Golden Matrix Group, Inc. - Quarter Report: 2012 October (Form 10-Q)

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SOURCE GOLD CORP.

(An Exploration Stage Company)

Condensed Consolidated Financial Statements

(Expressed in US dollars)

October 31, 2012 (unaudited)

Financial Statement Index

3

SOURCE GOLD CORP.

(An Exploration Stage Company)

Consolidated Balance Sheets

The accompanying notes are an integral part of these financial statements.

F-1

SOURCE GOLD CORP.

(An Exploration Stage Company)

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

The accompanying notes are an integral part of these financial statements.

F-2

SOURCE GOLD CORP.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these financial statements.

F-3

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 1  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for financial information and with the instructions to Form 10-Q of Regulation S-K. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements.  However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended July 31, 2012 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. These consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal and recurring adjustments have been made. Operating results for the three months ended October 31, 2012 are not necessarily indicative of the results that may be expected for the year ending July 31, 2013.

The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are presented in United States dollars.  

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary companies IRC Exploration Ltd., (‘IRC”) a company incorporated in Alberta, Canada on August 1, 2008; Northern Bonanza Inc, (‘NBI”) a company incorporated in Ontario, Canada on June 30, 2010; Source Bonanza LLC, (“SB”) a Limited Liability Company incorporated in Nevada, USA on June 18, 2010 and Vulture Gold LLC, (“Vulture”) a Nevada Limited Liability Company which was acquired on August 7, 2010.

All significant inter-company transactions and balances have been eliminated.

Note 2  Nature of Operations and Ability to Continue as a Going Concern

The Company was incorporated in the state of Nevada, United States of America on June 4, 2008.  The Company is an exploration stage company and was formed for the purpose of acquiring exploration and development stage mineral properties.  The Company’s year-end is July 31. On August 31, 2009, the Company changed its name to Source Gold Corp. in order to reflect the current focus of the Corporation.

Effective September 10, 2009, the Company increased the number of authorized common shares of the Company from 90,000,000 to 180,000,000 shares and it’s authorized preferred shares from 10,000,000 to 20,000,000 shares per director’s resolution dated August 31, 2009.  The Company also conducted a four to one forward stock split of the Company’s issued and outstanding common shares per director’s resolution. Following this stock split, the number of outstanding shares of the Company’s common stock increased from 11,100,000 shares to 44,400,000 shares. All share and per share information in these financial statements has been retro-actively restated for all periods presented to give effect of this stock split.

During the year ended July 31, 2009, the Company acquired via its subsidiary company IRC Exploration Ltd. (“IRC”), a mineral claim located in British Columbia, Canada. During the year ended

F-4

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 2  Nature of Operations and Ability to Continue as a Going Concern - (Cont’d)

July 31, 2010, the mineral property option agreement for the claim in British Columbia was abandoned.

During the year ended July 31, 2010, the Company acquired two additional mineral properties located in Ontario, Canada. The Company also incorporated two new subsidiary companies, Northern Bonanza Inc. (“NBI”) to hold its mineral properties located in Ontario, Canada, and Source Bonanza LLC (“SB”) to hold its mineral properties located in the USA. The Company also transferred its Ontario mineral properties to NBI during the year ended July 31, 2010.

On August 7, 2010, the Company acquired a 100% interest in Vulture Gold LLC, (“Vulture”) a Nevada Limited Liability Company.  (Note 9c)

On March 28, 2012, the Company entered into a property option agreement to acquire a 100% undivided right in three tenures comprising 2,785 acres in northern British Columbia, Canada. (Note 9d)

The Company intends on exploring its mineral properties and has not yet determined the existence of economically recoverable reserves.  The recoverability of amounts incurred on its mineral properties is dependent upon the existence of economically recoverable reserves in the property, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to complete their development, and the attainment and maintenance of future profitable production or disposition thereof.

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

The Company has yet to achieve profitable operations, has accumulated a deficit of $14,299,347 since inception, has working capital deficiency of $297,957, has no source of recurring revenues, and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due.

Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

F-5

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 3  Newly Issued Accounting Pronouncements

The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have a material impact on its results of operations or financial position.

Note 4  Computer equipment

Note 5  Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.

The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

The fair value hierarchy for valuation inputs prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels; the level is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 - inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

The carrying value of the Company’s financial assets and liabilities which consist of cash, and accounts payable and accrued liabilities, in management’s opinion approximate their fair value due to the short maturity of such instruments. These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1.  Unless otherwise noted, it is management’s opinion that the

F-6

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 5  Financial Instruments - (Cont’d)

Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.

