News Column

DNA PRECIOUS METALS INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 19, 2014

DNA Precious Metals, Inc., a Nevada corporation, (the "Company") is an exploratory stage mining company. The Company may also be referred to as "we", "our" or "us", unless the context provides for otherwise.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations discusses significant factors that have affected our financial position and operations during the six and three month periods ended June 30, 2014 and 2013. This discussion also includes events that occurred after the end of the last fiscal quarter end and contains both historical and forward-looking statements.

When used in this discussion, the words "expect(s)", "feel(s)","believe(s)", "will", "may", "anticipate(s)" "intend(s)" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected.

MEASUREMENTS AND GLOSSARY Conversion Table



For ease of reference in reviewing our business, we are providing you with conversion information and abbreviations:

1 acre = 0.4047 1 mile = 1.6093 hectare kilometers 1 foot = 0.3048 1 troy ounce = 31.1035 meter grams 1 gram per metric = 0.0292 1 square mile = 2.59 square ton troy kilometers ounce/ short ton 1 short ton (2000 = 0.9072 1 square = 100 pounds) ton kilometer hectares 1 ton = 1,000 kg 1 kilogram = 2.204 or pounds or 2,204.6 32.151 lbs troy oz 1 hectare = 10,000 1 hectare = 2.471 acres square meters



The following abbreviations may be used herein:

Au = gold m2 = square meter G = gram m3 = cubic meter g/t = grams per ton Mg = milligram Ha = hectare mg/m3 = milligrams per cubic meter Km = kilometer T or t = ton Km2 = square kilometers Oz = troy ounce Kg = kilogram Ppb = parts per billion M = meter Ma = million years 30



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Mining Terms

The following mining terms are used throughout this filing:

a) SEC Industry Guide 7 Definitions



exploration An "exploration stage" prospect, which is not stage in either the development or production stage.

development A "development stage" project is one which stage there is ongoing preparation of an established commercially mineable deposit for its extraction but which is not yet in production. This stage occurs after completion of a feasibility study. mineralized The term "mineralized material" refers to material material that is not included in the reserve as it does not meet all of the criteria for adequate demonstration for economic or legal extraction. probable The term "probable reserve" refers to reserves reserve for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. production A "production stage" project is actively stage engaged in the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product. proven The term "proven reserve" refers to reserves reserve for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. Reserve The term "reserve" refers to that part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination. Reserves must be supported by a feasibility study done to bankable standards that demonstrates the economic extraction ("bankable standards" implies that the confidence attached to the costs and achievements developed in the study is sufficient for the project to be eligible for external debt financing). A reserve includes adjustments to the in-situ tons and grade to include diluting materials and allowances for losses that might occur when the material is mined. b) Additional Definitions



alteration Any change in the mineral composition of a

rock brought about by physical or chemical means. assay A measure of the valuable mineral content. dip The angle that a structural surface, a bedding or fault plane, makes with the horizontal, measured perpendicular to the strike of the structure.



disseminated Where minerals occur as scattered particles in

the rock. fault A surface or zone of rock fracture along which there has been displacement. 31



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feasibility A comprehensive study of a mineral deposit in study which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production. formation A distinct layer of sedimentary rock of similar composition.



geochemistry The study of the distribution and amounts of

the chemical elements in minerals, ores, rocks, solids, water and the atmosphere.



geophysics The study of the mechanical, electrical and

magnetic properties of the earth's crust. geophysical A survey method used primarily in the mining surveys industry as an exploration tool, applying the methods of physics and engineering to the earth's surface.



geotechnical The study of ground stability.

grade Quantity of metal per unit weight of host rock.

heap leach A mineral processing method involving the

crushing and stacking of an ore on an impermeable liner upon which solutions are sprayed to dissolve metals i.e. gold, copper, etc.; the solutions containing the metals are then collected and treated to recover the metals. host rock The rock in which a mineral or an ore body may be contained. in-situ In its natural position. lithology The character of the rock described in terms of its structure, color, mineral composition, grain size and arrangement of tits component parts, all those visible features that in the aggregate impart individuality to the rock. mapped or The recording of geologic information geological including rock units and the occurrence of mapping structural features and mineral deposits on maps. mineral A naturally occurring inorganic crystalline material having a definite chemical composition.



mineralization A natural accumulation or concentration in

rocks or soil of one or more potentially economic minerals, also the process by which minerals are introduced or concentrated in a rock. outcrop That part of a geologic formation or structure that appears at the surface of the earth. open pit or Surface mining in which the ore is extracted open cut from a pit or quarry, the geometry of the pit may vary with the characteristics of the ore body. ore Mineral bearing rock that can be mined and treated profitably under current or immediately foreseeable economic conditions. ore body A mostly solid and fairly continuous mass of mineralization estimated to be economically mineable. ore grade The average weight of the valuable metal or mineral contained in a specific weight of ore i.e. grams per ton of ore. 32



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oxide Gold bearing ore, which results from the

oxidation of near surface sulfide ore.



preliminary A study that includes an economic analysis of assessment the potential viability of Mineral

Resources taken at an early stage of the project prior to the completion of a preliminary feasibility study. QA/QC Quality Assurance/Quality Control is the process of controlling and assuring data quality for assays and other exploration and mining data. quartz A mineral composed of silicon dioxide, SiO2 (silica). rock Indurated naturally occurring mineral matter of various compositions.



