Indigenous Roots Corp. - Quarter Report: 2011 May (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2011

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______to _______

Commission File Number: 333-138148

AMERICAN PARAMOUNT GOLD CORP.
(Exact Name of Registrant as Specified in its Charter)

130 King Street West, Suite 3670, Toronto, ON, M5X 1A9
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number including area code: (416) 214-5640

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

Number of common shares outstanding at July 14, 2011: 69,500,000

American Paramount Gold Corp.
(fka Zebra Resources Inc.)
(An exploration Stage Company)

Index

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

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

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

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

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On July 30, 2010, the Company adopted the 2010 Stock Option Plan which permits the Company to issue up to 6,500,000 shares of common stock to directors, officers, employees and consultants of the Company upon the exercise of stock options granted under the 2010 Plan. At the time of the grant of the option, the Plan Administrator shall designate the expiration date of the option, which date shall not be later than five (5) years from the date of grant. The vesting schedule for each option shall be specified by the Plan Administrator at the time of grant of the Option. Effective September 29, 2010 the Plan provides for an exercise price to be established based on the Fair Market Value of a common share of the Company being the average of the high and low sales prices (or bid and ask prices, if sales prices are not reported) for the common stock for the last trading day immediately preceding the date with respect to which Fair Market Value is being determined, as reported for the principal trading market for the Common Stock.

On October 6, 2010, an aggregate of 5,400,000 stock options was granted to ten individuals, including directors, officers, consultants and employees, pursuant to our 2010 Stock Plan, at an exercise price of $0.68 per share. Of the 5,400,000 stock options, 400,000 options are exercisable until October 5, 2012 and 5,000,000 options are exercisable until October 6, 2015. These stock options all vest immediately.

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On March 2, 2011, the Company cancelled 5,400,000 stock options previously granted on October 6, 2010 to various directors, officers, and consultants. The cancelled options constituted all of the active stock options of the Company as at the cancellation date and were variably exercisable for a term of 2 or 5 years at an exercise price of $0.68 per share. The cancellations were made in accordance with cancellation agreements between the Company and the respective option holders.

The Company concurrently reissued 5,150,000 stock options to the officers, directors, and consultants of the Company at an exercise price of $0.12 per share. Of the 5,150,000 stock options, 150,000 options are exercisable until March 2, 2013 and 5,000,000 options are exercisable until March 2, 2016. These stock options all vest immediately. Under ASC(718) this concurrent cancellation and reissuance of options was accounted for as a modification. Accordingly, the Company compared the fair value of the options cancelled to the fair value of the options reissued on March 2, 2011. In connection with this modification the Company recorded stock-based compensation of $122,650.

A summary of the status of the Company's stock option plan as of May 31, 2011 and changes during the nine months is presented below:

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

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our or our industry's 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 these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited interim financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our company's audited financial statements and 10-K for the year ended August 31, 2010 and unaudited interim financial statements and the related notes that appear elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all references to "common stock" refer to common shares in the capital of our company and the terms "we", "us", "our" and "our company" mean American Paramount Gold Corp.

General Overview

We were incorporated under the laws of the State of Nevada on July 20, 2006 under the name Zebra Resources Incorporated (aka “Zebra Resources, Inc.”) At inception, we were an exploration stage company engaged in the acquisition, exploration and development of mineral properties.

On February 26, 2010, Monaco Capital Inc. acquired a controlling interest in our company by purchasing 20,000,000 shares of our common stock in a private transaction.

On March 17, 2010, we affected a 1 old for 2 new forward stock split of our issued and outstanding common stock. As a result, our authorized capital increased from 75,000,000 to 150,000,000 shares of common stock and our issued and outstanding increased from 32,000,000 shares of common stock to 64,000,000 shares of common stock, all with a par value of $0.001.

Also effective March 17, 2010, we changed our name from Zebra Resources Incorporated to American Paramount Gold Corp., by way of a merger with our wholly owned subsidiary American Paramount Gold Corp., which was formed solely for the change of name.

The name change and forward stock split became effective with the Over-the-Counter Bulletin Board at the opening for trading on April 12, 2010 under the stock symbol APGA. Our CUSIP number is 02882T 05.