Note 6  Related Party Transactions

All related party transactions have been recorded at the exchange value which was the amount of consideration established and agreed to by the related parties.

As at October 31, 2012, due to related party includes $4,962 (July 31, 2012 - $3,429) owing to the President.

During the three month period ended October 31, 2012, the Company incurred management fees of $18,000 (three month period ended October 31, 2011 - $18,000) owed to the Company’s president.  

On November 1, 2009, the Company entered into a Corporate Management Services Agreement with the President of the Company for management services.  Pursuant to the agreement the President would receive a signing bonus of $7,500 (paid November 1, 2009) and $5,000 per month beginning December 1, 2009 for services rendered plus reimbursement of the Company’s expenses.  The agreement may be terminated by either party upon 30 days written notice.

On June 21, 2011, the Company amended the agreement by issuing a resolution to reflect a payment of $6,000 per month for services rendered.

On October 31, 2012, the President of the Company acquired 10,000,000 common shares of the Company in a private transaction.  As of October 31, 2012, the President holds a 16.4% interest in the common stock of the Company.

Note 7  Convertible Notes Payable

Promissory Note #1

On February 1, 2012, the Company received funding pursuant to a convertible promissory note in the amount of $32,500 dated January 23, 2012.  The promissory note is unsecured, bears interest at 8% per annum, and matured on October 25, 2012.  During the three month period ended October 31, 2012 the Company accrued $507 (three months ended October 31, 2011 - $nil) in interest expense.

F-7

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 7  Convertible Notes Payable - (Cont’d)

Promissory Note #1 - (Cont’d)

The note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price defined as “the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date”.

During the three month period ended October 31, 2012, the Company issued an aggregate of 9,585,054 common shares with a fair value of $66,301 upon the conversion into common stock of this convertible note.

As at October 31, 2012 and July 31, 2012 , the convertible note payable was recorded net of unamortized debt and accrued interest discount of $ nil and $11,029 respectively.

Promissory Note #2

On March 19, 2012, the Company received $30,000 cash and the Company issued a convertible promissory note in the amount of $30,000.  The promissory note is unsecured, interest free and repayable upon demand.

The note may be converted at the option of the holder into Common stock of the Company.  The fixed conversion price is $0.01 per share.  Accordingly the note may be converted into 3,000,000 common shares of the Company.

The Company determined that this Promissory note should be accounted for in accordance with FASB ASC 470-20 which addresses “Accounting for Convertible Securities with Beneficial Conversion Features".  The beneficial conversion feature is calculated at its intrinsic value (that is, the difference between the conversion price $0.01 and the fair value of the common stock into which the debt is convertible at the commitment date (being $0.08), multiplied by the number of shares into which the debt is convertible. The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance

During the year ended July 31, 2012 interest expense relating to the beneficial conversion feature of this convertible note of $30,000 (2011 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

Promissory Note #3

On May 14, 2012, the Company received funding pursuant to a convertible promissory note in the amount of $52,500 dated May 14, 2012.  The promissory note is unsecured, bears interest at 8% per annum, and matures on February 18, 2013.  During the three month period ended October 31, 2012 the Company accrued $1,058 (three month period ended October 31, 2011 - $nil) in interest expense.

F-8

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 7  Convertible Notes Payable - (Cont’d)

Promissory Note #3 - (Cont’d)

After 180 days from issuance the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price defined as “the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date”.

As at October 31, 2012 and July 31, 2012, the convertible note payable was recorded net of unamortized debt and accrued interest discount of $17,898 and $34,316, respectively.

Promissory Note #4

On October 5, 2012, the Company received funding pursuant to a convertible promissory note in the amount of $42,500 dated October 5, 2012.  The promissory note is unsecured, bears interest at 8% per annum, and matures on July 10, 2013.  During the three month period ended October 31, 2012 the Company accrued $242 (three month period ended October 31, 2011 - $nil) in interest expense.

After 180 days from issuance the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price defined as “the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date”.

As at October 31, 2012 and July 31, 2012, the convertible note payable was recorded net of unamortized debt and accrued interest discount of $39,960 and $nil, respectively.

Promissory Note #5

On October 30, 2012, the Company received funding pursuant to a convertible promissory note in the amount of $12,000 dated October 30, 2012.  The promissory note is unsecured, bears interest at 8% per annum, and matures on April 30, 2013.  During the three month period ended October 31, 2012 the Company accrued $nil (three month period ended October 31, 2011 - $nil) in interest expense.

