
as follows:</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg18.jpg"></P>

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

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Metales HBG, S.A. de C.V. (&ldquo;Metales&rdquo;)
was formed under the laws of Mexico on May 31, 2011. We own 70% of the issued and outstanding shares of capital stock of Metales
while the remaining 30% are held by Homero Bustillos Gonzalez, a resident of Mexico (&ldquo;Gonzalez&rdquo;). On June 10, 2011,
Gonzalez assigned to Metales eight 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: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 18; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 letter of intent or Option Agreement, or (iii) the Assignment Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Assignment Agreement, we
have taken or have 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: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">1.</TD>
    <TD STYLE="text-align: justify">We have issued 125,000 shares of our 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 to Gonzalez in connection with the Option Agreement. The shares were issued to North American in satisfaction of our obligations under the Assignment Agreement, with the agreement of American Gold.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>2.</TD>
    <TD STYLE="text-align: justify">We have issued 300,000 shares of our common stock to Gonzalez.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>3.</TD>
    <TD STYLE="text-align: justify">We have paid Gonzalez an additional $125,000.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Gonzalez retains a 2% Net Smelter Returns
Royalty on the Concessions. In addition, we are obligated to issue 1,000,000 shares of our 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 NI 43-101 standards.
Finally, we have granted anti-dilution rights to Gonzalez, such that we must allow Gonzalez the opportunity to maintain his percentage
stock ownership in the Company until the date on which we have complied fully with our 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 North American Investment Agreement.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black">We advanced
approximately $122,341 to Metales in the first year of the Work Plan, which, together with payments made to Gonzalez that were
credited to the Work Plan, satisfied its obligations for that first year. We</FONT> have paid approximately $50,000 towards the
payments required in the second year of the Work Plan, and intend to make additional payments totaling $100,000 in 2012 as required
under the Work Plan.</P>

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

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

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Mine Concessions &ldquo;La Candelaria&rdquo;</TD></TR></TABLE>

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

<!-- Field: Page; Sequence: 19; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Concessions in the La Candelaria project
are without known proven (measured) or probable (indicated) 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. See &ldquo;<FONT STYLE="color: black">No
Proven or Probable Reserves&rdquo; below<I>. </I></FONT></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The transfer of the Concessions to Metales
must be registered under Mexican law. <FONT STYLE="color: black">We have been advised that the transfer of the Concessions from
Gonzalez to Metales has been 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, and they may not hold mining concessions directly. Because of those requirements,
we will have to rely on persons associated with Metales, and our 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: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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

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

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

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

<!-- Field: Page; Sequence: 20; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><img src="pg21.jpg"></P>

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have 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 our 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&rsquo;s Chihuahua office. In November 2011, a team
of Geologists drilled ten drill holes to a depth of approximately 200 meters (650 feet). We are waiting for the results of the
drilling from the ALS CHEMEX laboratories. We have received initial drilling results from a local laboratory in Parral for split
core project. The results ranged from 0.09-0.12 grams per ton (gpt) gold and 15-35 gpt silver. The grade assays are not recognized
as NI 43-101 standard. 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 or more (1,600 feet).</P>

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

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

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

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

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

<!-- Field: Page; Sequence: 21; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Mine Tailings Project</TD></TR></TABLE>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As consideration for Jaramillo&rsquo;s
contribution of the right to process the Tailings to the Joint Venture, we 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. We 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: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, the Company or Amiko Kay will
fund an amount up to $1,000,000 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: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 48px">.</TD>
    <TD STYLE="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>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 48px">.</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: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As further consideration, we are obligated
to issue 600,000 shares of our common stock to Jaramillo. 300,000 shares of common stock have been issued as of the date of this
prospectus and the remaining 300,000 shares shall be issued within 12 months of signing the JV Agreement which is December 26,
2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The shares of common stock will be restricted
shares and are being issued with 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.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 net revenues paid to Amiko Kay (and in turn Lone Star
Gold) and 35% of the net revenues paid to Jaramillo. It is anticipated that the portion to be paid to Amiko Kay 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: 0pt 0; text-align: justify">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Amiko Kay 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 Amiko Kay. Finally, Jaramillo will provide quarterly financial reports to Amiko
Kay.</P>

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

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

<!-- Field: Page; Sequence: 22; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The JV Agreement will terminate upon completion
of processing the Tailings, as determined by Amiko Kay in its sole discretion. If Jaramillo materially breaches the JV Agreement,
Amiko Kay 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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 Amiko Kay).</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Tailings Property (the &ldquo;Property&rdquo;)
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: 0pt 0">&nbsp;</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><img src="pg23.jpg"></P>

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

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, our consultants in Mexico
performed additional testing by having a sample of approximately 40 kilograms (approximately 88 pounds) of ore processed and analyzed.
Grade assays based on the sampling were received from&nbsp;SGM (Servicio Geologico Mexicano). The results of the analysis showed
115 grams per ton of silver and 0.7 grams per ton of gold, with 1% per ton of lead and zinc. The grade assays are not recognized
as NI 43-101 standard.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Tailings are without known proven (measured)
or probable (indicated) reserves, as defined under SEC Industry Guide 7, and the exploration program described in &ldquo;History
and Plan of Operation&rdquo; is exploratory in nature. See &ldquo;<FONT STYLE="color: black">No Proven or Probable Reserves&rdquo;
below<I>. </I></FONT></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are obligated to fund $250,000 for the
benefit of the Joint Venture before January 26, 2013, under the Work Commitment established for the Tailings Project. For the three
months ending March 31, 2012, we made payments totaling $160,000 pursuant to the Work Commitment.</P>

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

<!-- Field: Page; Sequence: 23; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Approximately 3,000 tons of the Tailings
material has been sent to the processing plant in Parral, Mexico. As of the date of this prospectus, this shipment has not been
fully processed and the Company has no revenues from Tailings project. In addition, the Parral processing plant has undergone a
change of management and was temporarily closed, it has now reopened under new management and the Joint Venture has formally agreed
for them to take 200 tons per day of the tailings material. We have identified another processing plant in the area that it anticipates
will process future shipments of Tailings material in addition to the JV Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black">We are constructing
a basic wash plant and jig circuit on the property on which the Tailings are located. The wash plant&rsquo;s simple processing
circuit will separate the heavy, mineral-rich material from the lighter, worthless material in the Tailings. We expect the construction
of the wash plant to take between 6 to 8 weeks once construction has begun. </FONT>The first of two jigs are currently in place
on the Tailings Project wash plant, and testing is currently being conducted to confirm the best flow rates to maximize the separation
ratios of heavier material. The jig in question is the smaller of two jigs planned for the wash plant's start-up. The existing
jig will be used to set up the entire wash plant circuit in preparation for the second, larger jig, which we expect to be delivered
during July 2012. The cost of the wash plant and jig circuit is expected to be approximately $80,000 - $95,000.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have also decided to proceed with the
design and development of a Benign nitrogen leaching pile process to be built on the property, which is expected to be capable
of processing 1,500 tons of Tailings per day. This relatively new leaching process represents the benefits of not using cyanide
and of having minimal environmental impact. In turn, the complexity of the permitting process for the plant's construction will
be greatly reduced.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Letter of Intent Regarding the Ocampo Property</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 29, 2011, we entered into
a letter of intent 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 letter of intent 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 letter of intent, the letter of intent would expire unless
extended by mutual agreement of the parties. The letter of intent expired as of December 29, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>No Proven or Probable Reserves</B></P>

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

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

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compliance with Governmental Regulation</B></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intellectual Property</B></P>

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

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Currently, the sole employee of the Company
is Daniel M. Ferris, our President, Treasurer, Secretary and sole director. We engage independent contractors and consultants from
time to time to consult with our geologic and exploration program.</P>

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

<!-- Field: Page; Sequence: 24; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE </B></P>

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Officers will hold their positions at the
pleasure of the board of directors. On July 12, 2011, we 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 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 Mr. 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: 0pt 0; text-align: justify">&nbsp;</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Ferris was elected sole
director and President, Secretary and Treasurer of the Company on March 29, 2011. Mr. Ferris was also recently appointed
President, Secretary and Treasurer of Curry Gold Corp. (OTCBB: CURG), a shell company with no current operations. 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: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have retained several consultants. Miguel
Angel Jaramillo Tapia (&ldquo;Jaramillo&rdquo;) is an independent consultant who is acting as our 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.
We do not have a written consulting contract with Jaramillo.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have entered into a joint venture with
Jaramillo to process the Tailings. See &ldquo;Description of Business&rdquo; section. He is entitled to 35% of the net revenue
from the Tailings Joint Venture under the Joint Venture Agreement, as well as 600,000 shares of common stock as partial consideration.
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: 0pt 0; text-align: justify">&nbsp;</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We employ the services of engineering consultants.
On September 27, 2011, we signed a contract with Ralph R. Sacrison, P.E., of the firm Sacrison Engineering, to perform engineering
consulting and related services. We agree to 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: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

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

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

<!-- Field: Page; Sequence: 25; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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



<P STYLE="margin: 0"></P>
<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Finally, we also employ legal counsel in
Mexico in connection with the formation of our Mexican subsidiaries, and on-going legal work associated with the business of our
subsidiaries in Mexico, such as the registration of our properties with Mexican governmental authorities.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Code of Ethics</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not adopted a code of ethics that
applies to our executive officers and employees. We anticipate that we will adopt a code of ethics when appropriate as we hire
additional employees and engage additional officers and directors.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Committees of the Board of Directors</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We do not presently have a separately designated
audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors.
As such, the sole director acts in those capacities. We believe that committees of the Board are not necessary at this time given
that we are in the exploration stage.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Audit Committee Financial Expert</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Ferris does not qualify as an &ldquo;audit
committee financial expert.&rdquo; We believe that the cost related to retaining such a financial expert at this time is prohibitive,
given our current operating and financial condition. Further, because we are in the development stage of our business operations,
we believe that the services of an audit committee financial expert are not necessary at this time.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Section 16(a) Beneficial Ownership Reporting Compliance </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Section 16(a) of the Exchange Act requires
our executive officers and directors, and persons who own more than ten percent of our common stock to file reports of ownership
and change in ownership with the Securities and Exchange Commission and the exchange on which the common stock is listed for trading.
Executive officers, directors and more than ten percent stockholders are required by regulations promulgated under the Exchange
Act to furnish us with copies of all Section 16(a) reports filed. Based solely on our review of copies of the Section 16(a) reports
filed for the fiscal year ended December 31, 2011, we believe that our executive officers, directors and ten percent stockholders
complied with all reporting requirements applicable to them.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth all compensation paid by the
Company for the fiscal years of 2010 and 2011.&nbsp;&nbsp;</P>

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

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>Name</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Year</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Salary <BR> ($)</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Bonus <BR> ($)</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Stock <BR> Awards <BR> ($)</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Non-Equity <BR> Incentive&nbsp;Plan <BR> Compensation <BR> ($)</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">All&nbsp;Other <BR> Compensation <BR> ($)</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Total <BR> ($)</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD NOWRAP STYLE="width: 23%; text-align: left">Daniel Ferris <BR>President, CEO &amp; CFO</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: center">2011</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">70,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">70,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Alvaro Vollmers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center">2011</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Former sole officer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center">2010</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Maurice Bidaux <BR>Former sole officer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center">2010</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Neither Mr. Bidaux nor Mr. Vollmers received
compensation from the Company in 2010 and 2011, as applicable. Mr. Ferris replaced Mr. Vollmers as sole director and officer on
March 29, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Equity Awards at the End of the Fiscal Year</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We do not have any equity compensation plans and therefore no
equity awards were outstanding as of December 31, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stock Option Grants</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have not granted any stock options to the executive officers
as of December 31, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Compensation</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our sole director did not receive any compensation for serving
on the Board of Directors.</P>

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

<!-- Field: Page; Sequence: 26; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employment Agreements</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 12, 2011, we 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 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 Mr. Ferris to perform his duties under the 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: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the terms of the
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. Mr. Ferris  received 1,000,000 shares of common stock on July 11, 2012, and will receive 1,000,000 shares of common stock on
July 12,  2013 and 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: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth the ownership,
as of July 12, 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 July 12, 2012, there were 89,341,068 common shares issued and outstanding. 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: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">Name and Address of<BR> Beneficial Owner</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Number of Shares Owned<BR> Beneficially</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Percentage<BR> Ownership</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left">Director and Officer:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 44%; text-align: left">Daniel M. Ferris (1)(2)<BR> President, Secretary, Treasurer and Director<BR> 6565 Americas Parkway NE, Suite 200<BR> Albuquerque, NM&nbsp; 87110</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 25%; text-align: right">8,500,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 25%; text-align: right">9.51</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left">5% or more beneficial owners:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">John Rhoden (2)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,500,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25.47</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">All executive officers and directors as a group</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">8,500,000</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">9.51</TD><TD STYLE="font-weight: bold; text-align: left">%</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(1) Includes 3,750,000 shares of common
stock as pledge to secure the 2% Secured Note issued to Fairhills by the Company.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(2) On January 13, 2012, the Company agreed
to redeem certain shares of common stock held by two of its principal shareholders. The Company agreed to redeem 7,500,000 shares
of common stock owned by Dan M. Ferris, for total consideration of $1.00. In addition, the Company agreed to redeem 22,500,000
shares of common stock held by John G. Rhoden, for total consideration of $1.00. The redeemed shares of common stock are to be
retired and restored to the status of authorized and unissued shares, and not held in treasury. The number of shares owned by Mr.
Ferris and Mr. Rhoden in the chart above includes the effect of the redemption of these shares, although the redemption of Mr.
Rhoden&rsquo;s shares has not been reflected in the books and records of the Company&rsquo;s transfer agent. See section &ldquo;Certain
Relationships and Related Transactions&rdquo; below.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Changes in Control</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company underwent a change in management
on November 17, 2010, when Mr. Bidaux resigned as sole director and officer of the Company. Shareholders holding at least a majority
of the issued and outstanding shares of the common stock of the Company elected Mr. Vollmers to serve as the sole director. Mr.
Vollmers subsequently appointed himself President, Secretary and Treasurer. The Company underwent another change in management
on March 29, 2011, when Mr. Ferris became our sole director and executive officer. There are currently no arrangements which would
result in a change in control of the Company.</P>

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

<!-- Field: Page; Sequence: 27; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Transactions with Related Persons</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following is a description of transactions
since January 1, 2011 to which the Company has been a party in which the amount involved exceed or will exceed $120,000 and in
which any of the person who serves as our director and executive officer or with any beneficial owners of more than 5% of our common
stock, or entities affiliated with them, had or will have a direct or indirect material interest.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On&nbsp;June 25, 2012, we borrowed $50,000
from Fairhills evidenced by a 2% Secured Note. The Note contains the following payment terms: (a) the unpaid principal amount accrues
interest at the rate of two percent (2%) per annum, (b) the unpaid principal and all accrued but unpaid interest thereon will be
due and payable on December 24, 2012, and (c) any portion of the unpaid principal and accrued but unpaid interest may be prepaid
by the Company, without penalty. Payment of the Note is secured by 3,750,000 shares of our common stock owned by Daniel M. Ferris,
our sole director and officer.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of March 31, 2012, an advance from Maurice
Bideaux, former chief executive officer and director, in the amount of $38,910, remains unpaid.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2010, the Company lent $290,000
to American Liberty Petroleum Corp. (&ldquo;ALP&rdquo;) and in 2011 lent ALP another $295,000. The promissory notes executed by
ALP in connection with the loans contained the following payment terms: (a) the unpaid principal amount accrued interest at the
rate of six percent (6%) per annum, (b) the unpaid principal and all accrued but unpaid interest thereon was due and payable on
April 30, 2011, and (c) the unpaid principal and accrued but unpaid interest could be prepaid in whole or in part at the option
of ALP, without penalty or premium. The notes are not secured by any assets of ALP. ALP made no payments of principal or interest
under the notes. In April 2011, the Company assigned the notes to New World in consideration for the redemption of the Units owned
by New World. As a result, the Company no longer holds any notes from ALP. At the time the loans were made, Mr. Vollmers was the
sole director and officer of ALP and of the Company. However, Mr. Vollmers is no longer a director or executive officer of the
Company. Mr. Vollmers sold his shares of common stock in March 2011 to Mr. Ferris, and resigned as director and executive officer
of the Company.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 24, 2011, the Board of Directors
of the Company approved a series of transactions that would result in the merger of TAEC, a subsidiary of ALP, with and into the
Company. See &ldquo;Business.&rdquo; If the proposed merger had been completed, the Company would have acquired an option agreement
to purchase certain oil and gas properties in Nevada, which were the sole asset of ALP. Mr. Rhoden, Mr. Vollmers and New World,
as stockholders holding more than 50% of the votes entitled to be cast with respect to the approval of the transactions, adopted
resolutions authorizing the Company to complete the series of transactions.&nbsp; However, the Company and ALP have since terminated
their agreement for the purchase of the assets, and the Company has no further obligations under such agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 13, 2012, the Company agreed
to redeem certain shares of the common stock of the Company held by two of its principal shareholders. The Company redeemed 7,500,000
shares of common stock owned by Dan Ferris, for total consideration of $1.00. Mr. Ferris is the sole officer and director of the
Company. In addition, the Company redeemed 22,500,000 shares of common stock held by John G. Rhoden, for total consideration of
$1.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">After redemption, Mr. Ferris owns 7,500,000
shares of common stock, and Mr. Rhoden owns 22,500,000 shares of common stock, representing 8.64% and 25.92%, respectively, of
the issued and outstanding shares of common stock. The redeemed shares of common stock were retired and restored to the status
of authorized and unissued shares, and not held in treasury. The Company, Mr. Ferris and Mr. Rhoden agreed to effect the redemption
in order to reduce the number of issued and outstanding shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The stock transfer agent has not yet recorded
the redemption of the stock formerly owned by Mr. Rhoden due to a delay caused by his inability to locate and deliver one of his
stock certificates. However, the number of issued and outstanding shares reported by the Company in this prospectus gives effect
to this redemption.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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
the Company&rsquo;s principal executive officer.</P>

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

<!-- Field: Page; Sequence: 28; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS</B></P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 2, 2011, our Board of Directors
dismissed Seale and Beers, CPAs, our independent registered public accountants.&nbsp;&nbsp;On the same date, the accounting firm
of LBB &amp; Associates Ltd., LLP was engaged by our Board of Directors as our new independent registered public accountants.&nbsp;&nbsp;
None of the reports of Seale &amp; Beers on the Company's&nbsp;&nbsp;financial&nbsp;&nbsp;statements for the year ended December
31, 2009 or subsequent interim periods contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles, except for a going concern qualification in the registrant's audited financial
statements.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the registrant's year ended December
31, 2009 and the subsequent interim periods thereto, there were no disagreements with Seale and Beers, whether or not resolved,
on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if
not resolved to Seale and Beers&rsquo; satisfaction, would have caused it to make reference to the subject matter of the disagreement
in connection with its report on the registrant's financial statements.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Seale and Beers furnished us with a letter
addressed to the Securities and Exchange Commission stating that it agrees with the above statements.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the two most recent
fiscal years and the interim periods preceding the engagement, the registrant has not consulted LBB &amp; Associates Ltd., LLP
regarding any of the matters set forth in Item 304(a)(2) of Regulation S-K.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are registering for resale shares of
our common stock that are issued and outstanding held by the selling stockholder identified below. We are registering the shares
to permit the selling stockholder and its pledgees, donees and other successors-in-interest that receive their shares from the
selling stockholder as a gift, partnership distribution or other non-sale related transfer after the date of this Prospectus to
resell the shares when and as they deem appropriate in the manner described in the &ldquo;Plan of Distribution.&rdquo; As of the
date of this Prospectus, there are 89,341,068 shares of common stock issued and outstanding.</P>

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

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the name of the selling stockholder,</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the number of shares of our common stock that the selling stockholder beneficially owned prior
to the offering for resale of the shares under this Prospectus,</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the maximum number of shares of our common stock that may be offered for resale for the account
of the selling stockholder under this Prospectus, and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the number and percentage of shares of our common stock to be beneficially owned by the selling
stockholder after the offering of the shares (assuming all of the offered shares are sold by the selling stockholder).</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The selling stockholder has never served
as our officer or director or any of its predecessors or affiliates within the last three years, nor has the selling stockholder
had a material relationship with us. The selling stockholder is neither a broker-dealer nor an affiliate of a broker-dealer. The
selling stockholder did not have any agreement or understanding, directly or indirectly, to distribute any of the shares being
registered at the time of purchase.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The selling stockholder may offer for sale
all or part of the shares from time to time. The table below assumes that the selling stockholder will sell all of the shares offered
for sale. A selling stockholder is under no obligation, however, to sell any shares pursuant to this Prospectus.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Number of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Shares of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Shares of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Maximum</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Common</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Common Stock</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Number of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Stock</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Beneficially</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Shares of</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Beneficially</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Percent</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Owned prior to</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Common Stock</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Owned after</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">Ownership</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Offering (1)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">to be Offered</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">after Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; width: 36%">Fairhills Capital Offshore Ltd. (2)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="text-align: right; width: 13%">30,000,000</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="text-align: right; width: 13%">30,000,000</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="text-align: right; width: 13%">0</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="text-align: right; width: 13%">0</TD><TD STYLE="text-align: left; width: 1%">%</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">__________________</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%; vertical-align: top">(1)</TD>
    <TD STYLE="width: 95%">Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, securities that are currently convertible or exercisable into shares of our common stock, or convertible or exercisable into shares of our common stock within 60 days of the date hereof are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to the following table, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder&rsquo;s name.</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">(2)</TD>
    <TD>Edward Bronson has the voting and dispositive power over the shares owned by Fairhills Capital Offshore Ltd.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<!-- Field: Page; Sequence: 29; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The selling stockholder and any of its
respective pledges, donees, assignees and other successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These
sales may be at fixed or negotiated prices. The selling stockholder may use any one or more of the following methods when selling
shares:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">block trades in which the broker-dealer will attempt to sell the shares as agent, but may position
and resell a portion of the block as principal to facilitate the transaction</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">purchases by a broker-dealer as principal and resale by the broker-dealer for its account;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">an exchange distribution in accordance with the rules of the applicable exchange;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">privately negotiated transactions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">short sales after this registration statement becomes effective;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">broker-dealers may agree with the selling stockholder to sell a specified number of such shares
at a stipulated price per share;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">through the writing of options on the shares;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">a combination of any such methods of sale; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any other method permitted pursuant to applicable law.</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The selling stockholder or any of its respective
pledgees, donees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or
broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder and/or the purchasers of shares for whom such broker-dealers
may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess
of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their
own risk. It is possible that a selling stockholder will attempt to sell shares of common stock in block transactions to market
makers or other purchasers at a price per share which may be below the then market price. The selling stockholder cannot assure
that all or any of the shares offered in this prospectus will be issued to, or sold by, the selling stockholder. The selling stockholder
and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, are &ldquo;underwriters&rdquo;
as that term is defined under the Securities Act, or the Exchange Act, or the rules and regulations under such acts. In such event,
any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be borne by the selling stockholder. The selling stockholder
may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The selling stockholder may from time to
time pledge or grant a security interest in some or all of the shares of common stock owned by it and, if it defaults in the performance
of its secured obligations, the pledgee or secured parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable provision of the
Securities Act amending the list of selling stockholders to include the pledge or other successors in interest as selling stockholders
under this Prospectus.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The selling stockholder also may transfer
the shares of common stock in other circumstances, in which case the pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending
the list of selling stockholders to include the pledge or other successors in interest as selling stockholders under this prospectus.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fairhills has agreed to pay all fees and
expenses incident to the registration of the shares of common stock.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The selling stockholder shall acquire the
securities offered hereby in the ordinary course of business and has advised us that it has not entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of its shares of common stock, nor is there an underwriter
or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are
notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares
of common stock, if required, we will file a supplement to this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the selling stockholder uses this Prospectus
for any sale of the shares of common stock, it will be subject to the prospectus delivery requirements of the Securities Act.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of our common stock and activities of the selling stockholder.</P>

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

<!-- Field: Page; Sequence: 30; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During such time as it may be engaged in
a distribution of any of the shares we are registering by this registration statement, Fairhills is required to comply with Regulation
M. In general, Regulation M precludes any selling security holder, any affiliated purchasers and any broker-dealer or other person
who participates in a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any
security which is the subject of the distribution until the entire distribution is complete. Regulation M defines a &quot;distribution&quot;
as an offering of securities that is distinguished from ordinary trading activities by the magnitude of the offering and the presence
of special selling efforts and selling methods. Regulation M also defines a &quot;distribution participant&quot; as an underwriter,
prospective underwriter, broker, dealer, or other person who has agreed to participate or who is participating in a distribution.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Regulation M under the Exchange Act prohibits,
with certain exceptions, participants in a distribution from bidding for or purchasing, for an account in which the participant
has a beneficial interest, any of the securities that are the subject of the distribution. Regulation M also governs bids and purchases
made in order to stabilize the price of a security in connection with a distribution of the security. We have informed Fairhills
that the anti-manipulation provisions of Regulation M may apply to the sales of their shares offered by this prospectus, and we
have also advised Fairhills of the requirements for delivery of this prospectus in connection with any sales of the common stock
offered by this prospectus.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Fairhills Investment Agreement,
Fairhills shall not sell stock short, either directly or indirectly through its affiliates, principals or advisors, our common
stock during the term of the agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF SECURITIES TO BE REGISTERED
</B></P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are authorized to issue 150,000,000
shares of common stock, $0.001 par value per share.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of July 12, 2012, 89,341,068 shares of
common stock are issued and outstanding.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of our common stock have equal
ratable rights to dividends from funds legally available if and when declared by our board of directors and are entitled to share
ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up
of our affairs. Our common stock does not provide the right to a preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions or rights. Our common stock holders are entitled to one non-cumulative vote per share on
all matters on which shareholders may vote.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All shares of common stock now outstanding
are fully paid for and non-assessable. We refer you to our Articles of Incorporation, Bylaws and the applicable statutes of the
state of Nevada for a more complete description of the rights and liabilities of holders of our securities. All material terms
of our common stock have been addressed in this section.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Holders of shares of our common stock do
not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election
of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining
shares will not be able to elect any of our directors.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of March 31, 2012, there were 200,000
share purchase warrants outstanding and exercisable. The warrants have a weighted average remaining life of 2.3 years and a weighted
average exercise price of $1.20 per warrant for one common share. The share purchase warrants outstanding at March 31, 2012 are
as follows:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">average</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">average</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">remaining</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Aggregate</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">exercise</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">contractual</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">intrinsic</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">price</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">life (years)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">value</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 36%">Outstanding December 31, 2011</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">200,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1.20</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Forfeited or cancelled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Expired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Outstanding March 31, 2012</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.20</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">2.33</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">59,467</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<!-- Field: Page; Sequence: 31; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Dividends </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have never declared or paid any cash
dividends on shares of our capital stock. We currently intend to retain earnings, if any, to fund the development and growth of
our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be
at the discretion of our board of directors after taking into account various factors, including our financial condition, operating
results, cash needs and growth plans.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The validity of the common stock offered
by this prospectus will be passed upon for us by Anslow&nbsp;+ Jaclin, LLP, Manalapan, New Jersey.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements
of our company included in this prospectus and in the registration statement have been audited by LBB &amp; Associates Ltd.,
LLP, an independent registered public accounting firm, to the extent and for the periods set forth in their report appearing
elsewhere herein and in the registration statement, and are included in reliance on such report, given the authority of said
firm as an expert in auditing and accounting.</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements of
our company included in this prospectus and in the registration statement have been audited by Seale and Beers, CPAs, an independent
registered public accounting firm, to the extent and for the periods set forth in their report appearing elsewhere herein and in
the registration statement, and are included in reliance on such report, given the authority of said firm as an expert in auditing
and accounting.</P>



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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INTERESTS OF NAMED EXPERTS AND COUNSEL
</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No expert or counsel named in this prospectus
as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being
registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant
or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries
as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WHERE YOU CAN FIND MORE INFORMATION </B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We filed with the Securities and Exchange
Commission a registration statement under the Securities Act for the common stock in this offering. This prospectus does not contain
all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement.
For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits and
schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract
or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you
to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration
statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the
Public Reference Room maintained by the Securities and Exchange Commission at 100 F Street, N.E. Washington, DC 20549, and copies
of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the
prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains reports, proxy
and information statements, and other information regarding registrants that file electronically with the SEC. The address of the
website is www.sec.gov.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We file periodic reports under the Exchange
Act, including annual, quarterly and special reports, and other information with the Securities and Exchange Commission. These
periodic reports and other information are available for inspection and copying at the regional offices, public reference facilities
and website of the Securities and Exchange Commission referred to above.</P>

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

<!-- Field: Page; Sequence: 32; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II &mdash; INFORMATION NOT REQUIRED
IN THE PROSPECTUS</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item. 13 Other Expenses Of Issuance And Distribution.</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 77%; text-align: left">Securities and Exchange Commission registration fee</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 20%; text-align: right">515.70</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Federal Taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">State Taxes and Fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Transfer Agent Fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accounting fees and expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Legal fees and expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Blue Sky fees and expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Miscellaneous</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">0</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">515.70</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All amounts are estimates other than the
Commission&rsquo;s registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will
be borne by the selling shareholders. The selling shareholders, however, will pay any other expenses incurred in selling their
common stock, including any brokerage commissions or costs of sale.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item. 14 Indemnification Of Directors
And Officers.</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Nevada Revised Statute 78.037 permits a
corporation to eliminate or limit the personal liability of a director or officer to the corporation or its stockholders for damages
relating to breach of fiduciary duty as a director or officer, but such a provision must not eliminate or limit the liability of
a director or officer for (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or (b)
the payment of distributions in violation of Nevada Revised Statute 78.300.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Nevada Revised Statutes 78.7502 provides
as follows with respect to indemnification of directors, officers, employees and agents:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18.05pt">(a)</TD><TD STYLE="text-align: justify">We may indemnify any person who was or is a party or is threatened to be made a party to any action,
except an action by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving
as a director, officer, employee or agent of any other person at our request, against expenses actually and reasonably incurred
by him in connection with the action, suit or proceeding if he: (i) is not liable for breach of his fiduciary duties as a director
or officer pursuant to Nevada Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed
to be in or not opposed to our best interests and, with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.05pt; text-align: justify; text-indent: -18.05pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18.05pt">(b)</TD><TD STYLE="text-align: justify">We may indemnify any person who was or is a party or is threatened to be made a party to any action
by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving as a director, officer,
employee or agent of any other person at our request, against expenses actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he: (i) is not liable for breach of his fiduciary duties pursuant to Nevada
Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to our
best interest.&nbsp;&nbsp;We may not indemnify him for any claim, issue or matter as to which he has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to us or for amounts paid in settlement to us,
unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines
upon application that in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.05pt; text-align: justify; text-indent: -18.05pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18.05pt">(c)</TD><TD STYLE="text-align: justify">To the extent that our director, officer, employee or agent has been successful on the merits or
otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein, we are required to
indemnify him against expenses, including attorneys&rsquo; fees actually and reasonably incurred by him in connection with the
defense.</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Articles of Incorporation and Bylaws
provide for elimination of any liability of our directors and officers and indemnity of our directors and officers to the fullest
extent permitted by Nevada law.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The above-described provisions relating
to the exclusion of liability and indemnification of directors and officers are sufficiently broad to permit the indemnification
of such persons in certain circumstances against liabilities arising under the Securities Act.&nbsp;&nbsp;Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors and officers and to persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.</P>