sampling An estimate of the total error induced by analytical sampling, sample preparation and analysis. variance/ precision

sediment Particles transported by water, wind or ice.

sedimentary Rock formed at the earth's surface from solid rock particles, whether mineral or organic, which have been moved from their position of origin and re-deposited. strike The direction or trend that a structural surface, e.g. a bedding or fault plane, takes as it intersects the horizontal. strip To remove overburden in order to expose ore. Tailings The residue from an ore crushing plant.



orphan site Tailings residues from former mining

operations that the Quebec government has taken responsibility for remediation 33



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Background

We are a Nevada corporation organized on June 2, 2006. We were originally incorporated under the name, Celtic Capital, Inc. On October 20, 2008, we changed our name to Entertainment Education Arts, Inc. On May 12, 2010, we changed our name to DNA Precious Metals, Inc. to accurately reflect our new business plan.

Our Business



We are an exploration stage mining company. Our Montauban property is located in the Montauban and Chavigny townships near Grondines-West in Portneauf County, Province of Quebec, Canada (the "Montauban Property" or "Property"). Our business objective is to identify proven reserves of gold, silver and other base metals, construct a mill, build out the Property's infrastructure and place the mine into production. The Property does not contain any known ore reserves according to the definition of ore reserves under Industry Guide 7 promulgated by the Securities and Exchange Commission ("SEC") as well as various SEC mining related leases. There is no assurance that a commercially viable deposit will be proven through our exploration efforts. The funds we spend on our Property may be unsuccessful in measuring ore reserves that meet SEC guidelines.

On June 20, 2014, DNA Crypto Corp. ("DNAC"), a wholly-owned subsidiary of DNA Precious Metals, Inc., signed a definitive asset purchase agreement with Lynx Mining LLC, a Texas limited liability company ("Lynx"), whereby DNAC acquired the assets of Lynx, being its intellectual property rights. As part of the asset purchase agreement, DNAC issued 4.9 million shares of its common stock to Lynx Mining LLC. Following the issuance of the DNAC common stock, DNA Precious Metals, Inc. owns 5.1 million shares (51%) of the outstanding shares of common stock of DNAC and Lynx owns 4.9 million shares (49%) of DNAC common stock. The issuance of the 10 million shares represents 100% of DNAC's authorized common stock. Lynx's contribution of all of its intellectual property rights is in connection with the design of proprietary software to mine bitcoins. Lynx has developed formulas for how much hashing power must be added to negate the decreased Bitcoin generation.

The intellectual property rights acquired from Lynx did not have significant value as Lynx itself was a start-up entity and there had not been any significant amounts expensed by Lynx to design the proprietary software. The 4.9 million shares of DNAC issued to Lynx was for the proprietary software and has been valued at $10,000 as of the acquisition date which represents the approximate cost the individual owners of Lynx expended to develop the software.

From June 3, 2014 to June 30, 2014, aside from the asset purchase agreement, there have been no transactions in DNAC as operations have not yet commenced. As a result, there is no non-controlling interest shown on the consolidated statement of operations.

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PROPERTY DESCRIPTION AND LOCATION



The Property is composed of 103 mining claims totaling 3600 hectares located in the Montauban-les-Mines sector of the Notre-Dame-de-Montauban municipality, in the Montauban Township, Portneuf County, Province of Quebec, Canada. The Property is located 120 km east of Quebec City and 80 km north of Trois-RiviÈres. The Property is located one kilometer west of Montauban-les-Mines with multiple land accesses. Manpower, water and electric power are easily available within the very same distance.

[[Image Removed]] Figure I: Montauban Location Map



Mining Claims Previously Acquired

The Company acquired ten (10) mining claims, which became fifteen (15) mining claims under new government regulations, on June 9, 2011 through the issuance of 5,000,000 common shares with a valuation of $15,000. The mining claims are located in the Montauban and Chavigny townships near Grondines-West in the Portneuf County of Quebec, Canada ("Montauban Mine Property" or "Property").

New Mining Claims Acquired

On October 30, 2013 and November 27, 2013, the Company entered into binding agreements for the asset acquisitions of an undivided one hundred percent (100%) interest in certain mineral claims and mining assets located in the Province of Quebec's Montauban and Chavigny townships near Grondines West, in the county of Portneuf, specifically Mining Lease BM 748 and Mining Concession Miniere CM 410. The purchase price was CDN$75,000 together with the issuance of 1,050,000 common shares of the Company. The common shares for the acquisition were valued at their fair market value on the day they were issued which totaled $496,860. In connection with the asset purchase, the Company also issued 40,000 shares of common stock to a former supplier of the vendor for mining related information of the assets purchased valued at $20,000 along with cash consideration of CDN$20,000. The total cost of the acquisition amounted to $612,431. The Company had been awaiting confirmation of the contemplated transaction from a bankruptcy court in Montreal, Quebec overviewing the financial restructuring of the vendor. The bankruptcy court approved the transaction on April 17, 2014 and has been included in mining rights on the consolidated balance sheet as at June 30, 2014.