After 180 days from issuance the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price defined as “the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date”.

As at October 31, 2012 and July 31, 2012, the convertible note payable was recorded net of unamortized debt and accrued interest discount of $11,529 and $nil, respectively.

Note 8  Common Stock

The Company is authorized to issue 20,000,000 shares of its $0.001 par value preferred stock and 180,000,000 shares of its $0.001 par value common stock.

During the three month period ended October 31, 2012, the Company issued 9,585,054 common shares with a fair value of $66,301 upon the conversion of a promissory note into common stock.

F-9

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 8  Common Stock - (Cont’d)

Warrants and Options

As of July 31, 2012 and 2011, there were no warrants or options outstanding to acquire any additional shares of common stock.

Note 9  Mineral Properties

a)

On October 26, 2009, the Company entered into a property option agreement whereby the Company was granted an option to earn up to a 50% interest in 19 mineral claims (the “KRK West” claims) located in the Thunder Bay Mining Division of Ontario.  The option agreement is denominated in Canadian dollars.  

Consideration for the option was the issuance of 2,000,000 common shares of the Company, cash payments totaling $103,718 (CDN$110,000), and aggregate exploration expenditures of $969,268 (CDN$1,000,000) as follows:

 i)

Cash payments:

·

$46,640 (CDN$50,000) upon execution of the Option agreement (paid);

·

$57,078(CDN$60,000) on or before December 1, 2009 (paid)

ii)

Exploration expenditures of $484,768 (CDN$500,000) on or before December 31, 2010, and $969,268 (CDN$1,000,000) in aggregate on or before December 31, 2011.

In aggregate to July 31, 2011, the Company incurred exploration expenditures aggregating $32,080 (CDN$32,836) (See below regarding status of the agreement)

iii)

The issuance of 2,000,000 common shares (none issued) to the shareholders of the optionor, as directed by the optionor.

Upon earning its 50% interest in the option, the Company was to enter into a joint venture agreement to develop and operate the property.

Pursuant to the agreement, if commercial production had been achieved and the Company sold or otherwise disposed of metals and minerals that had been produced and removed from the KRK West properties, the Company would pay Thunder Bay a 3% Net Smelter Return royalty.

In the event the Company sold or caused the sale of products other than to a smelter or refinery or otherwise caused the removal of products from the Property, the Company would pay a 2% Net Smelter Return Royalty. Alternatively, the Company could buy back the royalty right for $1,000,000 for each breccia pipe that reached commercial production.

The property option agreement was stated in Canadian dollars.  The US dollar equivalent was converted using the foreign exchange rate at July 31, 2010 for all future commitments.

During the year ended July 31, 2010, the Company learned that the optionor had allowed the underlying claims to lapse, and therefore the option agreement was null and void.

F-10

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 9  Mineral Properties - (Cont’d)

The Company, and a director of the Company (The Company subsequently purchased these claims from the director), purchased the claims from persons who re-staked the claims for an aggregate amount of $27,577.  Subsequent to acquisition, the claims were transferred to the Company’s wholly owned subsidiary, Northern Bonanza Inc.  Due to the lapse of the underlying claims the Company impaired a total of $131,295 of acquisition costs incurred as of July 31, 2010 made up of the initial $103,718 payment and the additional payment of $27,577.

The original optionor represents that control of the claims remains with the optionor and that the Company has no right to further explore the property.  The Company disagrees with this assertion and accordingly, ownership to the claims is in dispute.  On January 6, 2011 the Ministry of Northern Development, Mines and Forestry, Canada, was to adjudicate upon the ownership of the claims.  The hearing did not occur as the other party filed for a change of venue.  A determination regarding the change of venue has not yet been made and a date for rendering the decision has not yet been established.  

Mediation regarding the matter was deferred until late 2011 and prior to the hearing the optionor cancelled the mediation.  

In October 2011, the Company, as a result of the cancellation of the mediation hearing with William J. Wheeler regarding the Thunder Bay claims, decided the best course of action was to file suit.  Accordingly, a suit was filed against Thunder Bay and Wheeler in Ontario Superior Court of Justice. In the suit we detail the breach of the Agreement by Thunder Bay and Wheeler and request:

i.

An order transferring an application regarding mining claims pending before the Office of the Mining and Lands Commissioner to the  Ontario Superior Court of Justice to be consolidated with this action;

ii.