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

<!-- Field: Page; Sequence: 33; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item. 15 Recent Sales Of Unregistered
Securities.</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Set forth below is information regarding
securities sold by us within the past three years that were not registered under the Securities Act:</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 11, 2012, the Company issued
1,000,000 shares of common stock to Dan Ferris, the President of the Company, pursuant to the terms of his Employment Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 28, 2012, we issued 200,000 shares
of common stock to Jaramillo pursuant to the JV Agreement dated January 26, 2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 21, 2012, we completed a private
placement of sale of 625,000 shares of our common stock to North American. We sold the shares at a price of $0.40 per share, resulting
in total proceeds of approximately $250,000 to the Company. The sale of the shares to North American represents the fifth sale
of common stock under the North American Investment Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 13, 2012, we completed a private
placement of sale of 625,000 shares of our common stock to North American. We sold the shares at a price of $0.48 per share, resulting
in gross proceeds of approximately $300,000 to the Company. The sale of shares to North American represents the fourth sale of
common stock under the North American Investment Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A portion of the proceeds of both private
placements have been or will be used to fund the exploration and development of the Concessions, according to a work plan established
for the La Candelaria project, and to make the annual payments for the property and concession taxes associated with the project.
The Company will also use the proceeds to commence payments in connection with the JV Agreement, such as shipping, trucking and
on-site wash plant construction, and other expenses under the work plan established for the Tailings project. Finally, a portion
of the proceeds will be used for general corporate expenses associated with the Company&rsquo;s exploration and development activities.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 30, 2012, we issued 100,000
shares of common stock to Jaramillo pursuant to the JV Agreement dated January 26, 2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 27, 2011, we sold 273,972 shares
of our common stock to North American for gross proceeds of $200,000 pursuant to a put notice delivered under the North American
Investment Agreement. The proceeds were used to fund the Work Plan related to the La Candelaria project, for expenses related to
the letter of intent for the Ocampo Property, and other operating expenses incurred by the Company.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 31, 2011, we entered into an
agreement with a consultant to perform certain consulting services. The contract calls for the consultant 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 our common stock. The fair market value of the common stock on the date of grant was $124,500. 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.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 24, 2011, we sold 204,081 shares
of our common stock to North American for gross proceeds of $200,000 pursuant to a put notice delivered under the North American
Investment Agreement. The proceeds were used to fund the Work Plan related to the La Candelaria project, for expenses related to
the letter of intent for the Ocampo Property, and other operating expenses incurred by the Company.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 14, 2011, we issued 238,095
shares of our common stock to North American for gross proceeds of $200,000 pursuant to a put notice delivered under the North
American Investment Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 17, 2011, we entered into an
agreement to issue 300,000 shares of our common stock to Gonzalez in accordance with certain option agreement. The fair market
value of the common stock was $303,000 on the date of issuance.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 17, 2011, we entered into an
agreement to issue 125,000 shares of our common stock to American Gold as repayment of the $125,000 that American Gold paid to
Gonzalez in connection with certain option agreement. The shares were issued in the name of North American with the agreement of
American Gold. The fair market value of the common stock was $126,250 on the date of issuance, September 15, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 29, 2011, we entered into an
agreement to issue 100,000 units to North American in a private placement, with each unit consisting of one share of our common
stock and one warrant to purchase an equal amount of share of our common stock at $1.20 per share exercisable at any time until
August 29, 2014, for cash proceeds of $100,000. The relative fair market value of the warrants on the date of issuance was $44,000.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 30, 2011, we entered into an agreement
to issue 100,000 units to North American Gold Corp. in a private placement, for $1.00 per unit, with each unit consisting of one
share of common stock and one warrant to purchase an equal amount of share of common stock at $1.20 per share exercisable at any
time until June 30, 2014, for cash proceeds of $100,000. The fair market value of the Warrants on the date of issuance was $15,467.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 13, 2011, the Company and New
World executed a Redemption Agreement, whereby we redeemed all of the shares of common stock and the warrants that New World owned
(consisting of the 12,000,000 shares of common stock and warrants to purchase 12,000,000 shares of common stock obtained in private
placements of Units), and in consideration for the common stock and warrants assigned to New World the four Promissory Notes. As
a result of the Redemption Agreement, the Company no longer holds the Promissory Notes, and New World owns no shares of common
stock or other securities of the Company.</P>

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

<!-- Field: Page; Sequence: 34; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 3, 2011, we issued 3,000,000
units to New World in a private placement, with each unit consisting one share of our common stock and one warrant to purchase
a share of our common stock at $0.0625 per share exercisable at any time until January 3, 2014, for cash proceeds of $150,000.
On January 6, 2011, the Company completed a private placement of an additional 3,000,000 units to New World on similar terms, for
cash proceeds of $150,000. The relative fair value of the warrants issued was $46,000. All shares of common stock and warrants
issued to New World have been redeemed.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 3, 2010, we issued 6,000,000
units to New World in a private placement, with each unit consisting of one share of our common stock and one warrant to purchase
a share of our common stock at $0.0625 per share exercisable at any time within 3 years, for cash proceeds of $300,000. The relative
fair value of the warrants issued was $46,500.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>The above securities were not registered
under the Securities Act.&nbsp;&nbsp;These securities qualified for exemption under Regulation S promulgated under the Securities
Act. We made this determination based on the representations of the investors, which included, in pertinent part, that such shareholders
were not a &ldquo;U.S. person&rdquo; as that term is defined in Rule 902(k) of Regulation S under the Act, and that such shareholders
were acquiring our common stock, for investment purposes for their own respective accounts and not as nominees or agents, and not
with a view to the resale or distribution thereof, and that the shareholders understood that the shares of our common stock may
not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.</I></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 16. Exhibits and Financial Statement
Schedules </B></P>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="width: 9%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Exhibit&nbsp;No.</TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 90%; border-bottom: black 1pt solid; font-weight: bold">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Incorporation of Keyser Resources Incorporated (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>By-laws of Keyser Resources Incorporated (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated Articles of Incorporation (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>Legal Opinion of Anslow &amp; Jaclin, LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.1</TD>
    <TD>&nbsp;</TD>
    <TD>Declaration of Trust (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.2</TD>
    <TD>&nbsp;</TD>
    <TD>Option Agreement with Bearclaw Capital Corporation&nbsp; (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.3</TD>
    <TD>&nbsp;</TD>
    <TD>Assignment Agreement by and among the Company, American Gold Holdings, Ltd. and Homero Bustillos Gonzalez dated as of June 10, 2011 (3)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.4</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement dated July 12, 2011, between the Company and Dan M. Ferris (3)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.6</TD>
    <TD>&nbsp;</TD>
    <TD>Investment Agreement between North American Gold Corp. and the Company dated August 29, 2011(4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.7</TD>
    <TD>&nbsp;</TD>
    <TD>Press Release dated August 29, 2011(4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.8</TD>
    <TD>&nbsp;</TD>
    <TD>Option Agreement between American Gold Holdings, Ltd. and Homero Bustillos Gonzales dated January 11, 2011 (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.9</TD>
    <TD>&nbsp;</TD>
    <TD>Consulting Agreement between the Company and Adam Whyte dated October 31, 2011 (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.10</TD>
    <TD>&nbsp;</TD>
    <TD>First Amendment to the Investment Agreement dated November 9, 2011, between the Company and North American Gold Corp. (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.11</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment Agreement dated January 10, 2012, between the Company and Homero Bustillos Gonzales (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.12</TD>
    <TD>&nbsp;</TD>
    <TD>Joint Venture Agreement between Amiko Kay, S. de R.L. de C.V. and Miguel Angel Jaramillo Tapia dated January 26, 2012 (7)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.13</TD>
    <TD>&nbsp;</TD>
    <TD>Investment Agreement dated April 27, 2012, between Lone Star Gold, Inc. and Fairhills Capital Offshore Ltd. (executed on April 30, 2012) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.14</TD>
    <TD>&nbsp;</TD>
    <TD>Registration Rights Agreement dated April 30, 2012 between Lone Star Gold, Inc. and Fairhills Capital Offshore Ltd. (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">10.15</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment No. 1 to Investment Agreement dated June 25, 2012, between Lone Star Gold, Inc. and Fairhills Capital Offshore Ltd.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">21.1</TD>
    <TD>&nbsp;</TD>
    <TD>List of Subsidiaries of the Registrant</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">23.1</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Consent of LBB &amp; Associates Ltd., LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">23.2</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Consent of Seale and Beers, CPAs</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">23.3</TD>
    <TD>&nbsp;</TD>
    <TD>Consent of Anslow &amp; Jaclin, LLP (included in Exhibit 5.1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">101.INS</TD>
    <TD>&nbsp;</TD>
    <TD>XBRL Instance Document</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">101.SCH</TD>
    <TD>&nbsp;</TD>
    <TD>XB <FONT STYLE="font: 10pt Times New Roman, Times, Serif">RL Taxonomy Extension Schema Document</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">101.CAL</TD>
    <TD>&nbsp;</TD>
    <TD>XBRL Taxonomy Extension Calculation Linkbase Document</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">101.DEF</TD>
    <TD>&nbsp;</TD>
    <TD>XBRL Taxonomy Extension Definition Linkbase Document</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">101.LAB</TD>
    <TD>&nbsp;</TD>
    <TD>XBRL Taxonomy Extension Label Linkbase Document</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">101.PRE</TD>
    <TD>&nbsp;</TD>
    <TD>XBRL Taxonomy Extension Presentation Linkbase Document</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Incorporated by reference to the Company&rsquo;s Registration
Statement on Form S-1 filed on May 28, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Incorporated by reference to the Company&rsquo;s 10-Q filed
on May 12, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) Incorporated by reference to the Company&rsquo;s 10-Q filed
August 22, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4) Incorporated by reference to the Company&rsquo;s Current
Report on Form 8-K filed on August 29, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(5) Incorporated by reference to the Company&rsquo;s Quarterly
Report on Form 10-Q filed on November 10, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(6) Incorporated by reference to the Company&rsquo;s Current
Report on Form 8-K filed on January 17, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(7) Incorporated by reference to the Company&rsquo;s Current
Report on Form 8-K filed on February 1, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(8) Incorporated by reference to the Company&rsquo;s Quarterly
Report on Form 10-Q filed on May 14, 2012.</P>

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

<!-- Field: Page; Sequence: 35; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 17. Undertakings.</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Undertaking Required by Item 512 of Regulation
S-K.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(a) The undersigned registrant hereby undertakes:</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
to file, during any period in which it offers or sells securities are being made, a post-effective amendment to this Registration
Statement to:</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
include any prospectus required by Section 10(a)(3) of the Securities Act;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the &ldquo;Calculation of Registration Fee&rdquo; table in the effective registration statement; and</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
of this rule do not apply if the registration statement is on Form S-8, and the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Exchange Act that are incorporated by reference in the registration statement; and paragraphs (a)(1)(i),
(a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the Exchange Act that are incorporated by reference in
the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is not part of the registration
statement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provided
further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is for an offering of asset-backed
securities on Form S-1 or Form S-3, and the information required to be included in a post-effective amendment is provided pursuant
to item 1100(c) of Regulation AB.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the initial bona fide offering.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(b) For determining liability of the registrant
under the Securities Act to any purchaser in the initial distribution of the securities, the registrant undertakes that in a primary
offering of securities of the registrant pursuant to this registration statement, regardless of the underwriting method used to
sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such
purchaser:</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
Any preliminary prospectus or prospectus of the registrant relating to the offering required to be filed pursuant to Rule 424;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
Any free writing prospectus relating to the offering prepared by or on behalf of the registrant or used or referred to by the registrant;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
The portion of any other free writing prospectus relating to the offering containing material information about the registrant
or its securities provided by or on behalf of the registrant; and</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)
Any other communication that is an offer in the offering made by the registrant to the purchaser.</P>

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

<!-- Field: Page; Sequence: 36; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(c) Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to
the foregoing provisions, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(d) That, for the purpose of determining
liability under the Securities Act to any purchaser:</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the registrant is relying on Rule 430B:</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Each prospectus filed by the registrant pursuant to 424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration statement; and</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of
the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with
a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date;
or</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating
to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that is part of a registration statement or made in a
document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately
prior to such date of first use.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the registrant is relying on Rule 430A:</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the
time it was declared effective.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.</P>

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

<!-- Field: Page; Sequence: 37; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Albuquerque, State of New Mexico, on July 13, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&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>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">LONE STAR GOLD, INC.</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 51%">&nbsp;</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 43%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: white 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: white 1pt solid">By:</TD>
    <TD STYLE="border-bottom: black 1pt solid">/s/&nbsp;Daniel M. Ferris</TD>
    <TD STYLE="border-bottom: white 1pt solid">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">Name:&nbsp;Daniel M. Ferris</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Title:&nbsp;President, Chief Executive Officer and</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Financial Officer</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&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: 38%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Signature</TD>
    <TD STYLE="width: 5%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 33%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Title</TD>
    <TD STYLE="width: 5%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 19%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Date</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid">/s/ Daniel M. Ferris</TD>
    <TD>&nbsp;</TD>
    <TD>President, Chief Executive Officer</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>July 13, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Daniel M. Ferris</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Financial Officer and Director</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 38; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Consolidated Balance Sheets</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">March 31</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">December 31,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">(unaudited)</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current Assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">150,554</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">215,737</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Prepaid expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,313</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,238</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">152,867</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">217,975</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">43,985</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46,325</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Mining assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">146,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">25,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">342,852</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">289,300</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">LIABILITIES AND STOCKHOLDERS EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current Liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">31,779</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">21,767</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,698</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Due to related party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">38,910</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">38,910</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,689</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">74,375</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,689</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">74,375</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Commitments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stockholders Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common stock, 150,000,000 shares authorized, $0.001 par value; 88,141,068 and 116,791,068 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">88,141</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">116,791</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,687,179</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,812,532</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deficit accumulated during the exploration stage</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(2,485,551</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(1,697,717</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Total Lone Star Gold, Inc. Stockholders Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">289,769</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">231,606</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Noncontrolling interest in subsidiary</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(17,606</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(16,681</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total Stockholders Equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">272,163</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">214,925</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total Liabilities and Stockholders Equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">342,852</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">289,300</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(The Accompanying Notes are an Integral
Part of These Financial Statements)</P>

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

<!-- Field: Page; Sequence: 39; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Consolidated Statements of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(unaudited)</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Accumulated from</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">November 26,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">2007 (Inception)</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">For the three months ended</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">through</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">March 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">March 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating Expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt; width: 55%">General and administrative</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">152,064</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">18,416</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">773,310</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Exploration costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">356,696</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">909,894</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Management fees</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">279,999</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">836,453</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Operating Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(788,759</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(18,416</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(2,519,657</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Other income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,397</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,839</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Gain on settlement of note receivable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">5,161</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total other income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">7,397</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">15,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Loss before income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(788,759</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(11,019</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(2,504,657</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Provision for Income Tax</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net Loss for the Period</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(788,759</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,019</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,504,657</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss attributable to noncontrolling interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">925</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">19,106</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss attributable to Lone Star Gold, Inc.</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(787,834</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(11,019</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(2,485,551</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net Loss Per Share - Basic and Diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(0.01</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">(0.00</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Weighted Average Common Shares Outstanding</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">91,727,606</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">126,895,820</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(The Accompanying Notes are an Integral
Part of These Financial Statements)</P>

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

<!-- Field: Page; Sequence: 40; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Consolidated Statements of Cash Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(unaudited)</B>&nbsp;</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Accumulated from</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">November 26,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">For the</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">For the</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">2007</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Three Months</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Three Months</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">(Inception)</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Ended</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Ended</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">trhough</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">March 31,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">March 31,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">March 31,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating Activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 55%; text-align: left; padding-left: 9pt">Net loss</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(788,759</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(11,019</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(2,504,657</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Depreciation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,340</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,192</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Stock based compensation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">249,999</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">849,973</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Shares issued for exploration expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">429,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Gain on redemption of common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,161</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(75</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,313</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Interest receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,397</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,839</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in; padding-bottom: 1pt">Accounts payable and accrued liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(3,686</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">16,072</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">31,779</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Net Cash Used In Operating Activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(540,181</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,344</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,205,776</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Investing Activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Purchase of property and equipment and mining assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(75,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(149,177</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Note receivable extended to Related Party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(295,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(585,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Net Cash Used in Investing Activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(75,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(295,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(734,177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Financing Activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">Redemption of shares</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Proceeds from advances related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">56,484</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Proceeds from sale of common stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">550,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">300,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,034,025</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Net Cash Provided By Financing Activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">549,998</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">300,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,090,507</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net change in Cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(65,183</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,656</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">150,554</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Cash - Beginning of Period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">215,737</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">9,977</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Cash - End of Period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">150,554</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,633</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">150,554</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Supplemental Disclosures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Interest paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Income taxes paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Non Cash Transactions:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Redemption of common stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">600,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Forgiveness of advances related party</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,574</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Shares issued for mining assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">46,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">46,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(The Accompanying Notes are an Integral
Part of These Financial Statements)</P>

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

<!-- Field: Page; Sequence: 41; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Consolidated Statements of Stockholders&rsquo; Equity (Deficit)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>For the Period from November 26, 2007 (Inception) to March
31, 2012</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 8pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Deficit</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Accumulated</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Additional</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">During the</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Non-</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Common Stock</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Paid-in</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Exploration</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">controlling</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Par Value</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Stage</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Interests</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">Balance November 26, 2007 (Date of Inception)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss for the period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Balance December 31, 2007</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common shares issued for cash in private placement:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 34%">at $0.001 per share on January 19, 2008</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">60,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">60,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">(57,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">3,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>at $0.015 per share on April 28, 2008</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,699,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,700</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,175</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,525</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>at $0.05 per share on December 24, 2008</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,600,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,600</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,900</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">56,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss for the year (Restated)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(13,983</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(13,983</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Balance December 31, 2008 (Restated)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,299,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(31,275</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,983</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,042</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss for the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(93,034</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(93,034</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Balance December 31, 2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,299,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(31,275</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(107,017</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(22,992</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sale of common stock for cash and warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">294,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Forgiveness of advances related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,574</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,574</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss for the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(61,049</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(61,049</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Balance December 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">121,299,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">121,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">280,299</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(168,066</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">233,533</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Sale of common stock for cash and warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,916,148</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,916</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,093,084</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,100,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Redemption of shares</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,000,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(588,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(600,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Formation of subsidiary</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">150,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">150</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">598,324</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">598,474</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Shares issued for exploration costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">425,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">425</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">428,825</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">429,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss for the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(1,529,651</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(18,181</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(1,547,832</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Balance December 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">116,791,068</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">116,791</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,812,532</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,697,717</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16,681</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">214,925</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Sale of common stock for cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,250,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,250</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">548,750</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">550,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">249,999</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">249,999</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Shares issued for mining assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45,900</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Cancellation of shares</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,000,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss for the period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(787,834</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(925</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(788,759</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Balance March 31, 2012 (unaudited)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">88,141,068</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">88,141</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,687,179</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2,485,551</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(17,606</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">272,163</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(The Accompanying Notes are an Integral
Part of These Financial Statements)</P>

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

<!-- Field: Page; Sequence: 42; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 31, 2012</B></P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">1.</TD><TD>Nature of Operations and Continuance of Business</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Lone Star Gold, Inc. (the &ldquo;Company&rdquo;
or &ldquo;Lone Star&rdquo;), formerly known as Keyser Resources, Inc. (&ldquo;Keyser&rdquo;), was incorporated in the State of
Nevada on November 26, 2007. The Company is an Exploration Stage Company as defined by Financial Accounting Standards Board (&ldquo;FASB&rdquo;)
Accounting Standards Codification (&ldquo;ASC&rdquo;) 915,<I> Development Stage Entities.</I></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">These financial statements have
been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The Company has not generated any revenue since inception and has never paid any dividends and
is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a
going concern is dependent upon the continued financial support from its shareholders and other investors, the ability of the Company
to obtain any necessary financing to continue operations, and the attainment of profitable operations. As at March 31, 2012, the
Company has accumulated losses of $2,485,551 since inception. These factors raise substantial doubt regarding the Company&rsquo;s
ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification
of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">The unaudited financial statements
as of March 31, 2012 and for the three months ended March 31, 2012 and 2011, and for the period November 26, 2007 (inception) to
March 31, 2012 have been prepared in accordance with accounting principles generally accepted in the United States for interim
financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited financial statements have
been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the financial position as of March 31, 2012 and the results of operations and cash flows
for the periods ended March 31, 2012 and 2011, and for the period November 26, 2007 (inception) to March 31, 2012. The financial
data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited.
The results for the three month period ended March 31, 2012 is not necessarily indicative of the results to be expected for any
subsequent quarter of the entire year ending December 31, 2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Certain information and footnote
disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These
unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year
ended December 31, 2011 as included in our Form 10-K filed with the Securities and Exchange Commission.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Principles of consolidation</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">The consolidated financial statements
include the accounts of the Company and its subsidiaries.&nbsp;&nbsp;All intercompany accounts and transactions have been eliminated
in consolidation.</P>

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

<!-- Field: Page; Sequence: 43; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 31, 2012</B></P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">2.</TD><TD>Related Party Transactions</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">All related party transactions
are recorded at the exchange amount which is the value established and agreed to by the related party.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">An advance from Maurice Bideaux,
former chief executive officer and director, in the amount of $38,910, remains unpaid.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On January 13, 2012, the Company
agreed to redeem certain shares of the common stock, 0.001 par value, of the Company (the Common Stock&rdquo;) held by two of its
principal shareholders. The Company redeemed 7,500,000 shares of Common Stock owned by Dan Ferris, for total consideration of
$1.00. Mr. Ferris is the sole officer and director of the Company. In addition, the Company redeemed 22,500,000 shares of Common
Stock held by John G. Rhoden, for total consideration of $1.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">After redemption, Mr. Ferris
owns 7,500,000 shares of Common Stock, and Mr. Rhoden owns 22,500,000 shares of Common Stock, representing 8.64% and 25.92%, respectively,
of the issued and outstanding shares of Common Stock. The redeemed shares of Common Stock were retired and restored to the status
of authorized and unissued shares, and not held in treasury. The Company, Mr. Ferris and Mr. Rhoden agreed to effect the redemption
in order to reduce the number of issued and outstanding shares of Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">The redemption of the stock
formerly owned by Mr. Ferris has been reflected on the books and records of the Company&rsquo;s stock transfer agent. The stock
transfer agent has not yet recorded the redemption of the stock formerly owned by Mr. Rhoden due to a delay caused by
his inability to locate and deliver one of his stock certificates. However, the number of issued and outstanding shares reported
by the Company in this Quarterly Report gives effect to this redemption.</P>

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

<!-- Field: Page; Sequence: 44; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 31, 2012</B></P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">3.</TD><TD>Equity Line of Credit</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On August 29, 2011, the Company
and North American Gold Corp., a company organized under the laws of the Marshall Islands (&ldquo;North American&rdquo;), executed
an Investment Agreement (the &ldquo;Investment Agreement&rdquo;). Under the Investment Agreement, North American agreed to invest
up to $15,000,000 to purchase shares of&nbsp;&nbsp;the Company&rsquo;s $0.001 par value common stock (the &ldquo;Common Stock&rdquo;),
in increments of $100,000 or an integral multiple thereof, at the Company&rsquo;s option at any time through August 31, 2013 (the
&ldquo;Open Period&rdquo;). During the Open Period, the Company has the option to deliver a put notice (a &ldquo;Put Notice&rdquo;)
to North American that states the number of shares of Common Stock the Company proposes to sell to North American (the &ldquo;Put
Shares&rdquo;), and the price per share for those Put Shares (the &ldquo;Share Price&rdquo;). The Share Price is equal to 90% of
the volume weighted average closing price of the Common Stock for the 20 Trading Days immediately preceding the date on which the
Company sends the Put Notice. The closing for the sale of the Put Shares pursuant to a Put Notice shall take place no later than
10 Trading Days after the date on which the Company sends such Put Notice. A &ldquo;Trading Day&rdquo; is defined as a day in which
the NASDAQ stock market or OTC Bulletin Board is open for business.&nbsp;&nbsp;North American has the right to refuse to close
any requested sale of Put Shares because of negative market conditions affecting the Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">The original Investment Agreement
required the Company to use the net proceeds from the sale of the Put Shares to fund the exploration and development of gold and
silver mining concessions in the La Candelaria project in Chihuahua, Mexico. On November 9, 2011, the Company and North American
executed a First Amendment&nbsp;to Investment Agreement, which states that the Company shall use the net proceeds from the sale
of Put Shares to fund operating expenses, working capital and general corporate activities related ot the exploration and development
of gold and silver mining concessions held by the Company and/or a subsidiary in relation to the La Candelaria property, the Ocampo
property, or any other properties agreed upon in advance by the Company and North American. The Company and North American have
further agreed that the Company may use the proceeds of the Put Shares to fund operations related to the Mine Tailings project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">The sales of Put Shares will
not be registered under the Securities Act of 1933, but will be issued under an exemption from the registration requirements of
the Securities Act of 1933. Any Put Shares issued and sold to North American will be &ldquo;restricted securities&rdquo; and will
be subject to applicable restrictions on resale.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">4.</TD><TD>Equity</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On January 13, 2012, the Company
agreed to redeem certain shares of Common Stock held by two of its principal shareholders. The Company agreed to redeem 7,500,000
shares of Common Stock owned by Dan Ferris, for total consideration of $1.00. In addition, the Company agreed to redeem 22,500,000
shares of Common Stock held by John G. Rhoden, for total consideration of $1.00. The redeemed shares of Common Stock are to be
retired and restored to the status of authorized and unissued shares, and not held in treasury. (See Note 2)</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On January 30, 2012, the
Company issued 100,000 shares of its $0.001 par value Common Stock to Miguel Angel Jaramillo Tapia in accordance with the
JV agreement (See Note 5). The fair market value of the shares on the date of issuance was $46,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On February 13, 2012, the Company
sold 625,000 shares of its $0.001 par value Common Stock to North American for gross proceeds of $300,000 pursuant to a Put Notice
delivered under the Investment Agreement.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On March 21, 2012, the
Company sold 625,000 shares of its $0.001 par value Common Stock to North American for gross proceeds of $250,000 pursuant to
a Put Notice delivered under the Investment Agreement.</P>

