10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

  (Mark one)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2011

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
	For the transition period from _________ to ___________

LONE STAR GOLD, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	333-159561	45-2578051
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

6565 Americas Parkway NE

Suite 200

Albuquerque, New Mexico 87110

(Address of principal executive offices) (Zip code)

Issuer's telephone number: (505) 563-5828

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x      No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x      No  o

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.  (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x     No  o

The number of shares of the registrant's Common Stock, $0.001 par value per share, outstanding as of November 7, 2011 was 116,517,096.

Table of Contents

		Page
Part I –	Financial Information
	Item 1. Consolidated Financial Statements
	Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010	1
	Consolidated Statements of Operations for the three and nine month periods ended September    30, 2011 and 2010 and from November 26, 2007 (Date of Inception) to September 30, 2011 (Unaudited)	2
	Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2011 and 2010 and from November 26, 2007 (Date of Inception) to September 30, 2011 (Unaudited)	3
	Consolidated Statements of Stockholders’ Equity (Deficit) for the period from November 26,     2007 (Date of Inception) to September  30, 2011 (Unaudited)	4
	Notes to the Consolidated Financial Statements (unaudited)	5
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	13
	Item 4. Controls and Procedures	13
Part II –	Other Information
	Item 1. Legal Proceedings	14
	Item 1A. Risk Factors	14
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14
	Item 3. Defaults upon Senior Securities	14
	Item 4. (Removed and Reserved)	14
	Item 5. Other Information	14
	Item 6. Exhibits	14
Signatures		14
Exhibit Index
Rule 13a-14(a) Certification
Section 1350 Certification

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Consolidated Balance Sheets

	September 30, 2011			December 31, 2010
	(unaudited)
ASSETS
Current Assets
Cash	$	111,231		$	9,977
Prepaid expenses		4,700			-
Notes and interest receivable from related party		-			291,192
Total current assets		115,931			301,169
Property and equipment, net		10,588			-
Total Assets	$	126,519		$	301,169
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	22,567		$	5,726
Accrued liabilities		-			23,000
Due to related party		38,910			38,910
Total current liabilities		61,477			67,636
Total Liabilities		61,477			67,636
Commitments
Stockholders’ Equity
Common stock, 150,000,000 shares authorized, $0.001 par value; 116,163,015 and 121,299,920 shares issued and outstanding as of September 30, 2011 and December 31, 2010 respectively.		116,163			121,300
Additional paid-in capital		1,033,865			280,299
Subscription receivable		(1,500	)		-
Deficit accumulated during the exploration stage		(1,067,671	)		(168,066	)
Total Lone Star Gold, Inc. stockholders’ equity		80,857			233,533
Noncontrolling interest in subsidiary		(15,815	)		-
Total Stockholders’ Equity		65,042			233,533
Total Liabilities and Stockholders’ Equity	$	126,519		$	301,169

(The Accompanying Notes are an Integral Part of These Financial Statements)

1

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Consolidated Statements of Operations

(unaudited)

	For the Three Months Ended September 30, 2011			For the Three Months Ended September 30, 2010			For the Nine Months Ended September 30, 2011			For the Nine Months Ended September 30, 2010			Accumulated from November 26, 2007 (Date of Inception) to September 30, 2011
Revenue	$	–		$	–		$	–		$	–		$	–
Expenses
General and administrative		92,699			13,468			217,799			26,740			352,304
Exploration costs		453,750			–			453,750			397			476,023
Management fees		259,179			–			259,179			–			271,659
Total Expenses		(805,628	)		(13,468	)		(930,728	)		(27,137	)		(1,099,986	)
Other income
Interest income		–			–			8,647			–			9,839
Gain on redemption of common stock		–			–			5,161			–			5,161
Total other income		–			–			13,808			–			15,000
Loss before income taxes		(805,628	)		(13,468	)		(916,920	)		(27,137	)		(1,084,986	)
Provision for Income Tax		–			–			–			–			–
Net Loss for the Period		(805,628	)		(13,468	)		(916,920	)		(27,137	)		(1,084,986	)
Net loss attributable to noncontrolling interest		11,315			–			17,315			–			17,315
Net loss attributable to Lone Star Gold, Inc.	$	(794,313	)	$	(13,468	)	$	(899,605	)	$	(27,137	)	$	(1,067,671	)
Loss per share attributable to Lone Star Gold, Inc. stockholders
Loss Per Share – Basic and Diluted	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.00	)
Weighted Average Common Shares Outstanding		115,398,833			115,299,920			119,827,393			115,299,920

 (The Accompanying Notes are an Integral Part of These Financial Statements)

2

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(unaudited)

	For the Nine Months Ended September 30, 2011			For the Nine Months Ended September 30, 2010			Accumulated from November 26, 2007 (Date of Inception) to September 30, 2011
Operating Activities
Net loss	$	(916,920	)	$	(27,137	)	$	(1,084,986	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		512			–			512
Stock based compensation expense		219,179			–			219,179
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		(4,700	)		344			(4,700	)
Interest receivable		(8,647	)		–			(9,839	)
Accounts payable and accrued liabilities		(6,159	)		3,252			22,567
Net Cash Used In Operating Activities		(292,646	)		(23,541	)		(433,178	)
Investing Activities
Purchase of property and equipment		(11,100	)		–			(11,100	)
Note receivable extended to Related Party		(295,000	)		–			(585,000	)
Net Cash Used in Investing Activities		(306,100	)		–			(596,100	)
Financing Activities
Proceeds from advances – related party		–			17,574			56,484
Proceeds from sale of common stock		700,000			–			1,084,025
Net Cash Provided By Financing Activities		700,000			17,574			1,140,509
Net change in Cash		101,254			(5,967	)		111,231
Cash - Beginning of Period		9,977			6,099			–
Cash - End of Period	$	111,231		$	132		$	111,231
Supplemental Disclosures
Interest paid	$	–		$	–		$	–
Income taxes paid	$	–		$	–		$	–
Non Cash Transactions:
Redemption of common stock	$	600,000		$	–		$	600,000
Issuance of noncontrolling interest for subscription receivable	$	1,500		$	–		$	1,500
Forgiveness of advances – related party	$	–		$	–		$	17,574

(The Accompanying Notes are an Integral Part of These Financial Statements)

3

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 September 30, 2011

													Deficit
													Accumulated
							Additional			Subscript-			During the			Non-
	Common Stock						Paid-in			ion			Exploration			controlling
	Shares			Par Value			Capital			Receivable			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		6,438,095			6,438			693,562			–			–			–			700,000
Redemption of shares		(12,000,000	)		(12,000	)		(588,000	)		–			–			–			(600,000	)
Formation of subsidiary		–			–			–			(1,500	)		–			1,500			–
Stock based compensation		–			–			219,179			–			–			–			219,179
Shares issued for exploration costs		425,000			425			428,825			–			–			–			429,250
Net loss for the period		–			–			–			–			(899,605	)		(17,315	)		(916,920	)
Balance – September 30, 2011 (unaudited)		116,163,015		$	116,163		$	1,033,865		$	(1,500	)		(1,067,671	)	$	(15,815	)		65,042

(The Accompanying Notes are an Integral Part of These Financial Statements)

4

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

September 30, 2011

(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.

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”).  See Note 6 to these financial statements.  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 at September 30, 2011, the Company has accumulated losses of $1,067,671 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 September 30, 2011 and for the three and nine months ended September 30, 2011 and 2010, and for the period November 26, 2007 (inception) to September 30, 2011 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 September 30, 2011 and the results of operations and cash flows for the periods ended September 30, 2011 and 2010, and for the period November 26, 2007 (inception) to September 30, 2011. 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 and nine month periods ended September 30, 2011 is not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending December 31, 2011.

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, 2010 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 subsidiary.  All intercompany accounts and transactions have been eliminated in consolidation.

5

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

September 30, 2011

(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.

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.  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 unsecured Promissory Note (the “Initial Note”) executed by ALP in connection with the Initial Loan and the unsecured 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.  

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 June 30, 2011, and an Amended and Restated Promissory Note that amended and restated the Second Note in its entirety, and extended the maturity date to June 30, 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, as amended, including the extended maturity date of June 30, 2011.

On  March 28, 2011, ALP and the Company executed a (i) 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, (ii) 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, (iii) 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 (iv) 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) of these notes remain 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, to New World Petroleum Investments (“New World”).

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.

3. Property and equipment

Property and equipment consists of a used truck with a cost of $11,100 being depreciated over 2 years.  Accumulated depreciation at September 30, 2011 was $512.

6

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

September 30, 2011

(unaudited)

4. 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. A copy of the First Amendment to Investment Agreement is attached as Exhibit 10.10 to this Quarterly Report.

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.

5. Common Stock

On December 3, 2010, the Company issued 6,000,000 Units (post split) 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 (post split) 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 (post split) 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.  See Note 2 above.

On June 30, 2011, the Company entered into an agreement to issue 100,000 Units to North American in a private placement, for $1.00 per Unit, 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 $1.20 at any time until June 30, 2014, for cash proceeds of $100,000.  The relative fair market value of the warrants on the date of issuance was $15,467.  These shares were issued on August 23, 2011.

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.  These shares were issued on September 15, 2011.

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 6 below.  The fair market value of the common stock was $303,000 on the date of issuance. These shares were issued on September 16, 2011.

7

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

September 30, 2011

(unaudited)

On August 17, 2001, 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 Note 6 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.

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.

6. 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 must pay Gonzalez an additional $125,000 before January 11, 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.  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 quarter ended September 30, 2011, the Company advanced $50,000 under the Work Plan.

8

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

September 30, 2011

(unaudited)

6. Commitments (cont’d)

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 June 10, 2014, the Option Agreement will terminate and the Company will be obligated to return the Concessions to Gonzalez.

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 $219,179 in expense related to the stock grant as of September 30, 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.    If a Definitive Agreement is signed, the LOI contemplates the following payments:

· $50,000 upon the execution of the Definitive Agreement;

· $75,000 within 12 months of signing the Definitive Agreement; and

· $112,500 within 24 months of signing the Definitive Agreement.

In addition, if a Definitive Agreement is reached, the Company will be obligated to provide a work commitment for the Ocampo Property of $1,750,000 over a three year period, as follows:

· $250,000 within the first year after signing the Definitive Agreement;

· $500,000 within the second year after signing the Definitive Agreement to be used for the development and construction of a concentrating plant; and

· $1,000,000 within the third year after signing the Definitive Agreement.

9

Lone Star Gold, Inc.

(formerly known as Keyser Resources, Inc.)