A declaration regarding our ownership and Thunder Bay and Wheeler’s ownership with respect to certain mining claims; and 1,200,000 in damages from Thunder Bay and Wheeler.

b)

During the year ended July 31, 2010, the Company entered into a property purchase agreement, which was formalized on May 4, 2010, to acquire a 100% interest in 21 mining claims located in the Northern Ontario for $50,767 (Cdn$51,800).  During the year ended July 31, 2010, the Company incurred an additional $17,741 in staking costs in relation to these claims.  Subsequent to acquisition the claims and exploration costs were transferred to NBI at cost.

During the year ended July 31, 2010, the Company made exploration advances to the operator amounting to $47,806.  As at July 31, 2010 the operator had incurred exploration expenses aggregating $20,118 resulting in net advances held being $26,968.  During the year ended July 31, 2011, the Company made further advances to the operator of $7,040.  

During the year ended July 31, 2011 the operator incurred exploration expenditures of $34,008 and the Company also incurred direct exploration expenditures of $47,335.

As at October 31, 2012, the operator held exploration advances amounting to $nil (July 31, 2012 - $nil).  Due to lack of funding, the Company has no immediate plans to explore this properties to determine resources available and consequently the costs incurred of $68,599 for these mineral

F-11

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

October 31, 2012

(Unaudited)

Note 9  Mineral Properties - (Cont’d)

properties was deemed to be fully impaired as of July 31, 2011.  Subsequent to the period end the Company abandoned the claims.

c)

On August 7, 2010, the Company acquired a 100% interest in Vulture Gold LLC, (“Vulture”) a Nevada limited Liability Company.  Vulture holds 27 mineral claims in Maricopa County, Arizona, known as the Vulture Mine.  As consideration for the acquisition the Company issued 4,000,000 common shares with a fair value of $2,000,000.

This transaction has been recorded as an asset acquisition and the fair value paid has been allocated to the cost of acquisition of the mineral property.

During the three month period ended October 31, 2012, the Company incurred exploration expenditures of $3,317.

Due to lack of funding, the Company has no immediate plans to explore these mines to determine resources available and consequently the costs of $2,000,000 incurred for these mineral properties is deemed to be fully impaired.

d)

On March 28, 2012, the Company entered into a property option agreement whereby the Company was granted an option to earn a 100% interest in 3 mineral tenures located in Northern British Columbia.  The option agreement is denominated in US dollars.  

Consideration for the option was the issuance of 1,000,000 common shares of the Company on March 28, 2012 valued at $80,000, (issued) and cash payment of $5,000 by April 2, 2012 (paid) and aggregate exploration expenditures of $25,000 by September 15, 2013.

As at October 31, 2012, no exploration expenditures have been incurred on the property.

Note 10  Commitments

The Company has an on-going agreement with a director of the Company to provide management services for $6,000 per month.  Either party may terminate the agreement with one month’s written notice.

Note 11  Subsequent events

The Company issued 1,558,442 common shares with a fair value of $23,529 upon the partial conversion into common stock of $12,000 principal of the convertible note payable which falls due of February 18, 2013.

F-12

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

Forward-Looking Statements

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

RESULTS OF OPERATIONS

Working Capital

Cash Flows

Results for the Quarter Ended October 31, 2012 Compared to the Quarter Ended October 31, 2011

Operating Revenues

The Company’s revenues for the three months ended October 31, 2012 and October 31, 2011 were $nil and $nil, respectively. We do not anticipate earning revenues until such time that we enter into commercial production of our claims.  We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources, or if such resources are discovered, that we will enter into commercial production.

Cost of Revenues

The Company’s cost of revenues for the three months ended October 31, 2012 and October 31, 2011 were $nil and $nil, respectively.

4

Gross Profit

The Company’s gross profit (loss) for the three months ended October 31, 2012 and October 31, 2011 was $(88,976) and $(56,521), respectively.

General and Administrative Expenses

General and administrative expenses for the three months ended October 31, 2012 and October 31, 2011 were $55,040 and $56,521, respectively.  General and administrative expenses consisted primarily of consulting fees, officer compensation, legal fees and accounting and audit fees.  The decrease was primarily attributable to a decrease in Accounting and Audit fees and Office expenses appropriate for normal operations.

Net Loss

Net loss for the three months ended October 31, 2012 was $(88,976) compared with a net loss of $(56,521) for the three months ended October 31, 2011.  The increased loss is due to an increase in Legal fees and the accretion of convertible note discount – Note 7.