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

<!-- Field: Page; Sequence: 45; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 31, 2012</B></P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">4.</TD><TD>Equity (cont&rsquo;d)</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt">A summary of warrant activity for the quarter ended
March 31, 2012 is presented below:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 44pt">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">average</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">average</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">remaining</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Aggregate</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">exercise</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">contractual</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">intrinsic</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">price</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">life (years)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">value</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%">Outstanding December 31, 2011</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">200,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1.20</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Forfeited or cancelled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Expired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Outstanding March 31, 2012</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.20</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">2.33</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">59,467</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<!-- Field: Page; Sequence: 46; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 31, 2012</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">5.</TD><TD>Commitments</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On October 31, 2011, the Company
entered into an agreement with a consultant to perform&nbsp;consulting services&nbsp;as requested by the Company.&nbsp;The contract
calls for the consultant 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 $0.001 par value common stock. The fair market value of the
common stock on the date of grant was $124,500. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify"><B><I>La Candelaria Property</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On May 31, 2011, Metales was
formed, with the Company owning 70% of the issued and outstanding shares of capital stock.&nbsp;&nbsp;The remaining 30% of the
issued and outstanding capital stock of Metales was issued to Gonzalez.&nbsp;&nbsp;On June 10, 2011, Gonzalez assigned the Concessions
to Metales.&nbsp;&nbsp;The Concessions cover 800 hectares, or approximately 1,976 acres.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Gonzalez transferred the Concessions
to Metales pursuant to an agreement with&nbsp;American Gold.&nbsp;&nbsp;&nbsp;&nbsp;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 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. Pursuant to the
Assignment Agreement (which has an effective date of June 10, 2011), the Company has taken or will take the following actions in
connection with transfer of the Concessions from Gonzalez&nbsp;to Metales:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 66.6pt"></TD><TD STYLE="width: 34.25pt">1.</TD><TD STYLE="text-align: justify">The Company issued 125,000 shares of its $0.001 par value common stock to North American as repayment
of the $125,000 that American Gold paid Gonzalez in connection with Option Agreement (the &ldquo;American Gold Shares&rdquo;) on
August 17, 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 100.85pt; text-align: justify; text-indent: -34.25pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 66.6pt"></TD><TD STYLE="width: 34.25pt">2.</TD><TD STYLE="text-align: justify">The Company issued 300,000 shares of its $0.001 par value common stock, with a fair value of $303,000,
to Gonzalez on September 16, 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 100.85pt; text-align: justify; text-indent: -34.25pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 66.6pt"></TD><TD STYLE="width: 34.25pt">3.</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: 0pt 0 0pt 100.85pt; text-align: justify; text-indent: -34.25pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 66.6pt"></TD><TD STYLE="width: 34.25pt">4.</TD><TD STYLE="text-align: justify">The Company paid Gonzalez an additional $125,000 during the three months ended March 31, 2012.</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">The American Gold Shares were
issued in the name of&nbsp;North American, with the agreement of American Gold.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Gonzalez retains a 2% Net Smelter
Returns Royalty on the Property.&nbsp;&nbsp;Metales is obligated to undertake work necessary to bring the existing geological survey
on the Property up to NJ 43-101 standards.&nbsp;&nbsp;During the quarter ended March 31, 2012, the Company advanced $50,000 under
the Work Plan for the second year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">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.&nbsp;&nbsp;Gonzalez has waived the exercise of his anti-dilution rights with respect to issuances of common
stock to North American under the Investment Agreement.&nbsp;&nbsp;In addition, the Company is obligated to issue 1,000,000 shares
of its $0.001 par value 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.&nbsp;&nbsp;Finally, 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: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 47; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 31, 2012</B></P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">5.</TD><TD>Commitments (cont&rsquo;d)</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify"><B><I>Employment Agreement</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On July 12, 2011, the
Company entered into an Employment Agreement with Dan Ferris regarding his position as President of the
Company.&nbsp;&nbsp;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;).&nbsp;&nbsp;Mr. Ferris will be paid a base salary of $120,000 per year during the Term.&nbsp;&nbsp;Mr.
Ferris will also be entitled to receive 3,000,000 shares of the Company&rsquo;s $0.001 common stock (&ldquo;Common Stock&ldquo;), which will be issued in
three equal increments of 1,000,000 shares over the first 3 years of the Term.&nbsp;&nbsp;The shares of Common Stock will not
be registered under the Securities Act, and will be subject to restrictions on transfer.&nbsp;&nbsp;Therefore, Mr. Ferris
will receive 1,000,000 shares of Common Stock on July 12 of each of the years 2012, 2013, and 2014.&nbsp;&nbsp;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 at any time for &ldquo;cause&rdquo; by the
Company.&nbsp;&nbsp;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&nbsp;been issued&nbsp;as of the date of
resignation or termination.&nbsp;&nbsp;If Mr. Ferris&rsquo; employment is terminated for any other reason, he would receive
the full 3,000,000 shares of Common Stock.&nbsp;&nbsp;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.&nbsp;&nbsp;The fair market value of the stock grant on the date of the Employment Agreement
was $3,000,000.&nbsp;&nbsp;The Company recognized $249,999 in expense related to the stock grant during the three months
ended March 31, 2012.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify"><B><I>Tailings Project</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 30.8pt; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">On January 26, 2012, the Company,
acting through a newly-formed subsidiary, entered into a Joint Venture Agreement (the 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 (&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 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: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; 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 refuse remaining after ore has been processed. The joint venture between the Amiko Kay and Jaramillo (the 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; 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 on December 5, 2011, and another $75,000 when it signed the
JV Agreement in the quarter ending March 31, 2012. 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: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<!-- Field: Page; Sequence: 48; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 31, 2012</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">5.</TD><TD>Commitments (cont&rsquo;d)</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; 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: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">(a)&nbsp;&nbsp;&nbsp;&nbsp;$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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">(b)&nbsp;&nbsp;&nbsp;&nbsp;$750,000
within the second year of the Joint Venture for the construction of a heap leach system and floatation plant on the Property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; 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: 0pt 0 0pt 43.9pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; 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: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">(a)&nbsp;&nbsp;&nbsp;&nbsp;100,000
shares of Common Stock, which have been issued to Jaramillo.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">(b)&nbsp;&nbsp;&nbsp;&nbsp;200,000
shares of Common Stock within 6 months of signing the JV Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 43.9pt; text-align: justify; text-indent: 0.25in">(c)&nbsp;&nbsp;&nbsp;&nbsp;300,000
shares of Common Stock within 12 months of signing the JV Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; 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 Agreement, with respect to the shares of Common Stock to be issued under the JV Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; 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 Amiko Kay and 35%
of the net revenues paid to Jaramillo. It is anticipated that the portion to be paid to Amiko Kay 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.
During the three months ended March 31, 2012, the Company made payments totaling $160,000 towards the Work Commitment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; 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. Amiko Kay 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: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">Amiko Kay 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 Amiko Kay. Finally, Jaramillo will provide quarterly financial reports to
Amiko Kay.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; 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 Amiko Kay 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: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<!-- Field: Page; Sequence: 49; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 31, 2012</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">5.</TD><TD>Commitments (cont&rsquo;d)</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; text-align: justify">The JV Agreement will terminate
upon completion of processing the Tailings, as determined by Amiko Kay 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: 0pt 0 0pt 44pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 44pt; 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 Amiko Kay).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">6.</TD><TD>Subsequent events</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-align: justify">On April 30, 2012, the
Company entered into an Investment Agreement (the &ldquo;Fairhills Investment Agreement&rdquo;) with Fairhills Capital
Offshore Ltd., a Cayman Islands exempted company (the &ldquo;Investor&rdquo;), pursuant to which the Investor has agreed to
purchase the shares of Common Stock for an
aggregate purchase price of up to $24,000,000. The Fairhills Investment Agreement is attached as Exhibit 10.13 to this
Quarterly Report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-align: justify">The Investment Agreement provides
that the Company may, from time to time during the Open Period (defined below), in its sole discretion, deliver a Put Notice to
the Investor which states the dollar amount that the Company intends to sell to the Investor on a date specified in the Put Notice
(the &ldquo;Put&rdquo;). The Company will be entitled to Put to the Investor (the &ldquo;Put Amount&rdquo;) the number of shares
of Common Stock equal to two hundred percent (200%) of the average daily volume of the Common Stock for the ten consecutive trading
days immediately prior to date of the applicable Put Notice. The purchase price per share to be paid by the Investor for each Put
Amount will be calculated at a twenty-four and a half percent (24.5%) discount to the lowest volume weighted average price of the
Common Stock reported by Bloomberg, L.P. during the ten (10) consecutive trading days immediately prior to the Investor&rsquo;s
receipt of the Put Notice. The Open Period begins on the trading day after a registration statement is declared effective as to
the Common Stock to be subject to the Put, and ends thirty-six (36) months after such date, unless earlier terminated in accordance
with the Investment Agreement. The Company has reserved 30,000,000 shares of its Common Stock for issuance to the Investor under
the Investment Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-align: justify">The Company will use the proceeds
from the sale of the Common Stock under the Fairhills Investment Agreement for general corporate and working capital purposes and
acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be
in the best interest of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-align: justify">In connection with
the Fairhills Investment Agreement, the Company and the Investor entered into a Registration Rights Agreement. Under
the Registration Rights Agreement, the Company will use its commercially reasonable efforts to file, within twenty-one (21)
days of the date of the Agreement, a Registration Statement on Form S-1 covering the resale of the Common Stock subject to
the Investment Agreement. The Company intends to initially register 30,000,000 shares of Common Stock for resale. The Company
has agreed to use all commercially reasonable efforts to have the Registration Statement declared effective by the SEC within
one hundred and twenty (120) calendar days after the date of the Registration Rights Agreement.</P>

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

<!-- Field: Page; Sequence: 50; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Lone Star Gold Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(formerly known as Keyser Resources, Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(An Exploration Stage Company)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">December 31, 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&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: 87%; text-autospace: none">&nbsp;</TD>
    <TD STYLE="width: 13%; border-bottom: black 1pt solid; text-autospace: none; text-align: center">Index</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none">Reports of Independent Registered Public Accounting Firm</TD>
    <TD STYLE="text-autospace: none; text-align: center">F&ndash;2</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none">Consolidated Balance Sheets</TD>
    <TD STYLE="text-autospace: none; text-align: center">F&ndash;4</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none">Consolidated Statements of Operations</TD>
    <TD STYLE="text-autospace: none; text-align: center">F&ndash;5</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none">Consolidated Statements of Cash Flows</TD>
    <TD STYLE="text-autospace: none; text-align: center">F&ndash;6</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none">Consolidated Statements of Stockholders&rsquo; Equity (Deficit)</TD>
    <TD STYLE="text-autospace: none; text-align: center">F&ndash;7</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-autospace: none">Notes to the Consolidated Financial Statements</TD>
    <TD STYLE="text-autospace: none; text-align: center">F&ndash;8</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 51; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">LBB &amp; ASSOCIATES LTD., LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">10260 Westheimer Road, Suite 310</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Houston, TX 77042</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Phone: (713) 800-4343 Fax: (713) 456-2408</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><U>Report of Independent Registered Public
Accounting Firm</U></B></P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(formerly known as Keyser Resources, Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(An Exploration Stage Company)</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying consolidated
balance sheets of Lone Star Gold, Inc. (the &ldquo;Company&rdquo;) as of December 31, 2011 and 2010, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the years then ended and for the period from November
26, 2007 (inception) through December 31, 2011. These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the
statements of operations, stockholders&rsquo; deficit and cash flows for the period from November 26, 2007 (inception) to December
31, 2009, which totals reflected a deficit of $107,017 accumulated during the exploration stage. Those financial statements and
cumulative totals were audited by other auditors whose report dated April 12, 2010, expressed an unqualified opinion on those statements
and cumulative totals, and included an explanatory paragraph regarding the Company&rsquo;s ability to continue as a going concern.
Our opinion, insofar as it relates to amounts included for that period is based on the report of other independent auditors, mentioned
above.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&rsquo;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our opinion, based on our audits and
the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Lone Star Gold, Inc. as of December 31, 2011 and 2010, and the results of its operations and its cash flows
for each of the years then ended and for the period from November 26, 2007 (inception) through December 31, 2011 in conformity
with accounting principles generally accepted in the United States of America.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As discussed in Note 1 to the consolidated
financial statements, the Company's absence of significant revenues, recurring losses from operations, and its need for additional
financing in order to fund its projected loss in 2012 raise substantial doubt about its ability to continue as a going concern.
The 2011 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">/s/ LBB &amp; Associates Ltd., LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">LBB &amp; Associates Ltd., LLP</P>

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">March 22, 2012</P>

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

<!-- Field: Page; Sequence: 52; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SEALE AND BEERS, CPAs</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>PCAOB &amp; CPAB REGISTERED AUDITORS</I></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">www.sealebeers.com</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>To the Board of Directors</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>(An Exploration Stage Company)</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying balance
sheet of Keyser Resources, Inc. (An Exploration Stage Company) as of December 31, 2009, and the related statements of operations,
stockholders&rsquo; equity (deficit) and cash flows for the years ended December 31, 2009 and since inception on November 26, 2007
through December 31, 2009. These financial statements are the responsibility of the Company&rsquo;s management.&nbsp;&nbsp;Our
responsibility is to express an opinion on these financial statements based on our audits.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conduct our audits in accordance with
standards of the Public Company Accounting Oversight Board (United States).&nbsp;&nbsp;Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.&nbsp;&nbsp;An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.&nbsp;&nbsp;An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.&nbsp;&nbsp;We believe that our audits provide a reasonable basis for our opinion.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Keyser Resources, Inc. (An Exploration Stage
Company) as of December 31, 2009, and the related statements of operations, stockholders&rsquo; equity (deficit) and cash flows
for the years ended December 31, 2009 and since inception on November 26, 2007 through December 31, 2009, in conformity with accounting
principles generally accepted in the United States of America.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern.&nbsp;&nbsp;As discussed in Note 1 to the financial statements,
the Company has had a loss from operations of $93,034, an accumulated deficit of $107,017, a working capital deficit of $22,992
and has earned no revenues since inception, which raises substantial doubt about its ability to continue as a going concern.&nbsp;&nbsp;Management&rsquo;s
plans concerning these matters are also described in Note 1.&nbsp;&nbsp;The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.</P>

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

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">April 12, 2010</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>50 S. Jones Blvd. Suite 202 Las Vegas,
NV 89107 Phone: (888)727-8251 Fax: (888)782-2351</I></P>

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

<!-- Field: Page; Sequence: 53; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">Lone Star Gold Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">(formerly known as Keyser Resources,
Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">(An Exploration Stage Company)</P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December 31, <BR>2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December 31, <BR>2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current Assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; padding-left: 0.25in">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">215,737</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">9,977</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,238</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Notes and interest receivable (related party)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">291,192</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Total current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">217,975</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">301,169</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46,325</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Mining assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">25,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">289,300</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">301,169</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">LIABILITIES AND STOCKHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current Liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">21,767</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,726</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,698</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Due to related party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">38,910</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">38,910</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">74,375</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">67,636</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">74,375</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">67,636</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Commitments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stockholders&rsquo; Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Common stock, 150,000,000 shares authorized, $0.001 par value; 116,791,068 and 121,299,920&nbsp; shares issued and outstanding as of December 31, 2011 and 2010, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">116,791</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">121,300</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.25in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,812,532</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">280,299</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.25in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Deficit accumulated during the exploration stage</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,697,717</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(168,066</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Total Lone Star Gold, Inc. Stockholders&rsquo; Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">231,606</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">233,533</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Noncontrolling interest in subsidiary</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(16,681</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total Stockholders&rsquo; Equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">214,925</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">233,533</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total Liabilities and Stockholders&rsquo; Equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">289,300</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">301,169</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(The Accompanying Notes are an Integral
Part of These Financial Statements)</P>

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

<!-- Field: Page; Sequence: 54; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Lone Star Gold Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(formerly known as Keyser Resources, Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(An Exploration Stage Company)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Consolidated Statements of Operations</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">For the <BR>Year Ended <BR>December 31, <BR>2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">For the <BR>Year Ended <BR>December 31, <BR>2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Accumulated<BR>from <BR>November 26, <BR>2007 <BR>(Date of <BR>Inception) <BR>to December<BR>31, <BR>2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Revenue</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating Expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 64%; text-align: left; padding-left: 0.25in">General and administrative</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">486,741</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">62,241</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">621,246</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Exploration costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">530,925</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">553,198</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Management fees</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">543,974</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">556,454</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total Operating Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,561,640</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(62,241</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,730,898</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Other income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Interest Income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,647</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,192</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,839</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in; padding-bottom: 1pt">Gain on settlement of note receivable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">5,161</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">5,161</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total other income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,808</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,192</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Loss before income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,547,832</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(61,049</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,715,898</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Provision for Income Tax</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net Loss for the Period</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,547,832</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(61,049</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,715,898</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss attributable to noncontrolling interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">18,181</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">18,181</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss attributable to Lone Star Gold, Inc.</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,529,651</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(61,049</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,697,717</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net Loss Per Share &ndash; Basic and Diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.01</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Weighted Average Common Shares Outstanding</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">118,686,221</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">115,760,194</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(The Accompanying Notes are an Integral
Part of These Financial Statements)</P>

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

<!-- Field: Page; Sequence: 55; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Lone Star Gold Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(formerly known as Keyser Resources, Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(An Exploration Stage Company)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Consolidated Statements of Cash Flows</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">For&nbsp;the <BR>Year&nbsp;Ended <BR>December&nbsp;31,<BR>2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">For&nbsp;the <BR>Year&nbsp;Ended <BR>December&nbsp;31,<BR>2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Accumulated <BR>from <BR>November&nbsp;26, <BR>2007 <BR>(Date&nbsp;of <BR>Inception) <BR>to&nbsp;December&nbsp;31,<BR>2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating Activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 64%; text-align: left; padding-left: 9pt">Net loss for the year</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(1,547,832</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(61,049</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(1,715,898</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Depreciation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,852</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,852</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Stock based compensation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">599,974</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">599,974</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Shares issued for exploration expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">429,250</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">429,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Gain on redemption of common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,161</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,161</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.25in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,238</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(848</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,238</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Interest receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,647</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,839</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Accounts payable and accrued liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,739</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(709</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">35,465</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Net Cash Used In Operating Activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(525,063</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(62,606</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(665,595</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Investing Activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Note receivable extended to Related Party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(295,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(290,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(585,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Purchases of property and equipment and mining assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(74,177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(74,177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net Cash Used in Investing Activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(369,177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(290,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(659,177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Financing Activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Proceeds from advances &ndash; related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">56,484</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">56,484</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Proceeds from sale of common stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,100,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">300,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,484,025</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net Cash Provided By Financing Activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,100,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">356,484</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,540,509</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net change in cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">205,760</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,878</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">215,737</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Cash - Beginning of Period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,977</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,099</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Cash - End of Period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">215,737</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,977</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">215,737</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Supplemental Disclosures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Interest paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Income taxes paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Non&nbsp;Cash transactions:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Redemption of common stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">600,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">600,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 9pt">Forgiveness of advances-related party</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,574</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,574</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(The Accompanying Notes are an Integral
Part of These Financial Statements)</P>

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

<!-- Field: Page; Sequence: 56; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Lone Star Gold, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(formerly known as Keyser Resources, Inc.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(An Exploration Stage Company)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Consolidated Statements of Stockholders&rsquo; Equity (Deficit)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the Period from November 26, 2007 (Date of Inception) to
December 31, 2011</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Deficit</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Accumulated</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Additional</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">During the</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Non-</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">Common Stock</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Paid-in</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Exploration</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">controlling</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Par Value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Stage</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">Balance &ndash; November 26, 2007 (Date of Inception)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Net loss for the period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-indent: -0.1in; padding-left: 0.1in">Balance &ndash; December 31, 2007</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Common shares issued for cash in private placement:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 28%; text-indent: -0.1in; padding-left: 16.2pt">at $0.001 per share on January 19, 2008</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">60,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">60,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">(57,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">3,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.2pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.2pt">at $0.015 per share on April 28, 2008</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,699,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,700</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,175</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,525</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.2pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 16.2pt">at $0.05 per share on December 24, 2008</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,600,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,600</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,900</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">56,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Net loss for the year &ndash; (Restated)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(13,983</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(13,983</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-indent: -0.1in; padding-left: 0.1in">Balance &ndash; December 31, 2008 &ndash; (Restated)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,299,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(31,275</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,983</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,042</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Net loss for the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(93,034</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(93,034</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-indent: -0.1in; padding-left: 0.1in">Balance &ndash; December 31, 2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,299,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(31,275</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(107,017</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(22,992</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Sale of common stock for cash and warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">294,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Forgiveness of advances &ndash; related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,574</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,574</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Net loss for the year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(61,049</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(61,049</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-indent: -0.1in; padding-left: 0.1in">Balance &ndash; December 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">121,299,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">121,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">280,299</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(168,066</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">233,533</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Sale of common stock for cash and warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,916,148</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,916</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,093,084</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,100,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">Redemption of shares</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,000,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(588,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(600,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Services received in connection with formation of subsidiary</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">150,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">150</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">598,324</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">598,474</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Shares issued for exploration costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">425,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">425</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">428,825</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">429,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Net loss for the period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,529,651</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(18,181</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,547,832</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Balance &ndash; December 31, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">116,791,068</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">116,791</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,812,532</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,697,717</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(16,681</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">214,925</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(The Accompanying Notes are an Integral
Part of These Financial Statements)</P>

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

<!-- Field: Page; Sequence: 57; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">1.</TD><TD STYLE="text-align: justify">Nature of Operations and Continuance of Business</TD>
</TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Lone Star Gold, Inc. (the &ldquo;Company&rdquo;
or &ldquo;Lone Star&rdquo;), formerly known as Keyser Resources, Inc. (&ldquo;Keyser&rdquo;), was incorporated in the State of
Nevada on November 26, 2007. The Company is an Exploration Stage Company as defined by Financial Accounting Standards Board (&ldquo;FASB&rdquo;)
Accounting Standards Codification (&ldquo;ASC&rdquo;) 915,<I> Development Stage Entities.</I></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On May 10, 2011, stockholders
holding at least a majority of the issued and outstanding shares of Common Stock, acting by written consent, adopted resolutions
that approved a change in the Company&rsquo;s name from &ldquo;Keyser Resources, Inc.&rdquo; to &ldquo;Lone Star Gold, Inc.&rdquo;,
an increase in the number of authorized shares of common stock to 150,000,000 and a 20:1 forward stock split.&nbsp;&nbsp;Share
information throughout these financial statements and footnotes have been presented retroactively of the stock split.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; 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 capital stock.&nbsp;&nbsp;The remaining 30% of the issued and outstanding capital stock of Metales was
issued to Homero Bustillos Gonzalez (&ldquo;Gonzalez&rdquo;), an individual resident of Mexico.&nbsp;&nbsp;On June 10, 2011, Gonzalez
assigned to Metales eight (8) gold and silver mining concessions related to the &ldquo;La Candelaria&rdquo; property located in
the town of Guachochi, state of Chihuahua, Mexico (the &ldquo;Concessions&rdquo;).&nbsp; The Concessions cover 800 hectares, or
approximately 1,976 acres.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">These financial statements have
been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The Company has not generated any revenue since inception and has never paid any dividends and
is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a
going concern is dependent upon the continued financial support from its shareholders and other investors, the ability of the Company
to obtain any necessary financing to continue operations, and the attainment of profitable operations. As of December 31, 2011,
the Company has accumulated losses of $1,697,717 since inception. These factors raise substantial doubt regarding the Company&rsquo;s
ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification
of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">2.</TD><TD STYLE="text-align: justify">Summary of Significant Accounting Policies</TD>
</TR></TABLE>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">a)</TD><TD>Principles of consolidation</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: justify; margin-bottom: 0pt; margin-left: 0.5in">The consolidated financial statements include the
accounts of the Company and its subsidiary.&nbsp;&nbsp;All intercompany accounts and transactions have been eliminated in consolidation.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">b)</TD><TD>Non-controlling interests</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: justify; margin-bottom: 0pt; margin-left: 0.5in">Non-controlling interests represent the equity in
a subsidiary not attributable directly or indirectly to the Company, and in represented in the consolidated balance sheets as a
component of stockholders&rsquo; equity. Non-controlling interests in the results of operations of the Company are presented in
the face of the consolidated statement of operations as an allocation of the total profit or loss between non-controlling interests
and the shareholders of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: justify; margin-bottom: 0pt; margin-left: 0.5in">When the Company loses control of a subsidiary, it
is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss recognized as a component
of net income. Any interests retained in that former subsidiary at the date when control is lost is recognized at fair value and
this amount is regarded as the fair value on initial recognition of a financial asset, or, when appropriate, the cost on initial
recognition of an investment in an associated or jointly controlled entity.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">c)</TD><TD>Basis of Presentation</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">These financial statements and
related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company&rsquo;s fiscal year-end is December 31.</P>

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

<!-- Field: Page; Sequence: 58; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B>(An Exploration Stage
Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">d)</TD><TD STYLE="text-align: justify">Use of Estimates</TD>
</TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The preparation of financial
statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates
estimates and assumptions related to the recoverability of long-lived assets and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the Company&rsquo;s estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in; text-align: justify"></TD><TD STYLE="width: 0.25in; text-align: justify">e)</TD><TD STYLE="text-align: justify">Cash and Cash Equivalents</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The Company considers all highly
liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in; text-align: justify"></TD><TD STYLE="width: 0.25in; text-align: justify">f)</TD><TD STYLE="text-align: justify">Foreign Currency Translation</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The Company&rsquo;s functional
and reporting currency is the United States dollar. Occasional transactions may occur in Mexican Pesos and management has adopted
ASC 830<I> Foreign Currency Matters</I> . Monetary assets and liabilities denominated in foreign currencies are translated using
the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are
translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues
and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are
included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in; text-align: justify"></TD><TD STYLE="width: 0.25in; text-align: justify">g)</TD><TD STYLE="text-align: justify">Fair Value of Financial Instruments</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The Company&rsquo;s financial
instruments consist principally of cash and accounts payable. Pursuant to ASC 820,<I> Fair Value Measurements and Disclosures</I>
&nbsp;&nbsp;and ASC 825,<I> &nbsp;&nbsp;Financial Instruments</I> &nbsp;&nbsp;the fair value of cash equivalents is determined
based on &ldquo;Level 1&rdquo; inputs, which consist of quoted prices in active markets for identical assets. The Company believes
that the recorded values of all other financial instruments approximate their current fair values because of their nature and relatively
short maturity dates or durations.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in; text-align: justify"></TD><TD STYLE="width: 0.25in; text-align: justify">h)</TD><TD STYLE="text-align: justify">Basic and Diluted Net Loss Per Share</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The Company computes net loss
per share in accordance with ASC 260,<I> Earnings Per Share</I> which requires presentation of both basic and diluted earnings
per share (&ldquo;EPS&rdquo;) on the face of the income statement. Basic EPS is computed by dividing net loss available to common
shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred
stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the
number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti dilutive.</P>

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

<!-- Field: Page; Sequence: 59; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">i)</TD><TD STYLE="text-align: justify">Mineral Property Costs</TD>
</TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The Company has been in the
exploration stage since its formation on November 26, 2007 and has not yet realized any revenues from its planned operations. It
is primarily engaged in the acquisition, exploration and development of mineral properties. Mineral property acquisition costs
are capitalized when management has determined that probable future benefits consisting of a contribution to future cash inflows
have been identified and adequate financial resources are available or are expected to be available as required to meet the terms
of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed
as incurred if the criteria for capitalization are not met. In the event that a mineral property is acquired through the issuance
of the Company&rsquo;s shares, the mineral property will be recorded at the fair value of the respective property or the fair value
of common shares, whichever is more readily determinable.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">When mineral properties are
acquired under option agreements with future acquisition payments to be made at the sole discretion of the Company, those future
payments, whether in cash or shares, are recorded only when the Company has made or is obliged to make the payment or issue the
shares. When it has been determined that a mineral property can be economically developed as a result of establishing proven and
probable reserves and bankable feasibility, the costs incurred to develop such property are capitalized.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in; text-align: justify"></TD><TD STYLE="width: 0.25in; text-align: justify">j)</TD><TD STYLE="text-align: justify">Long-lived Assets</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">In accordance with ASC 360<I>,
Property Plant and Equipment</I> the Company tests long-lived assets or asset groups for recoverability when events or changes
in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include,
but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate
or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction
of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses
associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly
before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair
value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount
is not recoverable and exceeds fair value.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">Property and equipment is stated
at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease
term. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired
for internal use, three years; computer equipment, two to three years; buildings and improvements, five to 15 years; leasehold
improvements, two to 10 years; and furniture and equipment, one to five years. Land is not depreciated.</P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in; text-align: justify"></TD><TD STYLE="width: 0.25in; text-align: justify">k)</TD><TD STYLE="text-align: justify">Asset Retirement Obligations</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The Company follows the provisions
of ASC 410<I> Asset Retirement and Environmental Obligations,</I> which establishes standards for the initial measurement and subsequent
accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the
acquisition, construction or development and for normal operations of such assets. As at December 31, 2011 and 2010, the Company
has not recognized any asset retirement obligations.</P>

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

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

<!-- Field: Page; Sequence: 60; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"></P>

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



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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B>(An Exploration Stage
Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">l)</TD><TD>Income Taxes</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">Potential benefits of income
tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740,<I> Income
Taxes</I> as of its inception. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses
carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because
the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in; text-align: justify"></TD><TD STYLE="width: 0.25in; text-align: justify">m)</TD><TD STYLE="text-align: justify">Stock-based Compensation</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">In accordance with ASC 718,<I>
Compensation &ndash; Stock Compensation</I>, the Company accounts for share-based payments using the fair value method. The Company
has not issued any stock options since its inception. Common shares issued to third parties for non-cash consideration are valued
based on the fair market value of the services provided or the fair market value of the common stock on the measurement date, whichever
is more readily determinable.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">ASC 220,<I> Comprehensive Income</I>
establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at
December 31, 2011 and 2010, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule
of comprehensive loss in the financial statements.</P>

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

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

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">Notes receivable consist of
amounts due from an entity in which our former CEO, Alvaro Vollmers, is the sole officer and director. The notes receivable were
transferred to New World Petroleum in April 2011 in redemption of Units of common stock and warrants of the Company owned by New
World. Management estimates an allowance for doubtful notes which is based upon management's review of all accounts and notes and
an assessment of the Company's historical evidence of collections. Specific accounts and notes are charged directly to the reserve
when management obtains evidence of a noteholder's insolvency or other evidence of the inability to pay. The reserve for doubtful
notes as of December 31, 2011and 2010 was $0.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in; text-align: justify"></TD><TD STYLE="width: 0.25in; text-align: justify">p)</TD><TD STYLE="text-align: justify">Recent accounting pronouncements</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: justify; margin-bottom: 0pt; margin-left: 0.5in">In June 2011, the FASB issued guidance on presentation
of comprehensive income.&nbsp;The new guidance eliminates the current option to report other comprehensive income and its components
in the statement of changes in equity.&nbsp;Instead, an entity will be required to present either a continuous statement of net
income and other comprehensive income or in two separate but consecutive statements.&nbsp;The new guidance will be effective for
us beginning July&nbsp;1, 2012 and will have presentation changes only.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: justify; margin-bottom: 0pt; margin-left: 0.5in">In May 2011, the FASB issued guidance to amend the
accounting and disclosure requirements on fair value measurements.&nbsp;The new guidance limits the highest-and-best-use measure
to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit
risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts.&nbsp;Additionally, the
new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions,
as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. The
new guidance will be effective for us beginning January&nbsp;1, 2012.&nbsp;Other than requiring additional disclosures, we do not
anticipate material impacts on our financial statements upon adoption.</P>

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

<!-- Field: Page; Sequence: 61; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B>(An Exploration Stage
Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">q)</TD><TD>Recent accounting pronouncements (cont&rsquo;d)</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: justify; margin-bottom: 0pt; margin-left: 0.5in">In January 2010, the FASB issued guidance to amend
the disclosure requirements related to fair value measurements. The guidance requires the disclosure of roll forward activities
on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level
3 fair value measurements). The guidance will become effective for us with the reporting period beginning January&nbsp;1, 2012.
The adoption of this new guidance will not have a material impact on our financial statements.</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">3.</TD><TD>Related Party Transactions</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">All related party transactions
are recorded at the exchange amount which is the value established and agreed to by the related party.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">A payable to a related party
of $17,574 to Maurice Bideaux, the Company&rsquo;s former chief executive officer and director, was forgiven by Mr. Bideaux in
2010.&nbsp;&nbsp;An additional advance from Mr. Bideaux of $38,910 remains unpaid.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The Company made four separate
loans to American Liberty Petroleum Corp., a Nevada corporation (&ldquo;ALP&rdquo;) in late 2010 and early 2011, all of which have
been settled in accordance with the Redemption Agreement described below.&nbsp;&nbsp;Alvaro Vollmers, the sole director and officer
of ALP, was the sole director and officer of the Company until his resignation on March 29, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: justify; margin-bottom: 0pt; margin-left: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT>On December
6, 2010, ALP borrowed $290,000 from the Company&nbsp;&nbsp;(the &ldquo;Initial Loan&rdquo;). On&nbsp;January 7, 2011, ALP borrowed
$200,000 from the Company (the &ldquo;Second Loan&rdquo;). The Promissory Note (the &ldquo;Initial Note&rdquo;) executed by ALP
in connection with the Initial Loan and the Promissory Note (the &ldquo;Second Note&rdquo;) executed by ALP in connection with
the Second Loan contained the following payment terms: (a) the unpaid principal amount accrued interest at the rate of six percent
(6%) per annum, (b) the unpaid principal and all accrued but unpaid interest thereon was due and payable on February 28, 2011,
and (c) the unpaid principal and accrued but unpaid interest could be prepaid in whole or in part at the option of ALP, without
penalty or premium.&nbsp;&nbsp;None of the Notes was secured by any assets of ALP.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">On February 28, 2011, ALP executed
an Amended and Restated Promissory Note that amended and restated the Initial Note in its entirety, and extended the maturity date
to March 31, 2011, and an Amended and Restated Promissory Note that amended and restated the Second Note in its entirety, and extended
the maturity date to March 31, 2011.&nbsp;&nbsp;Except for the extension of the maturity date, the terms of payment (including
the interest rate) remained the same.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">Also on February 28, 2011, ALP
borrowed $50,000 from the Company (the &ldquo;Third Loan&rdquo;). Finally, on March 8, 2011, ALP borrowed an additional $45,000
from the Company (the &ldquo;Fourth Loan&rdquo;). Both the Promissory Note (the &ldquo;Third Note&rdquo;) executed by ALP in connection
with the Third Loan and the Promissory Note (the &ldquo;Fourth Note&rdquo;) executed by ALP in connection with the Fourth Loan
contained identical payment terms as the Initial Note and the Second Note, except for a maturity date of March 31, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">On&nbsp;&nbsp;March 28, 2011,
ALP and the Company executed a Second Amended and Restated Promissory Note that amends and restates the Initial Note in its entirety,
and extends the maturity date to April 30, 2011,&nbsp;&nbsp;a Second Amended and Restated Promissory Note that amends and restates
the Second Note in its entirety, but extends the maturity date to April 30, 2011, an Amended and Restated Promissory Note that
amends and restates the Third Note in its entirety, but extends the maturity date to April 30, 2011, and an Amended and Restated
Promissory Note that amends and restates the Fourth Note in its entirety, but extends the maturity date to April 30, 2011. Except
for the extension of the maturity date, the terms of payment (including the interest rate) remained the same.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; margin-left: 0.5in">The Company obtained the funds
subsequently loaned to ALP from the private placements of Units, consisting of Common Stock and Warrants to purchase Common Stock,
from New World Petroleum Investments (&ldquo;New World&rdquo;).</P>