(An Exploration Stage Company)

Notes to the Financial Statements

September 30, 2011

(unaudited)

Further, the Company will issue 425,000 shares of its $0.001 par value common stock to Rasconas follows:

· 50,000 shares upon the execution of the Definitive Agreement;

· 75,000 within six months of signing the Definitive Agreement;

· 100,000 within twelve months after signing the Definitive Agreement; and

· 200,000 within twenty-four months after signing the Definitive Agreement.

Rascon will retain a 3% Net Smelter Returns Royalty (“NSR”) on the gross mineral production.  The Company will have the option to buy-out 2% of the NSR for $2,000,000.

7. Subsequent events

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 $118,500. 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.  A copy of the Consulting Agreement is attached on Exhibit 10.9 to this Quarterly Report.

ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Special Note on Forward-Looking Statements

This Form 10-Q contains "forward-looking" statements including statements regarding our expectations of our future operations. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate," or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include, but are not limited to, economic conditions generally and in the industries in which we may participate, competition within our chosen industry, including competition from much larger competitors, technological advances, and the failure by us to successfully develop business relationships.

General Overview

We are a start-up exploration stage company in the business of gold and mineral exploration, acquisition and development. Our principal office is located at 6565 Americas Parkway NE, Suite 200, Albuquerque, New Mexico 87110. Our telephone number is (505) 563-5828.

Agreements

On June 10, 2011, Homero Bustillos Gonzalez, an individual who is a resident of Mexico ("Gonzalez"), assigned to Metales HBG, S.A. de C.V, a company organized under the laws of Mexico ("Metales"), eight (8) gold and silver mining concessions (the “Concessions”) covering property located in the town of Guachochi, state of Chihuahua, Mexico.  The Concessions cover 800 hectares, or approximately 1,976 acres.  Seventy percent of the issued and outstanding capital stock of Metales is owned by the Company, with the remaining 30% owned by Gonzalez.

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.

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Pursuant to the Assignment Agreement, the Company has taken or has agreed to take the following actions that are required under the Option Agreement and the Letter of Intent, in connection with transfer of the Concessions to Metales:

1. The Company has issued 125,000 shares of its Common Stock to North American as repayment of the $125,000 that American Gold paid Gonzalez in connection with the Option Agreement.  The shares were issued in the name of North American in satisfaction of the Company’s obligations under the Assignment Agreement, with the agreement of American Gold.

2. The Company has issued 300,000 shares of its Common Stock to Gonzalez.

3. The Company must pay Gonzalez an additional $125,000 before January 11, 2012.

4. The Company, either alone or through Metales, is obligated to fund $150,000 per year of development costs for three years, for a total of $450,000 (the “Work Plan”).

Gonzalez retains a 2% Net Smelter Returns Royalty on the Concessions.  In addition, the Company is obligated to issue 1,000,000 shares of its Common Stock to Gonzalez upon the discovery of a 1 million-ounce equivalent gold deposit, as defined by industry standards as set forth by a recognized exchange in North America.  Metales is obligated to undertake work necessary to bring the existing geological survey on the property up to NJ 43-101 standards.  The Company advanced $20,000 to Metales in June 2011 and $50,000 during the quarter ended September 30, 2011in order to initiate this work, which will be credited to the $150,000 per year due under the Work Plan. Finally, the Company has granted anti-dilution rights to Gonzalez, such that the Company must allow Gonzalez the opportunity to maintain his percentage stock ownership in the Company until the date on which the Company has complied fully with its obligations under the Option Agreement or January 11, 2014, whichever comes first.  Gonzalez has waived the exercise of his anti-dilution rights with respect to issuances of Common Stock to North American under the Investment Agreement.

If the Company fails to comply with all its obligations under the Option Agreement before January 11, 2014, the Option Agreement will terminate and the Company will be obligated to return the Concessions to Gonzalez.

A copy of the Option Agreement is attached as Exhibit 10.8 to this Quarterly Report.  A copy of the Assignment Agreement was filed as Exhibit 10.3 to the Company’s Quarterly Report filed on August 22, 2011.

The transfer of the Concessions to Metales must be registered under Mexican law. The Company has been advised that the transfer of the Concessions from Gonzalez to Metales is in the process of being registered with the appropriate Mexican authorities.Under Mexican law, a mining concession gives the holder both exploration and exploitation rights for any minerals found in the property. To maintain the concession, the holder must pay appropriate taxes, perform assessment work, comply with environmental laws, and file a production report each year with the appropriate authorities. Foreign individuals and companies wanting to hold concessions must do so through ownership in a Mexican corporation or through a joint venture, but may not hold mining concessions directly. The Company will rely on persons associated with Metales, and its employees and consultants in Mexico, to perform all acts necessary to comply with the legal requirements necessary to maintain the Concessions.

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.  The La Candelaria project is without known reserves and the proposed program of exploration and development for the La Candelaria 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 can be shown to exist until sufficient and appropriate exploration is done, and a comprehensive evaluation of such work concludes that the extraction of such a mineral deposit, if found, can be economically and legally feasible.

LOI Regarding the Ocampo Property

On September 29, 2011, the Company entered into a letter of intent with Antonio Aguirre Rascon, a resident of Mexico (“Rascon”) (the “LOI”), to acquire a 70% interest in mining concessions covering approximately 570 hectares located in the municipality of Ocampo in the state of Chihuahua, Mexico (the “Ocampo Property”).  The LOI is to serve as the basis for a definitive agreement (the “Definitive Agreement”) to be negotiated between the parties.  The Company is currently conducting due diligence on the Ocampo Property in order to evaluate whether or not to proceed with the Definitive Agreement.

If a Definitive Agreement has not been executed within 90 days of the date of the LOI, the LOI will expire unless extended by mutual agreement of the parties.  If a Definitive Agreement is reached, the purchaser of the mining concessions will be a to-be formed subsidiary of the Company organized under Mexican law.  The Company paid Rascon $12,500 upon the signing of the LOI.  The LOI contains a 90-day exclusivity clause, whereby Rascon will not negotiate with any other party with respect to a sale of the mining concessions within the 90-day period following the execution of the LOI.  See Note 6 to the Financial Statements.

11

Results of Operations

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 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 September 30, 2011		For the Three Months Ended September 30, 2010		For the Nine Months Ended September 30, 2011		For the Nine Months Ended September 30, 2010		Accumulated Deficit from November 26, 2007 to September 30, 2011
General and administrative	$	92,699	$	13,468	$	217,799	$	26,740	$	352,304
Exploration		453,750		-		453,750		397		476,023
Management fees		259,179		-		259,179		-		271,659
	$	805,628	$	13,468	$	930,728	$	27,137	$	1,099,986

For the three months ended September 30, 2011, we incurred general and administrative expenses totaling $92,699.  This increase of $79,231 was due to increases as compared to the third quarter of 2011 as follows:  professional fees of $51,435, travel of $11,174, accounting and auditing fees of $13,767, legal fees of $1,605, depreciation expense of $512, and general expenses of $738.

In addition, we incurred aggregate costs of $453,750 related to our investment in Metales and expenditures under the Work Plan, as follows: $303,000 in stock compensation to Gonzalez, $126,250 in payments to North American related to the Option Agreement and $24,500 related to the Work Plan.

Management fees paid to our sole officer and director were $40,000, and $219,179 in expenses related to the stock grant under Mr. Ferris’ Employment Agreement during the three months ended September 30, 2011, an increase of $259,179 from the three months ended September 30, 2010 as compared to the third quarter of 2010.

For the nine months ended September 30, 2011, we incurred $217,799 in general and administrative costs.  This increase of $191,059 was due to increases as follows: professional fees of $125,630, travel of $19,139, accounting and auditing fees of $30,233, legal fees of $10,451, depreciation expense of $512, and general expenses of $5,094.

In addition, we incurred aggregate costs of $453,750 related to our investment in Metales and expenditures under the Work Plan, as follows: $303,000 in stock compensation to Gonzalez, $126,250 in payments to North American related to the Option Agreement and $24,500 related to the Work Plan.

Management fees paid to our sole officer and director were $40,000, and $219,179 in expenses related to the stock grant under Mr. Ferris’ Employment Agreement during the nine months ended September 30, 2011, an increase of $259,179 from the nine months ended September 30, 2010.

12

Liquidity and Capital Resources

The following is a summary of our balance sheet as of September 30, 2011 and December 31, 2010:

	September 30, 2011 ($)		December 31, 2010 ($)
Cash		111,231		9,977
Current Liabilities		61,477		67,636
Working Capital		54,454		233,533
Stockholders’ Equity		65,042		233,533

We had cash of $111,231 as of September 30, 2011.  We have committed to fund $450,000 over the next three years under the Work Plan.  Because the Company has no revenues, we are dependent upon obtaining additional financing in order to fund our obligations under the Work Plan, and also to acquire the interests described in the Ocampo LOI, if a Definitive Agreement is executed.  While the Company has funded its exploratory program through the Investment Agreement and other sources of equity financing, there is no assurance that adequate financing on acceptable terms will continue to be available to us.  During the three months ended September 30, 2011, our sole source of financing was the proceeds of two private placements of Common Stock to North American.  See Part II, Item 2, Unregistered Sales of Equity Securities.  The net proceeds from those stock offerings were used to fund the Company’s operating expenses, the exploration activities under the Work Plan, and expenses associated with the Ocampo LOI.

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 Plan

We intend to continue to have our outside accountants 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 accountant is expected to charge us approximately $3,000 to prepare our quarterly financial statements and approximately $7,000 to prepare our annual financial statements.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

N/A

Item 4.Controls and Procedures.

Our principal executive and principal financial officers have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report due to a lack of segregation of duties and an absence of written policies and procedures for accounting and financial reporting, which are identified in our Annual Report on Form 10-K for the year ended December 31, 2010 as a material weakness in our internal controls over financial reporting.

13

(b) Changes In Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during this fiscal quarter that materially affected, or is reasonably likely to have a materially affect, on our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.  Legal Proceedings.

We are not aware of any pending or threatened legal proceedings which involve the Company.

Item 1A.  Risk Factors.

An investment in the Common Stock involves a high degree of risk. In addition to the other information in this Quarterly Report and the risk factors discussed in our Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating the Company and our business. We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our Common Stock.  If you decide to buy our Common Stock, you should be able to afford a complete loss of your investment.

The Company holds the Concessions through a Mexican subsidiary, Metales, in which it owns a 70% interest. Therefore, the Company’s ability to realize revenues from the project will depend in part upon the payment of dividends by Metales and thus is dependent on Mexican corporate and other law.

As a US company, Lone Star Gold cannot hold the Concessions directly. Instead, Mexican law requires that a company formed in Mexico own the Concessions. The Company has invested in Metales in order to comply with this law. Therefore, Metales must comply with Mexican laws regarding the declaration and payment of dividends in order to distribute profits to its stockholders, including the Company. If it fails to do so, the Company could fail to realize revenues from the project and you could lose all or part of your investment.