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On January 10, 2014, the Company entered into an asset purchase agreement for an undivided one hundred percent (100%) interest in certain mineral claims located in the Province of Quebec's Montauban and Chavigny townships near Grondines West, in the county of Portneuf, including claims, rights, concessions and leases. The purchase price was CDN$70,000, 1,000,000 common shares of the Company and a one percent (1%) net smelter return ("NSR"). The Company paid CDN$10,000 upon the signing of the asset purchase agreement with the cash balance due, along with the common shares, upon the closing of the asset purchase agreement and transfer of the mineral claims in the name of the Company. The transfer of the mineral claims was completed in February 2014 whereby the remaining cash balance due and the common shares were released to the vendor. The common shares for the acquisition will be valued at their fair market value on the day they were issued which totaled $340,000. The total cost of the acquisition amounted to $403,840.

On April 14, 2014, the Company entered into an asset purchase agreement for an undivided one hundred percent (100%) interest in fifty seven (57) mining claims located in the Province of Quebec's Montauban and Chavigny townships near Grondines West, in the county of Portneuf. The purchase price was CDN$5,000 (U.S.$4,547). The transfer of the mining claims has been completed by the Province of Quebec in the name of the Company.

There are mining residues, or tailings, ("Montauban Tailings") located on the Montauban Property which are considered toxic wastes according to the Quebec Provincial Government. There are no environmental liabilities as such to our Company. However, the Company will have to obtain the necessary permits from the Quebec Government Authorities to realize any further fieldwork having an impact on the environment, especially if re-mobilization of mining residues is contemplated.

On September 14, 2012, we received the Certificate of Authorization issued by the MDDEFP (MinistÈre du DÉveloppement durable, de l'Environnement et des parc) of the Quebec Provincial Government to process the mining residues. On March 13, 2014, we received another Certificate of Authorization, also from the Quebec Provincial Government's MDDEFP, with respect to operating a cyanization circuit to process the mining residues located on the Montauban Property. Previously, on February 28, 2014, we received approval, from the Quebec Provincial Government, for the Restoration Plan on the Montauban Tailings, which will be implemented after our processing of the mining residues (tailings) on the site. The two (2) Certificates of Authorization issued to us will allow for the construction and installation of equipment facilities to recuperate mica (phlogorite) and precious metals (gold and silver) from the mining residues (tailings) located on the Montauban Property.

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The Company's mineral claims are presented in Table I below, these coming from the Province of Quebec Government Ministry of Natural Resources GESTIM website.

Table I: List of Claims CLAIM CLAIM CLAIM CLAIM NUMBER NUMBER NUMBER NUMBER CDC 2388117 CDC 2395241 CDC 2374988 CDC 2378932 CDC 2388118 CDC 2395242 CDC 2374989 CDC 2378933 CDC 2388119 CDC 2395243 CDC 2374990 CDC 2378934 CDC 2388120 CDC 2395244 CDC 2374991 CDC 2378935 CDC 2388121 CDC 2395245 CDC 2374992 CDC 2378936 CDC 2388122 CDC 2395246 CDC 2374993 CDC 2378937 CDC 2388123 CDC 2395247 CDC 2374994 CDC 2378938 CDC 2388124 CDC 2395248 CDC 2374995 CDC 2378939 CDC 2388125 CDC 2397489 CDC 2374996 CDC 2378940 CDC 2388126 CDC 2190140 CDC 2374997 CDC 2378941 CDC 2388127 CDC 2191456 CDC 2374998 CDC 2378942 CDC 2388128 CDC 2191457 CDC 2374999 CDC 2378943 CDC 2388129 CDC 2191512 CDC 2375000 CDC 2378944 CDC 2388130 CDC 2195875 CDC 2375001 CDC 2378945 CDC 2388131 CDC 2331339 CDC 2375002 CDC 2378946 BM 748 CDC 2331340 CDC 2375003 CDC 2378947 CM 410 CDC 2331341 CDC 2375004 CDC 2378948 CDC 2331342 CDC 2375005 CDC 2378949 CDC 2336204 CDC 2375006 CDC 2378950 CDC 2397363 CDC 2375007 CDC 2378951 CDC 2398022 CDC 2375008 CDC 2378952 CDC 2398023 CDC 2375009 CDC 2378953 CDC 2398024 CDC 2375010 CDC 2378954 CDC 2398025 CDC 2375011 CDC 2378955 CDC 2398026 CDC 2378927 CDC 2383757 CDC 2398027 CDC 2378928 CDC 2383758 CDC 2398028 CDC 2378929 CDC 2383759 CDC 2398029 CDC 2378930 CDC 2383760 CDC 2398030 CDC 2378931 37



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DRILLING SUMMARY



A systematical sampling program was developed to provide an accurate and homogeneous grid of data to estimate the Montauban mining residues (tailings) potential located on the Property. A 24-hole percussion drilling campaign was performed totaling 143.1 meters. This percussion drilling campaign was considered part of completing a previous 25-hole drilling campaign performed earlier. A total of 49 holes totaling 302.3 meters of drilling were completed. No proven or indicated reserves were identified.

GEOLOGY



Regional geology consists of three main rock groups: the basement crust, the supracrustal rocks and the intrusive rocks which were respectively identified as the Mekinac Group, the Montauban Group and the La Bostonnais Complex

The Montauban Group is composed of Helikian supracrustal rocks. Those are various gneiss, quartzites, amphibolites, metabasalts and calcosilicated rocks reaching less than 2 kilometers in thickness. The Montauban Property is located in the upper part of this unit.