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

<!-- Field: Page; Sequence: 62; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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



<P STYLE="margin: 0"></P>

<P STYLE="margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On April 13, 2011, the Company
and New World executed a Redemption Agreement, whereby the Company redeemed all of the shares of Common Stock and the Warrants
that New World owned (consisting of the 600,000 shares of Common Stock and Warrants to purchase 600,000 shares of Common Stock
obtained in private placements of Units), and in consideration for the Common Stock and Warrants assigned to New World the four
Promissory Notes described above. As a result of the Redemption Agreement, the Company no longer holds the Promissory Notes, and
New World owns no shares of Common Stock or other securities of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On January 13, 2012, the Company
agreed to redeem certain shares of the common stock, 0.001 par value, of the Company (the &ldquo;Common Stock&rdquo;) held by two
of its principal shareholders. The Company redeemed 7,500,000 shares of Common Stock owned by Dan M. Ferris, for total consideration
of $1.00. Mr. Ferris is the sole officer and director of the Company. In addition, the Company has agreed to redeem 22,500,000
shares of Common Stock held by John G. Rhoden, for total consideration of $1.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">After redemption, Mr. Ferris
owns 7,500,000 shares of Common Stock, and Mr. Rhoden will own 22,500,000 shares of Common Stock, which will represent 8.64% and
25.92%, respectively, of the issued and outstanding shares of Common Stock. The redeemed shares of Common Stock will be retired
and restored to the status of authorized and unissued shares, and not held in treasury. The Company, Mr. Ferris and Mr. Rhoden
have agreed to effect the redemption transactions in order to reduce the number of issued and outstanding shares of Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">4.</TD><TD>Property and equipment</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Property and equipment consists
of a used truck and drill with a cost of $11,100 and $38,077, respectively, being depreciated over 2 and 10 years, respectively.&nbsp;&nbsp;Accumulated
depreciation at December 31, 2011 was $2,852.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">5.</TD><TD>Equity Line of Credit</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On August 29, 2011, the Company
and North American Gold Corp., a company organized under the laws of the Marshall Islands (&ldquo;North American&rdquo;), executed
an Investment Agreement (the &ldquo;Investment Agreement&rdquo;). Under the Investment Agreement, North American agreed to invest
up to $15,000,000 to purchase shares of&nbsp;&nbsp;the Company&rsquo;s $0.001 par value common stock (the &ldquo;Common Stock&rdquo;),
in increments of $100,000 or an integral multiple thereof, at the Company&rsquo;s option at any time through August 31, 2013 (the
&ldquo;Open Period&rdquo;). During the Open Period, the Company has the option to deliver a put notice (a &ldquo;Put Notice&rdquo;)
to North American that states the number of shares of Common Stock the Company proposes to sell to North American (the &ldquo;Put
Shares&rdquo;), and the price per share for those Put Shares (the &ldquo;Share Price&rdquo;). The Share Price is equal to 90% of
the volume weighted average closing price of the Common Stock for the 20 Trading Days immediately preceding the date on which the
Company sends the Put Notice. The closing for the sale of the Put Shares pursuant to a Put Notice shall take place no later than
10 Trading Days after the date on which the Company sends such Put Notice. A &ldquo;Trading Day&rdquo; is defined as a day in which
the NASDAQ stock market or OTC Bulletin Board is open for business.&nbsp;&nbsp;North American has the right to refuse to close
any requested sale of Put Shares because of negative market conditions affecting the Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">The original Investment Agreement
required the Company to use the net proceeds from the sale of the Put Shares to fund the exploration and development of gold and
silver mining concessions in the La Candelaria project in Chihuahua, Mexico. On November 9, 2011, the Company and North American
executed a First Amendment&nbsp;to Investment Agreement, which states that the Company shall use the net proceeds from the sale
of Put Shares to fund operating expenses, working capital and general corporate activities related to the exploration and development
of gold and silver mining concessions held by the Company and/or a subsidiary in relation to the La Candelaria property, the Ocampo
property, or any other properties agreed upon in advance by the Company and North American. The Company and North American have
further agreed that the Company may use the proceeds of the put shares to fund operations related to the Mine Tailings project.</P>

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

<!-- Field: Page; Sequence: 63; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">6.</TD><TD>Common Stock</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">On January 19, 2008, the Company issued 60,000,000
shares of common stock at $0.00005 per share for cash proceeds of $3,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">On April 28, 2008, the Company issued 32,699,920
shares of common stock at $0.00075 per share for cash proceeds of $24,525.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">On December 24, 2008, the Company issued 22,600,000
shares of common stock at $0.0025 per share for cash proceeds of $56,500.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On December 3, 2010, the Company
issued 6,000,000 Units to New World in a private placement, with each Unit consisting of one share of the Company&rsquo;s $0.001
par value&nbsp;common stock and one warrant to purchase a share of the Company&rsquo;s $0.001 par value common stock at $0.0625
at any time within 3 years, for cash proceeds of $300,000. The&nbsp;relative fair value of the warrants issued was $46,500.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On January 3, 2011, the Company
issued 3,000,000 Units&nbsp;to New World in a private placement, with each Unit consisting one share of the Company&rsquo;s $0.001
par value&nbsp;common stock and one warrant to purchase a share of the Company&rsquo;s $0.001 par value common stock at $0.0625
at any time until January 3, 2014, for cash proceeds of $150,000. On January 6, 2011, the Company completed a private placement
of an additional 3,000,000 Units to New World on similar terms, for cash proceeds of&nbsp;$150,000. The&nbsp;relative fair value
of the warrants issued was $46,000.&nbsp;&nbsp;All shares of common stock and warrants issued to New World have been redeemed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On April 13, 2011, the Company
and New World executed a Redemption Agreement, whereby the Company redeemed all of the shares of Common Stock and the Warrants
that New World owned (consisting of the 12,000,000 shares of Common Stock and Warrants to purchase 12,000,000 shares of Common
Stock obtained in private placements of Units), and in consideration for the Common Stock and Warrants assigned to New World the
four Promissory Notes described above. As a result of the Redemption Agreement, the Company no longer holds the Promissory Notes,
and New World owns no shares of Common Stock or other securities of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On June 30, 2011, the Company&nbsp;entered
into an agreement to issue&nbsp;100,000 Units to North American Gold Corp. in a private placement, for $1.00 per Unit, with each
Unit consisting of one share of&nbsp;Common Stock and one Warrant to purchase a share of Common Stock at $1.20 at any time until
June 30, 2014, for cash proceeds of $100,000.&nbsp;&nbsp;The fair market value of the Warrants on the date of issuance was $15,467.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On August 29, 2011, the Company
entered into an agreement to issue&nbsp;100,000 Units to North American in a private placement, with each Unit consisting of one
share of the Company&rsquo;s $0.001 par value&nbsp;common stock and one warrant to purchase a share of the Company&rsquo;s $0.001
par value common stock at $1.20 at any time until August 29, 2014, for cash proceeds of $100,000.&nbsp;&nbsp;The relative fair
market value of the warrants on the date of issuance was $44,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On August 17, 2011, the Company
entered into an agreement to issue&nbsp;300,000 shares of its $0.001 par value common stock to Homero Bustillos Gonzalez (&ldquo;Gonzales&rdquo;)
in accordance with the Option Agreement discussed more fully in Note 9 below.&nbsp;&nbsp;The fair market value of the common stock
was $303,000 on the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">On August 17, 2011, the Company entered into an agreement
to issue&nbsp;125,000 shares of its $0.001 par value common stock to American Gold Holdings, Ltd. (&quot;American Gold&quot;) as
repayment of the $125,000 that American Gold&nbsp;paid Gonzalez in connection with the Option Agreement discussed more fully in
Commitments below.&nbsp;&nbsp;The shares were issued&nbsp;in the name of&nbsp;North American with the agreement of American Gold.
The fair market value of the common stock was $126,250 on the date of issuance, September 15, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<!-- Field: Page; Sequence: 64; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">6.</TD><TD>Common stock (cont&rsquo;d)</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On September 14, 2011, the Company
issued 238,095 shares of its $0.001 par value common stock to North American for gross proceeds of $200,000 pursuant to a Put Notice
delivered under the Investment Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On October 24, 2011, the Company
sold 204,081 shares of its $0.001 par value common stock to North American for gross proceeds of $200,000 pursuant to a Put Notice
delivered under the Investment Agreement.&nbsp;&nbsp;The proceeds will be used to fund the Work Plan related to the La Candelaria
project, for expenses related to the Ocampo LOI, and other operating expenses incurred by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On October 31, 2011, the Company
entered into an agreement with a consultant to perform&nbsp;consulting services&nbsp;as requested by the Company.&nbsp;The contract
calls for the consultant 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 $0.001 par value common stock. The fair market value of the
common stock on the date of grant was $124,500. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On December 27, 2011, the Company
sold 273,972 shares of its $0.001 par value common stock to North American for gross proceeds of $200,000 pursuant to a Put Notice
delivered under the Investment Agreement.&nbsp;&nbsp;The proceeds will be used to fund the Work Plan related to the La Candelaria
project, for expenses related to the Ocampo LOI, and other operating expenses incurred by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">7.</TD><TD>Warrants</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On December 3, 2010, the Company
issued 6,000,000 Units&nbsp;to New World in a private placement, with each Unit consisting of one share of the Company&rsquo;s
$0.001 par value&nbsp;common stock and one warrant to purchase a share of the Company&rsquo;s $0.001 par value common stock at
$0.0625 at any time within 3 years, for cash proceeds of $300,000. The&nbsp;relative fair value of the warrants issued was $46,500,
which was calculated using the Black-Scholes option pricing model.&nbsp;&nbsp;Variables used in the valuation include (1) discount
rate of 1.9%, (2) expected life of 3 years, (3) expected volatility of 504% and (4) zero expected dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On January 3, 2011, the Company
issued 3,000,000 Units&nbsp;to New World in a private placement, with each Unit consisting one share of the Company&rsquo;s $0.001
par value&nbsp;common stock and one warrant to purchase a share of the Company&rsquo;s $0.001 par value common stock at $0.0625
at any time until January 3, 2014, for cash proceeds of $150,000. On January 6, 2011, the Company completed a private placement
of an additional 3,000,000 Units&nbsp;to New World on similar terms, for cash proceeds of&nbsp;$150,000. The&nbsp;relative fair
value of the warrants issued was $46,000, which was calculated using the Black-Scholes option pricing model.&nbsp;&nbsp;Variables
used in the valuation include (1) discount rate of 1.9%, (2) expected life of 3 years, (3) expected volatility of 504% and (4)
zero expected dividends.&nbsp;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">All shares of common stock and
warrants issued to New World have been redeemed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On June 30, 2011, the Company
entered into an agreement to issue 100,000 Units to North American Gold Corp. in a private placement, for $1.00 per Unit, with
each Unit consisting of one share of Common Stock and one Warrant to purchase a share of Common Stock at $1.20 at any time until
June 30, 2014, for cash proceeds of $100,000. The fair market value of the Warrants on the date of issuance was $15,467, which
was calculated using the Black-Scholes option pricing model.&nbsp;&nbsp;Variables used in the valuation include (1) discount rate
of 1.9%, (2) expected life of 3 years, (3) expected volatility of 386% and (4) zero expected dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On August 29, 2011, the Company
entered into an agreement to issue 100,000 Units to North American in a private placement, with each Unit consisting of one share
of the Company&rsquo;s $0.001 par value common stock and one warrant to purchase a share of the Company&rsquo;s $0.001 par value
common stock at $1.20 at any time until August 29, 2014, for cash proceeds of $100,000. The relative fair market value of the warrants
on the date of issuance was $44,000, which was calculated using the Black-Scholes option pricing model.&nbsp;&nbsp;Variables used
in the valuation include (1) discount rate of 0.49%, (2) expected life of 3 years, (3) expected volatility of 536% and (4) zero
expected dividends.</P>

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

<!-- Field: Page; Sequence: 65; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">A summary of warrant activity for the year ended
December 31, 2011 is presented below:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 16.2pt">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">average</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">average</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">remaining</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Aggregate</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">exercise</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">contractual</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">intrinsic</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">price</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">life (years)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">value</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%">Outstanding December 31, 2010</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">6,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">0.0625</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,200,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0. 0227</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Forfeited or cancelled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,000,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(0.0031</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Expired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Outstanding December 31, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.20</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">2.58</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">$</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">59,467</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">8.</TD><TD>Income Taxes</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify">The Company has a net operating
loss carry-forward of approximately $654,000 available to offset taxable income in future years which commence expiring in fiscal
2028.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify">The Company is subject to United
States income taxes at a rate of 34%. The reconciliation of the provision for income taxes at the United States statutory rate
compared to the Company&rsquo;s income tax expense as reported is as follows:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 80%; font: 10pt Times New Roman, Times, Serif; margin-left: 49.5pt">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Year&nbsp;Ended <BR>December&nbsp;31, <BR>2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Year&nbsp;Ended <BR>December&nbsp;31, <BR>2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Income tax recovery at statutory rate</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">165,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">21,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Valuation allowance change</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(165,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(21,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Provision for income taxes</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.5pt; text-align: justify">The significant components of
deferred income tax assets as at December 31, 2011 and 2010 are as follows:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 80%; font: 10pt Times New Roman, Times, Serif; margin-left: 49.5pt">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December 31, <BR>2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December 31, <BR>2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Net operating losses carried forward</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">222,360</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">58,456</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(222,360</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(58,456</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net deferred income tax asset</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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

<!-- Field: Page; Sequence: 66; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">9.</TD><TD>Commitments</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify"><B><I>La Candelaria Property</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On May 31, 2011, Metales was
formed, with the Company owning 70% of the issued and outstanding shares of capital stock.&nbsp;&nbsp;The remaining 30% of the
issued and outstanding capital stock of Metales was issued to Gonzalez.&nbsp;&nbsp;On June 10, 2011, Gonzalez assigned the Concessions
to Metales.&nbsp;&nbsp;The Concessions cover 800 hectares, or approximately 1,976 acres.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Gonzalez transferred the Concessions
to Metales pursuant to an agreement with&nbsp;American Gold.&nbsp;&nbsp;&nbsp;&nbsp;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 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. Pursuant to the
Assignment Agreement (which has an effective date of June 10, 2011), the Company has taken or will take the following actions in
connection with transfer of the Concessions from Gonzalez&nbsp;to Metales:</P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">1.</TD><TD STYLE="text-align: justify">The Company issued 125,000 shares of its $0.001 par value common stock to North American as repayment
of the $125,000 that American Gold paid Gonzalez in connection with Option Agreement (the &ldquo;American Gold Shares&rdquo;).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.4in; text-align: justify; text-indent: -34.2pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">2.</TD><TD STYLE="text-align: justify">The Company issued 300,000 shares of its $0.001 par value common stock, with a fair value of $303,000,
to Gonzalez on September 16, 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.4in; text-align: justify; text-indent: -34.2pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">3.</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: 0pt 0 0pt 1.4in; text-align: justify; text-indent: -34.2pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">4.</TD><TD STYLE="text-align: justify">The Company has paid Gonzalez an additional $125,000.</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">The American Gold Shares were
issued in the name of&nbsp;North American, with the agreement of American Gold.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">Gonzalez retains a 2% Net Smelter
Returns Royalty on the Property.&nbsp;&nbsp;Metales is obligated to undertake work necessary to bring the existing geological survey
on the Property up to NJ 43-101 standards.&nbsp;&nbsp;The Company advanced $20,000 to Metales in June 2011 in order to initiate
this work, which will be credited to the $150,000 due for the first year under the Work Plan.&nbsp;&nbsp;During the year ended
December 31, 2011, the Company advanced $122,341 under the Work Plan.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">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.&nbsp;&nbsp;Gonzalez has waived the exercise of his anti-dilution rights with respect to issuances of common
stock to North American under the Investment Agreement.&nbsp;&nbsp;In addition, the Company is obligated to issue 1,000,000 shares
of its $0.001 par value 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.&nbsp;&nbsp;Finally, 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: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<!-- Field: Page; Sequence: 67; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify"><B><I>Employment Agreement</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On July 12, 2011, the Company
entered into an Employment Agreement with Dan M. Ferris regarding his position as President of the Company.&nbsp;&nbsp;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;).&nbsp;&nbsp;Mr. Ferris will be paid a base salary of
$120,000 per year during the Term.&nbsp;&nbsp;Mr. Ferris will also be entitled to receive 3,000,000 shares of the Company&rsquo;s
$0.001 common stock, which will be issued in three equal increments of 1,000,000 shares over the first 3 years of the Term.&nbsp;&nbsp;The
shares of common stock will not be registered under the Securities Act, and will be subject to restrictions on transfer.&nbsp;&nbsp;Therefore,
Mr. Ferris will receive 1,000,000 shares of common stock on July 12 of each of the years 2012, 2013, and 2014.&nbsp;&nbsp;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 at any time for &ldquo;cause&rdquo; by the Company.&nbsp;&nbsp;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&nbsp;been issued&nbsp;as of the date of resignation or termination.&nbsp;&nbsp;If Mr. Ferris&rsquo;
employment is terminated for any other reason, he would receive the full 3,000,000 shares of common stock.&nbsp;&nbsp;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.&nbsp;&nbsp;The fair market value of the stock grant on the date of the Employment Agreement was
$3,000,000.&nbsp;&nbsp;The Company recognized $473,974 in expense related to the stock grant as of December 31, 2011.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify"><B><I>Ocampo Property</I></B></P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify">On September 29, 2011, the Company
entered into a 90-day exclusivity letter of intent (the &ldquo;LOI&rdquo;) with Antonio Aguirre Rascon (&ldquo;Rascon&rdquo;) 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;).&nbsp;&nbsp;The Company paid Rascon $12,500 upon signing of the LOI.&nbsp;&nbsp;The
LOI is to serve as the basis for a definitive agreement (the &ldquo;Definitive Agreement&rdquo;) to be negotiated between the parties.&nbsp;&nbsp;&nbsp;&nbsp;In
December 2011, the Company elected to allow the LOI to lapse without entering into a Definitive Agreement.</P>

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

<!-- Field: Page; Sequence: 68; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(formerly known as Keyser Resources,
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

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

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 16.2pt">10.</TD><TD>Subsequent Events</TD></TR></TABLE>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.3pt; text-align: justify">On January 13, 2012, the Company
agreed to redeem certain shares of Common Stock held by two of its principal shareholders. The Company agreed to redeem 7,500,000
shares of Common Stock owned by Dan M. Ferris, for total consideration of $1.00. In addition, the Company agreed to redeem 22,500,000
shares of Common Stock held by John G. Rhoden, for total consideration of $1.00. The redeemed shares of Common Stock are to be
retired and restored to the status of authorized and unissued shares, and not held in treasury</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.3pt; text-align: justify">On February 13, 2012, the Company
sold 625,000 shares of its $0.001 par value common stock to North American for gross proceeds of $300,000 pursuant to a Put Notice
delivered under the Investment Agreement.&nbsp;&nbsp;The proceeds will be used to fund the Work Plan related to the La Candelaria
project, expenses related to the Tailings Project (described below), and other operating expenses incurred by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify"><B><I>Tailings Project</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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 on December 5, 2011, 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;$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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;$750,000 within the
second year of the Joint Venture for the construction of a heap leach system and floatation plant on the Property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;100,000 shares of
Common Stock, which have been issued to Jaramillo.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;200,000 shares of
Common Stock within 6 months of signing the JV Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;300,000 shares of
Common Stock within 12 months of signing the JV Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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 Agreement, with respect to the shares of Common Stock to be issued under the JV Agreement.</P>

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

<!-- Field: Page; Sequence: 69; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Lone Star Gold Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; 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).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">On March 21, 2012, the Company completed
a private placement of 625,000 shares of Common Stock to North American. The Company sold the shares of Common Stock at a price
of $0.40 per share, resulting in total proceeds of approximately $250,000 to the Company. The sale of the shares to North American
represents the fifth sale of Common Stock under the Investment Agreement.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify">A portion of the proceeds will be used
to fund the exploration and development of the Concessions, according to a work plan established for the project, and to make the
annual payments for the property and concession taxes associated with the La Candelaria project. The Company will also use the
proceeds to fund a portion of the consideration in connection with the JV Agreement, such as shipping, trucking and on-site wash
plant construction, and to commence payments under the work plan established for the Tailings project. Finally, a portion of the
proceeds will be used for general corporate expenses associated with the Company&rsquo;s exploration and development activities.</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">The issuance
of the shares of Common Stock to North American was not registered under the Securities Act of 1933. Instead, the sale was completed
in reliance upon an exemption from registration pursuant to Regulation S promulgated under the Securities Act of 1933. North American
has represented to the Company that it is not a &ldquo;U.S. person&rdquo; as defined in Regulation S, and that it 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 North American 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.</FONT>&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt; text-align: justify"></P>

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

<!-- Field: Page; Sequence: 70; Options: Last -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