Our only significant asset is the capital stock of our subsidiary.

Our Company conducts substantially all its business operations through its sole subsidiary, Metales. We are wholly dependent, other than from our financing activities, on the cash flow of Metales, and dividends and distributions from Metales, to service any current or future obligations of the Company.

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 or other mineral reserves on any individual parcel of land is almost infinitesimal. It is not uncommon to spend millions of dollars on a potential project, complete many phases of exploration and still not obtain reserves that can be economically exploited. Therefore, the chances of the Company finding economically viable mineral reserves are remote.

We have no known mineral reserves. Even if the Company finds gold deposits, it may not be of sufficient quantity to warrant recovery. Additionally, even if the Company finds gold deposits in sufficient quantity to warrant recovery, it ultimately may not be recoverable. Finally, even if any gold 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 operations.

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.

14

We may not have access to all of the supplies and materials we need to explore our properties, which  could delay or suspend our operations.

Competition and unforeseen limited sources of supplies in the industry or in the region in which we operate could result in occasional spot shortages of supplies, such as explosives, and certain equipment such as bulldozers and excavators. If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need.

We face intense competition in the mining industry.  We will have to compete for financing and for qualified managerial and technical employees.

The mining industry is intensely competitive. Competition includes large established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration and development programs may be slowed down or suspended.

Our properties are located in Mexico and are subject to changes in Mexican political conditions and government regulations.

The Concessions and the property that is the subject of the Ocampo LOI are located in Mexico. In the past, Mexico has been subject to political and social instability.  Change and uncertainty in Mexico could lead to changes in existing government regulations affecting mineral exploration and mining. Our business activities in Mexico may be adversely affected by changing governmental regulations relating to the mining industry. More generally, shifts in political conditions may increase the cost of conducting our business or maintaining our properties.  Finally, Mexico’s status as a developing country may make it more difficult to obtain required financing for our projects.

Our business operations may be adversely affected by social and political unrest in Chihuahua.

Our business operations could be negatively impacted if Chihuahua or other areas of Mexico experiences a period of social and political unrest.  Our exploration and construction program 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.

We require substantial funds merely to determine if mineral reserves exist on our Concessions.

Any potential development and production of minerals on our Concessions depends upon the results of exploration programs, feasibility studies and the recommendations of qualified engineers and geologists. Such activities require substantial funding. Before deciding to explore for, and then produce or develop, mineral reserves, we must consider several significant factors, including, but not limited to:

• Costs of bringing the property into production;

• Availability and costs of financing;

• Ongoing costs of production;

• Market prices for the products to be produced;

• Environmental compliance regulations and restraints; and

• Political climate and/or governmental regulation and control.

The Assignment Agreement, and the Option Agreement underlying the Assignment Agreement, obligates the Company to fund certain exploration costs under the Work Plan, and to make certain payments to Gonzalez. If we fail to satisfy those obligations, Gonzalez could demand a return of the Concessions.

Under the terms of the Option Agreement, if the Company fails to comply with its obligations to make expenditures under the Work Plan and to pay $125,000 to Gonzalez before January 11, 2014, the Option Agreement will terminate and the Company will be obligated to return the Concessions to Gonzalez. If this occurs, Company may be forced to cease operations.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

On September 16, 2011, the Company issued 300,000 shares of Common Stock to Gonzalez, as part of the consideration paid to Gonzalez under the Assignment Agreement.  See Note 6 to the Financial Statements and Part II, Item 2, Agreements.

On September 15, 2011, the Company issued 125,000 shares of Common Stock to North American in repayment of the $125,000 that American Gold paid Gonzalez in connection with the Option Agreement. The shares were issued in the name of North American in satisfaction of the Company’s obligations under the Assignment Agreement, with the agreement of American Gold. In addition, the Company issued 100,000 Units to North American, with each Unit consisting of one share of Common Stock and one Warrant to purchase one share of Common Stock at a price of $1.20 per share at any time before August 29, 2014.  The Units were issued to North American for gross proceeds of $100,000, which were used to fund the Work Plan related to the La Candelaria project. See Note 6 to the Financial Statements and Part II, Item 2, Agreements.

The Company issued 238,095 shares of Common Stock to North American pursuant to the Investment Agreement on September 14, 2011.  See Note 4 to the Financial Statements.  The Company sold each share of Common Stock at a price of $0.84 per share, resulting in gross proceeds of $200,000 to the Company.  The proceeds will be used to fund the Work Plan related to the La Candelaria project.

On October 24, 2011, the Company sold 204,081 shares of Common Stock to North American pursuant to the Investment Agreement for gross proceeds of $200,000.  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 November 1, 2011, the Company issued 150,000 shares of Common Stock to Adam Whyte (“Whyte”), an individual who is a resident of Mexico. The shares were issued to Whyte as partial consideration under a Consulting Agreement dated October 31, 2011 between the Company and Whyte. A copy of the Consulting Agreement is attached as Exhibit 10.9 to this Quarterly Report.

15

Neither the Common Stock or Units issued to North American, nor the Common Stock issued to Gonzales or Whyte, were registered under the Securities Act.  The sales to North America, Gonzalez and Whyte were completed in reliance upon an exemption pursuant to Regulation S.  Each of Whyte and Gonzales has represented to the Company that he is not a US person as defined in Regulation S, and that he is acquiring the Common Stock for investment purposes only and not with a view towards distribution. North American has represented to the Company that it is not a US 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. 

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.(Removed and Reserved)

Item 5.  Other Information.

None.

Item 6.  Exhibits.

10.3	Assignment Agreement between American Gold Holdings, Ltd., Homero Bustillos Gonzalez and the Company dated August 17, 2011 (Incorporated by reference to the Company’s Quarterly Report filed on August 22, 2011)
10.8	Option Agreement between American Gold Holdings, Ltd. and Homero Bustillos Gonzalez dated January 11, 2011
10.9	Consulting Agreement between the Company and Adam Whyte dated October 31, 2011
10.10	First Amendment to Investment Agreement dated November 9, 2011, between the Company and North American Gold Corp.
31.1	Certification of Periodic Financial Reports by Dan Ferris in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Periodic Financial Reports by Dan Ferris in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LONE STAR GOLD, INC.
By:	/s/ Dan Ferris
Name:	Dan Ferris
Title:	President, Secretary and Treasurer
Date:	November 10, 2011

EX-10.8

HOMERO BUSTILLOS GONZALEZ

ASSIGNEES OR DESIGNEES

and

AMERICAN GOLD HOLDINGS LTD.

OPTION TO PURCHASE AGREEMENT

JANUARY 11, 2011

TABLE OF CONTENTS

ARTICLE 1
INTERPRETATION
Section 1.1 Defined Terms	1
Section 1.2 Interpretative clauses.	6
Section 1.3 Conditions Precedent.	7
ARTICLE 2
GRANT AND EXERCISE OF OPTION
Section 2.1 Grant of Option to Buy 70% of all mining rights in Property.	7
Section 2.2 Purchase Price	7
Section 2.3 Option to Purchase Payments, Expenditures and Financing	9
Section 2.4 Work Commitment, Expenditures and Exploration Objective(s).	9
ARTICLE 3
OPTION PERIOD
Section 3.1 Conduct of Business.	10
Section 3.2 Access for Exploration	10
Section 3.3 Optionee's Obligations	10
Section 3.4 Engagement	11
Section 3.5 Emergency Expenditures	11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 Signing Representations and Warranties of Optionor	12
Section 4.2 Closing Representations and Warranties of Optionor	12
Section 4.3 Representations and Warranties of Optionee.	13
Section 4.4 Survival	14
ARTICLE 5
POST-CLOSING PERIOD
Section 5.1 Anti-Dilution Rights.	14
Section 5.2 Nominees to Optionee's Advisory Board	14
Section 5.3 Further Assurances	14
ARTICLE 6
TERMINATION
Section 6.1 Termination by Optionee	14
Section 6.2 No Termination on Closing	14
Section 6.3 Obligations Cease	14
Section 6.4 Non-Compliance by Optionor	15

ARTICLE 7
ARBITRATION
Section 7.1 Arbitration of Disputes.	15
Section 7.2 Notice to Arbitrate	15
Section 7.3 BCICAC Administration and Rules.	15
Section 7.4 Arbitration Award.	15
ARTICLE 8
MISCELLANEOUS
Section 8.1 Notices.	16
Section 8.2 Time of the Essence.	17
Section 8.3 Time of the Essence.	17
Section 8.4 Confidential Information	17
Section 8.5 Expenses	17
Section 8.6 Amendments.	17
Section 8.7 Waiver.	18
Section 8.8 Non-Merger.	18
Section 8.9 Entire Agreement	18
Section 9.0 Successors and Assigns.	18
Section 9.1 Severability.	18
Section 9.2 Governing Law.	19
Section 9.3 Method of Payment	19
Section 9.4 Counterparts.	19

SCHEDULES

SCHEDULE 1              Properties

OPTION to PURCHASE AGREEMENT

THIS OPTION TO PURCHASE GREEMENT is made as of the 11th day of January, 2011. BETWEEN:

HOMERO BUSTILLOS GONZALEZ ("HBG"), a Mexican national, the "Optionor")

AND:

AMERICAN GOLD HOLDINGS LTD., a company incorporated under the laws of the British Virgin Islands, having its principal offices in Trident Chambers, Road Town, Tortola (the "Optionee")

WITNESSES THAT WHEREAS:

A.   HBG is the beneficial owner of a one hundred percent (100%) interest in and to the eight (8) mining concessions in the project area known as "La Candelaria", totaling 800 hectares and registered with the Directorate General of Mines at the Ministry of Economy under certificates 234 759, 234 760, 234 761, 234 762, and 235 690, 235 691, 235 692, 235 693 located in the Municipality of Guachochi, in the State of Chihuahua, Mexico, and listed in Schedule 1 attached hereto (the "Properties").

B.   HBG has agreed to transfer the Properties to a new Mexican company to be incorporated by the Optionee. The Optionee will endeavour to incorporate a company within 6 months of the closing of this Definitive Agreement under the laws of Mexico having its principal offices in Guachochi, Chihauhua.

C.   The Optionor has agreed to grant to the Optionee, subject to and upon the terms of this Agreement, an option to purchase seventy percent (70%) of the shares of the Company and an undivided 70% interest in the eight (8) mining concessions subject of this Buy-Sell Agreement.

NOW THEREFORE in consideration of the premises and the covenants, agreements, representations and warranties herein, the sufficiency of which is hereby acknowledged, the Parties hereto covenant and agree as follows:

ARTICLE 1

INTERPRETATION

Section 1.1 Defined Terms.

As used in this Agreement, the following terms have the following meanings:

"Affiliate" means any company, group, person, partners or associates or any other stakeholder who directly or indirectly controls or is controlled by or associated with Optionor or Optionee.