Results for the Period from June 4, 2008 (inception of exploration stage) Through October 31, 2012

Operating Revenues

The Company’s revenues for the period from June 4, 2008 (inception of exploration stage) through October 31, 2012 were $nil.

Cost of Revenues

The Company’s cost of revenues for the period from June 4, 2008 (inception of exploration stage) through October 31, 2012 were $nil.

Gross Profit

The Company’s gross profit (loss) for the period from June 4, 2008 (inception of exploration stage) through October 31, 2012 was $(14,299,347).

General and Administrative Expenses

General and administrative expenses for the period from June 4, 2008 (inception of exploration stage) through October 31, 2012 were $14,194,731.  General and administrative expenses consist primarily of consulting fees, officer compensation, management fees, legal fees, office expenses, and professional fees appropriate for being a public company.

Net Loss

Net loss for the period from June 4, 2008 (inception of exploration stage) through October 31, 2012 was $(14,299,347).

Liquidity and Capital Resources

As at October 31, 2012, the Company had a cash balance and asset total of $6,075 and $93,493, respectively, compared with $15,620 and $102,609 of cash and total assets, respectively, as at July 31, 2012. The decrease in cash was due to normal operating activities and the decrease in total assets was due to the use of cash for operations.

5

As at October 31, 2012, the Company had total liabilities of $304,847 compared with $291,133 as at July 31, 2012. The increase in total liabilities was attributed to the issuance of a note payable in the amount of $69,387.  This was, however, slightly offset by a decrease in accounts payable and accrued liabilities.

The overall working capital increased from $275,373 deficit at July 31, 2012 to $297,497 at October 31, 2012.

Cashflow from Operating Activities

During the three months ended October 31, 2012, cash used in operating activities was $(65,423) compared to $(66,489) for the three months ended October 31, 2011. The decrease in the amounts of cash used for operating activities was primarily due to the accretion of discount on convertible notes and interest and depreciation.

Cashflow from Investing Activities

During the three months ended October 31, 2012 cash used in investing activities was $nil compared to $nil for the three months ended October 31, 2011.

Cashflow from Financing Activities

During the three months ended October 31, 2012, cash provided by financing activity was $56,033 compared to $40,000 for the three months ended October 31, 2011.  The increase in cash provided by financing activities is due to receiving $54,500 proceeds from promissory notes and increase in the amounts due to related party.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

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 are material to stockholders.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

6

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 1. Legal Proceedings

On October 26, 2009, we entered into an agreement with Thunder Bay Minerals, Inc. (the “Agreement” and “Thunder Bay”, respectively) under which we were granted an option to acquire an undivided 50% interest in 19 mineral claims known as the KRK West Claim, located north of Thunder Bay, Ontario, Canada. During the year ended July 31, 2010, we learned that Thunder Bay had allowed the KRK West Claims to lapse, and therefore the option agreement was null and void. As discussed above, we were able to re-purchase 13 of the 19 KRK West Claims from persons who re-staked the claims for an aggregate amount of $27,578. We also incurred exploration expenditures of $555 in relation to these claims. Subsequent to acquisition of the claims they were transferred to our wholly owned subsidiary, Northern Bonanza, Inc.

Thunder Bay currently maintains that control of the KRK West Claims remains with it and that we have no right to further explore the property. We disagree with this assertion and accordingly ownership to the claims is in dispute.

On January 6, 2011 the Ministry of Northern Development, Mines and Forestry, Canada, was to adjudicate upon the ownership of the claims. The hearing did not occur as the other party filed for a change of venue and mediation regarding the matter was scheduled. Two days prior to the scheduled mediation, William J. Wheeler (“Wheeler”), the principal of Thunder Bay, cancelled the mediation.

As a result of the cancellation, we decided the best course of action was to file suit. Accordingly, we filed an action against Thunder Bay and Wheeler in Ontario Superior Court of Justice. In the suit we detail the breach of the Agreement by Thunder Bay and Wheeler and request:

·

An order transferring an application regarding mining claims to Ontario Superior Court to be consolidated with this action;

·

A declaration regarding our ownership and Thunder Bay and Wheeler’s ownership with respect to certain mining claims; and

·

$1,200,000 in damages from Thunder Bay and Wheeler.

The Company entered into a formal settlement agreement with a vendor to settle an amount due of Cdn$34,000 by monthly installments of Cdn$5,000 commencing May 15, 2011. As of October 31, 2011, Cdn$30,000 of the total amount due has been paid.

Other than the foregoing we know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

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