On April 16, 2010, we entered into an agreement with Royce L. Hackworth and Belva L. Tomany in respect of an option to acquire 189 unpatented mining claims situated in the Walker Lane Structural Belt in Nye County, Nevada known as the Capgold Project. The 189 claims making up the Capgold Project form a contiguous block of approximately 3,960 acres (1,602 hectares). We paid $125,000 to secure the option, giving us the right to acquire a 100% long-term lease interest in the Capgold Project. To exercise the option we must: (i) make ongoing yearly advance production royalty cash payments during the term of the agreement of $125,000 in years 2 through 5, $150,000 in years 6 through 12, $200,000 in years 13 through 20 and $300,000 in years 21 through 30; (ii) incur expenditures on exploration of the Capgold Project of not less than an aggregate of $1,250,000 over 5 years; and (iii) make production royalty payments from production from the property after the advance production royalty cash payments described above have been repaid to our company from production from the property. At our company’s election, the production royalty may be calculated either on a sliding scale or on a fixed production royalty basis, and must range from 1% to a maximum of 3%. On May 3, 2011 we paid the year 2 advance production royalty cash payment of $125,000.

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On April 22, 2010, we entered into a convertible loan agreement with Monaco Capital Inc., wherein Monaco Capital Inc. has agreed to loan our company up to $500,000. The loan (and accrued interest) is convertible in whole or in part into common shares of our company at a conversion price of $1.05 and will bear interest at 10% per annum. The principal amount of the loan and accrued interest is due and payable one year from the advancement date. We may at any time during the term of the loan prepay any sum up to the full amount of the loan and accrued interest then outstanding for an additional 10% of such amount. At December 17, 2010, Monaco Capital Inc. has advanced to our company $500,933.

On July 30, 2010, our directors approved the adoption of the 2010 stock option plan which permits our company to issue up to 6,500,000 shares of our common stock to directors, officers, employees and consultants of our company upon the exercise of stock options granted under the 2010 plan.

On July 28, 2010, we obtained an extra-provincial license to carry on business in the Province of Ontario, Canada. Our Ontario corporation number is 1827852.

On November 9, 2010, we entered into a non-binding letter of intent to acquire the Kisita Gold Mine Property, an operational gold property four hours northwest of the capital city of Kampala, Uganda. The acquisition was subject to further negotiation and due diligence of the project satisfactory to us. On December 9, 2010 our company, having performed the due diligence required to acquire the Kisita Gold Mine Property, advised Lonsdale Acquisition Corporation that we declined to proceed with the purchase agreement under its current terms and conditions.

On December 17, 2010, we entered into a new convertible loan agreement with Monaco Capital Inc. which replaces the original convertible loan agreement entered into on April 22, 2010 in its entirety and provides that the principal of $500,933 advanced under it, along with $20,664 in unpaid, accrued interest, to and including December 17, 2010, be treated as if issued under the terms of the new agreement. Under the December 17, 2010 convertible loan agreement, Monaco Capital has agreed to loan our company up to $5,000,000. The loan bears interest at a rate of 10% per annum and is convertible (including accrued interest) into securities of our company at a conversion price calculated as the mean volume weighted average price for our company’s common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date. The principal amount of the loan and accrued interest is due and payable one year from the effective date. We may at any time during the term of the loan prepay any sum up to the full amount of the loan and accrued interest then outstanding for an additional 10% of such amount. At May 31, 2011, Monaco Capital Inc. has advanced $681,597. The balance sheet at May 31, 2011 records the loan value at $678,413 due to the unamortized beneficial conversion feature on the convertible debt totalling $3,184. The beneficial conversion feature amount has been accounted for as a debt discount which is being amortized and treated as interest expense over the term of the new convertible loan. Accrued interest relating to the loan totalling $29,689 as at May 31, 2011 was recorded in accounts payable and accrued liabilities.

On March 1, 2011, we entered into a consulting agreement with Illyria Inc., (whose executive, Leland Verner, is a former director of our company) to provide strategic planning and business development services to our company. The agreement has a term ending December 31, 2012 and a fee of $120,000 per annum with eligibility for additional compensation in the form of warrants or options at the discretion of our company.