"Definitive Agreement" means this option to purchase agreement and all schedules and instruments in amendment or confirmation of it and the expressions "Article" and "Section" followed by a number mean and refer to the specified article or section of this Agreement.

"Assets" means all property and assets of the Company of every nature and kind and wherever situated and includes, for greater certainty and without limiting the generality of the foregoing, the Properties, the Books and Records, the Corporate Records and the Contracts, Mining Concession Titles, and all rights and interests related to the granting of those titles.

"Associate" means one or more of the following relationships with Optionor or Optionee;

(1)  a corporation of which that Person or another Associate of that Person beneficially owns, directly or indirectly, at least 10% of the voting shares;

(ii)   a partner or business associate, or stakeholder affiliated with that Person, corporation or Optionor or Optionee;

(iii)   a trust or estate in which that Person, business associate or stakeholder has a substantial beneficial interest or for which that Person serves as trustee or in a similar capacity;

(iv)   that Person's spouse or a relative of that Person or that Person's spouse.

"Authorization" means, with respect to any person, corporation or stakeholder or associate, any order, permit, approval, waiver, license or similar authorization of any governmental or public department, central bank, commission, board, bureau, agency or instrumentality or stock exchange having jurisdiction over the Person.

"Books and Records" means all books of account, tax records, sales and purchase records, supplier lists, computer software, business reports, plans and projections and all other documents, files, correspondence and other information and records of the Company (whether in written, printed, electronic or computer printout form) acquired or generated in the course of its Business.

"Business" means the business of exploring for, developing and exploiting mineral deposits, as well as the sale of any and all metallic or non-metallic products produced from such exploitation.

"Business Day" means any day of the year, other than a Saturday, Sunday or any other day on which banks are required or authorized to close in Reno, Nevada.

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"Closing" means the completion of the Transaction by signing of this Option to Buy -Sell Agreement, known as the "more-comprehensive, definitive agreement" in the letter of intent "L01" Dated November 15, 2010 and executed by the parties on or about November 25th, 2010.

"Closing Date" means the date which is this Option to Buy-Sell Agreement is signed by the Optionee and the Optionee delivers to the Optionor the executed copy notice of the Option to Buy-Sell Agreement, duly signed, or such other date as the Parties may agree for the Closing to take place. A period of up to

ninety (90) days was stipulated in the closing of the definitive agreement in the original LOl entered into by Optionor and Optonee for the acquisition of a seventy (70%) interest in La Candelaria, the  LOl is incorporated herein by this reference.

"Company" means a company to be incorporated under the laws of Mexico, as contemplated in Section 1.3(b).

"Company Shares" means all of the issued and outstanding shares in the capital

of the Company.

"Contracts" means all agreements to which the Company is a party including all contracts, leases of personal property and commitments of any nature, written

or oral.

"Corporate Records" means the corporate records of the Company, including:

a)   all incorporation and other constitutional documents and by-laws,

b)   all minutes of meetings and resolutions of shareholders and directors (and any committees),

c)   the share certificate books, and

d)   the registers of securities, of transfers, of directors, of powers of attorney and all other official registers of the Company.

"Effective Date" means the date that the conditions precedent set out in Section 1.3 are met.

"Encumbrances" means any mortgage, charge, pledge, hypothecation, security interest, assignment, lien (statutory or otherwise), charge, title retention agreement or arrangement, restrictive covenant, option, right of pre-emption, privilege or any contract to create any of the foregoing or any other arrangement or condition which, in substance, secures payment or performance of an obligation or which is capable of registration or registered against title.

"Expenditures" means all costs and expenses of whatever kind or nature spent or incurred by or on behalf of the Optionee from the Effective Date in the conduct of exploration, development and evaluation activities on or in relation to the

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Properties directly related to advancing the geologic information related to the mining concessions subject to this Option to Purchase/Buy-Sell Agreement including:

a)   in holding the Properties in good standing (including any monies expended as required to comply with Laws, such as for the completion and submission of assessment work and filings required in connection therewith), in curing title defects and in acquiring and maintaining surface and other ancillary rights, including payments owners of surface rights;

b)   in preparing for and in the application for and acquisition of environmental and other permits necessary or desirable to commence and complete exploration, development and evaluation activities on the Properties;

c)   in doing geophysical and geological surveys, drilling, assaying and metallurgical testing, including costs of assays, metallurgical testing and other tests and analyses to determine the quantity and quality of minerals, water and other materials or substances;

d)   in acquiring services or facilities or the use thereof and for all parts, supplies and consumables;

e)   for salaries and wages, including actual labour overhead expenses for employees assigned to exploration, development and evaluation activities directly related to advancing the geologic information  related to the mining concessions subject to this Option to Purchase/Buy-Sell Agreement;

f)   travelling expenses and fringe benefits (whether or not required by law) of all persons engaged in work with respect to and for the benefit of the Properties including for their food, lodging and other reasonable needs;

g)   payments to contractors or consultants for work done, services rendered or materials supplied, provided that such engagement of any non-arm's length person must be on terms no more favourable to such person than what would be customary in the industry for an arm's length person;

h)   all taxes or other imposts levied against or in respect of the Properties or activities thereon and the cost of insurance premiums and performance bonds or other security; and

"Final Payment" means the final payment of the Purchase Price under Section 2.2.

"Financing" means any equity financing arranged by or on behalf of the Optionee, affiliates, associates, assignees, designees or transferees.

"Financing Deadline" has the meaning ascribed to that term in Section 2.3(e);

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'Initial Financing" means at least US$ 150,000 of gross proceeds in Financing needed to conduct the initial exploration/development work at La Candelaria and bring current mining taxes for the eight mining concessions included in this option to purchase agreement as soon as possible.

"Laws" means any and all applicable laws including all statutes, codes, ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, policies, guidelines, and general principles of common and civil law and equity, binding on or affecting the Person referred to in the context in which the word is used.

"Net Smelter Returns" means a standard mining industry royalty agreement duly executed by the Company and Optionee as payor to the Optionor, of the two (2% NSR) net smelter returns royalty.

"Option" has the meaning specified in Section 2.1.

"Option Period" means the period between the close of business on the date of this Agreement and the Closing Date.

"Optionee" means American Gold Holdings Ltd. or affiliates, associates, assignees, designees or transferees.

"Optionor" means Homero Bustillos Gonzalez or affiliates, associates, designees or transferees.

"Optionor's Shares" has the meaning ascribed to that term in Section 2.2.4

"Parties" means the Optionor and the Optionee and any other Person who may become a party to this Agreement by, through or under the Optionor or the Optionee.

"Person" means a natural person, partnership, limited liability partnership, corporation, joint stock company, trust, unincorporated association, joint venture or other entity or governmental entity, and pronouns have a similarly extended meaning.

'Post Closing Period" means the period commencing with the Closing Date and ending on that date upon which the Optionee's comply completely with all the terms of this Definitive Option to Purchase/Buy - Sell Agreement or the three year period stipulated in the Work Commitment agreed to by Optionor and Optionee in the LOI, which ever occurs first.

"Properties" means the mineral concessions referred to in Recital A and described in Schedule 1 as may be modified and varied under applicable Laws from time to time.

"Purchase Price" means the purchase price as described in Section 2.2

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"Regulatory Approval" means the Authorizations required by the Optionee for its participation in the Transaction from all securities commissions, stock exchanges and other regulatory authorities having jurisdiction or from its shareholders.

"Related Party" means either of the Optionor or Homero Bustillos Gonzalez or any Affiliate or Associate of either of the Optionee, partners, subsidiaries or

designees, or transferees.

"Shares" means 300,000 common shares in the capital of the Optionee, a private company and, more specifically, the same number of shares vended in to a

public company either on a one to one (1:1) basis from Optionee's private company or on the same basis the Optionee is granted for this transfer/vend-in. This same requirement pursuant to this agreement shall apply to any of the 1,000,000 "earn-in" shares tied to mineral deposit discoveries. The common shares issued as earn-in shares require an additional 1,000,000 shares of the Optionee's private company issued to Optionor in the public company. The additional earn-in shares are contingent upon discovery of a 1,000,000 ounce gold-equivalent gold deposit. It is recognized that the shares of the private company (American Gold Holdings Ltd.) will be vended into a public company

on a reputable North American exchange.

"Transaction" means the purchase and sale of the Company Shares and Optionor's or affiliate's acquisition of 70% of the mining rights and interest to the eight (8) concessions as stipulated in the LOI, and as contemplated hereunder.

Section 1.2  Interpretative clauses.

(a)   Any reference in this Agreement to gender includes all genders and words importing the singular number only will include the plural and vice versa.

(b)   The provision of a Table of Contents, the division of this Agreement into Articles and Sections and the insertion of headings are for convenient reference only and are not to affect its interpretation.

(c)   The schedules attached to this Agreement, for all purposes of this Agreement, form an integral part of it.

(d)   All references in this Agreement to dollars, unless otherwise specifically indicated, are expressed in the currency of the United States of America.

(e)   In this Agreement:

(i)  the words "including" and "includes" mean "including (or includes)without limitation", and the phrase "the aggregate of", "the total of", "the sum of", or a phrase of similar meaning means "the aggregate (or total or sum), without duplication, of"; and

(ii)  in the computation of periods of time from a specified date to alater specified date, unless otherwise expressly stated, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding".

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Section 1.3  Conditions Precedent.

The obligation of the Optionee to complete the Transaction is subject to and does not become binding until:

(a)   receipt by the Optionee of Regulatory Approval, if this is required;

(b)   the incorporation of the Company, which must have (i) constitutional documents or commitments to transfer shares in the Company satisfactory to the Optionee

(c)   the transfer of all the rights and interest in the Property to the Company of all of the Properties indicated in Schedule 1 to be for initial transfer, free and clear of encumbrances

When all of the conditions precedent have been met, the date that the latter of the above three was met will be the effective date of this Agreement (the "Effective Date"). Each of the Parties and HBG to take all such actions and do all such things within its, their or his control as may be necessary or advisable to fulfill and satisfy the conditions precedent as soon as possible but no later than February 14, 2011. If the conditions precedent are not met by February 14, 2011, or such date as agreed upon as an extension by the Parties (such later date as the Optionee may reasonably request to which Optionor agrees), then this Agreement will have no further force and effect and no Party will have any further obligation or liability to another except in relation to its covenants under this Section 1.3.

ARTICLE 2

GRANT AND EXERCISE OF OPTION

Section 2.1  Grant of Option to Buy 70% of all mining rights in Property.

The Optionor hereby grants to the Optionee the irrevocable and exclusive option (the 'Option") exercisable in accordance with this Article 2, to purchase  seventy (70%) percent of the rights and interests in the mining concessions subject of this definitive agreement, free and clear of all Encumbrances for the Purchase Price.