The Montauban Group is bordered to the East by the La Bostonnais Complex, an intrusive rocks complex formed of basic, tonalitic and felsic igneous rocks. To the West, the Montauban Group is in contact with the Mekinac Group mostly composed of charnockitic migmatites.

The Montauban Property is a three-kilometer long mineralized formation with a geology that is fairly complex being located within an extensively folded sequence of amphibolite facies rocks that are sandwiched between intrusions of granodioritic to gabbroic composition. In the area, these metamorphic rocks strike roughly North-South and dip 60 to the East and consist of migmatitic biotite gneiss, amphibolite, quartzofeldspathic biotite gneiss and quartzite.

[[Image Removed]] 38



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Locally, the Montauban Property mineralization is contained within a thin complex package of biotite gneiss, nodular sillimanite gneiss, cordierite-antophyllite gneiss, calc-silicate rocks and rocks as meta-exhalites (tourmalinite and, along strike iron formation and carbonate rocks).

The Montauban Property is distributed within numerous different zones along the strike length of the mineralization, from South to North, we have the zones: South, TÉtreault, A, C, North and Montauban. All zones are zinc-bearing with the exception of the South and North zones which are gold-bearing.

[[Image Removed]]

MINERALIZATION



The base metal mineralization found on the Montauban Property is massive to semi-massive sulphides, coarsely grained and mostly composed of sphalerite, galena, pyrrhotite, pyrite and chalcopyrite with minor quantities of cubanite, tetrahedrite and molybdenite.

The gold-bearing mineralization is marginal and consists of disseminated pyrrhotite, galena, sphalerite and chalcopyrite with a large range of minor sulphides, sulphosalts and native minerals.

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MONTAUBAN TAILINGS



The Montauban mining residues ("Montauban Tailings") area of the Property covers a total area of 53,093 m and amounts to a total volume of 250,750 m. Since this volume is composed of tailings and that the water table is located within most of the blocks derived from each hole, the specific gravity of the material had to be evaluated to estimate the tonnage that is present on site. The estimation of the specific gravity was performed on the last drilling campaign 24 holes since no recovery evaluation is available from the first drilling campaign. Recovery of tailings in the sampling process averaged about 76% from the last percussion drilling campaign. Recoveries were ranging from 40 to 100 %, the lowest values being associated to the high water content of the deepest samples, the water table being at a depth of about 4,6 m (15 ft.) within the pile of tailings. The averaged recovery was in the order of 81 % (68 samples) for the upper portion of the tailings and it dropped to below 64 % (27 samples) for the deeper portion (below the water table). The specific gravity is then estimated to be 1, 71 g/cm.

[[Image Removed]] Montauban Tailings Hole Location Plan



The above graph shows the typical sections of the Montauban Tailings where it is clear that the drainage is towards the North (to the right on section C-C). It is also clear that the thickness is variable but not so thick compared to the value that should be reached if the whole production was to be still onsite. About 1.2 million tons were produced in the past; such a tonnage should be averaging over 13 meters in the Tailings pile. It is clear on site that an important fraction of the tailings was washed away through drainage.

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[[Image Removed]] Montauban Tailings Typical Sections 41



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[[Image Removed]] Figure X: Montauban Tailings View Looking South



A total of 49 blocks were defined from the two previous percussion-drilling campaigns. The drilling pattern is essentially regular with a hole each and every 30-meter on average. The block volumes were calculated with the help of the computer-modeling program that defined one polygon for each and every hole drilled. The perimeter of the tailings was mapped with the help of a GPS device, this perimeter is the limit where the surface meshing of the holes' collars meets the meshing of the bottom of the holes. The block size is fairly regular averaging 8,740 tons, the smallest block being # 26 at 1 342 tons and the biggest one being # 21 at 24 334 tons.

To these metals one should add the mica content of the Montauban Tailings, with the mica being mostly composed of the phlogopite type, with some muscovite and minor amounts of biotite. The mica content is estimated to be at least 10 % of the total volume. The mica is an industrial mineral that is valued according to the market conditions.

DRILLING RESULTS



The distribution of metals within the tailings is not homogeneous. It was demonstrated with the 49 holes drilled on the Montauban Tailings that recoveries dropped from 81 to less than 64 % below the 4,6 m (15 ft.) horizon, which is more or less the location of the water table within the Montauban Tailings. The impact is seen on metal content when gold is 67 % richer over this horizon, silver is up 73 %, Copper also up 63 %, and the winner being lead with a jump of 149 %. The only one being evenly distributed is zinc.

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[[Image Removed]]

Example of Block 15 Showing Richer Upper Portion of Montauban Tailings MILL CONSTRUCTION



We are constructing a mill to process mining residues. Our focus will be to produce gold and silver concentrate in addition to the mica product. By extracting mica and producing the gold and silver concentrate, we will reduce the sulphide content of the tailings and thus lowering the environmental impact and cost for the project closure at the end of the operation.

Presently, there are no similar mills in the area surrounding our mining claims. The on-site mill production equipment to be constructed and installed will incorporate a closed cyanization circuit and separation equipment consisting of spiral classifiers and Nelson concentrators in addition to other equipment. Test work to date has indicated that this configuration will effectively segregate the mica and produce a gold/silver concentrate. There is a risk however that the plant will not effectively separate the components as planned. There is also a risk that the process being used is not ideal or optimal and that a different process may enhance or increase recovery of values. We intend to continue testing to improve the recuperation and extraction process. We have incorporated flexibility into our mill building design to allow for alternative/additional precious metal extraction processes to be installed. Initial testing results indicate that recovery of mica, gold and silver is possible but economic feasibility has not been proven and there is the associated risk that the operation as planned will not be profitable either with respect to our own mining operations or refining tailings or other mining concentrates from other mining companies in close proximity to our operations.