On March 1, 2011, our company entered into a consulting agreement with Wayne Parsons, a director of our company, to provide strategic planning and business development services to our company. The agreement has a term ending December 31, 2012 and a fee of $60,000 per annum with eligibility for additional compensation in the form of warrants or options at the discretion of our company.

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On March 2, 2011, our company approved a private placement offering to sell up to a maximum of 40,000,000 units of our company’s securities at $0.10 per unit, each unit consisting of one common share and one-half of one common share purchase warrant entitling the holder to subscribe for one common share at a price of $0.15 per common share for a period of 18 months from closing. The offering was made pursuant to Section 4(2) of the Securities Act of 1933 and applicable exemptions in other jurisdictions to Accredited Investors.

On March 2, 2011, we cancelled 5,400,000 stock options previously granted on October 6, 2010 to various directors, officers, and consultants of our company pursuant to our 2010 Stock Plan. The cancelled options constituted all of the active stock options of our company as at the cancellation date and were variably exercisable for a term of 2 or 5 years at an exercise price of $0.68 per share. The cancellations were made in accordance with cancellation agreements between our company and the respective option holders.

On March 2, 2011, we granted 5,150,000 stock options to the officers, directors, and consultants of our company in accordance with our 2010 Stock Plan, at an exercise price of $0.12 per share. Of the 5,150,000 stock options, 150,000 options are exercisable until March 2, 2013 and 5,000,000 options are exercisable until March 2, 2016. These stock options all vest immediately.

On March 28, 2011 and April 19, 2011, Accredited Investors purchased an aggregate of 5,000,000 units of our company’s securities under the private placement offering for net proceeds of $476,191.

On April 11, 2011, we issued 500,000 restricted common shares of our company in full satisfaction of the debt owed to Investors Resource Group in the amount of $180,000 which accrued pursuant to a consulting agreement between Investors Resource Group and our company.

On May 1, 2011, we entered into a consulting agreement with Stephen Cook to provide general business, investor relations and marketing services to our company. The agreement has a term ending October 31, 2011 and a fee of $3,500 per month with a signing bonus of 500,000 common shares of our company.

On May 1, 2011, we entered into a consulting agreement with Ann Dumyn to provide the services of secretary, treasurer and chief financial officer to our company pursuant to which our company will pay a fee of $5,000 per month. The agreement can be terminated by either party upon 30 days written notice.

On May 1, 2011, we entered into a consulting agreement with Hugh H. Aird to provide the services of president to our company. Our company will pay a fee of $12,500 per month with a signing bonus of $35,000.

Our Current Business

We are an exploration stage mining company engaged in the identification, acquisition, and exploration of metals and minerals with a focus on gold mineralization on our property located in Nevada.

Since we are an exploration stage company, there is no assurance that a commercially viable mineral reserve exists on any of our current or future properties, To date, we do not know if an economically viable mineral reserve exists on our property and there is no assurance that we will discover one. Even if we do eventually discover a mineral reserve on our property, there can be no assurance that we will be able to develop our property into a producing mine and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.

Our current operational focus is to conduct exploration activities on the Capgold Project and to complete the terms of the Capgold option agreement.

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Cash Requirements

We intend to conduct exploration activities on our Capgold Project property over the next twelve months. We estimate our operating expenses and working capital requirements for the next twelve month period to be as follows:

At present, our cash requirements for the next 12 months outweigh the funds available to maintain or develop our properties. Of the $3,100,000 that we require for the next 12 months, we had $18,756 in cash as of May 31, 2011. In order to improve our liquidity, we intend to pursue additional equity financing from private investors or possibly a registered public offering. Other than as set out below, we currently do not have any arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

On April 22, 2010, we entered into a convertible loan agreement with Monaco Capital Inc., wherein Monaco Capital Inc. has agreed to loan our company up to $500,000. The loan is convertible into common shares of our company at a conversion price of $1.05. On December 6, 2010 Monaco Capital Inc. advanced $100,000. To date, $500,933 has been advanced under the April 2010 loan agreement. On December 17, 2010, we entered into a convertible loan agreement with Monaco Capital which replaces the original convertible loan agreement entered into on April 22, 2010 in its entirety. Under the December 17, 2010 convertible loan agreement, Monaco Capital has agreed to loan our company up to $5,000,000. The loan bears interest at a rate of 10% per annum.