Section 2.2  Purchase Price

The purchase price for the Option will be:

1) Cash Option Payments Required for the Buy Sell Agreement to remain in force. The Purchaser/Optionee will pay the Vendor USD $250,000 in cash consideration as follows:

a)  USD $25,000 on the signing of this letter. Paid pursuant to theoriginal LOI.

b)  USD $100,000 on signing of the definitive agreement (90 day periodfor closing of the definitive agreement was stipulated in the LOI)

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c)  USD $125,000 within 12 months of the closing of the definitiveagreement.

2) Granting or Payment in Common Shares: The Purchaser/Optionee will grant and deliver to the Vendor 300,000 of its shares as follows: 300,000 common shares in the capital of American Gold Holdings Ltd. and when a vend-in or transfer to a public trading company occurs or the same number of shares granted toOptionee per share for this vend-in either on a one to one (1:1) basis for shares in Optionee's private company or on the same basis Optionee is granted for this transfer/vend-in to the public company to be delivered on the Closing Date or whenever a vend-in occurs according to the following schedule:

a)  150,000 shares immediately upon listing of a recognizable North American public exchange (eg., TSX Venture)

b)  150,000 shares within 6 months of listing on a recognizable North American public exchange

3) The Purchaser/Optionee will grant the Optionor/Vendor "earn-in" shares tied to mineral deposit discoveries. The shares issued under this feature would requirean additional 1,000,000 shares of the Purchaser either on a one to one (1:1) basis for shares held by Optionor in the Optionee's private company or on the same share for share basis as the Optionee is granted for the transfer/vend-in. This is contingent upon discovery of at least a 1,000,000 ounce gold- equivalent deposit. This provision would be applied against a credible and recognizable standard on a one-time basis subsequent to completion of the work commitment or at any time this minimum threshold is met and is not dependent on the size of discovery, assuming the minimum threshold is met.

4) The Optionor/Vendor will retain a 2% Net Smelter Returns Royalty ("NSR") on thegross mineral production. The Optionee/ Purchaser will have the option to buy­-out 1% of the NSR for $1,000,000.

5) The Optionor/Vendor will provide a consulting prospector, or engineer acceptable to the Purchaser to act as VP of Exploration or member of the advisory board for the public company to oversee activities related to this Property. This consulting agreement would be for a period of 1 year with an option to renew for 1 additional year. The amounts paid to the consultant will be applied against the work commitment.

Section 2.3  Option to Purchase Payments, Expenditures and Financing

In consideration for the granting of this Exclusive Option to Purchase, the Optionee will do the following:

(a)  within five Business Days after the Effective Date, pay to the Optionor the sum of US $100,000.00 due and payable on signing of this Definitive Agreement, and

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(b)  make all subsequent option payments on a timely basis pursuant to Sec. 2.2 - Purchase Price as further shown in Paragaph 2 (C), page 1 of the LOl executed by Optionor and Optionee, incorporated herein by this reference, and

(c)  all other conditions related to completion of good delivery of shares of Optionee's private company and a number of shares on either a one to one (1:1) basis or on the same basis Optionee is granted for the transfer/vend-in to a public trading company; and

(d)  complete and timely compliance with the Work Program as stipulated in the LOl and this agreement with the exploration and mine development program(s) conducted in the Properties; and

(e)  obligated to raise a minimum of US $450,000 within the three (3) year period provided for in order to comply with on-going cash option payments and the work program.

Section 2.4  Work Commitment, Expenditures and Exploration Objective(s):

To keep the Option in good standing the Optionee must:

(1) The Purchaser/Optionee will provide a work commitment for the Property of USD $450,000 over 3 years as follows:

a)  Begin and continue to explore the Properties with the express purpose of advancing the geologic knowledge of the Property and spend at least USD $150,000 within the 1st year of the closing date of this Definitive Agreement

b)  Continue to explore the Properties with the express purpose of advancing the geologic knowledge of the Property and spend at least a minimum of USD $150,000 within the 2nd year of the closing date of this Definitive Agreement

c)  Continue to explore the Properties with the express purpose of advancing the geologic knowledge of the Property and spend at least a minimum of USD $150,000 within the 3rd year of the closing date of this Definitive Agreement

(2)  All exploration and mine development work will be conducted as part of the Work Program will be in accord with the best practices and usual standards of professional conduct with the express focus of further exploring and defining mineral resources and mining reserves.

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ARTICLE 3

OPTION PERIOD

Section 3.1  Conduct of Business.

During the Option Period, the Optionor, HBG will:

(a)  after the Effective Date, transfer to the Company, free and clear of Encumbrances other than the royalty to be granted to the Optionor hereunder, any of the Properties not a part of the initial transfer of Properties to the Company; and

(b)  cause the Company to conduct the Business in the ordinary course including, without limiting the generality of the foregoing, maintaining and preserving the Properties and refraining from selling, transferring or otherwise disposing of the Properties described in Schedule 1 or any interest therein or from amending or waiving any rights to the Properties.

Section 3.2  Access for Exploration.

Throughout the Option Period, the Optionee and its directors, officers, employees, consultants and other agents will have the exclusive right in respect of the Properties to

(a)  enter thereon;

(b)  have exclusive and quiet possession thereof;

(c)  carry out exploration and development activities including, without limitation, the removal of ores, minerals and metals from the Properties, but only for the purpose of testing; and

(d)  bring upon and erect upon the Properties such structures and other facilities asmay be necessary or advisable to carry out exploration and development activities.

The Optionee's rights pursuant to this Section 3.2 will at all times be subject to any restrictions that may be required by applicable Laws and to rights of entry and access reserved to the Optionor hereunder.

Section 3.3  Optionee's Obligations

The Optionee is obligated during the entire period of this Option Agreement:

(a)  to conduct all work on or with respect to the Properties, and to otherwiseproperly use and maintain the Properties, in a manner consistent with good exploration, engineering and mining practices and in compliance with all applicable laws and regulations; and

(b)  to keep the Properties in good standing by the doing and filing of all necessarywork and by the doing of all other acts and things and making all other  payments which may be necessary in that regard; and

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(c)  to keep the Properties free and clear of all Encumbrances arising from its activities thereon (except liens being contested in good faith) and proceed with all diligence to contest and discharge any Encumbrance that is filed against the Properties; and

(d)  to permit the directors, officers, employees, consultants and other agents of the Optionor, at their own risk, access to the Properties at all reasonable times, provided that the Optionor jointly and severally indemnifies the Optionee against and save it harmless from all costs, claims, liabilities and expenses that the Optionee may incur or suffer as a result of any injury (including injury causing death) to any director, officer, employee, consultant or other agent of the Optionor while on the Properties except to the extent that any such costs, claims, liabilities or expenses result from the Optionee's gross negligence or wilful misconduct; and

(e)  to deliver to the Optionor monthly reports (including up-to-date maps) containing information on exploration activity, drilling and assays of core, channel samples, and any or all results during active field operations or metallurgical testing and pre-feasibility or feasibility studies, including all engineering reports, environmental studies, geological reports and financial projections based on interim or final results of exploration or mining development;

(f)  to maintain true and correct Books and Records of Expenditures during the entire period of this Option Agreement;

(g)  to consult with the Optionor on all material matters involving negotiations or other dealings with Federal, State or Municipal governments, local land owners, regulatory authorities and other Persons in Mexico having authority or influence in respect of the Properties, and its exploration and development and any Authorizations in connection therewith.

Section 3.4  HBG Engagement

The Optionee will engage HBG or his designate as a consultant with respect to its work respecting the Property for a period beginning upon signing of this agreement for one year with an option for one additional 1 year.

Effective Date. For his consulting services HBG or his designate will be paid on a monthly basis. HBG or his designate shall be paid reasonable traveling expenses, including, but not limited to hotel, food, fuel costs and car rental if one is not supplied by the Company. Periodical expense reports will be submitted to the Company for approval and reimbursement. Consulting and travel expenditures will be applied against the company's work commitment.

Section 3.5  Emergency Expenditures

Notwithstanding any other provision of this Agreement, the Optionee will be entitled to incur as Expenditures all costs and expenses necessary to preserve or protect life, limb, property or the environment or to comply with Laws, Authorizations, and lawful orders in respect of the Properties.

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES

Section 4.1 Signing Representations and Warranties of the Optionor.

The Optionor represents to and warrants in favour of the Optionee the following:

(a)  Litigation: There are no pending actions, suits or proceedings threatened against the Optionor or the Properties.

(b)  Properties: The Optionor owns and has exclusive possession of, or has a right to acquire good and valid title to and exclusive possession of, all of the Properties and other Assets, free and clear of all Encumbrances and defects in title.

Section 4.2  Post Closing Representations and Warranties of the Optionor

The Optionee will incorporate a Company within 6 months of the closing of this Definitive Agreement under the laws of Mexico having its principal offices in Guachochi, Chihauhua, and the Optionor will represent and warrant in favour of the Optionee as follows:

(a)  Nature of Business and Compliance with Laws: The Company's only activities are respecting the Business and it is conducting and has always conducted the Business and any past business in compliance with Laws. The Company has all the Authorizations necessary for it to carry on the Business as it is presently carried on and to own and hold its Assets.

(b)  Title to the Assets. The only assets of the Company are the eight mining concessions or Properties (which are recorded in the name of the Company), the maps, reports, samples, core assay results and other geological or scientific data related to the Properties, the Books and Records and the Corporate Records, and the Company owns good and valid title to and exclusive possession of all of the Assets, free and clear of all Encumbrances and defects in title, other than the Underlying Agreements and the royalty to be granted hereunder to the Optionors, and no Person except the Optionor, the Optionee and the Underlying Owners has any royalty, claim or other right in or to any of the Assets.

(c)  Material Contracts: The Company has no Contracts material to the ownership of the Assets or the operation of the Business or otherwise except the Underlying Agreements. No default has occurred under any of the Underlying Agreements, each of which is in good standing and unamended subsequent to its being reinstated by Optionor.

(d)  Subsidiaries: The Company has no subsidiaries and holds no shares or other ownership, equity or propriety interests in any other Person.

(e) Books and Records: All accounting and financial Books and Records are fully, properly and accurately kept in accordance with international generally accepted accounting principles and are complete in all material respects. Copies of such Books and Records will be provided to the Optionee.

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(f)  Financial Statements: The Company's balance sheet is prepared in accordance with generally accepted accounting principles, and presents fairly and completely the assets and liabilities of the Company and its shareholder's equity as of such date. Copies of such balance sheet will be made available to the Optionee.

(g)  No Liabilities: Except as reflected or reserved against in the Company's balance sheet as of the Closing Date, the Company has no liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise) except for current liabilities incurred in the ordinary course since such date and under the Underlying Agreements.