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

</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "v317628_s1.htm", "description": "S-1", "secsgml_size_bytes": 794375}]
{"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": "S-1", "act": "33", "file-number": "333-182664", "film-number": "12961749"}, "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"}}
As filed with the Securities and Exchange
Commission on July 13, 2012
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LONE STAR GOLD, INC.
(Exact Name of Registrant in its Charter)
Nevada
1000
45-2578051
(State or other Jurisdiction of
(Primary Standard Industrial Classification
(IRS Employer Identification No.)
Incorporation)
Code)
6565 Americas Parkway NE, Suite 200
Albuquerque, NM 87110
(505) 563-5828
(Address and Telephone Number of Registrant's
Principal
Executive Offices and Principal Place of
Business)
Capitol
Corporate Services, Inc.
202 South
Minnesota Street
Carson City, NV 89703
(800) 899-0490
(Name, Address and Telephone Number
of Agent for Service)
Copies of communications to:
Gregg E. Jaclin, Esq.
Anslow & Jaclin, LLP
195 Route 9 South, Suite 204
Manalapan, NJ 07726
Tel. No.: (732) 409-1212
Fax No.: (732) 577-1188
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form
are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
x
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
x
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
Proposed
Proposed
Maximum
Maximum
Amount of
Title of Each Class of Securities
Amount to be
Offering Price
Aggregate
Registration
to be Registered
Registered (1)
Per Share (2)
Offering Price
Fee
Common Stock, par value $0.001 per share,
issuable pursuant to the Fairhills Investment Agreement
30,000,000
$
0.15
$
4,500,000
$
515.70
(1)
We are registering 30,000,000 shares of our common stock that we will put to Fairhills Capital Offshore Ltd. ("Fairhills") pursuant to an investment agreement (the "Fairhills Investment Agreement") between Fairhills and the registrant entered into on April 30, 2012 and amended on June 25, 2012. In the event of stock splits, stock dividends or similar transactions involving the common stock, the number of common shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). In the event that the adjustment provisions of the Fairhills Investment Agreement require the registrant to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act, the registrant will file a new registration statement to register those additional shares.
(2)
The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o) of the Securities Act on the basis of the closing bid price of the common stock of the registrant as reported on the OTCBB on July 11, 2012.
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant
to said section 8(a), may determine.
The information in this
prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED JULY 13, 2012
30,000,000 Shares of Common Stock
LONE STAR GOLD, INC.
This prospectus relates to the resale of
up to 30,000,000 shares of common stock of Lone Star Gold, Inc. ("we" or the "Company"), par value $0.001
per share, issuable to Fairhills Capital Offshore Ltd., a Cayman Islands exempted company ("Fairhills"), pursuant to
an investment agreement between us and Fairhills. The investment agreement permits us to "put" up to $15,000,000 in
shares of our common stock to Fairhills over a period of up to thirty-six (36) months. We will not receive any proceeds from the
resale of these shares of common stock. However, we will receive proceeds from the sale of securities pursuant to our exercise
of the put right offered by Fairhills.
The selling stockholder may offer all or
part of the shares for resale from time to time through public or private transactions, at either prevailing market prices or at
privately negotiated prices. Fairhills is paying all of the registration expenses incurred in connection with the registration
of the shares except for accounting fees and expenses and we will not pay any of the selling commissions, brokerage fees and related
expenses.
Investing in our common stock involves
a high degree of risk. See "Risk Factors" beginning on page 3 to read about factors you should consider before
investing in shares of our common stock.
NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of This Prospectus Is:  _____________,
2012
TABLE OF CONTENTS
Page
Prospectus Summary
1
The Offering
2
Risk Factors
3
Special Note Regarding Forward-Looking Statements
9
Use of Proceeds
9
Market For Common Equity and Related Stockholder Matters
9
Management's Discussion and Analysis of Financial Condition and Results Of Operations
10
Description of Business
13
Directors and Executive Officers
21
Executive Compensation
22
Security Ownership of Certain Beneficial Owners and Management
23
Certain Relationships and Related Transactions
24
Changes In and Disagreement With Accountants On Accounting and Financial Disclosure
25
Selling Stockholders
25
Plan of Distribution
26
Description of Securities To Be Registered
27
Legal Matters
28
Experts
28
Available Information
Index To Consolidated Financial Statements
F-1
PROSPECTUS SUMMARY
This summary highlights selected information
contained elsewhere in this Prospectus. This summary does not contain all the information that you should consider before investing
in the common stock of Lone Star Gold, Inc. (referred to herein as the "Company," "we," "our,"
and "us"). You should carefully read the entire Prospectus, including "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and the accompanying financial statements and notes
before making an investment decision.
Business Overview
We are currently a start-up exploration
stage company in the business of gold and mineral exploration, acquisition and development. We were incorporated in the State of
Nevada under the name Keyser Resources, Inc. on November 26, 2007.  Our business was initially operated to acquire an
option to purchase a mining interest in Canada. After a change in control in November 2010, we explored a merger with another company
in order to obtain an option to purchase several oil and gas leases in Nevada. A merger agreement was signed in January 2011. The
then-current management decided not to pursue the merger, and the merger agreement was terminated by mutual agreement of the parties
as of March 18, 2011.
On March 29, 2011, we 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 our
sole director and officer, we changed our focus to engage in the acquisition, exploration and development of gold and silver mining
properties. To further reflect this change in business focus, we changed our name to "Lone Star Gold, Inc." on June
14, 2011. In addition, to create a more flexible capital structure, we increased the number of authorized shares of our 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.
On August 29, 2011, we entered into an
investment agreement with North American Gold Corp. ("North American") pursuant to which North American agreed to invest
up to $15,000,000 to purchase our common stock in increments of $100,000 or an integral multiple thereof, at our option at any
time through August 31, 2013 (the "North American Investment Agreement").
On April 30, 2012, we entered into an investment
agreement, which was subsequently amended on June 25, 2012 (the "Fairhills Investment Agreement") with Fairhills Capital
Offshore Ltd., a Cayman Islands exempted company ("Fairhills"). Pursuant to the terms of the Fairhills Investment Agreement,
Fairhills committed to purchase up to $15,000,000 of our common stock over a period of up to thirty-six (36) months.
In connection with the Fairhills Investment
Agreement, we also entered into a registration rights agreement with Fairhills, pursuant to which we are obligated to file a registration
statement with the Securities and Exchange Commission (the "SEC") covering 30,000,000 shares of our common stock underlying
the Fairhills Investment Agreement within 21 days after the closing of the transaction. In addition, we are obligated to use all
commercially reasonable efforts to have the registration statement declared effective by the SEC within 120 days after the closing
of the transaction and maintain the effectiveness of such registration statement until termination of the Fairhills Investment
Agreement.
At an assumed purchase price of $0.11325
(equal to 75.5% of the closing price of our common stock of $0.15 on July 11, 2012), we will be able to receive up to $3,397,500
in gross proceeds, assuming the sale of the entire 30,000,000 shares being registered hereunder pursuant to the Fairhills Investment
Agreement. Accordingly, we would be required to register additional 102,450,332 shares to obtain the balance of $11,602,500 under
the Fairhills Investment Agreement. We are currently authorized to issue 150,000,000 shares of our common stock. We may be required
to increase our authorized shares in order to receive the entire purchase price. Fairhills has agreed to refrain from holding an
amount of shares which would result in Fairhills owning more than 4.99% of the then-outstanding shares of our common stock at any
one time.
There are substantial risks to investors
as a result of the issuance of shares of our common stock under the Fairhills Investment Agreement. These risks include dilution
of stockholders' percentage ownership, significant decline in our stock price and our inability to draw sufficient funds
when needed.
Fairhills will periodically purchase our
common stock under the Fairhills Investment Agreement and will, in turn, sell such shares to investors in the market at the market
price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Fairhills
to raise the same amount of funds, as our stock price declines.
Where You Can Find Us
Our principal office is located at 6565
Americas Parkway NE, Suite 200, Albuquerque, New Mexico 87110. Our telephone number is (505) 563-5828.
1
THE OFFERING
Common stock offered by Selling Stockholder
30,000,000 shares of common stock.
Common stock outstanding before the offering
89,341,068 shares of common stock as of the date hereof.
Common stock outstanding after the offering
119,341,068 shares of common stock.
Use of proceeds
We will not receive any proceeds from the sale of shares by the selling stockholder. However, we will receive proceeds from the sale of securities pursuant to the Fairhills Investment Agreement. The proceeds received under the Fairhills Investment Agreement will be used for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company.
OTCBB Trading Symbol
LSTG.OB
Risk Factors
The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See "Risk Factors".
2
RISK FACTORS
You should carefully consider the risks
described below together with all of the other information included in this Prospectus before making an investment decision with
regard to our securities. The statements contained in or incorporated into this Prospectus that are not historic facts are forward-looking
statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth
in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or
results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all
or part of your investment.
Risks Related to Our Business
We are an exploration stage company
with a history of operating losses and expect to continue to realize losses in the near future.  We currently have no
operations that are producing revenue, and currently rely on investments by third parties to fund our business.  Even
when we begin to generate revenues from operations, we may not become profitable or be able to sustain profitability.
We are an exploration stage company, and
since inception, we have incurred significant net losses and have not realized any revenue from our operations.  We have
reported a net loss of $2,504,657 from the date of inception through March 31, 2012.  We expect to continue to incur
net losses and negative cash flow from operations 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 our mining operations. The
size of these losses will depend, in large part, on whether we find gold or other minerals in our properties and are able to extract
and sell the minerals in a profitable manner.  To date, we have not had any operating revenues, nor have we found any
minerals or developed any mineral deposits.  Because we do not yet have a revenue stream resulting from sales or other
operations, there can be no assurance that we will achieve material revenues in the future.   Should we achieve
a level of revenues that make us profitable, there is no assurance that we can maintain or increase profitability levels in the
future.
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 prospectus; and (iii) our dependence on the sale of equity
securities to continue in operation. We have signed certain investment agreements with North American, for up to $15,000,000 through
sales of our common stock, and with Fairhills, for up to $15,000,000 through sales of our common stock. However, North American
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, we have 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.
We recently underwent two separate
changes in management, and the current management had no experience in mining or mineral exploration prior to joining the Company.
We 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 34.69% 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.
3
Mr. Ferris is our sole director and
officer and the loss of Mr. Ferris could adversely affect our business.
Since Mr. Ferris is currently our sole
director and officer, if he were to die, become disabled, or leave our company, we would be forced to retain individuals to replace
him. There is no assurance that we can find suitable persons to replace him if that becomes necessary. We have no "Key Man"
life insurance at this time.
We hold the Concessions through a
Mexican subsidiary, Metales, in which it owns a 70% interest. Therefore, our 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 U.S. company, we cannot hold the Concessions
(as defined in Description of business) directly. Instead, Mexican law requires a company formed in Mexico to own the Concessions.
We have invested in Metales in order to comply with the Mexican 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, we could fail to realize revenues from the project.
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,
our chances finding economically viable mineral reserves are remote.
We have no known mineral reserves. Even
if we find gold or silver deposits, we may not be of sufficient quantity to warrant recovery. Additionally, even if we find gold
or silver deposits in sufficient quantity to warrant recovery, we 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.
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 between Amiko Kay and Jaramillo (the "Joint Venture")
. If the Joint Venture fails to produce sufficient
revenue to offset the substantial costs incurred in exploration and development of the site, 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.
4
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, or by violence and crime in Mexico.
Both La Candelaria and the Mine Tailings
Project are located in the state of Chihuahua, Mexico. Our business operations could be negatively impacted if Chihuahua or other
areas of Mexico experiences a period of social and political unrest. Various areas in Mexico are affected by persistent violence
and crime, which has been well-publicized in the US. 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.
Our operations in Mexico may be adversely
affected by factors outside our control, such as changing political, local and economic conditions, any of which could materially
adversely affect our financial position or results of operations.
The La Candelaria Concessions are mineral
concessions granted by the Mexican government. We hold the Mine Tailings Project in a joint venture with a Mexican national.
Both of these projects are subject to the
laws of Mexico. Exploration and potential development activities are potentially subject to political and economic risks, including:
·
Cancellation or renegotiation of contracts;
·
Competition from companies not subject to US laws and regulations, such as the Foreign Corrupt Practices Act;
·
Changes in Mexican laws and regulations;
·
Changes in tax laws;
·
Royalty and tax increases or claims by Mexican governmental authorities;
·
Expropriation or nationalization of property;
·
Foreign exchange controls;
·
Import and export regulations;
·
Environmental controls;
·
Risks of loss due to civil strife, war, guerilla activity, insurrection and terrorism;
·
Other risks arising out of foreign sovereignty over the areas in which our business is operated.
Our business in Mexico is dependent
on our consultants.
We are almost entirely dependent on the
services of consultants in Mexico to operate our business in Mexico and to advise the Company on matters vital to its continued
viability and success. For example, Adam Whyte is responsible for overseeing the day to day operation of the La Candelaria property,
while Miguel Jaramillo ("Jaramillo") operates the Mine Tailings Project. We rely on such persons for advice on matters
such as permitting and environmental compliance, as well as mining operations. In addition, we rely on legal counsel in Mexico
to maintain the registration of our properties, to form our subsidiaries and to advise us on other matters involving Mexican law.
The loss of these persons or our inability to attract and train additional skilled employees may adversely affect our business,
future operations and financial condition.
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:
5
•
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 obligate the Company to fund certain exploration costs under the Work Plan. If we fail to satisfy those obligations,
Gonzalez could demand a return of the Concessions.
Under the terms of that certain assignment
agreement (the "Assignment Agreement") and the option agreement between American Gold Holdings, Ltd. and Homero Bustillos
Gonzalez ("Gonzalez") dated January 11, 2011 (the "Option Agreement"), if we fail to comply with our obligations
to make expenditures under the Work Plan (as defined in the Description of Business) before January 11, 2014, the Option Agreement
will terminate and we will be obligated to return the Concessions to Gonzalez. If this occurs, we would lose all our investment
in the Concessions.
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.
Title to some of our properties may
be defective or challenged.
While we believe that we have satisfactory
title to our properties, some titles may be defective or subject to challenge. In addition, certain of our Mexican properties could
be subject to rights of the
Ejido
, as discussed below.
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.
In the event of a dispute regarding
title or any other matter related to our operations in Mexico, we might be subject to Mexican courts or dispute resolution entities,
where we would be faced with unfamiliar laws and procedures.
The resolution of disputes in foreign countries
can be costly and time consuming. In a foreign country we would be faced with the additional burden of understanding unfamiliar
laws and procedures. We would also be faced with the necessity of hiring lawyers and other professionals who are familiar with
the foreign laws. For these reasons, we may incur unforeseen losses if we are forced to resolve a dispute in Mexico or any other
foreign country.
6
Risks Related to Our Common Stock
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. We have signed certain investment agreements with North American,
for up to $15,000,000 through sales of our common stock, and with Fairhills, for up to $15,000,000 through sales of our common
stock. Such investment agreements grant the investors 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, we must allow Gonzalez the opportunity to maintain his percentage stock ownership in the Company until
the date on which we have complied fully with our obligations under the Option Agreement or January 11, 2014, whichever comes first,
so any issuance of common stock or equivalents will result in even greater dilution because of the shares or share equivalents
that will have to be issued to Jaramillo as a result. Finally, Jaramillo is entitled to 600,000 shares of common stock as partial
consideration under the
Joint Venture Agreement (the "JV Agreement") with Jaramillo
.
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.
We are subject to penny stock regulations
and restrictions and you may have difficulty selling shares of our common stock.
Our common stock is subject to the provisions
of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934 (the "Exchange Act"), commonly referred to as
the "penny stock rule."  Section 15(g) sets forth certain requirements for transactions in penny stock, and
Rule 15g-9(d) incorporates the definition of "penny stock" that is found in Rule 3a51-1 of the Exchange Act.  The
SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain
exceptions. We are subject to the SEC's penny stock rules.
Since our common stock is deemed to be
penny stock, trading in the shares of our common stock is subject to additional sales practice requirements on broker-dealers who
sell penny stock to persons other than established customers and accredited investors.  "Accredited investors"
are persons with assets in excess of $1,000,000 (excluding the value of such person's primary residence) or annual income
exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such security and must have the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt the rules require the
delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market.  A
broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current
quotations for the securities.  Finally, monthly statements must be sent disclosing recent price information for the
penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the
ability of broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of our stockholders to
sell their shares of common stock.
There can be no assurance that our shares
of common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock was exempt from the
Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict
any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public
interest.
We do not expect to pay dividends
in the foreseeable future.
We do not intend to declare dividends for
the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business.  Therefore,
our stockholders will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares
on favorable terms or at all.
Our common stock is subject to price
volatility unrelated to our operations.
The market price of our common stock could
fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth,
quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions
in the economy and the financial markets or other developments affecting our competitors or ourselves. In addition, the OTCBB is
subject to extreme price and volume fluctuations in general.  This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect
on our common stock.
7
Trading in our common stock on the
OTC Bulletin Board is limited and sporadic making it difficult for our shareholders to sell their shares or liquidate their investments.
Our common stock is currently listed for
public trading on the OTC Bulletin Board. The trading price of our common stock has been subject to wide fluctuations. Trading
prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock
market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the
operating performance of companies with no current business operation. There can be no assurance that trading prices and price
earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors
may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods
of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.
Fairhills will pay less than the
then-prevailing market price for our common stock.
The common stock to be issued to Fairhills
pursuant to the Fairhills Investment Agreement will be purchased at a 24.5% discount to the lowest trading price of our common
stock during the ten (10) consecutive trading days immediately before Fairhills receives our notice of sale. Fairhills has a financial
incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between
the discounted price and the market price. If Fairhills sells the shares, the price of our common stock could decrease. If our
stock price decreases, Fairhills may have a further incentive to sell the shares of our common stock that it holds. These sales
may have a further impact on our stock price.
Your ownership interest may be diluted
and the value of our common stock may decline by exercising the put right pursuant to the Fairhills Investment Agreement.
Pursuant to the Fairhills Investment Agreement,
when we deem it necessary, we may raise capital through the private sale of our common stock to Fairhills at a price equal to a
24.5% discount to the lowest trading price of our stock for the ten (10) consecutive trading days before Fairhills receives our
notice of sale. Because the put price is lower than the prevailing market price of our common stock, to the extent that the put
right is exercised, your ownership interest may be diluted.
We are registering an aggregate of
30,000,000 shares of common stock to be issued under the Fairhills Investment Agreement. The sales of such shares could depress
the market price of our common stock.
We are registering an aggregate of 30,000,000
shares of common stock under this prospectus pursuant to the Fairhills Investment Agreement. Notwithstanding Fairhills' ownership
limitation, the 30,000,000 shares would represent approximately 25.4% of our shares of common stock outstanding immediately after
our exercise of the put right under the Investment Agreement. The sale of these shares into the public market by Fairhills could
depress the market price of our common stock.
At an assumed purchase price of $0.11325
(equal to 75.5% of the closing price of our common stock of $0.15 on July 11, 2012), we will be able to receive up to $3,397,500
in gross proceeds, assuming the sale of the entire 30,000,000 shares of our common stock. Accordingly, we would be required to
register additional 102,450,332 shares to obtain the balance of $11,602,500 under the Fairhills Investment Agreement. Due to the
floating offering price, we are not able to determine the exact number of shares that we will issue under the Fairhills Investment
Agreement.
We
may not have access to the full amount available under the
Fairhills Investment
Agreement.
We have not drawn down funds and have not
issued shares of our common stock under the Fairhills Investment Agreement. Our ability to draw down funds and sell shares under
the Fairhills Investment Agreement requires that the registration statement, of which this prospectus is a part, be declared effective
by the SEC, and that this registration statement continue to be effective. In addition, the registration statement of which this
prospectus is a part registers 30,000,000 shares issuable under the Fairhills Investment Agreement, and our ability to sell any
remaining shares issuable under the Fairhills Investment Agreement is subject to our ability to prepare and file one or more additional
registration statements registering the resale of these shares. These registration statements may be subject to review and comment
by the staff of the SEC, and will require the consent of our independent registered public accounting firm. Therefore, the timing
of effectiveness of these registration statements cannot be assured. The effectiveness of these registration statements is a condition
precedent to our ability to sell the shares of common stock to Fairhills under the Fairhills Investment Agreement. Even if we are
successful in causing one or more registration statements registering the resale of some or all of the shares issuable under the
Fairhills Investment Agreement to be declared effective by the SEC in a timely manner, we may not be able to sell the shares unless
certain other conditions are met. For example, we might have to increase the number of our authorized shares in order to issue
the shares to Fairhills. Accordingly, because our ability to draw down any amounts under the Fairhills Investment Agreement is
subject to a number of conditions, there is no guarantee that we will be able to draw down any portion or all of the proceeds of
$15,000,000 under the Fairhills Investment Agreement.
8
Certain restrictions on the extent
of puts and the delivery of advance notices may have little, if any, effect on the adverse impact of our issuance of shares in
connection with the Fairhills Investment Agreement, and as such, Fairhills may sell a large number of shares, resulting in substantial
dilution to the value of shares held by existing shareholders.
Fairhills has agreed, subject to certain
exceptions listed in the Fairhills Investment Agreement, to refrain from holding an amount of shares which would result in Fairhills
or its affiliates owning more than 4.99% of the then-outstanding shares of our common stock at any one time. These restrictions,
however, do not prevent Fairhills from selling shares of common stock received in connection with a put, and then receiving additional
shares of common stock in connection with a subsequent put. In this way, Fairhills could sell more than 4.99% of the outstanding
common stock in a relatively short time frame while never holding more than 4.99% at one time.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This Prospectus contains certain forward-looking
statements. When used in this Prospectus or in any other presentation, statements which are not historical in nature, including
the words "anticipate," "estimate," "should," "expect," "believe,"
"intend," "may," "project," "plan" or "continue," and similar expressions
are intended to identify forward-looking statements. They also include statements containing a projection of revenues, earnings
or losses, capital expenditures, dividends, capital structure or other financial terms.
The forward-looking statements in this
Prospectus are based upon our management's beliefs, assumptions and expectations of our future operations and economic performance,
taking into account the information currently available to them. These statements are not statements of historical fact. Forward-looking
statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance
or financial condition to be materially different from the expectations of future results, performance or financial condition we
express or imply in any forward-looking statements. These forward-looking statements are based on our current plans and expectations
and are subject to a number of uncertainties and risks that could significantly affect current plans and expectations and our future
financial condition and results.
We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of
these risks, uncertainties and assumptions, the forward-looking events discussed in this Prospectus might not occur. We qualify
any and all of our forward-looking statements entirely by these cautionary factors. As a consequence, current plans, anticipated
actions and future financial conditions and results may differ from those expressed in any forward-looking statements made by or
on our behalf. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented
herein.
USE OF PROCEEDS
We will not receive any proceeds from the
sale of shares by the selling stockholder. However, we will receive proceeds from the sale of securities pursuant to the Fairhills
Investment Agreement. The proceeds received from any "Puts" tendered to Fairhills under the Fairhills Investment Agreement
will be used for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other
purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company.
DILUTION
The sale of our common stock to Fairhills
in accordance with the Fairhills Investment Agreement will have a dilutive impact on our shareholders. As a result, our net loss
per share could increase in future periods and the market price of our common stock could decline. In addition, the lower our stock
price is at the time we exercise our put option, the more shares of our common stock we will have to issue to Fairhills in order
to drawdown pursuant to the Fairhills Investment Agreement. If our stock price decreases during the pricing period, then our existing
shareholders would experience greater dilution.
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Public Market for Common Stock
Since June 20, 2011, shares of our common
stock have been quoted on the OTCBB under the symbol "LSTG", following the change of our corporate name 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 the 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
$
0.66
$
0.28
Second Quarter 2012
$
0.23
$
0.14
Third Quarter 2012 (until July 11, 2012)
$
0.18
$
0.15
9
Holders
We had approximately 11 record holders
of our common stock as of July 2, 2012, according to the books of our transfer agent. The number of our stockholders of record
excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.
Dividends
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 "Executive Compensation" below,
we have no equity compensation program, including no stock option plan, and none are planned for the foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and
intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements
as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking
Statements and Business sections in this Prospectus. We use words such as "anticipate," "estimate," "plan,"
"project," "continuing," "ongoing," "expect," "believe," "intend,"
"may," "will," "should," "could," and similar expressions to identify forward-looking
statements.
Business Overview
We are currently a start-up exploration
stage company in the business of gold and mineral exploration, acquisition and development. We were incorporated in the State of
Nevada under the name Keyser Resources, Inc. on November 26, 2007.  Our business was initially operated to acquire an
option to purchase a mining interest in Canada. After a change in control in November 2010, we explored a merger with another company
in order to obtain an option to purchase several oil and gas leases in Nevada. A merger agreement was signed in January 2011. The
then-current management decided not to pursue the merger, and the merger agreement was terminated by mutual agreement of the parties
as of March 18, 2011.
On March 29, 2011, we 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 our sole director and officer, we changed
our focus to engage in the acquisition, exploration and development of gold and silver mining properties. To further reflect this
change in business focus, we changed our name to "Lone Star Gold, Inc." on June 14, 2011. In addition, to create a
more flexible capital structure, we increased the number of authorized shares of our 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.
Recent Development
Fairhills Investment Agreement
On April 30, 2012, we entered into a Fairhills
Investment Agreement with Fairhills, which is subsequently amended on June 25, 2012, pursuant to which Fairhills agreed to purchase
shares of our common stock for an aggregate purchase price of up to $15,000,000.
The Fairhills Investment Agreement provides
that we may, from time to time during the thirty-six (36) months period commencing from the effectiveness of the registration statement,
in our sole discretion, deliver a put notice to Fairhills which states the dollar amount that we intend to sell to Fairhills on
a date specified in the put notice. The maximum investment amount per notice shall be no more than two hundred percent (200%) of
the average daily volume of the common stock for the ten consecutive trading days immediately prior to date of the applicable put
notice. The purchase price per share to be paid by Fairhills shall be calculated at a twenty-four and a half percent (24.5%) discount
to the lowest trading price of the common stock as reported by Bloomberg, L.P. during the ten (10) consecutive trading days immediately
prior to the receipt by Fairhills of the put notice. We have reserved 30,000,000 shares of our common stock for issuance under
the Fairhills Investment Agreement.
10
We plan to use the proceeds from the sale
of the common stock under the Fairhills Investment Agreement for general corporate and working capital purposes and acquisitions
or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best
interest of the Company.
Bridge Note
On June 25, 2012, we borrowed $50,000
from Fairhills evidenced by a 2% Secured Note (the "Note"). The Note contains the following payment terms: (a) the
unpaid principal amount accrues interest at the rate of two percent (2%) per annum, (b) the unpaid principal and all accrued but
unpaid interest thereon will be due and payable on December 24, 2012, and (c) any portion of the unpaid principal and accrued but
unpaid interest may be prepaid by the Company, without penalty. Payment of the Note is secured by 3,750,000 shares of our common
stock owned by Daniel M. Ferris, our sole director and officer.
The proceeds of the Note will be used to
make certain payments relating to our mine tailings joint venture in Chihuahua, Mexico, and for general operating expenses.
Results of Operations
Results of Operations for the Period Ended March 31, 2012
as Compared to the Period Ended March 31, 2011
We have not generated any revenue since
our inception.  We do not anticipate earning revenues until we have begun to commercially produce minerals from the Concessions,
the Tailings, or other mineral properties that we may own in the future. For the periods below, we had the following expenses:
For the
Three Months
Ended
March 31,
2012
For the
Three Months
Ended
March 31,
2011
Accumulated
Deficit from
November 26,
2007
to
March 31,
2012
General and administrative
$
152,064
$
18,416
$
773,310
Exploration
356,696
-
909,894
Management fees
279,999
-
836,453
Total operating expenses
$
788,759
$
18,416
$
2,519,657
For the three months ended March 31, 2012,
we incurred general and administrative expenses totaling $152,064.  This increase of $133,648 was due to increases as
compared to the first quarter of 2011 as follows:  accounting and auditing fees of $30,164, professional fees of $57,220,
travel of $2,229, legal fees of $32,237, depreciation expense of $2,340, telephone expense of $5,301, rent expense of $2,696, and
general expenses of $1,461.
In addition, we incurred aggregate costs
of $356,696 related to our investment in Metales and expenditures under the Work Plan, and our Tailings Project as follows: $50,000
to fund the La Candelaria Work Plan and $160,000 to fund the Tailings Project Work Commitment and additional costs of $146,696
incurred in connection with the La Candelaria Project.
During the three months ended March 31,
2012, we paid management fees totaling $30,000 to our sole officer and director, and recognized $249,999 in expenses related to
the stock grant under Mr. Ferris' employment agreement during the three months ended March 31, 2012. We paid no management
fees in the first quarter of 2011.
Results of Operations for the Year Ended December 31,
2011 as Compared to the Year Ended December 31, 2010
We have not generated any revenue since our inception.  For
the years ended December 31, 2010 and December 31, 2011, we had the following expenses:
11
For the year
ended
December 31,
2010
For the year
ended
December 31,
2011
Accumulated
from
November 26,
2007 to
December 31,
2011
General and administrative
$
62,241
$
486,741
$
621,246
Exploration cost
-
530,925
553,198
Management fees
-
543,974
556,454
$
62,241
$
1,561,640
$
1,730,898
During the year ended December 31, 2010,
we incurred $62,241 in general and administrative expenses.  Our general and administrative fees were primarily for transfer
agent and filing fees and legal, accounting and auditing fees.
For the year ended December 31, 2011, we
incurred $486,741 in general and administrative expenses, $530,925 in exploration costs and $543,974 in management fees.  Our
general and administrative fees were primarily for legal costs and accounting and auditing fees. Management fees include cash compensation
and the value of the equity compensation paid to Mr. Ferris. Exploration costs include direct costs associated with La Candelaria
of $201,925 and the value of stock issued to Gonzalez of $303,000.
Liquidity and Capital Resources
The following is a summary of our balance sheet as of March
31, 2012 and December 31, 2011:
March 31,
2012 ($)
December 31,
2011 ($)
Cash
150,554
215,737
Current Liabilities
70,689
74,375
Working Capital
82,178
143,600
Stockholders' Equity
272,163
214,925
We had cash of $150,554 as of March 31,
2012.  We have committed to fund $450,000 over three years under the La Candelaria Work Plan, and $1,000,000 over the
next two years under the Work Commitment for the Tailings Project.  Because we have no revenues from operations, we are
dependent upon obtaining additional financing in order to fund our obligations under the Work Plan, and also to fund our obligations
under the Tailings Project.  We have funded our exploratory program to date through the North American Investment Agreement
and other sources of equity financing. We recently signed the Fairhills Investment Agreement, the proceeds of which may be used
for general corporate and working capital purposes, acquisitions, and other purposes as determined in good faith by the Board of
Directors. However, there is no assurance that adequate financing on acceptable terms will continue to be available to us.  During
the three months ended March 31, 2012, our sole source of financing was the proceeds of two private placements of common stock
to North American.  The net proceeds from those private placements were used to fund our operating expenses, and our
exploration activities under the Work Plan for the Concessions, and Work Commitment under the Tailings Project.
The following is a summary of our balance sheet as of December
31, 2010 and December 31, 2011:
December 31,
2010
December 31,
2011
Cash
$
9,977
$
215,737
Current Liabilities
67,636
74,375
Working Capital
233,533
143,600
Stockholders' Equity
$
233,533
$
214,925
As of December 31, 2010, we had a working
capital balance as a result of notes receivable offset by accounts payable and accrued liabilities. As of December 31, 2011, our
cash position has increased because of investments made by North American Gold Corp. ("North American") under an investment
agreement, which is described below. We anticipate earning revenues from the Tailings project by the third quarter of 2012.
On August 29, 2011, we entered into North
American Investment Agreement with North American pursuant to which North American agreed to invest up to $15,000,000 to purchase
our common stock in increments of $100,000 or an integral multiple thereof, at our option at any time through August 31, 2013.
During this period, we have the option to deliver a put notice to North American that states the number of shares of our common
stock proposes to sell to North American, at a price per share equal to 90% of the volume weighted average closing price of the