On December 17, 2010 we entered into a convertible loan agreement with Monaco Capital Inc., majority shareholder, for a principal amount of up to $5,000,000 for a term of one year. The convertible loan agreement replaced the original agreement with Monaco Capital Inc., dated April 22, 2010 and provided that the principal of $500,933 advanced under it, along with $20,664 in unpaid, accrued interest, to and including December 17, 2010, be treated as if issued under the terms of the new agreement. The loan is unsecured and shall bear interest at the rate of 10% per annum payable on the due date. Our company may at any time during the term of the loan prepay any sum up to the full amount of the loan and accrued interest then outstanding at any time for an additional 10% of such amount. The loan (including accrued interest) is convertible into securities of our company at a conversion price calculated as the mean volume weighted average price for our company’s common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date. At any time after the advancement date, if our company has not paid the loan and accrued interest in full, the lender may, by providing written notice to our company, exercise its rights of conversion in respect of either a portion of the total outstanding amount of the loan as of that date into shares of our company.

On December 29, 2010 Monaco Capital Inc. advanced $100,000 to our company and on February 15, 2011 advanced an additional $60,000 to us. The total advanced under the convertible loan is $681,596.

Results of Operations - Three Months Ended May 31, 2011 and 2010

The following summary of our results of operations should be read in conjunction with our financial statements for the three month period ended May 31, 2011 and 2010 which are included herein.

Our operating results for the three months ended May 31, 2011, for the three months ended May 31, 2010 and the changes between those periods for the respective items are summarized as follows:

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Revenues

We have not generated revenues since inception and we do not anticipate earning revenues in the near future.

Consulting Expenses

Consulting expenses decreased by $135,905 during the three months ended May 31, 2011 as compared to the three months ended May 31, 2010 due to a decrease in the valuation of stock option grants of $505,200 and increases in consulting agreement payments to Wayne Parsons of $41,275, Kristian Ross of $18,448 and Illyria Inc. of $9,323; charge of $180,000 for the debt settlement agreement with Investors Resource Group; and, $122,652 as an incremental increase to the stock-based compensation modified on March 2, 2011.

Exploration Expenses

Exploration expenses increased by $38,934 during the three months ended May 31, 2011 as compared to the three months ended May 31, 2010 due to our work on the Capgold Project.

General and Administrative Expenses

General and administrative expenses increased by $37,639 during the three months ended May 31, 2011 as compared to the three months ended May 31, 2010 due to administration and accounting of $11,680, amortization of $2,300, insurance costs of $9,675, travel expenses of $13,749 and other office expenses of $19,072 .

Rent Expenses

Rent expenses decreased by $1,000 during the three months ended May 31, 2011 as compared to the three months ended May 31, 2010 as a result of termination of the rental agreement.

Management Fees

Management fees increased by $77,122 during the three months ended May 31, 2011 as compared to the three months ended May 31, 2010 as a result of the payment for services of the president of $58,856 and the secretary and treasurer of $15,563.

Professional Fees

Professional fees decreased by $23,828 during the three months ended May 31, 2011 compared to the three months ended May 31, 2010 due to a decrease in legal fees.

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Liquidity and Financial Condition

Working Capital

Cash Flows

Operating Activities

Net cash used by operating activities was $701,048 for the nine months ended May 31, 2011 compared with cash used by operating activities of $78,716 in the same period in 2010. The difference was largely due to an overall increase in cash expenditures, an increase in stock issued for services, a gain on settlement of debt and an increase in accounts payable and accrued liabilities.

Investing Activities

Net cash used in investing activities was $126,290 for the nine months ended May 31, 2011 compared to net cash used in investing activities of $26,313 in the same period in 2010. The difference was due to the payment of year two (s) advance production royalty cash payment of $125,000 and a decrease in website design.