(h)  Environmental Matters: There are no reports or other documents relating to environmental matters affecting the Company or any of the Properties. To the best knowledge of each of them, all activities on the Properties by or on behalf of the Company or any previous owners have been conducted in accordance with all environmental Laws and any lawful orders or permits issued in connection therewith, and there are no contaminants or sources of contamination on or emanating from the Properties.

(i)  Employees: The Company does not have and has never had any employees.

Section 4.3  Representations and Warranties of Optionee.

The Optionee represents to and warrants in favour of the Optionor the following:

(a)  Incorporation: The Optionee is a body corporate duly incorporated, organized and validly subsisting under the Laws of its incorporating jurisdiction.

(b)  Power and Authority: The Optionee has full power and authority to carry on its Business and to enter into this Agreement and carry out its obligations hereunder including, without limitation, the issuance of the Shares in Optionee's private company and shares in for a vend-in. And when a vend-in or transfer to a public trading company occurs, then the same number of shares granted to Optionee per share for this vend-in either on a one to one (1:1) basis for shares in Optionee's private company or on the same basis Optionee is granted for this transfer/vend-in to the public company to be delivered on the Closing Date or whenever a vend-in occurs equal to the ownership/stock held by Optionor in American Gold Holdings.

(c)  Conflict: Neither the execution and delivery of this Agreement nor the consummation of the Transaction conflict with, result in the breach of or accelerate the performance required by an agreement to which the Optionee is a party nor does the execution and delivery of this Agreement violate or result in the breach of any Laws applicable to the Optionee.

(d)  Execution and Binding Obligation: This Agreement constitutes a legal, valid and binding obligation of the Optionee enforceable against it in accordance with its terms

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(e)  Proceedings: No proceedings are pending for and the Optionee is unaware of any basis for the institution of any proceedings leading to the dissolution or winding-up of the Optionee or its subjection to bankruptcy or any other Laws governing the affairs of insolvent persons.

Section 4.4  Survival

The representations and warranties of the Parties set forth in this Article 4 will survive the Closing and the Final Payment.

ARTICLE 5

POST-CLOSING PERIOD

Section 5.1  Anti-Dilution Rights.

During the Post Closing Period, the Optionee will, in any financing it arranges or which is arranged on its behalf, offer under the same terms Optionee is offered, to the Optionor the opportunity to maintain their aggregate percentage shareholding, participating in such financing(s) to the extent necessary to maintain such aggregate percentage interest.

Section 5.2  Nominee to Optionee's Advisory Board

During the Post-Closing Period, the Optionor will be entitled to appoint one nominee, who is acceptable to the Optionee acting reasonably, for appointment or election to the Optionee's Advisory Board.

Section 5.3  Further Assurances.

From time to time during the Post-Closing Period, each Party must, at the reasonable request of any other Party, execute and deliver such additional conveyances, transfers and other assurances as may be reasonably required to effectively evidence the ownership of the Properties by the Company and the transfer the Company Shares to the Optionee and to otherwise carry out the intent of this Agreement.

ARTICLE 6

TERMINATION

Section 6.1  Termination by Optionee.

The Optionee, at its sole discretion, may terminate this Definitive Option to Purchase/Buy Sell Agreement at any time during the Option Period upon at least 30 days' written notice to the Optionor.

Section 6.2  No Termination on Closing

If the Optionee does complies with all the terms of this Option to Purchase/Buy ­Sell Agreement and thereby does exercise the Option granted to Optionee by Optioner this Agreement will not terminate on the expiry of the Post Closing Period.

Section 6.3  Obligations Cease

Except as may have arisen prior to termination, on and after any termination this Agreement under this Article 6, no Party will have any liability to any other under or in relation to this Agreement except that the provisions of Section 8.3 and all other provisions necessary for the interpretation and enforcement thereof will remain in full force and effect. Without limiting the generality of the foregoing, upon any termination under Section 6.1, the Optionee will not be liable to the Optionor for any failure to make any payment to the Optionors not yet due.

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Section 6.4 Non-Compliance by Optionor

Should the Optionor not comply with all the option payments and good delivery of shares stipulated in Section 2.2.2 of this Definitive Agreement and the work program minimum investment of US $ 450,000 included in "Expenditures" as defined herein  within thirty-six months of the Effective date, this option agreement shall be null and void and any liability under or in relation to this Agreement shall cease, save the Optionee's obligation to return all the Properties transferred to the Company by Optionor to any entity or person designated by Optionor in good standing, including but not limited to the properties and Company being free and clear of all encumbrances including mining taxes, labor liens, and claims for exploration or mine development work, mining or feasibility studies.

ARTICLE 7

ARBITRATION

Section 7.1  Arbitration of Disputes.

All minor disputes (those not affecting the continuing validity or enforceability of this agreement) arising out of or in connection with this Agreement will be referred to and finally resolved by arbitration under the rules of the British Columbia International Commercial Arbitration Centre ("BCICAC") by a sole arbitrator.

Section 7.2  Notice to Arbitrate.

Any Party may refer any such matter to arbitration by notice to the others and, within 30 days after receipt of such notice, the affected Parties will endeavour to agree on the appointment of an arbitrator, who will be capable of commencing the arbitration within 21 days of his appointment. The arbitrator will be an individual who by a combination of education and experience is competent to adjudicate the matter in dispute and who has indicated his willingness and ability to act as arbitrator in accordance with this Article 7.

Section 7.3  BCICAC Administration and Rules.

The appointing authority for the arbitration will be the BCICAC. The case will be administered by the BCICAC in accordance with its ''Procedures for Cases under the BCICAC Rules". The place of arbitration will be Vancouver, British Columbia, Canada and the language of the arbitration will be English.

Section 7.4  Arbitration Award.

The award of the arbitrator will be final and binding upon each of the Parties and will not be subject to appeal or judicial review.

- 15 -

ARTICLE 8

MISCELLANEOUS

Section 8.1  Notices.

Any notice, direction or other communication given under this Agreement must be in writing and may be given by delivering it or sending it by facsimile or other similar form of recorded communication to any address provided by the Optionors or addressed:

(a) to the Optionor, HBG at:

Alamo #6, Colonia, Alta Vista

Guachochi, Chihuahua 33180

Telephone:       (649) 196-3542

E-mail                 bustilloshomero@hotmail.com

(b) to the Optionee, David Craven at:

Trident Chambers

Road Town, Tortola BVI

Attention:           Director

Telephone:

with a copy to:

World Trade Center

10 Route de l'Aeroport PO Box 691

CH-1215 Geneva 15

Attention: David Craven

Telephone:         +41 22 799 0800

Any such communication to the above addresses will be deemed to have been validly and effectively given: (I) if personally delivered, on the date of such delivery if such date is a Business Day and such delivery was made prior to 2:00 p.m. (Carson Ci and otherwise on the next Business Day; or (ii) if transmitted by facsimile, e-mail or similar means of recorded communication on the Business Day following the date of transmission.

- 16 -

Any Party may change its address for service from time to time by notice given in accordance with the foregoing and any subsequent notice must be sent to such Party at its changed address.

Section 8.2  Time of the Essence.

Time is of the essence of this Agreement.

Section 8.3 Area of Influence and Non-Competition

The Optionee - Purchaser/Buyer or affiliates, partners or agents shall not acquire any property interests within a boundary of twenty kilometers of the exterior boundaries of the Property - La Candelaria concessions in the greater Guachochi area as further described or shown in the LOI attached hereto and incorporated herein by this reference (hereinafter referred to as the "Area of Influence") for a period of five years from the date of this Definitive Agreement without the express consent of Optionor ­Vendor/Seller.

Section 8.4  Confidential Information

The Parties will keep confidential all information concerning the exploration of the Properties or otherwise relating to the Transaction, the Company or the Properties, and will not disclose it to any other Person, except:

(a)  to an Affiliate, consultant, advisor, financier, potential property purchaser, or potential investor to whom the disclosing Party has a bona fide reason for disclosing the information and who has executed an undertaking in favour of both Parties to keep such information confidential;

(b)  as required by Laws or stock exchange policy; and

(c)  information that is or becomes a part of the public domain, other than because of a breach of this Section 8.3.

Section 8.5  Expenses.

Except as otherwise expressly provided in this Agreement, all costs and expenses (including the fees and disbursements of legal counsel, investment advisers and accountants) incurred in connection with this Definitive Option to Purchase/Buy Agreement and the Transaction must be paid by the Party incurring such expenses.

Section 8.6  Amendments.

This Definitive Agreement may only be amended, supplemented or otherwise modified by written agreement prior to the Effective Date signed by all Parties and after the Effective Date signed by the Optionor and the Optionee.

- 17 -

Section 8.7  Waiver.

(a)  No waiver of any of the provisions of this Agreement constitutes a waiver of any other provision (whether or not similar); nor is such waiver binding unless executed in writing by the Party to be bound by the waiver.

(b)  No failure on the part of any Party to exercise, and no delay in exercising any right under this Agreement operates as a waiver of such right; nor does any single or partial exercise of any such right preclude any other or further exercise of such right or the exercise of any other right.

Section 8.8  Non-Merger.

Except as otherwise expressly provided in this Definitive Agreement, the covenants and the representations and warranties herein will not merge on and will survive the Closing and the Final Payment and, notwithstanding such Closing and Final Payment or any investigation made by or on behalf of any Party, will continue in full force and effect. Neither Closing or Final Payment will prejudice any right of one Party against any other Party in respect of anything done or omitted under this Definitive Agreement or in respect of any right to damages or other remedies.

Section 8.9  Entire Agreement.

This Definitive Agreement constitutes the entire agreement between and among the Parties with respect to the Transaction and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties.

Section 9.0  Successors and Assigns.

(a)  This Definitive Agreement will become effective when executed by each of the Parties and after that time will be binding upon and endure to the benefit of each of them and their respective heirs, successors and permitted assigns.

(b)  Except as permitted under Section 9.1 (c), neither this Definitive Agreement nor any of the rights or obligations under this Agreement are assignable or transferable by any Party without the prior written consent of the other Parties which may, in his, her or its sole discretion, be arbitrarily withheld.

(c)  The Optionee will be entitled, upon giving notice to the other Parties at any time on or prior to the Closing Date or at any time during the three (3) year period of the work commitment, to assign this Agreement or any of the Optionee's rights and obligations under this Agreement to any Affiliate, Associate(s), Assignee(s), Designee(s) of the Optionee or Transferee(s) subject to the that party executing an agreement confirming the assignment and the assumption by the assignee or transferee of all obligations of the Optionee under this Agreement.

Section 9.1  Severability.

If any provision of this Agreement is determined by an arbitrator or any court of competent jurisdiction to be illegal, invalid or unenforceable, that provision will be severed from this Agreement and the remaining provisions will continue in full force and effect.