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We anticipate that the mill will be able to process 1,000 tonnes per day. By constructing our own mill we will be able to reduce transportation costs.

PROPERTY DEVELOPMENT



The Company has completed construction of all access roads to and from the new milling facility. The hydropower source to the milling facility totaling 1.3 kilometers has been completed. The main power line consists of 2,500 amperes total output power and has been brought inside the newly erected 16,000 sq./ft. steel structure building.

We have also secured the necessary mining permits. On September 14, 2012, we received the Certificate of Authorization issued by the MDDEFP (MinistÈre du DÉveloppement durable, de l'Environnement et des parc) of the Quebec Provincial Government to process the mining residues. On March 13, 2014, we received another Certificate of Authorization, also from the Quebec Provincial Government's MDDEFP, with respect to operating a cyanization circuit to process the mining residues located on the Montauban Mine Tailings. Previously, on February 28, 2014, we received approval, from the Quebec Provincial Government, for the Restoration Plan on the Montauban Mine Tailings, which will be implemented after our processing of the mining residues (tailings) on the site. The two (2) Certificates of Authorization issued to us will allow for the construction and installation of equipment facilities to recuperate mica (phlogorite) and precious metals (gold and silver) from the mining residues (tailings) located on the Montauban Mine Tailings.

Following an economic analysis of the project, our management made an assessment of the feasibility of the Anacon project and made a decision to commercially extract the gold, silver and other base metals located on the Property.

We have prepared a proposal to the Ministry of Natural Resources and Wildlife in Quebec to correct the environmental problems caused by the presence of tailings from previous operations on additional nearby tailings sites, Montauban United and Tetrault 1&2. These additional resource residues sites will increase the project life if we go into production.

SUBSEQUENT EVENTS



On August 6, 2014, the Company entered into an agreement with a U.S.-based private equity fund ("Investor") under which the Company issued an unsecured Convertible Note ("Convertible Note") in the principal amount of $250,000. The funds to be issued under the Convertible Note is $225,000 ("Consideration"). The Convertible Note includes an original issue discount of $25,000 ("OID"), calculated at 10% of the principal amount ($250,000). The initial Consideration paid to the Company on August 6, 2014 was $60,000. The Investor may pay additional Consideration to the Company in such amounts and at such dates as the Investor may choose in its sole discretion. The principal sum due to the Investor shall be prorated based on the Consideration actually paid by the Investor plus a 10% OID, as well as any other interest or fees, such that the Company is only required to repay the amounts funded and the Company is not required to repay any unfunded portions of the Convertible Note. The Company may repay the Convertible Note at any time on or before 90 days from the transaction date after which the Company may not make further payments on the Convertible Note prior to the Maturity Date without written approval from the Investor. If the Company makes a payment of Consideration on or before 90 days from the transaction date, the interest rate on that payment of Consideration shall be zero percent (0%). If the Company does not repay a payment of Consideration on or before 90 days from the transaction date, a one-time interest charge of 12% shall be applied to the principal amount. Any interest payable is in addition to the OID and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by the Company. The maturity date is two years from the transaction date of each payment ("Maturity Date") and is the date upon which the principal amount of the Convertible Note, as well as any unpaid interest and other fees, shall be due and payable. The Investor has the right, at any time after the transaction date, at its election, to convert all or part of the outstanding and unpaid principal amount and accrued interest (and any other fees) into fully paid and non-assessable shares of common stock of the Company. The conversion price is the lesser of $0.16 or 60% of the lowest trade price in the 25 trading days prior to the conversion. Unless otherwise agreed in writing by both parties, at no time will the Investor convert any amount of the Convertible Note into common stock that would result in the Investor owning more than 4.99% of the common stock outstanding of the Company. At all times that this Convertible Note is outstanding, the Company agrees to reserve at least 10,000,000 shares of common stock for conversion.

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On August 1, 2014, DNAC entered into an updated Asset Purchase Agreement ("Agreement") with Lynx Mining LLC. The Agreement rescinds the prior Asset Purchase Agreement entered into between DNAC and Lynx dated June 20, 2014. The updated Agreement takes into account funding obligations by DNA Precious Metals, Inc. into DNAC. The accounting for DNAC as at and for the period ended June 30, 2014 remains the same as stipulated in the original Asset Purchase Agreement dated June 20, 2014. As part of the new Agreement and subsequent to its execution, the Company has remitted $11,000 to DNAC.

OUR PLAN OF OPERATIONS GOING FORWARD

We will need additional production financing, including working capital requirements, of $6 million to commence production. We have no commitments for additional financing.

We may also explore the local potential of other resources such as additional tailings and/or underground resources underneath the Property or close-by in the Montauban area.

COMPARISON OF OPERATING RESULTS FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2014 AND 2013

Six Months Ended June 30, 2014 and 2013:

We have not generated revenues from operations and do not anticipate generating any revenues from operations until we have obtained additional debt or equity financing to complete the infrastructure of the mill site and acquire milling equipment essential to the processing of gold, silver and other base metals located on the Montauban Property. There are no assurances that we will obtain the needed financing or in the amount we need to conduct our processing activities.