Financing Activities

Net cash from financing activities for the nine months ended May 31, 2011 was $843,948 and for the nine months ended May 31, 2010 was $220,932. During the nine months ended May 31, 2011, Monaco Capital Inc. advanced our company $430,664 pursuant to a convertible loan agreement and we received proceeds from the sale of common stock, net of costs of $476,191.

Contractual Obligations

As a “smaller reporting company", we are not required to provide tabular disclosure obligations.

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.

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Application of Critical Accounting Policies

Net loss per common share

Our company computes net loss per share in accordance with FASB ASC 260 "Earnings per Share". Under the provisions of FASB ASC 260 "Earnings per Share", basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. For the period from Inception (July 20, 2006) through May 31, 2011, common stock equivalents are the rights conferred upon Monaco Capital Inc. pursuant to the convertible loan agreement (Note 6) and those arising from the 2010 Stock Option Plan (Note 8). These stock equivalents were not included as their effect was anti-dilutive for the periods presented.

Stock-based compensation

On August 1, 2009, our company adopted the fair value recognition provisions of FASB ASC 718-10 and 505-10. Our company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505-10. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-10.

Our company records stock-based compensation in accordance with the guidance in ASC 718. ASC Topic 718 requires our company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. Our company recognizes the cost of all share based awards on a graded vesting basis over the vesting period of the award.

Concentration of credit risk

Our company places its cash and cash equivalents with high credit quality financial institutions. Our company obtained financing during the period from Monaco Capital Inc. which holds 52% of our company's common shares. The balance of the loan as at May 31, 2011 was $678,413, net of debt discount.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Mineral property costs

Our company has been in the exploration stage since its formation July 20, 2006 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property acquisitions are capitalized and exploration costs are charged to operations as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property, are capitalized. Such costs will be depleted using the units-of-production method over the estimated life of the probable reserve.

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Although our company has taken steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee our company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

Going Concern

Our company has incurred a net loss $444,620 for the three month period ended May 31, 2011 [2010 - $549,319] and at May 31, 2011 had a deficit accumulated during the development stage of $4,203,567. Since inception (July 20, 2006) to May 31, 2011, our company has commenced limited operations, raising substantial doubt about our company’s ability to continue as a going concern. Our company will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance our company will be successful in accomplishing its objectives.

The ability of our company to continue as a going concern is dependent on additional sources of capital and the success of our company's plan. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from the outcome of this uncertainty.

At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors, shareholders or investors to meet our obligations over the next twelve months. Other than a convertible loan agreement with Monaco Capital Inc., we do not have any further arrangements in place for any future debt. On March 2, 2011 we approved a private placement offering to sell up to a maximum of 40,000,000 units of our company’s securities at $0.10 per unit, each unit consisting of one common share and one-half of one common share purchase warrant entitling the holder to subscribe for one share at a price of $0.15 per share for a period of 18 months from closing.

Item 4. Controls and Procedures

Management's Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer) and our chief financial officer (also our principal financial officer and principal accounting officer), to allow for timely decisions regarding required disclosure.

As of May 31, 2011, the end the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer) and our chief financial officer (also our principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (also our principal executive officer) and our chief financial officer (also our principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were effective in providing reasonable assurance in the reliability of our financial reports as of the end of the period covered by this quarterly report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended May 31, 2011 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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 any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

Much of the information included in this quarterly report includes or is based upon estimates, projections or other “forward-looking statements". Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Such estimates, projections or other "forward-looking statements" involve various risks and uncertainties as outlined below. We caution readers of this quarterly report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward-looking statements". In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.

Risks Associated With Mining

Our property is in the exploration stage. There is no assurance that we can establish the existence of any mineral resource on our property in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business could fail.

Despite exploration work on our mineral property, we have not established that it contains any mineral reserve, nor can there be any assurance that we will be able to do so. If we do not, our business could fail.

A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7 as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a "reserve" that meets the requirements of the Securities and Exchange Commission's Industry Guide 7 is extremely remote; in all probability our mineral resource property does not contain any "reserve" and any funds that we spend on exploration will probably be lost.

Even if we do eventually discover a mineral reserve on our property, there can be no assurance that we will be able to develop our property into a producing mine and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

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Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our property, our business may fail.

Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could fail.