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Section 9.2  Governing Law.

This Agreement is governed by and must be interpreted and enforced in accordance with the laws of the state of Nevada in state court in Carson City County (without reference to its choice of law rules). The parties hereby consent to such venue and governing law.

Section 9.3  Method of Payment.

Unless provided otherwise, any payments of money required to be made hereunder to the Optionors may be made by cash, cheque, wire or electronic funds transfer. Payments may be made in Canada, in the USA, or in any place designated by depository agent in U.S. Dollars. The Optionor hereby designate HBG his assignees or designees as their depository agent to receive payments due hereunder. Upon making payment to such depository, the Optionee will have fulfilled its payment obligation to the Optionor hereunder for such payment.

Section 9.4  Counterparts.

This Agreement may be executed in any number of counterparts and all such counterparts taken together constitute one and the same instrument. This Agreement may be signed and accepted by facsimile.

IN WITNESS WHEREOF the Parties have executed this Definitive Option to Purchase or Buy Agreement and Share Purchase Agreement related to the shares of the Company.

For Optionor:

Homero Bustillos Gonzalez

/s/ Homero Bustillos Gonzalez

For Optionee:

AMERICAN GOLD HOLDINGS, LTD.

By: /s/ D. Craven

Name: D. Craven

Its: Director

- 19 -

EX-10.9

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (this “Agreement”), dated as of October 31, 2011 (the “Effective Date”), is by and between Lone Star Gold, Inc., a Nevada corporation (the “Company”), and Adam Whyte (“Whyte”).

 WHEREAS, the Company is in the business of gold and silver exploration, mining and production, on its own accord and through its subsidiaries in Mexico (the “Business”);

WHEREAS, Whyte has experience in the construction industry and is a resident of Mexico, where the Company and its subsidiaries are currently engaged in exploration and production activities;

WHEREAS, the Company desires to engage Whyte to perform consulting services, and Whyte desires to contract with the Company to perform consulting services, on the terms and conditions set forth in this Agreement.

Now, therefore, in consideration of the promises and the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.           Services and Compensation.  The Company engages Whyte, and Whyte accepts such engagement, to provide consulting services on the terms and conditions set forth below.

(a)           Services Provided.  Whyte agrees that from the date of this Agreement to the end of the Term (as defined below), he will provide such consulting services as he may be requested to provide by the Company.

(b)           Compensation.  The Company shall pay to Whyte, and Whyte agrees to accept as full consideration for his services, US$5,000 per month (the “Compensation”) commencing with October 2011, payable by Company in accordance with its payroll policies and subject to all appropriate withholdings.

(c)           Signing Bonus.   The Company will pay Whyte the amount of $15,000 on the Effective Date, in recognition of the work Whyte has performed for the Company prior to the Effective Date.

(d)           Award of Restricted Stock.  The Company will issue to Whyte, or a company wholly-owned by Whyte, 125,000 shares of the Common Stock, $0.001 par value, of the Company (the “Common Stock”) within 30 days of the Effective Date. Whyte acknowledges and agrees that the Common Stock will not be registered under the Securities Act of 1933, as amended, and will carry a restrictive legend to the effect that the shares of Common Stock may not be transferred absent such registration or pursuant to an exemption from registration. Whyte agrees to execute and deliver such other documentation requested by the Company, including but not limited to a Subscription Agreement, necessary or desirable in connection with the issuance of the Common Stock.

(e)           Independent Contractor.  Whyte shall perform the consulting services as an independent contractor and not as the employee, agent, partner or joint venturer of the Company. Whyte will pay all taxes associated with his Compensation.

(f)           Not Officer, Director.  Whyte will not hold himself out as an officer or director of the Company to any person or entity.  Whyte will not have any actual or implied authority to act as an officer or director of the Company.  This provision shall survive the termination of this Agreement.

2.           Term.  The term of this Agreement shall begin on the Effective Date and continue until the one-year anniversary of the Effective Date. If not terminated by either party on or before the one-year anniversary of the Effective Date, this Agreement will automatically renew for successive one-year terms until terminated upon 30 days written notice from either party to the other before the end of the one-year period (the “Term”).In addition, this Agreement will automatically terminate upon Whyte’s death, total or partial disability that renders him unable to perform the consulting services required by the Company, or relocation to an area that is more than a reasonable commute from the area in which the Company conducts its Business. Notwithstanding the foregoing, either party may terminate this Agreement by giving at least 60 days written notice to the other party. Upon such termination, neither party shall have any obligation to the other, including the Company’s obligation to pay the Compensation, except as otherwise provided herein.

3.           Trade Secrets and Confidential Information.  Whyte agrees that during the Term, he will hold in confidence all confidential information of the Company that comes into Whyte's knowledge, and will not disclose, publish or make use of such confidential information without the prior written consent of the Company.

4.           Return of Company Property.  All records, designs, business plans, work plans, testing results, financial statements, manuals, memoranda, and other property delivered to or compiled by Whyte for or on behalf of the Company or its representatives, vendors or customers that pertain to the Business of the Company (including the respective subsidiaries thereof) shall be and remain the property of the Company, and be subject at all times to its discretion and control. Upon the termination of this Agreement, and at any other time upon request of the Company, Whyte shall deliver all such materials to the Company.  Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company that are collected by Whyte shall be delivered promptly to the Company upon the request of the Company, or upon termination of this Agreement.

5.           Entire Agreement.  This Agreement supersedes any and all other agreements, either oral or written, between the parties hereto with respect to the subject matter hereof and contains all of the covenants and agreements between the parties with respect thereto.

2

6.           Modification.  No change or modification of this Agreement shall be valid or binding upon the parties hereto, nor shall any waiver of any term or condition in the future be so binding, unless such change or modification or waiver shall be in writing and signed by the parties hereto.

7.           Governing Law and Venue.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada (excluding conflicts of law principles).  If any action is brought to enforce or interpret this Agreement, venue for such action shall be in the state courts of Nevada.

8.           Counterparts.  This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one document.

9.           Assignment.  Company shall have the right to assign this Agreement to its successors or assigns.  The rights, duties and benefits to Whyte hereunder are personal to him, and no such right or benefit may be assigned by him. Except as provided in this paragraph, this Agreement shall be binding upon the parties hereto, together with their respective executors, administrators, successors, personal representatives, heirs and assigns.

10.           Waiver of Breach.  The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party.

IN WITNESS WHEREOF, the parties hereto have executed this Consulting Agreement as of the date first above written.

Lone Star Gold, Inc.

a Nevada corporation

By:      /s/ Dan Ferris

            Dan Ferris, President

       /s/ Adam Whyte

           Adam Whyte

3

EX-10.10

FIRST AMENDMENT TO

INVESTMENT AGREEMENT

This FIRST AMENDMENT TO INVESTMENT AGREEMENT (this “Amendment”) is made and entered into as of the 9th day of November, 2011, by and between Lone Star Gold, Inc., a Nevada corporation (the “Company”), andNorth American Gold Corp., a company formed under the laws of the Marshall Islands (“Subscriber”).

RECITALS

A.           The Company and Subscriber entered into that certain Investment Agreement dated August 29, 2011 (the “Original Agreement”), whereby Subscriber agreed to invest up to $15,000,000 to purchase the Company’s common stock, $0.001 par value per share, upon the Company’s election as provided therein;

B.           Section 2.6 of the Original Agreement provides that the Company will use the net proceeds from any Put to fund operating expenses, working capital and general corporate activities related to the exploration and development of gold and silver mining concessions for the “La Candelaria” property.

C.           The Company and Subscriber desire to amend Section 2.6 to expand the use of proceeds available to the Company.

NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.           Amendment to Section 2.6.                                                      Section 2.6 of the Original Agreement is hereby deleted in its entirety, and the following new Section 2.6 is inserted in lieu thereof for all purposes:

“Section 2.6 Use of Proceeds.  The Company shall use the net proceeds from any Put 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 of the Company in relation to (i) the “La Candelaria” property, (ii) the “Ocampo” property, and (iii) any other properties agreed upon in advance by the Company and Subscriber, whether inside or outside of Mexico.”

2.           No Other Amendment; Definitions.  Except as specifically modified and amended pursuant to Section 2 hereof, the Original Agreement shall remain in full force and effect without revision thereto.  Moreover, all capitalized terms used in this Amendment, unless otherwise defined herein or the context specifically provides otherwise, shall have the same meanings in this Amendment as attributed to such terms in the Original Agreement.

3.           Binding Effect.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

4.           Applicable Law.  THIS AMENDMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEVADA, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.

5.           Descriptive Headings; Language Interpretation.  The descriptive headings of this Amendment are inserted for convenience only and do not constitute a part of this Amendment.  In the interpretation of this Amendment, unless the context otherwise requires, (a) words importing the singular shall be deemed to import the plural and vice versa, (b) words denoting gender shall include all genders, and (c) references to parties, articles, sections, schedules, paragraphs and exhibits shall mean the parties, articles, sections, schedules, paragraphs and exhibits of and to this Amendment.

6.           Integration.  This Amendment and the documents referred to herein contain the entire understanding of the parties with respect to the subject matter hereof.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth or referred to herein.  This Amendment supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof.

7.           Counterparts.  This Amendment may be executed in two counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart.

(Signature Page Follows)

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.

THE COMPANY:	LONE STAR GOLD, INC. a Nevada corporation
	By: /s/ Dan Ferris       Printed Name:  Dan Ferris       Title:  President
SUBSCRIBER:	NORTH AMERICAN GOLD CORP.
	By: /s/ A. Ratsaphong       Printed Name:  A. Ratsaphong       Title:

EX-31.1

EXHIBIT 31.1

Certifications

I, Dan Ferris, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Lone Star Gold, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2011

/s/ Dan Ferris

Dan Ferris

President, Secretary and Treasurer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Lone Star Gold, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dan Ferris, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 10, 2011

/s/ Dan Ferris

Dan Ferris

President, Secretary and Treasurer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Lone Star Gold, Inc. and will be retained by Lone Star Gold, Inc. and furnished to the Securities and Exchange Commission or its staff upon request .