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The condensed consolidated financial statements for the six months ended June 30, 2014, included in this report, reflect total operations and other expenses of $1,078,536, representing a decrease of $346,682 compared to the six months ended June 30, 2013 when total operations and other expenses were $1,425,218. The decrease is mainly attributable to lower amount charged for the cost of salaries and related expenses of $535,111, to lower professional fees of $50,097, to higher exploration costs of $91,682, to higher general and administrative expenses of $141,282, to higher interest expense charges of $35,981 and to an increase in the charge for the fair value adjustment in derivative liabilities of $88,848. We also recognized a loss on conversion of the promissory note of $125,000 during the six month period ended June 30, 2013 for which there was no similar charge during the six month period ended June 30, 2014.

We had engineering costs of $133,633 for the six months ended June 30, 2014, representing an increase of $91,682 compared to the six months ended June 30, 2013 when engineering costs were $41,951. The primary reason for the increase in engineering costs for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 is attributable to the additional mining studies and drilling costs incurred in the current year. As mentioned above, the Company has now received all of its operating permits from the Ministry of Durable Development of the Environmental Parks ("MDDEFP") of the Quebec Provincial government. With the issuance of all necessary mining permits and approval of the restoration plan and upon obtaining additional financing, we will proceed with the installation of a custom designed milling circuit for the treatment of the mining residues on the Anacon Property.

Three Months Ended June 30, 2014 and 2013:

The condensed consolidated financial statements for the three months ended June 30, 2014, included in this report, reflect total operations and other expenses of $482,440, representing a decrease of $57,939 compared to the three months ended June 30, 2013 when total operations and other expenses were $540,379. The decrease is mainly attributable to lower amount charged for the cost of salaries and related expenses of $229,687, to lower professional fees of $14,351, to higher exploration costs of $6,582, to higher general and administrative expenses of $59,480, to higher interest expense charges of $35,076 and to an increase in the charge for the fair value adjustment in derivative liabilities of $88,848.

We had engineering costs of $20,951 for the three months ended June 30, 2014, representing an increase of $6,582 compared to the three months ended June 30, 2013 when engineering costs were 14,369. The primary reason for the increase in engineering costs for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 is attributable to the additional mining studies and drilling costs incurred in the current quarter. As mentioned above, the Company has now received all of its operating permits from the Ministry of Durable Development of the Environmental Parks ("MDDEFP") of the Quebec Provincial government.

SOURCE OF FUNDS

We will require additional debt or equity funding to complete the mill and the infrastructure to otherwise conduct operations. In 2012, we filed a registration statement with the Securities and Exchange Commission offering 12 million shares of our common stock at $.25 per share. As of September 30, 2013, we sold a total of 9,428,000 shares of our common stock from the registration statement and secured $2,357,000 in financing. Prior to the effective date of the Registration Statement, we secured funding through the sales of both debt and equity securities in the form of private placements. In the third quarter of 2013, we raised $110,000 from equity securities private placements and an additional $442,000 in the fourth quarter of 2013 from equity securities private placements. Also in the fourth quarter of 2013, the Company raised $472,217 (CDN$500,000) from flow-through financing through the issuance of 1,000,000 shares of common stock and 500,000 warrants. In the first two quarters of 2014, the Company raised $222,500 from the issuance of a convertible note (see below) and $12,500 from the exercise of stock options.

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On April 28, 2014, we entered into a Securities Purchase Agreement with Typenex Co-Investments, LLC, a("Typenex"), under which we issued to Typenex a Secured Convertible Promissory Note (the "Promissory Note") in the amount of $552,500. The Promissory Note includes an original issue discount of $50,000 ("OID"), calculated at 10% of the principal amount ($500,000), plus an additional $2,500 ("Transaction Expense Amount") to cover Typenex's due diligence and legal fees in connection therewith. The principal amount will be paid to Typenex in six (6) tranches of an initial amount under the Promissory Note of $250,000 and five (5) additional amounts of $50,000. The initial $250,000 in cash has been paid to the Company.

Payment of the Typenex Notes will be made on a monthly basis, beginning six months after the issue date when we received the initial $250,000, in the amount of $34,531 per month plus all accrued but unpaid interest and other costs, fees or charges payable, for sixteen (16) months until the balance is paid in full. The Typenex Notes are convertible into common stock, at the option of Typenex, at a price of $0.40 per share subject to adjustment in the case of a default, reorganization or recapitalization. In the event the Company elects to prepay all or any portion of the Typenex Notes, the Company is required to pay to Typenex an amount in cash equal to 125% of the outstanding balance of the Typenex Notes, plus accrued interest and any other amounts owing.

Interest accrues at the rate of 10% per annum.

The Typenex Notes are secured by an interest in all right, title, interest, claims and demands of the Company.

The Typenex Notes are convertible into shares of our common stock in six tranches, consisting of (i) an initial tranche in an amount equal to $277,500 and any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other Transaction Documents (as defined in the Securities Purchase Agreement), and (ii) five (5) additional tranches, each in the amount of $55,000, plus any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other Transaction Documents. Except in the case of a Company default, the Typenex Notes are convertible by Typenex at a price of $.40 per share.