common stock for the 20 days immediately preceding the date of the put notice. North American has the right to reject any requested
sale of shares because of negative market conditions affecting the common stock.
12
The North American Investment Agreement
was amended to allow us to use the net proceeds from the sale of the shares to fund the exploration and development of gold and
silver mining concessions in the La Candelaria project and other projects approved in advance by the Company and North American.
The Company and North American have agreed that the proceeds may be used to fund expenses incurred in connection with the Mine
Tailings Project.
The shares will not be registered under
the Securities Act of 1933, as amended (the "Securities Act"), but will be issued under an exemption from the registration
requirements of the Securities Act. Any shares issued and sold to North American will be "restricted securities" and
will be subject to applicable restrictions on resale.
As of the date of this prospectus, North
American has purchased 1,966,148 shares from the Company, resulting in gross proceeds to the Company (before any wire transfer or
other fees) of $1,150,000. North American owns a total of 2,291,148 shares of common stock, or 2.5% of the issued and outstanding
shares.
There are no assurances that we will be
able to achieve further sales of our common stock or any other form of additional financing.
Going Concern
We have not attained profitable operations
and are dependent upon obtaining financing to pursue any extensive exploration activities. For these reasons our auditors stated
in their report that they have substantial doubt we will be able to continue as a going concern.
Accounting and Audit Plan
We intend to continue to have our outside
consultant assist us in the preparation of our quarterly and annual financial statements and have these financial statements reviewed
or audited by our independent auditor. Our outside consultant is expected to charge us approximately $5,000 to prepare our quarterly
financial statements and approximately $10,000 to prepare our annual financial statements. In the next twelve months, we anticipate
spending approximately $60,000 to pay for our accounting and audit requirements.
Off-balance sheet arrangements
We have no significant off-balance sheet
arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to
stockholders.
Critical Accounting Policies
Our financial statements are impacted by
the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary
of these policies is included in Note 2 of the notes to our historical financial statements. We have identified below the accounting
policies that are of particular importance in the presentation of our financial position, results of operations and cash flows
and which require the application of significant judgment by management.
DESCRIPTION OF BUSINESS
Overview
We are currently a start-up exploration
stage company in the business of gold and mineral exploration, acquisition and development. We were incorporated in the State of
Nevada under the name Keyser Resources, Inc. on November 26, 2007.  Our business was initially operated to acquire an
option to purchase a mining interest in Canada. After a change in control in November 2010, we explored a merger with another company
in order to obtain an option to purchase several oil and gas leases in Nevada. A merger agreement was signed in January 2011. The
then-current management decided not to pursue the merger, and the merger agreement was terminated by mutual agreement of the parties
as of March 18, 2011.
On March 29, 2011, we 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 our
sole director and officer, we changed our focus to engage in the acquisition, exploration and development of gold and silver mining
properties. To further reflect this change in business focus, we changed our name to "Lone Star Gold, Inc." on June
14, 2011. In addition, to create a more flexible capital structure, we increased the number of authorized shares of our 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.
On August 29, 2011, we entered into an
investment agreement with North American pursuant to which North American agreed to invest up to $15,000,000 to purchase our common
stock in increments of $100,000 or an integral multiple thereof, at our option at any time through August 31, 2013.
13
On April 30, 2012, we entered into a Fairhills
Investment Agreement, which was subsequently amended on June 25, 2012, with Fairhills Capital Offshore Ltd., a Cayman Islands exempted
company. Pursuant to the terms of the Fairhills Investment Agreement, Fairhills committed to purchase up to $15,000,000 of our
common stock over a period of up to thirty-six (36) months.
In connection with the Fairhills Investment
Agreement, we also entered into a registration rights agreement with Fairhills, pursuant to which we are obligated to file a registration
statement with the Securities and Exchange Commission (the "SEC") covering 30,000,000 shares of our common stock underlying
the Fairhills Investment Agreement within 21 days after the closing of the transaction. In addition, we are obligated to use all
commercially reasonable efforts to have the registration statement declared effective by the SEC within 120 days after the closing
of the transaction and maintain the effectiveness of such registration statement until termination of the Fairhills Investment
Agreement.
At an assumed purchase price of $0.11325
(equal to 75.5% of the closing price of our common stock of $0.15 on July 11, 2012), we will be able to receive up to $3,397,500
in gross proceeds, assuming the sale of the entire 30,000,000 shares being registered hereunder pursuant to the Fairhills Investment
Agreement. Accordingly, we would be required to register additional 102,450,332 shares to obtain the balance of $11,602,500 under
the Fairhills Investment Agreement. We are currently authorized to issue 150,000,000 shares of our common stock. We may be required
to increase our authorized shares in order to receive the entire purchase price. Fairhills has agreed to refrain from holding an
amount of shares which would result in Fairhills owning more than 4.99% of the then-outstanding shares of our common stock at any
one time.
Subsidiaries
We have two subsidiaries: Metales HBG,
S.A. de C.V. ("Metales") and Amiko Kay, S. de R.L. de C.V. ("Amiko Kay"). Both companies were organized
under the laws of Mexico.
We own 70% of the issued and outstanding
shares of stock of Metales. Our President, Mr. Ferris, is the sole administrator of Metales. As sole administrator, he assumes
the duties of a Board of Directors. Miguel Robles, our attorney in Mexico, and his associates have limited duties for the day-to-day
operation of Metales.
We own 99% of the issued and outstanding
membership interests of Amiko Kay. Miguel Robles owns a 1% ownership interest to satisfy Mexican law requirements of being at least
two owners.
Our current corporate structure chart is
as follows:
Agreements
La Candelaria
Metales HBG, S.A. de C.V. ("Metales")
was formed under the laws of Mexico on May 31, 2011. We own 70% of the issued and outstanding shares of capital stock of Metales
while the remaining 30% are held by Homero Bustillos Gonzalez, a resident of Mexico ("Gonzalez"). On June 10, 2011,
Gonzalez assigned to Metales eight 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.
14
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 letter of intent or Option Agreement, or (iii) the Assignment Agreement.
Pursuant to the Assignment Agreement, we
have taken or have 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.
We have issued 125,000 shares of our 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 to Gonzalez in connection with the Option Agreement. The shares were issued to North American in satisfaction of our obligations under the Assignment Agreement, with the agreement of American Gold.
2.
We have issued 300,000 shares of our common stock to Gonzalez.
3.
We have paid Gonzalez an additional $125,000.
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, we are obligated to issue 1,000,000 shares of our 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 NI 43-101 standards.
Finally, we have granted anti-dilution rights to Gonzalez, such that we must allow Gonzalez the opportunity to maintain his percentage
stock ownership in the Company until the date on which we have complied fully with our 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 North American Investment Agreement.
If we fail to comply with all our obligations
under the Option Agreement before January 11, 2014, the Option Agreement will terminate and we will be obligated to return the
Concessions to Gonzalez.
We advanced
approximately $122,341 to Metales in the first year of the Work Plan, which, together with payments made to Gonzalez that were
credited to the Work Plan, satisfied its obligations for that first year. We
have paid approximately $50,000 towards the
payments required in the second year of the Work Plan, and intend to make additional payments totaling $100,000 in 2012 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
15
All references to "La Candelaria"
herein refer to all eight concessions unless otherwise indicated.
The Concessions in the La Candelaria project
are without known proven (measured) or probable (indicated) reserves, as defined under SEC Industry Guide 7, and the exploration
program described in "History and Plan of Operation" below is exploratory in nature. See "
No
Proven or Probable Reserves" below
.
The transfer of the Concessions to Metales
must be registered under Mexican law.
We have been advised that the transfer of the Concessions from
Gonzalez to Metales has been 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, and they may not hold mining concessions directly. Because of those requirements,
we will have to rely on persons associated with Metales, and our 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.
A map of the location of the La Candelaria
Concessions is set forth below:
16
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 our 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.
We have 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 our 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). We are waiting for the results of the
drilling from the ALS CHEMEX laboratories. We have received initial drilling results from a local laboratory in Parral for split
core project. The results ranged from 0.09-0.12 grams per ton (gpt) gold and 15-35 gpt silver. The grade assays are not recognized
as NI 43-101 standard. 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 or more (1,600 feet).
Mineralization
The mineralization is believed to be a
low sulphadation epithermal deposit, likely caused by a nearby magma chamber or caldera. If that is true, then this would be classified
as a large low grade deposit.
17
·
Mine Tailings Project
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 ("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 consists 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 Amiko Kay 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, we 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. We agreed to pay
Jaramillo an additional $200,000 no later than January 26, 2013.
In addition, the Company or Amiko Kay will
fund an amount up to $1,000,000 for the benefit of the Joint Venture over its first two years, as follows:
.
$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.
.
$750,000 within the second year of the Joint Venture for the construction of a heap leach system and floatation plant on the Property.
We 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, we are obligated
to issue 600,000 shares of our common stock to Jaramillo. 300,000 shares of common stock have been issued as of the date of this
prospectus and the remaining 300,000 shares shall be issued within 12 months of signing the JV Agreement which is December 26,
2012.
The shares of common stock will be restricted
shares and are being issued with 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.
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 net revenues paid to Amiko Kay (and in turn Lone Star
Gold) and 35% of the net revenues paid to Jaramillo. It is anticipated that the portion to be paid to Amiko Kay 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. Amiko Kay will have access to the Property and the Tailings at all
times during the term of the JV Agreement.
Amiko Kay 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 Amiko Kay. Finally, Jaramillo will provide quarterly financial reports to Amiko
Kay.
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 Amiko Kay 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.
18
The JV Agreement will terminate upon completion
of processing the Tailings, as determined by Amiko Kay in its sole discretion. If Jaramillo materially breaches the JV Agreement,
Amiko Kay 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 Amiko Kay).
Location
The Tailings Property (the "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:
History and Plan of Operation
We have 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.
In addition, our consultants in Mexico
performed additional testing by having a sample of approximately 40 kilograms (approximately 88 pounds) of ore processed and analyzed.
Grade assays based on the sampling were received from SGM (Servicio Geologico Mexicano). The results of the analysis showed
115 grams per ton of silver and 0.7 grams per ton of gold, with 1% per ton of lead and zinc. The grade assays are not recognized
as NI 43-101 standard.
The Tailings are without known proven (measured)
or probable (indicated) reserves, as defined under SEC Industry Guide 7, and the exploration program described in "History
and Plan of Operation" is exploratory in nature. See "
No Proven or Probable Reserves"
below
.
We are obligated to fund $250,000 for the
benefit of the Joint Venture before January 26, 2013, under the Work Commitment established for the Tailings Project. For the three
months ending March 31, 2012, we made payments totaling $160,000 pursuant to the Work Commitment.
19
Approximately 3,000 tons of the Tailings
material has been sent to the processing plant in Parral, Mexico. As of the date of this prospectus, this shipment has not been
fully processed and the Company has no revenues from Tailings project. In addition, the Parral processing plant has undergone a
change of management and was temporarily closed, it has now reopened under new management and the Joint Venture has formally agreed
for them to take 200 tons per day of the tailings material. We have identified another processing plant in the area that it anticipates
will process future shipments of Tailings material in addition to the JV Agreement.
We are constructing
a basic wash plant and jig circuit on the property on which the Tailings are located. The wash plant's simple processing
circuit will separate the heavy, mineral-rich material from the lighter, worthless material in the Tailings. We expect the construction
of the wash plant to take between 6 to 8 weeks once construction has begun.
The first of two jigs are currently in place
on the Tailings Project wash plant, and testing is currently being conducted to confirm the best flow rates to maximize the separation
ratios of heavier material. The jig in question is the smaller of two jigs planned for the wash plant's start-up. The existing
jig will be used to set up the entire wash plant circuit in preparation for the second, larger jig, which we expect to be delivered
during July 2012. The cost of the wash plant and jig circuit is expected to be approximately $80,000 - $95,000.
We have also decided to proceed with the
design and development of a Benign nitrogen leaching pile process to be built on the property, which is expected to be capable
of processing 1,500 tons of Tailings per day. This relatively new leaching process represents the benefits of not using cyanide
and of having minimal environmental impact. In turn, the complexity of the permitting process for the plant's construction will
be greatly reduced.
·
Letter of Intent Regarding the Ocampo Property
On September 29, 2011, we entered into
a letter of intent 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 letter of intent 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 letter of intent, the letter of intent would expire unless
extended by mutual agreement of the parties. The letter of intent expired as of December 29, 2011.
No Proven or Probable Reserves
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.
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.
Intellectual Property
We do not own any patents or trademarks.
Employees
Currently, the sole employee of the Company
is Daniel M. Ferris, our President, Treasurer, Secretary and sole director. We engage independent contractors and consultants from
time to time to consult with our geologic and exploration program.
20
Legal Proceedings
We are not aware of any pending legal proceedings
which involve the Company or any of our properties.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
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, we 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 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 Mr. 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 was also recently appointed
President, Secretary and Treasurer of Curry Gold Corp. (OTCBB: CURG), a shell company with no current operations. 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.
Significant Employees and Consultants
We have no employees, other than our President,
Mr. Ferris.
We have retained several consultants. Miguel
Angel Jaramillo Tapia ("Jaramillo") is an independent consultant who is acting as our 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.
We do not have a written consulting contract with Jaramillo.
We have entered into a joint venture with
Jaramillo to process the Tailings. See "Description of Business" section. He is entitled to 35% of the net revenue
from the Tailings Joint Venture under the Joint Venture Agreement, as well as 600,000 shares of common stock as partial consideration.
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 our 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.
We employ the services of engineering consultants.
On September 27, 2011, we signed a contract with Ralph R. Sacrison, P.E., of the firm Sacrison Engineering, to perform engineering
consulting and related services. We agree to 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.
We have 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 U.S. legal counsel
in connection with our securities reporting requirements and other matters related to our business.
21
Finally, we also employ legal counsel in
Mexico in connection with the formation of our Mexican subsidiaries, and on-going legal work associated with the business of our
subsidiaries in Mexico, such as the registration of our properties with Mexican governmental authorities.
Code of Ethics
We have not adopted a code of ethics that
applies to our executive officers and employees. We anticipate that we will adopt a code of ethics when appropriate as we hire
additional employees and engage additional officers and directors.
Committees of the Board of Directors
We do not presently have a separately designated
audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors.
As such, the sole director acts in those capacities. We believe that committees of the Board are not necessary at this time given
that we are in the exploration stage.
Audit Committee Financial Expert
Mr. Ferris does not qualify as an "audit
committee financial expert." We believe that the cost related to retaining such a financial expert at this time is prohibitive,
given our current operating and financial condition. Further, because we are in the development stage of our business operations,
we believe that the services of an audit committee financial expert are not necessary at this time.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires
our executive officers and directors, and persons who own more than ten percent of our common stock to file reports of ownership
and change in ownership with the Securities and Exchange Commission and the exchange on which the common stock is listed for trading.
Executive officers, directors and more than ten percent stockholders are required by regulations promulgated under the Exchange
Act to furnish us with copies of all Section 16(a) reports filed. Based solely on our review of copies of the Section 16(a) reports
filed for the fiscal year ended December 31, 2011, we believe that our executive officers, directors and ten percent stockholders
complied with all reporting requirements applicable to them.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the
Company for the fiscal years of 2010 and 2011.
Summary Compensation Table
Name
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
($)
Total
($)
Daniel Ferris
President, CEO & CFO
2011
70,000
-
-
-
-
70,000
Alvaro Vollmers
2011
0
-
-
-
-
0
Former sole officer
2010
0
-
-
-
-
0
Maurice Bidaux
Former sole officer
2010
0
-
-
-
-
0
Neither Mr. Bidaux nor Mr. Vollmers received
compensation from the Company in 2010 and 2011, as applicable. Mr. Ferris replaced Mr. Vollmers as sole director and officer on
March 29, 2011.
Outstanding Equity Awards at the End of the Fiscal Year
We do not have any equity compensation plans and therefore no
equity awards were outstanding as of December 31, 2011.
Stock Option Grants
We have not granted any stock options to the executive officers
as of December 31, 2011.
Director Compensation
Our sole director did not receive any compensation for serving
on the Board of Directors.
22
Employment Agreements
On July 12, 2011, we 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 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 Mr. Ferris to perform his duties under the 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
.
Under the terms of the
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. Mr. Ferris  received 1,000,000 shares of common stock on July 11, 2012, and will receive 1,000,000 shares of common stock on
July 12,  2013 and 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the ownership,
as of July 12, 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 July 12, 2012, there were 89,341,068 common shares issued and outstanding. All persons named
have sole voting and investment power with respect to the shares, except as otherwise noted.
Name and Address of
Beneficial Owner
Number of Shares Owned
Beneficially
Percentage
Ownership
Director and Officer:
Daniel M. Ferris (1)(2)
President, Secretary, Treasurer and Director
6565 Americas Parkway NE, Suite 200
Albuquerque, NM  87110
8,500,000
9.51
%
5% or more beneficial owners:
John Rhoden (2)
22,500,000
25.47
%
All executive officers and directors as a group
8,500,000
9.51
%
(1) Includes 3,750,000 shares of common
stock as pledge to secure the 2% Secured Note issued to Fairhills by the Company.
(2) On January 13, 2012, the Company agreed
to redeem certain shares of common stock held by two of its principal shareholders. The Company agreed to redeem 7,500,000 shares
of common stock owned by Dan M. Ferris, for total consideration of $1.00. In addition, the Company agreed to redeem 22,500,000
shares of common stock held by John G. Rhoden, for total consideration of $1.00. The redeemed shares of common stock are to be
retired and restored to the status of authorized and unissued shares, and not held in treasury. The number of shares owned by Mr.
Ferris and Mr. Rhoden in the chart above includes the effect of the redemption of these shares, although the redemption of Mr.
Rhoden's shares has not been reflected in the books and records of the Company's transfer agent. See section "Certain
Relationships and Related Transactions" below.
Changes in Control
The Company underwent a change in management
on November 17, 2010, when Mr. Bidaux resigned as sole director and officer of the Company. Shareholders holding at least a majority
of the issued and outstanding shares of the common stock of the Company elected Mr. Vollmers to serve as the sole director. Mr.
Vollmers subsequently appointed himself President, Secretary and Treasurer. The Company underwent another change in management
on March 29, 2011, when Mr. Ferris became our sole director and executive officer. There are currently no arrangements which would
result in a change in control of the Company.
23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
The following is a description of transactions
since January 1, 2011 to which the Company has been a party in which the amount involved exceed or will exceed $120,000 and in
which any of the person who serves as our director and executive officer or with any beneficial owners of more than 5% of our common
stock, or entities affiliated with them, had or will have a direct or indirect material interest.
On June 25, 2012, we borrowed $50,000
from Fairhills evidenced by a 2% Secured Note. The Note contains the following payment terms: (a) the unpaid principal amount accrues
interest at the rate of two percent (2%) per annum, (b) the unpaid principal and all accrued but unpaid interest thereon will be
due and payable on December 24, 2012, and (c) any portion of the unpaid principal and accrued but unpaid interest may be prepaid
by the Company, without penalty. Payment of the Note is secured by 3,750,000 shares of our common stock owned by Daniel M. Ferris,
our sole director and officer.
As of March 31, 2012, an advance from Maurice
Bideaux, former chief executive officer and director, in the amount of $38,910, remains unpaid.
In December 2010, the Company lent $290,000
to American Liberty Petroleum Corp. ("ALP") and in 2011 lent ALP another $295,000. The promissory notes executed by
ALP in connection with the loans contained the following payment terms: (a) the unpaid principal amount accrued interest at the
rate of six percent (6%) per annum, (b) the unpaid principal and all accrued but unpaid interest thereon was due and payable on
April 30, 2011, and (c) the unpaid principal and accrued but unpaid interest could be prepaid in whole or in part at the option
of ALP, without penalty or premium. The notes are not secured by any assets of ALP. ALP made no payments of principal or interest
under the notes. In April 2011, the Company assigned the notes to New World in consideration for the redemption of the Units owned
by New World. As a result, the Company no longer holds any notes from ALP. At the time the loans were made, Mr. Vollmers was the
sole director and officer of ALP and of the Company. However, Mr. Vollmers is no longer a director or executive officer of the
Company. Mr. Vollmers sold his shares of common stock in March 2011 to Mr. Ferris, and resigned as director and executive officer
of the Company.
On January 24, 2011, the Board of Directors
of the Company approved a series of transactions that would result in the merger of TAEC, a subsidiary of ALP, with and into the
Company. See "Business." If the proposed merger had been completed, the Company would have acquired an option agreement
to purchase certain oil and gas properties in Nevada, which were the sole asset of ALP. Mr. Rhoden, Mr. Vollmers and New World,
as stockholders holding more than 50% of the votes entitled to be cast with respect to the approval of the transactions, adopted
resolutions authorizing the Company to complete the series of transactions.  However, the Company and ALP have since terminated
their agreement for the purchase of the assets, and the Company has no further obligations under such agreement.
On January 13, 2012, the Company agreed
to redeem certain shares of the common stock of the Company held by two of its principal shareholders. The Company redeemed 7,500,000
shares of common stock owned by Dan Ferris, for total consideration of $1.00. Mr. Ferris is the sole officer and director of the
Company. In addition, the Company redeemed 22,500,000 shares of common stock held by John G. Rhoden, for total consideration of
$1.00.
After redemption, Mr. Ferris owns 7,500,000
shares of common stock, and Mr. Rhoden owns 22,500,000 shares of common stock, representing 8.64% and 25.92%, respectively, of
the issued and outstanding shares of common stock. The redeemed shares of common stock were retired and restored to the status
of authorized and unissued shares, and not held in treasury. The Company, Mr. Ferris and Mr. Rhoden agreed to effect the redemption
in order to reduce the number of issued and outstanding shares of common stock.
The stock transfer agent has not yet recorded
the redemption of the stock formerly owned by Mr. Rhoden due to a delay caused by his inability to locate and deliver one of his
stock certificates. However, the number of issued and outstanding shares reported by the Company in this prospectus gives effect
to this redemption.
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
the Company's principal executive officer.
24
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On March 2, 2011, our Board of Directors
dismissed Seale and Beers, CPAs, our independent registered public accountants.  On the same date, the accounting firm
of LBB & Associates Ltd., LLP was engaged by our Board of Directors as our new independent registered public accountants.  
None of the reports of Seale & Beers on the Company's  financial  statements for the year ended December
31, 2009 or subsequent interim periods contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles, except for a going concern qualification in the registrant's audited financial
statements.
During the registrant's year ended December
31, 2009 and the subsequent interim periods thereto, there were no disagreements with Seale and Beers, whether or not resolved,
on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if
not resolved to Seale and Beers' satisfaction, would have caused it to make reference to the subject matter of the disagreement
in connection with its report on the registrant's financial statements.
Seale and Beers furnished us with a letter
addressed to the Securities and Exchange Commission stating that it agrees with the above statements.
During the two most recent
fiscal years and the interim periods preceding the engagement, the registrant has not consulted LBB & Associates Ltd., LLP
regarding any of the matters set forth in Item 304(a)(2) of Regulation S-K.
SELLING STOCKHOLDER
We are registering for resale shares of
our common stock that are issued and outstanding held by the selling stockholder identified below. We are registering the shares
to permit the selling stockholder and its pledgees, donees and other successors-in-interest that receive their shares from the
selling stockholder as a gift, partnership distribution or other non-sale related transfer after the date of this Prospectus to
resell the shares when and as they deem appropriate in the manner described in the "Plan of Distribution." As of the
date of this Prospectus, there are 89,341,068 shares of common stock issued and outstanding.
The following table sets forth:
·
the name of the selling stockholder,
·
the number of shares of our common stock that the selling stockholder beneficially owned prior
to the offering for resale of the shares under this Prospectus,
·
the maximum number of shares of our common stock that may be offered for resale for the account
of the selling stockholder under this Prospectus, and
·
the number and percentage of shares of our common stock to be beneficially owned by the selling
stockholder after the offering of the shares (assuming all of the offered shares are sold by the selling stockholder).
The selling stockholder has never served
as our officer or director or any of its predecessors or affiliates within the last three years, nor has the selling stockholder
had a material relationship with us. The selling stockholder is neither a broker-dealer nor an affiliate of a broker-dealer. The
selling stockholder did not have any agreement or understanding, directly or indirectly, to distribute any of the shares being
registered at the time of purchase.
The selling stockholder may offer for sale
all or part of the shares from time to time. The table below assumes that the selling stockholder will sell all of the shares offered
for sale. A selling stockholder is under no obligation, however, to sell any shares pursuant to this Prospectus.
Number of
Shares of
Shares of
Maximum
Common
Common Stock
Number of
Stock
Beneficially
Shares of
Beneficially
Percent
Owned prior to
Common Stock
Owned after
Ownership
Name
Offering (1)
to be Offered
Offering
after Offering
Fairhills Capital Offshore Ltd. (2)
30,000,000
30,000,000
0
0
%
__________________
(1)
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, securities that are currently convertible or exercisable into shares of our common stock, or convertible or exercisable into shares of our common stock within 60 days of the date hereof are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to the following table, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder's name.
(2)
Edward Bronson has the voting and dispositive power over the shares owned by Fairhills Capital Offshore Ltd.
25
PLAN OF DISTRIBUTION
The selling stockholder and any of its
respective pledges, donees, assignees and other successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These
sales may be at fixed or negotiated prices. The selling stockholder may use any one or more of the following methods when selling
shares:
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position
and resell a portion of the block as principal to facilitate the transaction
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
short sales after this registration statement becomes effective;
·
broker-dealers may agree with the selling stockholder to sell a specified number of such shares
at a stipulated price per share;
·
through the writing of options on the shares;
·
a combination of any such methods of sale; and
·
any other method permitted pursuant to applicable law.
The selling stockholder or any of its respective
pledgees, donees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or
broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder and/or the purchasers of shares for whom such broker-dealers
may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess
of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their
own risk. It is possible that a selling stockholder will attempt to sell shares of common stock in block transactions to market
makers or other purchasers at a price per share which may be below the then market price. The selling stockholder cannot assure
that all or any of the shares offered in this prospectus will be issued to, or sold by, the selling stockholder. The selling stockholder
and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, are "underwriters"
as that term is defined under the Securities Act, or the Exchange Act, or the rules and regulations under such acts. In such event,
any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.
Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be borne by the selling stockholder. The selling stockholder
may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.
The selling stockholder may from time to
time pledge or grant a security interest in some or all of the shares of common stock owned by it and, if it defaults in the performance
of its secured obligations, the pledgee or secured parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable provision of the
Securities Act amending the list of selling stockholders to include the pledge or other successors in interest as selling stockholders
under this Prospectus.
The selling stockholder also may transfer
the shares of common stock in other circumstances, in which case the pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending
the list of selling stockholders to include the pledge or other successors in interest as selling stockholders under this prospectus.
Fairhills has agreed to pay all fees and
expenses incident to the registration of the shares of common stock.
The selling stockholder shall acquire the
securities offered hereby in the ordinary course of business and has advised us that it has not entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of its shares of common stock, nor is there an underwriter
or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are
notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares
of common stock, if required, we will file a supplement to this prospectus.
If the selling stockholder uses this Prospectus
for any sale of the shares of common stock, it will be subject to the prospectus delivery requirements of the Securities Act.
Regulation M
The anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of our common stock and activities of the selling stockholder.
26
During such time as it may be engaged in
a distribution of any of the shares we are registering by this registration statement, Fairhills is required to comply with Regulation
M. In general, Regulation M precludes any selling security holder, any affiliated purchasers and any broker-dealer or other person
who participates in a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any
security which is the subject of the distribution until the entire distribution is complete. Regulation M defines a "distribution"
as an offering of securities that is distinguished from ordinary trading activities by the magnitude of the offering and the presence
of special selling efforts and selling methods. Regulation M also defines a "distribution participant" as an underwriter,
prospective underwriter, broker, dealer, or other person who has agreed to participate or who is participating in a distribution.
Regulation M under the Exchange Act prohibits,
with certain exceptions, participants in a distribution from bidding for or purchasing, for an account in which the participant
has a beneficial interest, any of the securities that are the subject of the distribution. Regulation M also governs bids and purchases
made in order to stabilize the price of a security in connection with a distribution of the security. We have informed Fairhills
that the anti-manipulation provisions of Regulation M may apply to the sales of their shares offered by this prospectus, and we
have also advised Fairhills of the requirements for delivery of this prospectus in connection with any sales of the common stock
offered by this prospectus.
Pursuant to the Fairhills Investment Agreement,
Fairhills shall not sell stock short, either directly or indirectly through its affiliates, principals or advisors, our common
stock during the term of the agreement.
DESCRIPTION OF SECURITIES TO BE REGISTERED
Authorized Capital Stock
We are authorized to issue 150,000,000
shares of common stock, $0.001 par value per share.
Common Stock
As of July 12, 2012, 89,341,068 shares of
common stock are issued and outstanding.
The holders of our common stock have equal
ratable rights to dividends from funds legally available if and when declared by our board of directors and are entitled to share
ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up
of our affairs. Our common stock does not provide the right to a preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions or rights. Our common stock holders are entitled to one non-cumulative vote per share on
all matters on which shareholders may vote.
All shares of common stock now outstanding
are fully paid for and non-assessable. We refer you to our Articles of Incorporation, Bylaws and the applicable statutes of the
state of Nevada for a more complete description of the rights and liabilities of holders of our securities. All material terms
of our common stock have been addressed in this section.
Holders of shares of our common stock do
not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election
of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining
shares will not be able to elect any of our directors.
Warrants
As of March 31, 2012, there were 200,000
share purchase warrants outstanding and exercisable. The warrants have a weighted average remaining life of 2.3 years and a weighted
average exercise price of $1.20 per warrant for one common share. The share purchase warrants outstanding at March 31, 2012 are
as follows:
Weighted
Weighted
average
average
remaining
Aggregate
exercise
contractual
intrinsic
Warrants
price
life (years)
value
Outstanding December 31, 2011
200,000
$
1.20
Granted
-
-
Exercised
-
-
Forfeited or cancelled
-
-
Expired
-
-
Outstanding March 31, 2012
200,000
$
1.20
2.33
$
59,467
27
Dividends
We have never declared or paid any cash
dividends on shares of our capital stock. We currently intend to retain earnings, if any, to fund the development and growth of
our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be
at the discretion of our board of directors after taking into account various factors, including our financial condition, operating
results, cash needs and growth plans.
LEGAL MATTERS
The validity of the common stock offered
by this prospectus will be passed upon for us by Anslow + Jaclin, LLP, Manalapan, New Jersey.
EXPERTS
The consolidated financial statements
of our company included in this prospectus and in the registration statement have been audited by LBB & Associates Ltd.,
LLP, an independent registered public accounting firm, to the extent and for the periods set forth in their report appearing
elsewhere herein and in the registration statement, and are included in reliance on such report, given the authority of said
firm as an expert in auditing and accounting.
The consolidated financial statements of
our company included in this prospectus and in the registration statement have been audited by Seale and Beers, CPAs, an independent
registered public accounting firm, to the extent and for the periods set forth in their report appearing elsewhere herein and in
the registration statement, and are included in reliance on such report, given the authority of said firm as an expert in auditing
and accounting.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus
as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being
registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant
or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries
as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
WHERE YOU CAN FIND MORE INFORMATION
We filed with the Securities and Exchange
Commission a registration statement under the Securities Act for the common stock in this offering. This prospectus does not contain
all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement.
For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits and
schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract
or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you
to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration
statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the
Public Reference Room maintained by the Securities and Exchange Commission at 100 F Street, N.E. Washington, DC 20549, and copies
of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the
prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains reports, proxy