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Common stock, shares authorized	150,000,000	150,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares issued	116,163,015	121,299,920
Common stock, shares outstanding	116,163,015	121,299,920

XML

Consolidated Statements of Operations (USD $)	3 Months Ended		9 Months Ended		46 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011
Revenue
Expenses
General and administrative	92,699	13,468	217,799	26,740	352,304
Exploration costs	453,750		453,750	397	476,023
Management fees	259,179		259,179		271,659
Total Expenses	(805,628)	(13,468)	(930,728)	(27,137)	(1,099,986)
Other income
Interest income			8,647		9,839
Gain on redemption of common stock			5,161		5,161
Total other income			13,808		15,000
Loss before income taxes	(805,628)	(13,468)	(916,920)	(27,137)	(1,084,986)
Provision for Income Tax
Net Loss for the Period	(805,628)	(13,468)	(916,920)	(27,137)	(1,084,986)
Net loss attributable to noncontrolling interest	11,315		17,315		17,315
Net loss attributable to Lone Star Gold, Inc.	$ (794,313)	$ (13,468)	$ (899,605)	$ (27,137)	$ (1,067,671)
Loss per share attributable to Lone Star Gold, Inc. stockholders
Loss Per Share - Basic and Diluted	$ (0.01)	$ 0.00	$ (0.01)	$ 0.00
Weighted Average Common Shares Outstanding	115,398,833	115,299,920	119,827,393	115,299,920

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 07, 2011
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Trading Symbol	LSTG
Entity Registrant Name	LONE STAR GOLD, INC.
Entity Central Index Key	0001464865
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		116,517,096

XML

Common Stock

9 Months Ended

Sep. 30, 2011

Common Stock

5. Common Stock

On December 3, 2010, the Company issued 6,000,000 Units (post split) 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 (post split) 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 (post split) 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.  See Note 2 above.

On June 30, 2011, the Company entered into an agreement to issue 100,000 Units to North American in a private placement, for $1.00 per Unit, 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 $1.20 at any time until June 30, 2014, for cash proceeds of $100,000.  The relative fair market value of the warrants on the date of issuance was $15,467.  These shares were issued on August 23, 2011.

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.  These shares were issued on September 15, 2011.

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 6 below.  The fair market value of the common stock was $303,000 on the date of issuance. These shares were issued on September 16, 2011.

On August 17, 2001, 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 Note 6 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.

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.

XML

Nature of Operations and Continuance of Business

9 Months Ended

Sep. 30, 2011

Nature of Operations and Continuance of Business

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”).  See Note 6 to these financial statements.  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 at September 30, 2011, the Company has accumulated losses of $1,067,671 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 September 30, 2011 and for the three and nine months ended September 30, 2011 and 2010, and for the period November 26, 2007 (inception) to September 30, 2011 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 September 30, 2011 and the results of operations and cash flows for the periods ended September 30, 2011 and 2010, and for the period November 26, 2007 (inception) to September 30, 2011. 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 and nine month periods ended September 30, 2011 is not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending December 31, 2011.

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, 2010 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 subsidiary.  All intercompany accounts and transactions have been eliminated in consolidation.

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Subsequent events

9 Months Ended

Sep. 30, 2011

Subsequent events

7. Subsequent events

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 $118,500. 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.  A copy of the Consulting Agreement is attached on Exhibit 10.9 to this Quarterly Report.

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Commitments

9 Months Ended

Sep. 30, 2011

Commitments

6. 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 must pay Gonzalez an additional $125,000 before January 11, 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.  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 quarter ended September 30, 2011, the Company advanced $50,000 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 June 10, 2014, the Option Agreement will terminate and the Company will be obligated to return the Concessions to Gonzalez.

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 $219,179 in expense related to the stock grant as of September 30, 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.    If a Definitive Agreement is signed, the LOI contemplates the following payments:

· $50,000 upon the execution of the Definitive Agreement;

· $75,000 within 12 months of signing the Definitive Agreement; and

· $112,500 within 24 months of signing the Definitive Agreement.

In addition, if a Definitive Agreement is reached, the Company will be obligated to provide a work commitment for the Ocampo Property of $1,750,000 over a three year period, as follows:

· $250,000 within the first year after signing the Definitive Agreement;

· $500,000 within the second year after signing the Definitive Agreement to be used for the development and construction of a concentrating plant; and

· $1,000,000 within the third year after signing the Definitive Agreement.

Further, the Company will issue 425,000 shares of its $0.001 par value common stock to Rasconas follows:

· 50,000 shares upon the execution of the Definitive Agreement;

· 75,000 within six months of signing the Definitive Agreement;

· 100,000 within twelve months after signing the Definitive Agreement; and

· 200,000 within twenty-four months after signing the Definitive Agreement.

Rascon will retain a 3% Net Smelter Returns Royalty (“NSR”) on the gross mineral production.  The Company will have the option to buy-out 2% of the NSR for $2,000,000.

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Consolidated Statements of Stockholders' Equity (Deficit) (USD $)	Total	Common Stock	Additional Paid-in Capital	Subscript-ion Receivable	Deficit Accumulated During the Exploration Stage	Non- controlling Interests	Private Placement Transaction 01	Private Placement Transaction 01 Common Stock	Private Placement Transaction 01 Additional Paid-in Capital	Private Placement Transaction 02	Private Placement Transaction 02 Common Stock	Private Placement Transaction 02 Additional Paid-in Capital	Private Placement Transaction 03	Private Placement Transaction 03 Common Stock	Private Placement Transaction 03 Additional Paid-in Capital	Warrant	Warrant Common Stock	Warrant Additional Paid-in Capital
Beginning Balance at Dec. 31, 2007
Net loss	$ (13,983)				$ (13,983)
Common shares issued for cash (in shares)								60,000,000			32,699,920			22,600,000
Common shares issued for cash							3,000	60,000	(57,000)	24,525	32,700	(8,175)	56,500	22,600	33,900
Ending Balance at Dec. 31, 2008	70,042	115,300	(31,275)		(13,983)
Ending Balance (in shares) at Dec. 31, 2008		115,299,920
Net loss	(93,034)				(93,034)
Ending Balance at Dec. 31, 2009	(22,992)	115,300	(31,275)		(107,017)
Ending Balance (in shares) at Dec. 31, 2009		115,299,920
Forgiveness of advances - related party	17,574		17,574
Net loss	(61,049)				(61,049)
Common shares issued for cash (in shares)																	6,000,000
Common shares issued for cash																300,000	6,000	294,000
Ending Balance at Dec. 31, 2010	233,533	121,300	280,299		(168,066)
Ending Balance (in shares) at Dec. 31, 2010		121,299,920
Redemption of shares (in shares)		(12,000,000)
Redemption of shares	(600,000)	(12,000)	(588,000)
Formation of subsidiary				(1,500)		1,500
Stock based compensation	219,179		219,179
Shares issued for exploration costs (in shares)		425,000
Shares issued for exploration costs	429,250	425	428,825
Net loss	(916,920)				(899,605)	(17,315)
Common shares issued for cash (in shares)																	6,438,095
Common shares issued for cash																700,000	6,438	693,562
Ending Balance at Sep. 30, 2011	$ 65,042	$ 116,163	$ 1,033,865	$ (1,500)	$ (1,067,671)	$ (15,815)
Ending Balance (in shares) at Sep. 30, 2011		116,163,015

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Related Party Transactions

9 Months Ended

Sep. 30, 2011

Related Party Transactions

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.

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.  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 unsecured Promissory Note (the “Initial Note”) executed by ALP in connection with the Initial Loan and the unsecured 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.  

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 June 30, 2011, and an Amended and Restated Promissory Note that amended and restated the Second Note in its entirety, and extended the maturity date to June 30, 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, as amended, including the extended maturity date of June 30, 2011.

On  March 28, 2011, ALP and the Company executed a (i) 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, (ii) 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, (iii) 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 (iv) 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) of these notes remain 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, to New World Petroleum Investments (“New World”).

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.

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Property and equipment

9 Months Ended

Sep. 30, 2011

Property and equipment

3. Property and equipment

Property and equipment consists of a used truck with a cost of $11,100 being depreciated over 2 years.  Accumulated depreciation at September 30, 2011 was $512.

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Equity Line of Credit

9 Months Ended

Sep. 30, 2011

Equity Line of Credit

4. 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. A copy of the First Amendment to Investment Agreement is attached as Exhibit 10.10 to this Quarterly Report.

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.

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Consolidated Statements of Cash Flows (USD $)	9 Months Ended		46 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011
Operating Activities
Net loss	$ (916,920)	$ (27,137)	$ (1,084,986)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	512		512
Stock based compensation expense	219,179		219,179
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	(4,700)	344	(4,700)
Interest receivable	(8,647)		(9,839)
Accounts payable and accrued liabilities	(6,159)	3,252	22,567
Net Cash Used In Operating Activities	(292,646)	(23,541)	(433,178)
Investing Activities
Purchase of property and equipment	(11,100)		(11,100)
Note receivable extended to Related Party	(295,000)		(585,000)
Net Cash Used in Investing Activities	(306,100)		(596,100)
Financing Activities
Proceeds from advances - related party		17,574	56,484
Proceeds from sale of common stock	700,000		1,084,025
Net Cash Provided By Financing Activities	700,000	17,574	1,140,509
Net change in Cash	101,254	(5,967)	111,231
Cash - Beginning of Period	9,977	6,099
Cash - End of Period	111,231	132	111,231
Supplemental Disclosures
Interest paid
Income taxes paid
Non Cash Transactions:
Redemption of common stock	600,000		600,000
Issuance of noncontrolling interest for subscription receivable	1,500		1,500
Forgiveness of advances - related party			$ 17,574

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Consolidated Statements of Stockholders' Equity (Deficit) (Parenthetical) (Private Placement, USD $)	12 Months Ended
	Dec. 31, 2008
Transaction 01
Common Shares Issued, per share	$ 0.001
Common Shares Issued, Date	Jan. 19, 2008
Transaction 02
Common Shares Issued, per share	$ 0.015
Common Shares Issued, Date	Apr. 28, 2008
Transaction 03
Common Shares Issued, per share	$ 0.05
Common Shares Issued, Date	Dec. 24, 2008

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Consolidated Balance Sheets (USD $)	Sep. 30, 2011	Dec. 31, 2010
Current Assets
Cash	$ 111,231	$ 9,977
Prepaid expenses	4,700
Notes and interest receivable from related party		291,192
Total current assets	115,931	301,169
Property and equipment, net	10,588
Total Assets	126,519	301,169
Current Liabilities
Accounts payable	22,567	5,726
Accrued liabilities		23,000
Due to related party	38,910	38,910
Total current liabilities	61,477	67,636
Total Liabilities	61,477	67,636
Commitments
Stockholders' Equity
Common stock, 150,000,000 shares authorized, $0.001 par value; 116,163,015 and 121,299,920 shares issued and outstanding as of September 30, 2011 and December 31, 2010 respectively.	116,163	121,300
Additional paid-in capital	1,033,865	280,299
Subscription receivable	(1,500)
Deficit accumulated during the exploration stage	(1,067,671)	(168,066)
Total Lone Star Gold, Inc. stockholders' equity	80,857	233,533
Noncontrolling interest in subsidiary	(15,815)
Total Stockholders' Equity	65,042	233,533
Total Liabilities and Stockholders' Equity	$ 126,519	$ 301,169