Concurrently with the Securities Purchase Agreement, we also issued to Typenex a warrant (the "Warrant") to purchase 693,750 shares of our common stock at an exercise price of $.75 per share. The warrant also contains a cashless exercise provision. The warrant is for a term of two (2) years.

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In accordance with Financial Accounting Standards Board ("FASB") ASC 815, Derivatives and Hedging, the embedded conversion option in the Convertible Note, as well as the Warrants issued by the Company, are required to be accounted for as derivative instrument liabilities. Such liabilities are initially and continuously carried at fair value with changes in their fair value reported in income in each reporting period. Accounting for the conversion option in the Convertible Note and for the Warrants as derivative instruments is required because both the Convertible Note and the Warrants have down-round anti-dilution protection, or ratchet exercise prices, whereby the conversion or exercise price is reduced if the Company subsequently issues common stock, convertible securities or stock options or stock warrants at a lower price or with a lower exercise or conversion price. Such a provision is inconsistent with the "fixed for fixed" nature of an equity option and therefore the instruments do not meet one of the required tests for equity classification. In addition, because the Convertible Note and the Warrants are denominated in a currency (U.S. dollars) that is different from the Company's functional currency (Canadian dollars), they do not meet the test of being indexed only to the Company's common stock. When one or more instruments are accounted for as derivative liabilities at fair value, the proceeds received are first allocated to the initial fair value of those derivative instruments, with any remaining proceeds allocated to the initial carrying value of the Convertible Note, which is accounted for at amortized cost. Interest is accrued on the initial carrying value of the Convertible Note at whatever effective interest rate is required in order to equate the present value of the expected future cash flows associated with the Convertible Note with their initial carrying value. Stated interest on the Note (10% per annum) is not accrued separately but is included in the effective interest rate on the Convertible Note.

The fair value of the embedded conversion option in the Note and the fair value of the Warrants have been calculated using the call option value output from a binomial Lattice model. A binomial Lattice model assumes that the price of the stock that underlies an option follows a probability distribution in which the underlying event only has one of two possible outcomes - the market price of the stock can either go up or go down in the future. The Lattice valuation model takes into account all of the assumptions that market participants would likely consider in negotiating the transfer of the embedded conversion option and the Warrants, namely, stock price, exercise price, time to expiration, volatility, risk-free rate and dividends.

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Subsequent to the current balance sheet date, on August 6, 2014, the Company entered into an agreement with a U.S.-based private equity fund ("Investor") under which the Company issued an unsecured Convertible Note ("Convertible Note") in the principal amount of $250,000. The funds to be issued under the Convertible Note is $225,000 ("Consideration"). The Convertible Note includes an original issue discount of $25,000 ("OID"), calculated at 10% of the principal amount ($250,000). The initial Consideration paid to the Company on August 6, 2014 was $60,000. The Investor may pay additional Consideration to the Company in such amounts and at such dates as the Investor may choose in its sole discretion. The principal sum due to the Investor shall be prorated based on the Consideration actually paid by the Investor plus a 10% OID, as well as any other interest or fees, such that the Company is only required to repay the amounts funded and the Company is not required to repay any unfunded portions of the Convertible Note. The Company may repay the Convertible Note at any time on or before 90 days from the transaction date after which the Company may not make further payments on the Convertible Note prior to the Maturity Date without written approval from the Investor. If the Company makes a payment of Consideration on or before 90 days from the transaction date, the interest rate on that payment of Consideration shall be zero percent (0%). If the Company does not repay a payment of Consideration on or before 90 days from the transaction date, a one-time interest charge of 12% shall be applied to the principal amount. Any interest payable is in addition to the OID and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by the Company. The maturity date is two years from the transaction date of each payment ("Maturity Date") and is the date upon which the principal amount of the Convertible Note, as well as any unpaid interest and other fees, shall be due and payable. The Investor has the right, at any time after the transaction date, at its election, to convert all or part of the outstanding and unpaid principal amount and accrued interest (and any other fees) into fully paid and non-assessable shares of common stock of the Company. The conversion price is the lesser of $0.16 or 60% of the lowest trade price in the 25 trading days prior to the conversion. Unless otherwise agreed in writing by both parties, at no time will the Investor convert any amount of the Convertible Note into common stock that would result in the Investor owning more than 4.99% of the common stock outstanding of the Company.

LIQUIDITY AND CAPITAL RESOURCES

Assets and Liabilities

As of June 30, 2014, total assets were $3,050,513. We had current assets totaling $594,330 represented by cash totaling $35,779, prepaid expenses totaling $252,283, sales tax receivable totaling $51,824 and investor notes receivable totaling $254,444. Current assets as of December 31, 2013 totaled $1,374,306. We also had net fixed assets as of June 30, 2014 totaling $1,391,642, mining claims totaling $1,035,818, net deferred financing fees of $18,723 and proprietary software totaling $10,000. Total assets as of December 31, 2013 were $2,690,691 when we had cash totaling $535,934, prepaid deposit totaling $612,431, prepaid expenses totaling $190,514, sales tax receivable totaling $35,427, net fixed assets totaling $1,276,304, mining claims totaling $15,000 and net deferred financing fees totaling $25,081. There was not a significant change in total assets between December 31, 2013 and June 30, 2014. Total assets as of June 30, 2013 were $1,771,254. The primary reasons for the significant increase of $1,279,259 in our total assets between June 30, 2013 and June 30, 2014 were attributable to the purchases of mining rights resulting in an increase of $1,020,818, to the purchase of proprietary software resulting in an increase of $10,000, and to an increase in fixed assets of $115,338 and to an increase in investor notes receivable of $254,444 and offset by a decrease in prepaid deposits of $612,431 and by a decrease in cash of $500,155.