and information statements, and other information regarding registrants that file electronically with the SEC. The address of the
website is www.sec.gov.
We file periodic reports under the Exchange
Act, including annual, quarterly and special reports, and other information with the Securities and Exchange Commission. These
periodic reports and other information are available for inspection and copying at the regional offices, public reference facilities
and website of the Securities and Exchange Commission referred to above.
28
PART II — INFORMATION NOT REQUIRED
IN THE PROSPECTUS
Item. 13 Other Expenses Of Issuance And Distribution.
Securities and Exchange Commission registration fee
$
515.70
Federal Taxes
$
0
State Taxes and Fees
$
0
Transfer Agent Fees
$
0
Accounting fees and expenses
$
0
Legal fees and expense
$
0
Blue Sky fees and expenses
$
0
Miscellaneous
$
0
Total
$
515.70
All amounts are estimates other than the
Commission's registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will
be borne by the selling shareholders. The selling shareholders, however, will pay any other expenses incurred in selling their
common stock, including any brokerage commissions or costs of sale.
Item. 14 Indemnification Of Directors
And Officers.
Nevada Revised Statute 78.037 permits a
corporation to eliminate or limit the personal liability of a director or officer to the corporation or its stockholders for damages
relating to breach of fiduciary duty as a director or officer, but such a provision must not eliminate or limit the liability of
a director or officer for (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or (b)
the payment of distributions in violation of Nevada Revised Statute 78.300.
Nevada Revised Statutes 78.7502 provides
as follows with respect to indemnification of directors, officers, employees and agents:
(a)
We may indemnify any person who was or is a party or is threatened to be made a party to any action,
except an action by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving
as a director, officer, employee or agent of any other person at our request, against expenses actually and reasonably incurred
by him in connection with the action, suit or proceeding if he: (i) is not liable for breach of his fiduciary duties as a director
or officer pursuant to Nevada Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed
to be in or not opposed to our best interests and, with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(b)
We may indemnify any person who was or is a party or is threatened to be made a party to any action
by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving as a director, officer,
employee or agent of any other person at our request, against expenses actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he: (i) is not liable for breach of his fiduciary duties pursuant to Nevada
Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to our
best interest.  We may not indemnify him for any claim, issue or matter as to which he has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to us or for amounts paid in settlement to us,
unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines
upon application that in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
(c)
To the extent that our director, officer, employee or agent has been successful on the merits or
otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein, we are required to
indemnify him against expenses, including attorneys' fees actually and reasonably incurred by him in connection with the
defense.
Our Articles of Incorporation and Bylaws
provide for elimination of any liability of our directors and officers and indemnity of our directors and officers to the fullest
extent permitted by Nevada law.
The above-described provisions relating
to the exclusion of liability and indemnification of directors and officers are sufficiently broad to permit the indemnification
of such persons in certain circumstances against liabilities arising under the Securities Act.  Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors and officers and to persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
29
Item. 15 Recent Sales Of Unregistered
Securities.
Set forth below is information regarding
securities sold by us within the past three years that were not registered under the Securities Act:
On July 11, 2012, the Company issued
1,000,000 shares of common stock to Dan Ferris, the President of the Company, pursuant to the terms of his Employment Agreement.
On June 28, 2012, we issued 200,000 shares
of common stock to Jaramillo pursuant to the JV Agreement dated January 26, 2012.
On March 21, 2012, we completed a private
placement of sale of 625,000 shares of our common stock to North American. We sold the shares at a price of $0.40 per share, resulting
in total proceeds of approximately $250,000 to the Company. The sale of the shares to North American represents the fifth sale
of common stock under the North American Investment Agreement.
On February 13, 2012, we completed a private
placement of sale of 625,000 shares of our common stock to North American. We sold the shares at a price of $0.48 per share, resulting
in gross proceeds of approximately $300,000 to the Company. The sale of shares to North American represents the fourth sale of
common stock under the North American Investment Agreement.
A portion of the proceeds of both private
placements have been or will be used to fund the exploration and development of the Concessions, according to a work plan established
for the La Candelaria project, and to make the annual payments for the property and concession taxes associated with the project.
The Company will also use the proceeds to commence payments in connection with the JV Agreement, such as shipping, trucking and
on-site wash plant construction, and other expenses under the work plan established for the Tailings project. Finally, a portion
of the proceeds will be used for general corporate expenses associated with the Company's exploration and development activities.
On January 30, 2012, we issued 100,000
shares of common stock to Jaramillo pursuant to the JV Agreement dated January 26, 2012.
On December 27, 2011, we sold 273,972 shares
of our common stock to North American for gross proceeds of $200,000 pursuant to a put notice delivered under the North American
Investment Agreement. The proceeds were used to fund the Work Plan related to the La Candelaria project, for expenses related to
the letter of intent for the Ocampo Property, and other operating expenses incurred by the Company.
On October 31, 2011, we entered into an
agreement with a consultant to perform certain consulting services. The contract calls for the consultant 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 our common stock. The fair market value of the common stock on the date of grant was $124,500. 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.
On October 24, 2011, we sold 204,081 shares
of our common stock to North American for gross proceeds of $200,000 pursuant to a put notice delivered under the North American
Investment Agreement. The proceeds were used to fund the Work Plan related to the La Candelaria project, for expenses related to
the letter of intent for the Ocampo Property, and other operating expenses incurred by the Company.
On September 14, 2011, we issued 238,095
shares of our common stock to North American for gross proceeds of $200,000 pursuant to a put notice delivered under the North
American Investment Agreement.
On August 17, 2011, we entered into an
agreement to issue 300,000 shares of our common stock to Gonzalez in accordance with certain option agreement. The fair market
value of the common stock was $303,000 on the date of issuance.
On August 17, 2011, we entered into an
agreement to issue 125,000 shares of our common stock to American Gold as repayment of the $125,000 that American Gold paid to
Gonzalez in connection with certain option agreement. The shares were issued in the name of North American with the agreement of
American Gold. The fair market value of the common stock was $126,250 on the date of issuance, September 15, 2011.
On August 29, 2011, we entered into an
agreement to issue 100,000 units to North American in a private placement, with each unit consisting of one share of our common
stock and one warrant to purchase an equal amount of share of our common stock at $1.20 per share exercisable at any time until
August 29, 2014, for cash proceeds of $100,000. The relative fair market value of the warrants on the date of issuance was $44,000.
On June 30, 2011, we entered into an agreement
to issue 100,000 units to North American Gold Corp. in a private placement, for $1.00 per unit, with each unit consisting of one
share of common stock and one warrant to purchase an equal amount of share of common stock at $1.20 per share exercisable at any
time until June 30, 2014, for cash proceeds of $100,000. The fair market value of the Warrants on the date of issuance was $15,467.
On April 13, 2011, the Company and New
World executed a Redemption Agreement, whereby we redeemed all of the shares of common stock and the warrants that New World owned
(consisting of the 12,000,000 shares of common stock and warrants to purchase 12,000,000 shares of common stock obtained in private
placements of Units), and in consideration for the common stock and warrants assigned to New World the four Promissory Notes. As
a result of the Redemption Agreement, the Company no longer holds the Promissory Notes, and New World owns no shares of common
stock or other securities of the Company.
30
On January 3, 2011, we issued 3,000,000
units to New World in a private placement, with each unit consisting one share of our common stock and one warrant to purchase
a share of our common stock at $0.0625 per share exercisable at any time until January 3, 2014, for cash proceeds of $150,000.
On January 6, 2011, the Company completed a private placement of an additional 3,000,000 units to New World on similar terms, for
cash proceeds of $150,000. The relative fair value of the warrants issued was $46,000. All shares of common stock and warrants
issued to New World have been redeemed.
On December 3, 2010, we issued 6,000,000
units to New World in a private placement, with each unit consisting of one share of our common stock and one warrant to purchase
a share of our common stock at $0.0625 per share exercisable at any time within 3 years, for cash proceeds of $300,000. The relative
fair value of the warrants issued was $46,500.
The above securities were not registered
under the Securities Act.  These securities qualified for exemption under Regulation S promulgated under the Securities
Act. We made this determination based on the representations of the investors, which included, in pertinent part, that such shareholders
were not a "U.S. person" as that term is defined in Rule 902(k) of Regulation S under the Act, and that such shareholders
were acquiring our common stock, for investment purposes for their own respective accounts and not as nominees or agents, and not
with a view to the resale or distribution thereof, and that the shareholders understood that the shares of our common stock may
not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.
Item 16. Exhibits and Financial Statement
Schedules
Exhibit No.
Description
3.1
Certificate of Incorporation of Keyser Resources Incorporated (1)
3.2
By-laws of Keyser Resources Incorporated (1)
3.3
Amended and Restated Articles of Incorporation (2)
5.1
Legal Opinion of Anslow & Jaclin, LLP
10.1
Declaration of Trust (1)
10.2
Option Agreement with Bearclaw Capital Corporation  (1)
10.3
Assignment Agreement by and among the Company, American Gold Holdings, Ltd. and Homero Bustillos Gonzalez dated as of June 10, 2011 (3)
10.4
Employment Agreement dated July 12, 2011, between the Company and Dan M. Ferris (3)
10.6
Investment Agreement between North American Gold Corp. and the Company dated August 29, 2011(4)
10.7
Press Release dated August 29, 2011(4)
10.8
Option Agreement between American Gold Holdings, Ltd. and Homero Bustillos Gonzales dated January 11, 2011 (5)
10.9
Consulting Agreement between the Company and Adam Whyte dated October 31, 2011 (5)
10.10
First Amendment to the Investment Agreement dated November 9, 2011, between the Company and North American Gold Corp. (5)
10.11
Amendment Agreement dated January 10, 2012, between the Company and Homero Bustillos Gonzales (6)
10.12
Joint Venture Agreement between Amiko Kay, S. de R.L. de C.V. and Miguel Angel Jaramillo Tapia dated January 26, 2012 (7)
10.13
Investment Agreement dated April 27, 2012, between Lone Star Gold, Inc. and Fairhills Capital Offshore Ltd. (executed on April 30, 2012) (8)
10.14
Registration Rights Agreement dated April 30, 2012 between Lone Star Gold, Inc. and Fairhills Capital Offshore Ltd. (8)
10.15
Amendment No. 1 to Investment Agreement dated June 25, 2012, between Lone Star Gold, Inc. and Fairhills Capital Offshore Ltd.
21.1
List of Subsidiaries of the Registrant
23.1
Consent of LBB & Associates Ltd., LLP
23.2
Consent of Seale and Beers, CPAs
23.3
Consent of Anslow & Jaclin, LLP (included in Exhibit 5.1)
101.INS
XBRL Instance Document
101.SCH
XB
RL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
(1) Incorporated by reference to the Company's Registration
Statement on Form S-1 filed on May 28, 2009.
(2) Incorporated by reference to the Company's 10-Q filed
on May 12, 2011.
(3) Incorporated by reference to the Company's 10-Q filed
August 22, 2011.
(4) Incorporated by reference to the Company's Current
Report on Form 8-K filed on August 29, 2011.
(5) Incorporated by reference to the Company's Quarterly
Report on Form 10-Q filed on November 10, 2011.
(6) Incorporated by reference to the Company's Current
Report on Form 8-K filed on January 17, 2012.
(7) Incorporated by reference to the Company's Current
Report on Form 8-K filed on February 1, 2012.
(8) Incorporated by reference to the Company's Quarterly
Report on Form 10-Q filed on May 14, 2012.
31
Item 17. Undertakings.
Undertaking Required by Item 512 of Regulation
S-K.
(a) The undersigned registrant hereby undertakes:
(1)
to file, during any period in which it offers or sells securities are being made, a post-effective amendment to this Registration
Statement to:
(i)
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii)
reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii)
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
of this rule do not apply if the registration statement is on Form S-8, and the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Exchange Act that are incorporated by reference in the registration statement; and paragraphs (a)(1)(i),
(a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the Exchange Act that are incorporated by reference in
the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is not part of the registration
statement.
Provided
further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is for an offering of asset-backed
securities on Form S-1 or Form S-3, and the information required to be included in a post-effective amendment is provided pursuant
to item 1100(c) of Regulation AB.
(2)
For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the initial bona fide offering.
(3)
File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
(b) For determining liability of the registrant
under the Securities Act to any purchaser in the initial distribution of the securities, the registrant undertakes that in a primary
offering of securities of the registrant pursuant to this registration statement, regardless of the underwriting method used to
sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(1)
Any preliminary prospectus or prospectus of the registrant relating to the offering required to be filed pursuant to Rule 424;
(2)
Any free writing prospectus relating to the offering prepared by or on behalf of the registrant or used or referred to by the registrant;
(3)
The portion of any other free writing prospectus relating to the offering containing material information about the registrant
or its securities provided by or on behalf of the registrant; and
(4)
Any other communication that is an offer in the offering made by the registrant to the purchaser.
32
(c) Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to
the foregoing provisions, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(d) That, for the purpose of determining
liability under the Securities Act to any purchaser:
If
the registrant is relying on Rule 430B:
(i)
Each prospectus filed by the registrant pursuant to 424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration statement; and
(ii)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of
the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with
a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date;
or
If
the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating
to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that is part of a registration statement or made in a
document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately
prior to such date of first use.
If
the registrant is relying on Rule 430A:
(i)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the
time it was declared effective.
(ii)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
33
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Albuquerque, State of New Mexico, on July 13, 2012.
LONE STAR GOLD, INC.
By:
/s/ Daniel M. Ferris
Name: Daniel M. Ferris
Title: President, Chief Executive Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Daniel M. Ferris
President, Chief Executive Officer
July 13, 2012
Daniel M. Ferris
Chief Financial Officer and Director
34
Lone Star Gold, Inc.
(An Exploration Stage Company)
Consolidated Balance Sheets
March 31
December 31,
2012
2011
(unaudited)
ASSETS
Current Assets
Cash
$
150,554
$
215,737
Prepaid expenses
2,313
2,238
Total current assets
152,867
217,975
Property and equipment, net
43,985
46,325
Mining assets
146,000
25,000
Total Assets
$
342,852
$
289,300
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable
$
31,779
$
21,767
Accrued liabilities
-
13,698
Due to related party
38,910
38,910
Total current liabilities
70,689
74,375
Total Liabilities
70,689
74,375
Commitments
Stockholders Equity
Common stock, 150,000,000 shares authorized, $0.001 par value; 88,141,068 and 116,791,068 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively
88,141
116,791
Additional paid-in capital
2,687,179
1,812,532
Deficit accumulated during the exploration stage
(2,485,551
)
(1,697,717
)
Total Lone Star Gold, Inc. Stockholders Equity
289,769
231,606
Noncontrolling interest in subsidiary
(17,606
)
(16,681
)
Total Stockholders Equity
272,163
214,925
Total Liabilities and Stockholders Equity
$
342,852
$
289,300
(The Accompanying Notes are an Integral
Part of These Financial Statements)
1
Lone Star Gold, Inc.
(An Exploration Stage Company)
Consolidated Statements of Operations
(unaudited)
Accumulated from
November 26,
2007 (Inception)
For the three months ended
through
March 31,
March 31,
2012
2011
2012
Revenue
$
-
$
-
$
-
Operating Expenses
General and administrative
152,064
18,416
773,310
Exploration costs
356,696
-
909,894
Management fees
279,999
-
836,453
Total Operating Expenses
(788,759
)
(18,416
)
(2,519,657
)
Other income
Interest income
-
7,397
9,839
Gain on settlement of note receivable
-
-
5,161
Total other income
-
7,397
15,000
Loss before income taxes
(788,759
)
(11,019
)
(2,504,657
)
Provision for Income Tax
-
-
-
Net Loss for the Period
(788,759
)
(11,019
)
(2,504,657
)
Net loss attributable to noncontrolling interest
925
-
19,106
Net loss attributable to Lone Star Gold, Inc.
$
(787,834
)
$
(11,019
)
$
(2,485,551
)
Net Loss Per Share - Basic and Diluted
$
(0.01
)
$
(0.00
)
Weighted Average Common Shares Outstanding
91,727,606
126,895,820
(The Accompanying Notes are an Integral
Part of These Financial Statements)
2
Lone Star Gold, Inc.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(unaudited)
Accumulated from
November 26,
For the
For the
2007
Three Months
Three Months
(Inception)
Ended
Ended
trhough
March 31,
March 31,
March 31,
2012
2011
2012
Operating Activities
Net loss
$
(788,759
)
$
(11,019
)
$
(2,504,657
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
2,340
-
5,192
Stock based compensation expense
249,999
-
849,973
Shares issued for exploration expenses
-
-
429,250
Gain on redemption of common stock
-
-
(5,161
)
Changes in operating assets and liabilities:
Prepaid expenses
(75
)
-
(2,313
)
Interest receivable
-
(7,397
)
(9,839
)
Accounts payable and accrued liabilities
(3,686
)
16,072
31,779
Net Cash Used In Operating Activities
(540,181
)
(2,344
)
(1,205,776
)
Investing Activities
Purchase of property and equipment and mining assets
(75,000
)
-
(149,177
)
Note receivable extended to Related Party
-
(295,000
)
(585,000
)
Net Cash Used in Investing Activities
(75,000
)
(295,000
)
(734,177
)
Financing Activities
Redemption of shares
(2
)
-
(2
)
Proceeds from advances related party
-
-
56,484
Proceeds from sale of common stock
550,000
300,000
2,034,025
Net Cash Provided By Financing Activities
549,998
300,000
2,090,507
Net change in Cash
(65,183
)
2,656
150,554
Cash - Beginning of Period
215,737
9,977
-
Cash - End of Period
$
150,554
$
12,633
$
150,554
Supplemental Disclosures
Interest paid
$
-
$
-
$
-
Income taxes paid
$
-
$
-
$
-
Non Cash Transactions:
Redemption of common stock
$
-
$
-
$
600,000
Forgiveness of advances related party
$
-
$
-
$
17,574
Shares issued for mining assets
$
46,000
$
-
$
46,000
(The Accompanying Notes are an Integral
Part of These Financial Statements)
3
Lone Star Gold, Inc.
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
For the Period from November 26, 2007 (Inception) to March
31, 2012
Deficit
Accumulated
Additional
During the
Non-
Common Stock
Paid-in
Exploration
controlling
Shares
Par Value
Capital
Stage
Interests
Total
Balance November 26, 2007 (Date of Inception)
-
$
-
$
-
$
-
$
-
$
-
Net loss for the period
-
-
-
-
-
-
Balance December 31, 2007
-
-
-
-
-
-
Common shares issued for cash in private placement:
at $0.001 per share on January 19, 2008
60,000,000
60,000
(57,000
)
-
-
3,000
at $0.015 per share on April 28, 2008
32,699,920
32,700
(8,175
)
-
-
24,525
at $0.05 per share on December 24, 2008
22,600,000
22,600
33,900
-
-
56,500
Net loss for the year (Restated)
-
-
-
(13,983
)
-
(13,983
)
Balance December 31, 2008 (Restated)
115,299,920
115,300
(31,275
)
(13,983
)
-
70,042
Net loss for the year
-
-
-
(93,034
)
-
(93,034
)
Balance December 31, 2009
115,299,920
115,300
(31,275
)
(107,017
)
-
(22,992
)
Sale of common stock for cash and warrants
6,000,000
6,000
294,000
-
-
300,000
Forgiveness of advances related party
-
-
17,574
-
-
17,574
Net loss for the year
-
-
-
(61,049
)
-
(61,049
)
Balance December 31, 2010
121,299,920
121,300
280,299
(168,066
)
-
233,533
Sale of common stock for cash and warrants
6,916,148
6,916
1,093,084
-
-
1,100,000
Redemption of shares
(12,000,000
)
(12,000
)
(588,000
)
-
-
(600,000
)
Formation of subsidiary
-
-
-
-
1,500
1,500
Stock based compensation
150,000
150
598,324
-
-
598,474
Shares issued for exploration costs
425,000
425
428,825
-
-
429,250
Net loss for the year
-
-
-
(1,529,651
)
(18,181
)
(1,547,832
)
Balance December 31, 2011
116,791,068
116,791
1,812,532
(1,697,717
)
(16,681
)
214,925
Sale of common stock for cash
1,250,000
1,250
548,750
-
-
550,000
Stock based compensation
-
-
249,999
-
-
249,999
Shares issued for mining assets
100,000
100
45,900
-
-
46,000
Cancellation of shares
(30,000,000
)
(30,000
)
29,998
-
-
(2
)
Net loss for the period
-
-
-
(787,834
)
(925
)
(788,759
)
Balance March 31, 2012 (unaudited)
88,141,068
$
88,141
$
2,687,179
$
(2,485,551
)
$
(17,606
)
$
272,163
(The Accompanying Notes are an Integral
Part of These Financial Statements)
4
Lone Star Gold, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2012
(unaudited)
1.
Nature of Operations and Continuance of Business
Lone Star Gold, Inc. (the "Company"
or "Lone Star"), formerly known as Keyser Resources, Inc. ("Keyser"), was incorporated in the State of
Nevada on November 26, 2007. The Company is an Exploration Stage Company as defined by Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 915,
Development Stage Entities.
These financial statements have
been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The Company has not generated any revenue since inception and has never paid any dividends and
is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a
going concern is dependent upon the continued financial support from its shareholders and other investors, the ability of the Company
to obtain any necessary financing to continue operations, and the attainment of profitable operations. As at March 31, 2012, the
Company has accumulated losses of $2,485,551 since inception. These factors raise substantial doubt regarding the Company's
ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification
of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern.
The unaudited financial statements
as of March 31, 2012 and for the three months ended March 31, 2012 and 2011, and for the period November 26, 2007 (inception) to
March 31, 2012 have been prepared in accordance with accounting principles generally accepted in the United States for interim
financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited financial statements have
been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the financial position as of March 31, 2012 and the results of operations and cash flows
for the periods ended March 31, 2012 and 2011, and for the period November 26, 2007 (inception) to March 31, 2012. The financial
data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited.
The results for the three month period ended March 31, 2012 is not necessarily indicative of the results to be expected for any
subsequent quarter of the entire year ending December 31, 2012.
Certain information and footnote
disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These
unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year
ended December 31, 2011 as included in our Form 10-K filed with the Securities and Exchange Commission.
Principles of consolidation
The consolidated financial statements
include the accounts of the Company and its subsidiaries.  All intercompany accounts and transactions have been eliminated
in consolidation.
5
Lone Star Gold, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2012
(unaudited)
2.
Related Party Transactions
All related party transactions
are recorded at the exchange amount which is the value established and agreed to by the related party.
An advance from Maurice Bideaux,
former chief executive officer and director, in the amount of $38,910, remains unpaid.
On January 13, 2012, the Company
agreed to redeem certain shares of the common stock, 0.001 par value, of the Company (the Common Stock") held by two of its
principal shareholders. The Company redeemed 7,500,000 shares of Common Stock owned by Dan Ferris, for total consideration of
$1.00. Mr. Ferris is the sole officer and director of the Company. In addition, the Company redeemed 22,500,000 shares of Common
Stock held by John G. Rhoden, for total consideration of $1.00.
After redemption, Mr. Ferris
owns 7,500,000 shares of Common Stock, and Mr. Rhoden owns 22,500,000 shares of Common Stock, representing 8.64% and 25.92%, respectively,
of the issued and outstanding shares of Common Stock. The redeemed shares of Common Stock were retired and restored to the status
of authorized and unissued shares, and not held in treasury. The Company, Mr. Ferris and Mr. Rhoden agreed to effect the redemption
in order to reduce the number of issued and outstanding shares of Common Stock.
The redemption of the stock
formerly owned by Mr. Ferris has been reflected on the books and records of the Company's stock transfer agent. The stock
transfer agent has not yet recorded the redemption of the stock formerly owned by Mr. Rhoden due to a delay caused by
his inability to locate and deliver one of his stock certificates. However, the number of issued and outstanding shares reported
by the Company in this Quarterly Report gives effect to this redemption.
6
Lone Star Gold, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2012
(unaudited)
3.
Equity Line of Credit
On August 29, 2011, the Company
and North American Gold Corp., a company organized under the laws of the Marshall Islands ("North American"), executed
an Investment Agreement (the "Investment Agreement"). Under the Investment Agreement, North American agreed to invest
up to $15,000,000 to purchase shares of  the Company's $0.001 par value common stock (the "Common Stock"),
in increments of $100,000 or an integral multiple thereof, at the Company's option at any time through August 31, 2013 (the
"Open Period"). During the Open Period, the Company has the option to deliver a put notice (a "Put Notice")
to North American that states the number of shares of Common Stock the Company proposes to sell to North American (the "Put
Shares"), and the price per share for those Put Shares (the "Share Price"). The Share Price is equal to 90% of
the volume weighted average closing price of the Common Stock for the 20 Trading Days immediately preceding the date on which the
Company sends the Put Notice. The closing for the sale of the Put Shares pursuant to a Put Notice shall take place no later than
10 Trading Days after the date on which the Company sends such Put Notice. A "Trading Day" is defined as a day in which
the NASDAQ stock market or OTC Bulletin Board is open for business.  North American has the right to refuse to close
any requested sale of Put Shares because of negative market conditions affecting the Common Stock.
The original Investment Agreement
required the Company to use the net proceeds from the sale of the Put Shares to fund the exploration and development of gold and
silver mining concessions in the La Candelaria project in Chihuahua, Mexico. On November 9, 2011, the Company and North American
executed a First Amendment to Investment Agreement, which states that the Company shall use the net proceeds from the sale
of Put Shares to fund operating expenses, working capital and general corporate activities related ot the exploration and development
of gold and silver mining concessions held by the Company and/or a subsidiary in relation to the La Candelaria property, the Ocampo
property, or any other properties agreed upon in advance by the Company and North American. The Company and North American have
further agreed that the Company may use the proceeds of the Put Shares to fund operations related to the Mine Tailings project.
The sales of Put Shares will
not be registered under the Securities Act of 1933, but will be issued under an exemption from the registration requirements of
the Securities Act of 1933. Any Put Shares issued and sold to North American will be "restricted securities" and will
be subject to applicable restrictions on resale.
4.
Equity
On January 13, 2012, the Company
agreed to redeem certain shares of Common Stock held by two of its principal shareholders. The Company agreed to redeem 7,500,000
shares of Common Stock owned by Dan Ferris, for total consideration of $1.00. In addition, the Company agreed to redeem 22,500,000
shares of Common Stock held by John G. Rhoden, for total consideration of $1.00. The redeemed shares of Common Stock are to be
retired and restored to the status of authorized and unissued shares, and not held in treasury. (See Note 2)
On January 30, 2012, the
Company issued 100,000 shares of its $0.001 par value Common Stock to Miguel Angel Jaramillo Tapia in accordance with the
JV agreement (See Note 5). The fair market value of the shares on the date of issuance was $46,000.
On February 13, 2012, the Company
sold 625,000 shares of its $0.001 par value Common Stock to North American for gross proceeds of $300,000 pursuant to a Put Notice
delivered under the Investment Agreement.
On March 21, 2012, the
Company sold 625,000 shares of its $0.001 par value Common Stock to North American for gross proceeds of $250,000 pursuant to
a Put Notice delivered under the Investment Agreement.
7
Lone Star Gold, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2012
(unaudited)
4.
Equity (cont'd)
A summary of warrant activity for the quarter ended
March 31, 2012 is presented below:
Weighted
Weighted
average
average
remaining
Aggregate
exercise
contractual
intrinsic
Warrants
price
life (years)
value
Outstanding December 31, 2011
200,000
$
1.20
Granted
-
-
Exercised
-
-
Forfeited or cancelled
-
-
Expired
-
-
Outstanding March 31, 2012
200,000
$
1.20
2.33
$
59,467
8
Lone Star Gold, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2012
(unaudited)
5.
Commitments
On October 31, 2011, the Company
entered into an agreement with a consultant to perform consulting services as requested by the Company. The contract
calls for the consultant 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 $0.001 par value common stock. The fair market value of the
common stock on the date of grant was $124,500. 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.
La Candelaria Property
On May 31, 2011, Metales 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 Gonzalez.  On June 10, 2011, Gonzalez assigned the Concessions
to Metales.  The Concessions cover 800 hectares, or approximately 1,976 acres.
Gonzalez transferred the Concessions
to Metales pursuant to an agreement with American Gold.    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 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. Pursuant to the
Assignment Agreement (which has an effective date of June 10, 2011), the Company has taken or will take the following actions in
connection with transfer of the Concessions from Gonzalez to Metales:
1.
The Company issued 125,000 shares of its $0.001 par value common stock to North American as repayment
of the $125,000 that American Gold paid Gonzalez in connection with Option Agreement (the "American Gold Shares") on
August 17, 2011.
2.
The Company issued 300,000 shares of its $0.001 par value common stock, with a fair value of $303,000,
to Gonzalez on September 16, 2011.
3.
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").
4.
The Company paid Gonzalez an additional $125,000 during the three months ended March 31, 2012.
The American Gold Shares were
issued in the name of North American, with the agreement of American Gold.
Gonzalez retains a 2% Net Smelter
Returns Royalty on the Property.  Metales is obligated to undertake work necessary to bring the existing geological survey
on the Property up to NJ 43-101 standards.  During the quarter ended March 31, 2012, the Company advanced $50,000 under
the Work Plan for the second year.
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.  In addition, the Company is obligated to issue 1,000,000 shares
of its $0.001 par value 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.  Finally, 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.
9
Lone Star Gold, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2012
(unaudited)
5.
Commitments (cont'd)
Employment Agreement
On July 12, 2011, the
Company entered into an Employment Agreement with Dan 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").  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 the Company's $0.001 common stock ("Common Stock"), which will be issued in
three equal increments of 1,000,000 shares over the first 3 years of the Term.  The shares of Common Stock will not
be registered under the Securities Act, and will be subject to restrictions on transfer.  Therefore, Mr. Ferris
will receive 1,000,000 shares of Common Stock on July 12 of each of the years 2012, 2013, and 2014.  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 at any time for "cause" by the
Company.  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 been issued 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.  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.  The fair market value of the stock grant on the date of the Employment Agreement
was $3,000,000.  The Company recognized $249,999 in expense related to the stock grant during the three months
ended March 31, 2012.
Tailings Project
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 ("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 Amiko Kay 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 on December 5, 2011, and another $75,000 when it signed the
JV Agreement in the quarter ending March 31, 2012. The Company agreed to pay Jaramillo an additional $200,000 no later than January
26, 2013.
10
Lone Star Gold, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2012
(unaudited)
5.
Commitments (cont'd)
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, which have been issued to Jaramillo.
(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.
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 Amiko Kay and 35%
of the net revenues paid to Jaramillo. It is anticipated that the portion to be paid to Amiko Kay 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.
During the three months ended March 31, 2012, the Company made payments totaling $160,000 towards the Work Commitment.
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. Amiko Kay will have access to the Property and the Tailings
at all times during the term of the JV Agreement.
Amiko Kay 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 Amiko Kay. Finally, Jaramillo will provide quarterly financial reports to
Amiko Kay.
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 Amiko Kay 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.
11
Lone Star Gold, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2012
(unaudited)
5.
Commitments (cont'd)
The JV Agreement will terminate
upon completion of processing the Tailings, as determined by Amiko Kay 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 Amiko Kay).
6.
Subsequent events
On April 30, 2012, the
Company entered into an Investment Agreement (the "Fairhills Investment Agreement") with Fairhills Capital
Offshore Ltd., a Cayman Islands exempted company (the "Investor"), pursuant to which the Investor has agreed to
purchase the shares of Common Stock for an
aggregate purchase price of up to $24,000,000. The Fairhills Investment Agreement is attached as Exhibit 10.13 to this
Quarterly Report.
The Investment Agreement provides
that the Company may, from time to time during the Open Period (defined below), in its sole discretion, deliver a Put Notice to
the Investor which states the dollar amount that the Company intends to sell to the Investor on a date specified in the Put Notice
(the "Put"). The Company will be entitled to Put to the Investor (the "Put Amount") the number of shares
of Common Stock equal to two hundred percent (200%) of the average daily volume of the Common Stock for the ten consecutive trading
days immediately prior to date of the applicable Put Notice. The purchase price per share to be paid by the Investor for each Put
Amount will be calculated at a twenty-four and a half percent (24.5%) discount to the lowest volume weighted average price of the
Common Stock reported by Bloomberg, L.P. during the ten (10) consecutive trading days immediately prior to the Investor's
receipt of the Put Notice. The Open Period begins on the trading day after a registration statement is declared effective as to
the Common Stock to be subject to the Put, and ends thirty-six (36) months after such date, unless earlier terminated in accordance
with the Investment Agreement. The Company has reserved 30,000,000 shares of its Common Stock for issuance to the Investor under
the Investment Agreement.
The Company will use the proceeds
from the sale of the Common Stock under the Fairhills Investment Agreement for general corporate and working capital purposes and
acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be
in the best interest of the Company.
In connection with
the Fairhills Investment Agreement, the Company and the Investor entered into a Registration Rights Agreement. Under
the Registration Rights Agreement, the Company will use its commercially reasonable efforts to file, within twenty-one (21)
days of the date of the Agreement, a Registration Statement on Form S-1 covering the resale of the Common Stock subject to
the Investment Agreement. The Company intends to initially register 30,000,000 shares of Common Stock for resale. The Company
has agreed to use all commercially reasonable efforts to have the Registration Statement declared effective by the SEC within
one hundred and twenty (120) calendar days after the date of the Registration Rights Agreement.
12
Lone Star Gold Inc.
(formerly known as Keyser Resources, Inc.)
(An Exploration Stage Company)
December 31, 2011
Index
Reports of Independent Registered Public Accounting Firm
F–2
Consolidated Balance Sheets
F–4
Consolidated Statements of Operations
F–5
Consolidated Statements of Cash Flows
F–6
Consolidated Statements of Stockholders' Equity (Deficit)
F–7
Notes to the Consolidated Financial Statements
F–8
F-
1
LBB & ASSOCIATES LTD., LLP
10260 Westheimer Road, Suite 310
Houston, TX 77042
Phone: (713) 800-4343 Fax: (713) 456-2408
Report of Independent Registered Public
Accounting Firm
To the Board of Directors of
Lone Star Gold, Inc.
(formerly known as Keyser Resources, Inc.)
(An Exploration Stage Company)
Albuquerque, New Mexico
We have audited the accompanying consolidated
balance sheets of Lone Star Gold, Inc. (the "Company") as of December 31, 2011 and 2010, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the years then ended and for the period from November
26, 2007 (inception) through December 31, 2011. These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the
statements of operations, stockholders' deficit and cash flows for the period from November 26, 2007 (inception) to December
31, 2009, which totals reflected a deficit of $107,017 accumulated during the exploration stage. Those financial statements and
cumulative totals were audited by other auditors whose report dated April 12, 2010, expressed an unqualified opinion on those statements
and cumulative totals, and included an explanatory paragraph regarding the Company's ability to continue as a going concern.
Our opinion, insofar as it relates to amounts included for that period is based on the report of other independent auditors, mentioned
above.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, based on our audits and
the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Lone Star Gold, Inc. as of December 31, 2011 and 2010, and the results of its operations and its cash flows
for each of the years then ended and for the period from November 26, 2007 (inception) through December 31, 2011 in conformity
with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated
financial statements, the Company's absence of significant revenues, recurring losses from operations, and its need for additional
financing in order to fund its projected loss in 2012 raise substantial doubt about its ability to continue as a going concern.
The 2011 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ LBB & Associates Ltd., LLP
LBB & Associates Ltd., LLP
Houston, Texas
March 22, 2012
F-
2
SEALE AND BEERS, CPAs
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors
Keyser Resources, Inc
(An Exploration Stage Company)