We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

If we establish the existence of a mineral resource on our property in a commercially exploitable quantity, we will require additional capital in order To develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could fail.

If we do discover mineral resources in commercially exploitable quantities on our property, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.

Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our company.

Mineral exploration, development and production involve many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our company.

Mineral prices are subject to dramatic and unpredictable fluctuations.

We expect to derive revenues, if any, either from the sale of our mineral resource property or from the extraction and sale of ore. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond our control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious metals, and therefore the economic viability of any of our exploration properties and projects, cannot accurately be predicted.

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The mining industry is highly competitive and there is no assurance that we will continue to be successful in acquiring mineral claims. If we cannot continue to acquire properties to explore for mineral resources, we may be required to reduce or cease operations.

The mineral exploration, development, and production industry is largely un-integrated. We compete with other exploration companies looking for mineral resource properties. While we compete with other exploration companies in the effort to locate and acquire mineral resource properties, we will not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of mineral products. Therefore, we will likely be able to sell any mineral products that we identify and produce.

In identifying and acquiring mineral resource properties, we compete with many companies possessing greater financial resources and technical facilities. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future. Accordingly, there can be no assurance that we will acquire any interest in additional mineral resource properties that might yield reserves or result in commercial mining operations.

Risks Related To Our Company

The fact that we have not earned any operating revenues since our incorporation raises substantial doubt about our ability to continue to explore our mineral properties as a going concern.

We have not generated any revenue from operations since our incorporation and we anticipate that we will continue to incur operating expenses without revenues unless and until we are able to identify a mineral resource in a commercially exploitable quantity on our mineral property and we build and operate a mine. We had cash in the amount of $18,756 as of May 31, 2011. At May 31, 2011, we had working capital deficit of $702,386. We incurred a net loss of $444,620 for the three month period ended May 31, 2011 and $4,183,567 since inception. We estimate our average monthly operating expenses to be approximately $150,000, including mineral property costs, management services and administrative costs. Should the results of our planned exploration require us to increase our current operating budget, we may have to raise additional funds to meet our currently budgeted operating requirements for the next 12 months. As we cannot assure a lender that we will be able to successfully explore and develop our mineral property, we will probably find it difficult to raise debt financing from traditional lending sources. We have traditionally raised our operating capital from sales of equity securities, but there can be no assurance that we will continue to be able to do so. If we cannot raise the money that we need to continue exploration of our mineral property, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these were to occur, there is a substantial risk that our business would fail.

Risks Associated With Our Common Stock

Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority. Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like NYSE Amex. Accordingly, shareholders may have difficulty reselling any of their shares.

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Our stock is a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations and FINRA's sales practice requirements, which may limit a stockholder's ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The Financial Industry Regulatory Authority’s requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.

Other Risks

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

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

On March 28, 2011 and April 19, 2011, we issued an aggregate of 5,000,000 units of our company’s securities to Accredited Investors under the private placement offering for net proceeds of $476,191. Each unit consists of one share and one-half share purchase warrant. These units were issued to non-US persons (as that term is defined in Regulation S of the Securities Act of 1933) relying on Regulation of the Securities Act of 1933.

On April 11, 2011, we issued 500,000 restricted common shares of our company in full satisfaction of the debt owed to Investors Resource Group in the amount of $180,000 which accrued pursuant to a consulting agreement between Investors Resource Group and our company. These shares were issued pursuant to an exemption from registration relying on Regulation S and Section 4(2) of the Securities Act of 1933.

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Item 3. Default Upon Senior Securities

None.

Item 4. [Removed and Reserved]

Item 5. Other Information

On June 27, 2011, we terminated the consulting agreement with Ann Dumyn, by giving 30 days’ notice pursuant to the consulting agreement. Under the consulting agreement Ann Dumyn acted as our chief financial officer and her termination will be effective July 27, 2011. Ms Dumyn’s termination was not the result of any disagreement with our company regarding its operations, policies, practices or otherwise.

On July 14, 2011, we appointed our director, Wayne Parsons, as chief financial officer and secretary and treasurer effective July 27, 2011.

Item 6. Exhibits

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* Filed herewith.

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SIGNATURES

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

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