As of June 30, 2014, total liabilities were $882,754. We had current liabilities totaling $616,695, represented by accounts payable and accrued expenses totaling $164,083, convertible notes carrying value totaling 86,214 and derivative liabilities totaling $366,398. There were long-term liabilities represented by non-convertible notes carrying value totaling $148,908 and asset retirement obligation totaling $117,151. Total liabilities as of December 31, 2013, represented by current liabilities, totaled $186,729. The primary reasons for the significant increase of our total liabilities between December 31, 2013 and June 30, 2014 were attributable to the increase in convertible notes carrying value of $86,214, to the increase in non-convertible notes carrying value of $148,908, to the increase in derivative liabilities of $366,398 and to an increase in asset retirement obligation of $117,151. Total liabilities as of June 30, 2013, represented by current liabilities, totaled $104,101. The primary reasons for the significant increase of our total liabilities between June 30, 2013 and June 30, 2014 were attributable to the increase in convertible and non-convertible notes carrying value of $235,122, to the increase in derivative liabilities of $366,398, to an increase in asset retirement obligation of $117,151 and to an increase in accounts payable and accrued expenses of $59,982.

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We have a working capital deficit of $22,365 as of June 30, 2014 as compared to a working capital surplus of $1,187,577 as of December 31, 2013, representing a decrease of $1,209,942. This decrease is mainly attributable to a decrease in prepaid deposit, represented by mining rights that were reclassified as such on the consolidated balance sheet as at December 31, 2013, of $612,431, by a decrease in cash of $500,155, by an increase in convertible notes carrying value of $86,214, by an increase in derivative liabilities of $366,398 and offset by an increase in investor notes receivable of $254,444. We have invested most of our funds to complete the infrastructure and construction on the mill.

As of June 30, 2014, the cost of fixed assets totaled $1,406,973 and consisted of the mill building at a cost value of $1,089,415, land at a cost value of $111,587, mill equipment at a cost value of $43,115, computer equipment at a cost of $5,867, office equipment at a cost value of $14,711, a vehicle at a cost value of $25,127 and an asset related to retirement obligation of $117,151. As of June 30, 2014, net fixed assets totaled $1,391,642. As of December 31, 2013, the cost of fixed assets totaled $1,285,766 and consisted of the mill building at a cost value of $1,089,415, land at a cost value of $108,974, mill equipment at a cost value of $43,115, computer equipment at a cost value of $4,424, office equipment at a cost value of $14,711 and a vehicle at a cost value $25,127. As of December 31, 2013, net fixed assets totaled $1,276,304. The primary reason for the difference in fixed assets between December 31, 2013 and June 30, 2014 is attributable to the increase in asset related to retirement obligation of $117,151.

As of June 30, 2014, the cost of mining claims totaled $1,035,818. As of December 31, 2013, the cost of mining claims totaled $15,000. The primary reason for the difference in mining claims between December 31, 2013 and June 30, 2014 is attributable to the completion of three (3) acquisitions of mining properties during the six months ended June 30, 2014. The cost of the first acquisition for 2 mining claims was $612,431, the second acquisition for 29 mining claims was $403,840 and the third acquisition for 57 mining claims was $4,547. The initial acquisition of 15 mining claims was for $15,000. As of June 30, 2014, the Company held 103 mining claims.

As of June 30, 2014, we had an accumulated deficit totaling $5,789,058 as compared to $4,710,522 as of December 31, 2013. The $1,078,536 increase in the accumulated deficit is attributable to the loss recorded for the six months ended June 30, 2014.

The success of our mining operations business and the ability to continue as a going concern will be dependent upon our ability to obtain additional and adequate financing to commence profitable commercial activities in the extraction of gold, silver and other base metals and meet anticipated performance specifications on a continuous and long term commercial basis.

Going Concern

Our consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that we will continue in operation for the foreseeable future and be able to realize assets and discharge its liabilities and commitments in the normal course of business. We have not generated revenues since our inception and we have generated losses totaling $2,937,475 and $797,126 for the years ended December 31, 2013 and 2012, respectively, losses totaling $1,078,536 and $1,425,218 for the six months ended June 30, 2014 and 2013, respectively. We have had very little operating history to date.

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Our continuation as a going concern is dependent upon, amongst other things, continued financial support from our shareholders, attaining a satisfactory revenue level, attainment of profitable operations and the generation of cash from operations and the ability to secure new financing arrangements and new capital to carry out our business plan. These matters are dependent on a number of items outside of our control and there exists material uncertainties that may cast significant doubt about our ability to continue as a going concern. There are no assurances that we will achieve profitability or be capable of sustaining profitable operations. Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of the carrying amounts of assets or the amount and classification of liabilities that might result if we are unable to continue as a going concern. These factors raise substantial doubt regarding our ability to continue as a going concern.

Off-Balance Sheet Arrangements

We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.


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Source: Edgar Glimpses


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