We have audited the accompanying balance
sheet of Keyser Resources, Inc. (An Exploration Stage Company) as of December 31, 2009, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years ended December 31, 2009 and since inception on November 26, 2007
through December 31, 2009. These financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on our audits.
We conduct our audits in accordance with
standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Keyser Resources, Inc. (An Exploration Stage
Company) as of December 31, 2009, and the related statements of operations, stockholders' equity (deficit) and cash flows
for the years ended December 31, 2009 and since inception on November 26, 2007 through December 31, 2009, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements,
the Company has had a loss from operations of $93,034, an accumulated deficit of $107,017, a working capital deficit of $22,992
and has earned no revenues since inception, which raises substantial doubt about its ability to continue as a going concern.  Management's
plans concerning these matters are also described in Note 1.  The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Seale and Beers, CPAs
Seale and Beers, CPAs
Las Vegas, Nevada
April 12, 2010
50 S. Jones Blvd. Suite 202 Las Vegas,
NV 89107 Phone: (888)727-8251 Fax: (888)782-2351
F-
3
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage Company)
Consolidated Balance Sheets
December 31,
2011
December 31,
2010
ASSETS
Current Assets
Cash
$
215,737
$
9,977
Prepaid expenses
2,238
-
Notes and interest receivable (related party)
-
291,192
Total current assets
217,975
301,169
Property and equipment, net
46,325
-
Mining assets
25,000
-
Total Assets
$
289,300
$
301,169
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable
$
21,767
$
5,726
Accrued liabilities
13,698
23,000
Due to related party
38,910
38,910
Total current liabilities
74,375
67,636
Total Liabilities
74,375
67,636
Commitments
Stockholders' Equity
Common stock, 150,000,000 shares authorized, $0.001 par value; 116,791,068 and 121,299,920  shares issued and outstanding as of December 31, 2011 and 2010, respectively
116,791
121,300
Additional paid-in capital
1,812,532
280,299
Deficit accumulated during the exploration stage
(1,697,717
)
(168,066
)
Total Lone Star Gold, Inc. Stockholders' Equity
231,606
233,533
Noncontrolling interest in subsidiary
(16,681
)
-
Total Stockholders' Equity
214,925
233,533
Total Liabilities and Stockholders' Equity
$
289,300
$
301,169
(The Accompanying Notes are an Integral
Part of These Financial Statements)
F-
4
Lone Star Gold Inc.
(formerly known as Keyser Resources, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Operations
For the
Year Ended
December 31,
2011
For the
Year Ended
December 31,
2010
Accumulated
from
November 26,
2007
(Date of
Inception)
to December
31,
2011
Revenue
$
–
$
–
$
–
Operating Expenses
General and administrative
486,741
62,241
621,246
Exploration costs
530,925
-
553,198
Management fees
543,974
-
556,454
Total Operating Expenses
(1,561,640
)
(62,241
)
(1,730,898
)
Other income
Interest Income
8,647
1,192
9,839
Gain on settlement of note receivable
5,161
-
5,161
Total other income
13,808
1,192
15,000
Loss before income taxes
(1,547,832
)
(61,049
)
(1,715,898
)
Provision for Income Tax
–
–
–
Net Loss for the Period
(1,547,832
)
(61,049
)
(1,715,898
)
Net loss attributable to noncontrolling interest
18,181
-
18,181
Net loss attributable to Lone Star Gold, Inc.
$
(1,529,651
)
$
(61,049
)
$
(1,697,717
)
Net Loss Per Share – Basic and Diluted
$
(0.01
)
$
(0.00
)
Weighted Average Common Shares Outstanding
118,686,221
115,760,194
(The Accompanying Notes are an Integral
Part of These Financial Statements)
F-
5
Lone Star Gold Inc.
(formerly known as Keyser Resources, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
For the
Year Ended
December 31,
2011
For the
Year Ended
December 31,
2010
Accumulated
from
November 26,
2007
(Date of
Inception)
to December 31,
2011
Operating Activities
Net loss for the year
$
(1,547,832
)
$
(61,049
)
$
(1,715,898
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
2,852
–
2,852
Stock based compensation expense
599,974
–
599,974
Shares issued for exploration expenses
429,250
–
429,250
Gain on redemption of common stock
(5,161
)
–
(5,161
)
Changes in operating assets and liabilities:
Prepaid expenses
(2,238
)
(848
)
(2,238
)
Interest receivable
(8,647
)
–
(9,839
)
Accounts payable and accrued liabilities
6,739
(709
)
35,465
Net Cash Used In Operating Activities
(525,063
)
(62,606
)
(665,595
)
Investing Activities
Note receivable extended to Related Party
(295,000
)
(290,000
)
(585,000
)
Purchases of property and equipment and mining assets
(74,177
)
–
(74,177
)
Net Cash Used in Investing Activities
(369,177
)
(290,000
)
(659,177
)
Financing Activities
Proceeds from advances – related party
-
56,484
56,484
Proceeds from sale of common stock
1,100,000
300,000
1,484,025
Net Cash Provided By Financing Activities
1,100,000
356,484
1,540,509
Net change in cash
205,760
3,878
215,737
Cash - Beginning of Period
9,977
6,099
–
Cash - End of Period
$
215,737
9,977
215,737
Supplemental Disclosures
Interest paid
$
–
$
–
$
–
Income taxes paid
$
–
$
–
$
–
Non Cash transactions:
Redemption of common stock
$
600,000
$
–
$
600,000
Forgiveness of advances-related party
$
–
$
17,574
$
17,574
(The Accompanying Notes are an Integral
Part of These Financial Statements)
F-
6
Lone Star Gold, Inc.
(formerly known as Keyser Resources, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
For the Period from November 26, 2007 (Date of Inception) to
December 31, 2011
Deficit
Accumulated
Additional
During the
Non-
Common Stock
Paid-in
Exploration
controlling
Shares
Par Value
Capital
Stage
Interests
Total
Balance – November 26, 2007 (Date of Inception)
–
$
–
$
–
$
–
$
–
$
–
Net loss for the period
–
–
–
–
–
–
Balance – December 31, 2007
–
–
–
–
–
–
Common shares issued for cash in private placement:
at $0.001 per share on January 19, 2008
60,000,000
60,000
(57,000
)
–
–
3,000
at $0.015 per share on April 28, 2008
32,699,920
32,700
(8,175
)
–
–
24,525
at $0.05 per share on December 24, 2008
22,600,000
22,600
33,900
–
–
56,500
Net loss for the year – (Restated)
–
–
–
(13,983
)
–
(13,983
)
Balance – December 31, 2008 – (Restated)
115,299,920
115,300
(31,275
)
(13,983
)
–
70,042
Net loss for the year
–
–
–
(93,034
)
–
(93,034
)
Balance – December 31, 2009
115,299,920
115,300
(31,275
)
(107,017
)
–
(22,992
)
Sale of common stock for cash and warrants
6,000,000
6,000
294,000
–
–
300,000
Forgiveness of advances – related party
–
–
17,574
–
–
17,574
Net loss for the year
–
–
–
(61,049
)
–
(61,049
)
Balance – December 31, 2010
121,299,920
121,300
280,299
(168,066
)
–
233,533
Sale of common stock for cash and warrants
6,916,148
6,916
1,093,084
–
–
1,100,000
Redemption of shares
(12,000,000
)
(12,000
)
(588,000
)
–
–
(600,000
)
Services received in connection with formation of subsidiary
–
–
–
–
1,500
1,500
Stock based compensation
150,000
150
598,324
–
–
598,474
Shares issued for exploration costs
425,000
425
428,825
–
–
429,250
Net loss for the period
–
–
–
(1,529,651
)
(18,181
)
(1,547,832
)
Balance – December 31, 2011
116,791,068
$
116,791
$
1,812,532
$
(1,697,717
)
$
(16,681
)
$
214,925
(The Accompanying Notes are an Integral
Part of These Financial Statements)
F-
7
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
1.
Nature of Operations and Continuance of Business
Lone Star Gold, Inc. (the "Company"
or "Lone Star"), formerly known as Keyser Resources, Inc. ("Keyser"), was incorporated in the State of
Nevada on November 26, 2007. The Company is an Exploration Stage Company as defined by Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 915,
Development Stage Entities.
On May 10, 2011, stockholders
holding at least a majority of the issued and outstanding shares of Common Stock, acting by written consent, adopted resolutions
that approved a change in the Company's name from "Keyser Resources, Inc." to "Lone Star Gold, Inc.",
an increase in the number of authorized shares of common stock to 150,000,000 and a 20:1 forward stock split.  Share
information throughout these financial statements and footnotes have been presented retroactively of the stock split.
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 capital stock.  The remaining 30% of the issued and outstanding capital stock of Metales was
issued to Homero Bustillos Gonzalez ("Gonzalez"), an individual resident of Mexico.  On June 10, 2011, Gonzalez
assigned to Metales eight (8) gold and silver mining concessions related to the "La Candelaria" property located in
the town of Guachochi, state of Chihuahua, Mexico (the "Concessions").  The Concessions cover 800 hectares, or
approximately 1,976 acres.
These financial statements have
been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The Company has not generated any revenue since inception and has never paid any dividends and
is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a
going concern is dependent upon the continued financial support from its shareholders and other investors, the ability of the Company
to obtain any necessary financing to continue operations, and the attainment of profitable operations. As of December 31, 2011,
the Company has accumulated losses of $1,697,717 since inception. These factors raise substantial doubt regarding the Company's
ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification
of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern.
2.
Summary of Significant Accounting Policies
a)
Principles of consolidation
The consolidated financial statements include the
accounts of the Company and its subsidiary.  All intercompany accounts and transactions have been eliminated in consolidation.
b)
Non-controlling interests
Non-controlling interests represent the equity in
a subsidiary not attributable directly or indirectly to the Company, and in represented in the consolidated balance sheets as a
component of stockholders' equity. Non-controlling interests in the results of operations of the Company are presented in
the face of the consolidated statement of operations as an allocation of the total profit or loss between non-controlling interests
and the shareholders of the Company.
When the Company loses control of a subsidiary, it
is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss recognized as a component
of net income. Any interests retained in that former subsidiary at the date when control is lost is recognized at fair value and
this amount is regarded as the fair value on initial recognition of a financial asset, or, when appropriate, the cost on initial
recognition of an investment in an associated or jointly controlled entity.
c)
Basis of Presentation
These financial statements and
related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company's fiscal year-end is December 31.
F-
8
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage
Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
d)
Use of Estimates
The preparation of financial
statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates
estimates and assumptions related to the recoverability of long-lived assets and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected.
e)
Cash and Cash Equivalents
The Company considers all highly
liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents.
f)
Foreign Currency Translation
The Company's functional
and reporting currency is the United States dollar. Occasional transactions may occur in Mexican Pesos and management has adopted
ASC 830
Foreign Currency Matters
. Monetary assets and liabilities denominated in foreign currencies are translated using
the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are
translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues
and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are
included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
g)
Fair Value of Financial Instruments
The Company's financial
instruments consist principally of cash and accounts payable. Pursuant to ASC 820,
Fair Value Measurements and Disclosures
and ASC 825,
Financial Instruments
the fair value of cash equivalents is determined
based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The Company believes
that the recorded values of all other financial instruments approximate their current fair values because of their nature and relatively
short maturity dates or durations.
h)
Basic and Diluted Net Loss Per Share
The Company computes net loss
per share in accordance with ASC 260,
Earnings Per Share
which requires presentation of both basic and diluted earnings
per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net loss available to common
shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred
stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the
number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti dilutive.
F-
9
Lone Star Gold Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
i)
Mineral Property Costs
The Company has been in the
exploration stage since its formation on November 26, 2007 and has not yet realized any revenues from its planned operations. It
is primarily engaged in the acquisition, exploration and development of mineral properties. Mineral property acquisition costs
are capitalized when management has determined that probable future benefits consisting of a contribution to future cash inflows
have been identified and adequate financial resources are available or are expected to be available as required to meet the terms
of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed
as incurred if the criteria for capitalization are not met. In the event that a mineral property is acquired through the issuance
of the Company's shares, the mineral property will be recorded at the fair value of the respective property or the fair value
of common shares, whichever is more readily determinable.
When mineral properties are
acquired under option agreements with future acquisition payments to be made at the sole discretion of the Company, those future
payments, whether in cash or shares, are recorded only when the Company has made or is obliged to make the payment or issue the
shares. When it has been determined that a mineral property can be economically developed as a result of establishing proven and
probable reserves and bankable feasibility, the costs incurred to develop such property are capitalized.
j)
Long-lived Assets
In accordance with ASC 360
,
Property Plant and Equipment
the Company tests long-lived assets or asset groups for recoverability when events or changes
in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include,
but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate
or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction
of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses
associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly
before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair
value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount
is not recoverable and exceeds fair value.
Property and equipment is stated
at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease
term. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired
for internal use, three years; computer equipment, two to three years; buildings and improvements, five to 15 years; leasehold
improvements, two to 10 years; and furniture and equipment, one to five years. Land is not depreciated.
k)
Asset Retirement Obligations
The Company follows the provisions
of ASC 410
Asset Retirement and Environmental Obligations,
which establishes standards for the initial measurement and subsequent
accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the
acquisition, construction or development and for normal operations of such assets. As at December 31, 2011 and 2010, the Company
has not recognized any asset retirement obligations.
F-
10
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage
Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
l)
Income Taxes
Potential benefits of income
tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740,
Income
Taxes
as of its inception. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses
carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because
the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
m)
Stock-based Compensation
In accordance with ASC 718,
Compensation – Stock Compensation
, the Company accounts for share-based payments using the fair value method. The Company
has not issued any stock options since its inception. Common shares issued to third parties for non-cash consideration are valued
based on the fair market value of the services provided or the fair market value of the common stock on the measurement date, whichever
is more readily determinable.
n)
Comprehensive Income
ASC 220,
Comprehensive Income
establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at
December 31, 2011 and 2010, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule
of comprehensive loss in the financial statements.
o)
Note receivable
Notes receivable consist of
amounts due from an entity in which our former CEO, Alvaro Vollmers, is the sole officer and director. The notes receivable were
transferred to New World Petroleum in April 2011 in redemption of Units of common stock and warrants of the Company owned by New
World. Management estimates an allowance for doubtful notes which is based upon management's review of all accounts and notes and
an assessment of the Company's historical evidence of collections. Specific accounts and notes are charged directly to the reserve
when management obtains evidence of a noteholder's insolvency or other evidence of the inability to pay. The reserve for doubtful
notes as of December 31, 2011and 2010 was $0.
p)
Recent accounting pronouncements
In June 2011, the FASB issued guidance on presentation
of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components
in the statement of changes in equity. Instead, an entity will be required to present either a continuous statement of net
income and other comprehensive income or in two separate but consecutive statements. The new guidance will be effective for
us beginning July 1, 2012 and will have presentation changes only.
In May 2011, the FASB issued guidance to amend the
accounting and disclosure requirements on fair value measurements. The new guidance limits the highest-and-best-use measure
to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit
risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the
new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions,
as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. The
new guidance will be effective for us beginning January 1, 2012. Other than requiring additional disclosures, we do not
anticipate material impacts on our financial statements upon adoption.
F-
11
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage
Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
q)
Recent accounting pronouncements (cont'd)
In January 2010, the FASB issued guidance to amend
the disclosure requirements related to fair value measurements. The guidance requires the disclosure of roll forward activities
on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level
3 fair value measurements). The guidance will become effective for us with the reporting period beginning January 1, 2012.
The adoption of this new guidance will not have a material impact on our financial statements.
3.
Related Party Transactions
All related party transactions
are recorded at the exchange amount which is the value established and agreed to by the related party.
A payable to a related party
of $17,574 to Maurice Bideaux, the Company's former chief executive officer and director, was forgiven by Mr. Bideaux in
2010.  An additional advance from Mr. Bideaux of $38,910 remains unpaid.
The Company made four separate
loans to American Liberty Petroleum Corp., a Nevada corporation ("ALP") in late 2010 and early 2011, all of which have
been settled in accordance with the Redemption Agreement described below.  Alvaro Vollmers, the sole director and officer
of ALP, was the sole director and officer of the Company until his resignation on March 29, 2011.
On December
6, 2010, ALP borrowed $290,000 from the Company  (the "Initial Loan"). On January 7, 2011, ALP borrowed
$200,000 from the Company (the "Second Loan"). The Promissory Note (the "Initial Note") executed by ALP
in connection with the Initial Loan and the Promissory Note (the "Second Note") executed by ALP in connection with
the Second Loan contained the following payment terms: (a) the unpaid principal amount accrued interest at the rate of six percent
(6%) per annum, (b) the unpaid principal and all accrued but unpaid interest thereon was due and payable on February 28, 2011,
and (c) the unpaid principal and accrued but unpaid interest could be prepaid in whole or in part at the option of ALP, without
penalty or premium.  None of the Notes was secured by any assets of ALP.
On February 28, 2011, ALP executed
an Amended and Restated Promissory Note that amended and restated the Initial Note in its entirety, and extended the maturity date
to March 31, 2011, and an Amended and Restated Promissory Note that amended and restated the Second Note in its entirety, and extended
the maturity date to March 31, 2011.  Except for the extension of the maturity date, the terms of payment (including
the interest rate) remained the same.
Also on February 28, 2011, ALP
borrowed $50,000 from the Company (the "Third Loan"). Finally, on March 8, 2011, ALP borrowed an additional $45,000
from the Company (the "Fourth Loan"). Both the Promissory Note (the "Third Note") executed by ALP in connection
with the Third Loan and the Promissory Note (the "Fourth Note") executed by ALP in connection with the Fourth Loan
contained identical payment terms as the Initial Note and the Second Note, except for a maturity date of March 31, 2011.
On  March 28, 2011,
ALP and the Company executed a Second Amended and Restated Promissory Note that amends and restates the Initial Note in its entirety,
and extends the maturity date to April 30, 2011,  a Second Amended and Restated Promissory Note that amends and restates
the Second Note in its entirety, but extends the maturity date to April 30, 2011, an Amended and Restated Promissory Note that
amends and restates the Third Note in its entirety, but extends the maturity date to April 30, 2011, and an Amended and Restated
Promissory Note that amends and restates the Fourth Note in its entirety, but extends the maturity date to April 30, 2011. Except
for the extension of the maturity date, the terms of payment (including the interest rate) remained the same.
The Company obtained the funds
subsequently loaned to ALP from the private placements of Units, consisting of Common Stock and Warrants to purchase Common Stock,
from New World Petroleum Investments ("New World").
F-
12
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
On April 13, 2011, the Company
and New World executed a Redemption Agreement, whereby the Company redeemed all of the shares of Common Stock and the Warrants
that New World owned (consisting of the 600,000 shares of Common Stock and Warrants to purchase 600,000 shares of Common Stock
obtained in private placements of Units), and in consideration for the Common Stock and Warrants assigned to New World the four
Promissory Notes described above. As a result of the Redemption Agreement, the Company no longer holds the Promissory Notes, and
New World owns no shares of Common Stock or other securities of the Company.
On January 13, 2012, the Company
agreed to redeem certain shares of the common stock, 0.001 par value, of the Company (the "Common Stock") held by two
of its principal shareholders. The Company redeemed 7,500,000 shares of Common Stock owned by Dan M. Ferris, for total consideration
of $1.00. Mr. Ferris is the sole officer and director of the Company. In addition, the Company has agreed to redeem 22,500,000
shares of Common Stock held by John G. Rhoden, for total consideration of $1.00.
After redemption, Mr. Ferris
owns 7,500,000 shares of Common Stock, and Mr. Rhoden will own 22,500,000 shares of Common Stock, which will represent 8.64% and
25.92%, respectively, of the issued and outstanding shares of Common Stock. The redeemed shares of Common Stock will be retired
and restored to the status of authorized and unissued shares, and not held in treasury. The Company, Mr. Ferris and Mr. Rhoden
have agreed to effect the redemption transactions in order to reduce the number of issued and outstanding shares of Common Stock.
4.
Property and equipment
Property and equipment consists
of a used truck and drill with a cost of $11,100 and $38,077, respectively, being depreciated over 2 and 10 years, respectively.  Accumulated
depreciation at December 31, 2011 was $2,852.
5.
Equity Line of Credit
On August 29, 2011, the Company
and North American Gold Corp., a company organized under the laws of the Marshall Islands ("North American"), executed
an Investment Agreement (the "Investment Agreement"). Under the Investment Agreement, North American agreed to invest
up to $15,000,000 to purchase shares of  the Company's $0.001 par value common stock (the "Common Stock"),
in increments of $100,000 or an integral multiple thereof, at the Company's option at any time through August 31, 2013 (the
"Open Period"). During the Open Period, the Company has the option to deliver a put notice (a "Put Notice")
to North American that states the number of shares of Common Stock the Company proposes to sell to North American (the "Put
Shares"), and the price per share for those Put Shares (the "Share Price"). The Share Price is equal to 90% of
the volume weighted average closing price of the Common Stock for the 20 Trading Days immediately preceding the date on which the
Company sends the Put Notice. The closing for the sale of the Put Shares pursuant to a Put Notice shall take place no later than
10 Trading Days after the date on which the Company sends such Put Notice. A "Trading Day" is defined as a day in which
the NASDAQ stock market or OTC Bulletin Board is open for business.  North American has the right to refuse to close
any requested sale of Put Shares because of negative market conditions affecting the Common Stock.
The original Investment Agreement
required the Company to use the net proceeds from the sale of the Put Shares to fund the exploration and development of gold and
silver mining concessions in the La Candelaria project in Chihuahua, Mexico. On November 9, 2011, the Company and North American
executed a First Amendment to Investment Agreement, which states that the Company shall use the net proceeds from the sale
of Put Shares to fund operating expenses, working capital and general corporate activities related to the exploration and development
of gold and silver mining concessions held by the Company and/or a subsidiary in relation to the La Candelaria property, the Ocampo
property, or any other properties agreed upon in advance by the Company and North American. The Company and North American have
further agreed that the Company may use the proceeds of the put shares to fund operations related to the Mine Tailings project.
F-
13
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
6.
Common Stock
On January 19, 2008, the Company issued 60,000,000
shares of common stock at $0.00005 per share for cash proceeds of $3,000.
On April 28, 2008, the Company issued 32,699,920
shares of common stock at $0.00075 per share for cash proceeds of $24,525.
On December 24, 2008, the Company issued 22,600,000
shares of common stock at $0.0025 per share for cash proceeds of $56,500.
On December 3, 2010, the Company
issued 6,000,000 Units to New World in a private placement, with each Unit consisting of one share of the Company's $0.001
par value common stock and one warrant to purchase a share of the Company's $0.001 par value common stock at $0.0625
at any time within 3 years, for cash proceeds of $300,000. The relative fair value of the warrants issued was $46,500.
On January 3, 2011, the Company
issued 3,000,000 Units to New World in a private placement, with each Unit consisting one share of the Company's $0.001
par value common stock and one warrant to purchase a share of the Company's $0.001 par value common stock at $0.0625
at any time until January 3, 2014, for cash proceeds of $150,000. On January 6, 2011, the Company completed a private placement
of an additional 3,000,000 Units to New World on similar terms, for cash proceeds of $150,000. The relative fair value
of the warrants issued was $46,000.  All shares of common stock and warrants issued to New World have been redeemed.
On April 13, 2011, the Company
and New World executed a Redemption Agreement, whereby the Company redeemed all of the shares of Common Stock and the Warrants
that New World owned (consisting of the 12,000,000 shares of Common Stock and Warrants to purchase 12,000,000 shares of Common
Stock obtained in private placements of Units), and in consideration for the Common Stock and Warrants assigned to New World the
four Promissory Notes described above. As a result of the Redemption Agreement, the Company no longer holds the Promissory Notes,
and New World owns no shares of Common Stock or other securities of the Company.
On June 30, 2011, the Company entered
into an agreement to issue 100,000 Units to North American Gold Corp. in a private placement, for $1.00 per Unit, with each
Unit consisting of one share of Common Stock and one Warrant to purchase a share of Common Stock at $1.20 at any time until
June 30, 2014, for cash proceeds of $100,000.  The fair market value of the Warrants on the date of issuance was $15,467.
On August 29, 2011, the Company
entered into an agreement to issue 100,000 Units to North American in a private placement, with each Unit consisting of one
share of the Company's $0.001 par value common stock and one warrant to purchase a share of the Company's $0.001
par value common stock at $1.20 at any time until August 29, 2014, for cash proceeds of $100,000.  The relative fair
market value of the warrants on the date of issuance was $44,000.
On August 17, 2011, the Company
entered into an agreement to issue 300,000 shares of its $0.001 par value common stock to Homero Bustillos Gonzalez ("Gonzales")
in accordance with the Option Agreement discussed more fully in Note 9 below.  The fair market value of the common stock
was $303,000 on the date of issuance.
On August 17, 2011, the Company entered into an agreement
to issue 125,000 shares of its $0.001 par value common stock to American Gold Holdings, Ltd. ("American Gold") as
repayment of the $125,000 that American Gold paid Gonzalez in connection with the Option Agreement discussed more fully in
Commitments below.  The shares were issued in the name of North American with the agreement of American Gold.
The fair market value of the common stock was $126,250 on the date of issuance, September 15, 2011.
F-
14
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
6.
Common stock (cont'd)
On September 14, 2011, the Company
issued 238,095 shares of its $0.001 par value common stock to North American for gross proceeds of $200,000 pursuant to a Put Notice
delivered under the Investment Agreement.
On October 24, 2011, the Company
sold 204,081 shares of its $0.001 par value common stock to North American for gross proceeds of $200,000 pursuant to a Put Notice
delivered under the Investment Agreement.  The proceeds will be used to fund the Work Plan related to the La Candelaria
project, for expenses related to the Ocampo LOI, and other operating expenses incurred by the Company.
On October 31, 2011, the Company
entered into an agreement with a consultant to perform consulting services as requested by the Company. The contract
calls for the consultant 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 $0.001 par value common stock. The fair market value of the
common stock on the date of grant was $124,500. 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.
On December 27, 2011, the Company
sold 273,972 shares of its $0.001 par value common stock to North American for gross proceeds of $200,000 pursuant to a Put Notice
delivered under the Investment Agreement.  The proceeds will be used to fund the Work Plan related to the La Candelaria
project, for expenses related to the Ocampo LOI, and other operating expenses incurred by the Company.
7.
Warrants
On December 3, 2010, the Company
issued 6,000,000 Units to New World in a private placement, with each Unit consisting of one share of the Company's
$0.001 par value common stock and one warrant to purchase a share of the Company's $0.001 par value common stock at
$0.0625 at any time within 3 years, for cash proceeds of $300,000. The relative fair value of the warrants issued was $46,500,
which was calculated using the Black-Scholes option pricing model.  Variables used in the valuation include (1) discount
rate of 1.9%, (2) expected life of 3 years, (3) expected volatility of 504% and (4) zero expected dividends.
On January 3, 2011, the Company
issued 3,000,000 Units to New World in a private placement, with each Unit consisting one share of the Company's $0.001
par value common stock and one warrant to purchase a share of the Company's $0.001 par value common stock at $0.0625
at any time until January 3, 2014, for cash proceeds of $150,000. On January 6, 2011, the Company completed a private placement
of an additional 3,000,000 Units to New World on similar terms, for cash proceeds of $150,000. The relative fair
value of the warrants issued was $46,000, which was calculated using the Black-Scholes option pricing model.  Variables
used in the valuation include (1) discount rate of 1.9%, (2) expected life of 3 years, (3) expected volatility of 504% and (4)
zero expected dividends. .
All shares of common stock and
warrants issued to New World have been redeemed.
On June 30, 2011, the Company
entered into an agreement to issue 100,000 Units to North American Gold Corp. in a private placement, for $1.00 per Unit, with
each Unit consisting of one share of Common Stock and one Warrant to purchase a share of Common Stock at $1.20 at any time until
June 30, 2014, for cash proceeds of $100,000. The fair market value of the Warrants on the date of issuance was $15,467, which
was calculated using the Black-Scholes option pricing model.  Variables used in the valuation include (1) discount rate
of 1.9%, (2) expected life of 3 years, (3) expected volatility of 386% and (4) zero expected dividends.
On August 29, 2011, the Company
entered into an agreement to issue 100,000 Units to North American in a private placement, with each Unit consisting of one share
of the Company's $0.001 par value common stock and one warrant to purchase a share of the Company's $0.001 par value
common stock at $1.20 at any time until August 29, 2014, for cash proceeds of $100,000. The relative fair market value of the warrants
on the date of issuance was $44,000, which was calculated using the Black-Scholes option pricing model.  Variables used
in the valuation include (1) discount rate of 0.49%, (2) expected life of 3 years, (3) expected volatility of 536% and (4) zero
expected dividends.
F-
15
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
A summary of warrant activity for the year ended
December 31, 2011 is presented below:
Weighted
Weighted
average
average
remaining
Aggregate
exercise
contractual
intrinsic
Warrants
price
life (years)
value
Outstanding December 31, 2010
6,000,000
$
0.0625
Granted
6,200,000
0. 0227
Exercised
-
-
Forfeited or cancelled
(12,000,000
)
(0.0031
)
Expired
-
-
Outstanding December 31, 2011
200,000
$
1.20
2.58
$
59,467
8.
Income Taxes
The Company has a net operating
loss carry-forward of approximately $654,000 available to offset taxable income in future years which commence expiring in fiscal
2028.
The Company is subject to United
States income taxes at a rate of 34%. The reconciliation of the provision for income taxes at the United States statutory rate
compared to the Company's income tax expense as reported is as follows:
Year Ended
December 31,
2011
Year Ended
December 31,
2010
Income tax recovery at statutory rate
$
165,000
$
21,000
Valuation allowance change
(165,000
)
(21,000
)
Provision for income taxes
$
–
$
–
The significant components of
deferred income tax assets as at December 31, 2011 and 2010 are as follows:
December 31,
2011
December 31,
2010
Net operating losses carried forward
$
222,360
$
58,456
Valuation allowance
(222,360
)
(58,456
)
Net deferred income tax asset
$
–
$
–
F-
16
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
9.
Commitments
La Candelaria Property
On May 31, 2011, Metales 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 Gonzalez.  On June 10, 2011, Gonzalez assigned the Concessions
to Metales.  The Concessions cover 800 hectares, or approximately 1,976 acres.
Gonzalez transferred the Concessions
to Metales pursuant to an agreement with American Gold.    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 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. Pursuant to the
Assignment Agreement (which has an effective date of June 10, 2011), the Company has taken or will take the following actions in
connection with transfer of the Concessions from Gonzalez to Metales:
1.
The Company issued 125,000 shares of its $0.001 par value common stock to North American as repayment
of the $125,000 that American Gold paid Gonzalez in connection with Option Agreement (the "American Gold Shares").
2.
The Company issued 300,000 shares of its $0.001 par value common stock, with a fair value of $303,000,
to Gonzalez on September 16, 2011.
3.
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").
4.
The Company has paid Gonzalez an additional $125,000.
The American Gold Shares were
issued in the name of North American, with the agreement of American Gold.
Gonzalez retains a 2% Net Smelter
Returns Royalty on the Property.  Metales is obligated to undertake work necessary to bring the existing geological survey
on the Property up to NJ 43-101 standards.  The Company advanced $20,000 to Metales in June 2011 in order to initiate
this work, which will be credited to the $150,000 due for the first year under the Work Plan.  During the year ended
December 31, 2011, the Company advanced $122,341 under the Work Plan.
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.  In addition, the Company is obligated to issue 1,000,000 shares
of its $0.001 par value 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.  Finally, 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.
F-
17
Lone Star Gold Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
Employment Agreement
On July 12, 2011, the Company
entered into an Employment Agreement with Dan M. 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").  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 the Company's
$0.001 common stock, which will be issued in three equal increments of 1,000,000 shares over the first 3 years of the Term.  The
shares of common stock will not be registered under the Securities Act, and will be subject to restrictions on transfer.  Therefore,
Mr. Ferris will receive 1,000,000 shares of common stock on July 12 of each of the years 2012, 2013, and 2014.  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 at any time for "cause" by the Company.  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 been issued 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.  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.  The fair market value of the stock grant on the date of the Employment Agreement was
$3,000,000.  The Company recognized $473,974 in expense related to the stock grant as of December 31, 2011.
Ocampo Property
On September 29, 2011, the Company
entered into a 90-day exclusivity letter of intent (the "LOI") with Antonio Aguirre Rascon ("Rascon") 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 Company paid Rascon $12,500 upon signing of the LOI.  The
LOI is to serve as the basis for a definitive agreement (the "Definitive Agreement") to be negotiated between the parties.    In
December 2011, the Company elected to allow the LOI to lapse without entering into a Definitive Agreement.
F-
18
Lone Star Gold Inc.
(formerly known as Keyser Resources,
Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
10.
Subsequent Events
On January 13, 2012, the Company
agreed to redeem certain shares of Common Stock held by two of its principal shareholders. The Company agreed to redeem 7,500,000
shares of Common Stock owned by Dan M. Ferris, for total consideration of $1.00. In addition, the Company agreed to redeem 22,500,000
shares of Common Stock held by John G. Rhoden, for total consideration of $1.00. The redeemed shares of Common Stock are to be
retired and restored to the status of authorized and unissued shares, and not held in treasury
On February 13, 2012, the Company
sold 625,000 shares of its $0.001 par value common stock to North American for gross proceeds of $300,000 pursuant to a Put Notice
delivered under the Investment Agreement.  The proceeds will be used to fund the Work Plan related to the La Candelaria
project, expenses related to the Tailings Project (described below), and other operating expenses incurred by the Company.
Tailings Project
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 on December 5, 2011, 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.
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, which have been issued to Jaramillo.
(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.
F-
19
Lone Star Gold Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2011 and 2010
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.
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.
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).
On March 21, 2012, the Company completed
a private placement of 625,000 shares of Common Stock to North American. The Company sold the shares of Common Stock at a price
of $0.40 per share, resulting in total proceeds of approximately $250,000 to the Company. The sale of the shares to North American
represents the fifth sale of Common Stock under the Investment Agreement.
A portion of the proceeds will be used
to fund the exploration and development of the Concessions, according to a work plan established for the project, and to make the
annual payments for the property and concession taxes associated with the La Candelaria project. The Company will also use the
proceeds to fund a portion of the consideration in connection with the JV Agreement, such as shipping, trucking and on-site wash
plant construction, and to commence payments under the work plan established for the Tailings project. Finally, a portion of the
proceeds will be used for general corporate expenses associated with the Company's exploration and development activities.
The issuance
of the shares of Common Stock to North American was not registered under the Securities Act of 1933. Instead, the sale was completed
in reliance upon an exemption from registration pursuant to Regulation S promulgated under the Securities Act of 1933. North American
has represented to the Company that it is not a "U.S. person" as defined in Regulation S, and that it 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 North American 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.
F-
20