UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549




Form 10-K




ýANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the fiscal year ended December 31, 2010




 ̈TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the transition period from  to _______________.




Commission file number:  000-51203




First Colombia Gold Corp.


(Exact name of registrant as specified in its charter)




Nevada

98-0425310(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)Alcalá Centro de Negocios, Cra 43 B # 14-51 Office 705, Medellin, Colombia(Address of principal executive offices)                    (Zip Code)Registrant’s telephone, including area code:   +574 461 61 54




Securities registered under Section 12(b) of the Exchange Act:  None.




Securities registered under Section 12(g) of the Exchange Act:




ecurities registered under Section 12(g) of the Exchange Act:
  Common Stock, $0.00001 par value
Not Applicable(Title of class)
(Name of each exchange on which registered)


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   ̈  No ý




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes   ̈  No ý




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




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ̈




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




Large accelerated filer  ̈                                                                                                   Accelerated filer                     ̈


Non-accelerated filer    ̈ (Do not check if a smaller reporting company)                 Smaller reporting company  ý




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




As of June 30, 2010, the aggregate market value of the Company’s common equity held by non-affiliates computed by reference to the closing price $0.25 was:  $9,199,646




The number of shares of our common stock outstanding as of May 24, 2011 was: 39,503,585




Documents Incorporated by Reference:  None.






Table of Contents






FORM 10-K


FIRST COLOMBIA GOLD CORP.


DECEMBER 31, 2010




Table of Contents






PageItem 1.          Business.
5Item 1A.       Risk Factors.
12Item 1B.       Unresolved Staff Comments.
20Item 2.          Properties.
21Item 3.          Legal Proceedings.
29Item 4.          Reserved.
29




PART II




Item 5.          Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
29Item 6.          Selected Financial Data.
31Item 7.          Management’s Discussion and Analysis of Financial Condition and Results ofOperations.
32Item 7A.       Quantitative and Qualitative Disclosures About Market Risk.
37Item 8.          Financial Statements and Supplementary Data.
37Item 9.          Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
37Item 9A.       Controls and Procedures.
37Item 9B.       Other Information.
38




PART III




Item 10.         Directors, Executive Officers and Corporate Governance.
39Item 11.         Executive Compensation.
41Item 12.         Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
43Item 13.         Certain Relationships and Related Transactions, and Director Independence.
44Item 14.         Principal Accounting Fees and Services.
45




PART I




Item 15.         Exhibits, Financial Statement Schedules.
46GlossarySignature PageExhibit Index








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Cautionary Note Regarding Forward Looking Statements




This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue,” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements.  These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control.  Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  A wide variety of factor could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs.  There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. 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 any forward-looking statements.




Important factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:




●
risk that we will not be able to remediate identified material weaknesses in our internal control over financial reporting and disclosure controls and procedures;




●
risk that we will not be able to further amend the option agreement under which we acquired our fifty percent property interest in certain mining rights in certain properties in Peru in order to revive certain options we had which have lapsed as a result of our failure to meet the requirements necessary to exercise these options;




●
risk that, if we are unable to further amend the option agreement and unable to revive the lapsed options, that we will be unable to recover the partial consideration we paid to exercise the option to acquire the remaining fifty percent interest in these mining and mineral rights of $250,000 in cash and the issuance of  5,000,000 shares of our common stock, a $250,000 Convertible Note and a $3,250,000 Convertible Note, which would have a significant, adverse impact on our financial condition;




●
risk that, should we be to further amend the option agreement and to revive the lapsed options, that we will be unable to secure the necessary funding to exercise such revived third or fourth twenty-five percent options;




●
risk that, while we have commenced our Phase I drilling program on our mining properties in Peru, we must secure additional financing in the near future in order to complete this planned work and be able to sustain any drilling activity or we will be forced to cease our exploration and development program.;




●
risk that we cannot attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations in Peru;




●
risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits;




●
results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with our expectations;




●
mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;




●
the potential for delays in exploration or development activities or the completion of feasibility studies;




●
risks related to the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses;




●
risks related to commodity price fluctuations;




●
the uncertainty of profitability based upon our history of losses;








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●
risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration and development projects;




●
risks related to environmental regulation and liability;




●
risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;




●
risks related to tax assessments;




●
political and regulatory risks associated with mining development and exploration; and




●
other risks and uncertainties related to our prospects, properties and business strategy.




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.  You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report.  Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.




As used in this annual report, “First Colombia,” the “Company,” “we,” “us,” or “our” refer to First Colombia Gold Corp., unless otherwise indicated.




If you are not familiar with the mineral exploration terms used in this report, please refer to the definitions of these terms under the caption “Glossary” at the end of Item 15 of this report.










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PART I




ITEM 1. Business.




Corporate History




We were incorporated in the state of Nevada under the name Gondwana Energy, Ltd. on September 5, 1997, and previously operated under the name Finmetal Mining Ltd and Amazon Goldsands Ltd.  We were previously focused on the acquisition and development of interests in mineral rights on properties located in Finland.  In September 2008, we reorganized our operations and our current focus is on the acquisition and development of our interests in the mineral rights on properties located in northeastern Peru.




Exploration Stage Company




We are considered an exploration or exploratory stage company because we are involved in the examination and investigation of land that we believe may contain valuable minerals, for the purpose of discovering the presence of ore, if any, and its extent.  There is no assurance that a commercially viable mineral deposit exists on any of the properties underlying our mineral property interests, and a great deal of further exploration will be required before a final evaluation as to the economic and legal feasibility for our future exploration is determined.  We have no known reserves of any type of mineral.  To date, we have not discovered an economically viable mineral deposit on any of the properties underlying our mineral property interests, and there is no assurance that we will discover one.  If we cannot acquire or locate mineral deposits, or if it is not economical to recover any mineral deposits that we do find, our business and operations will be materially and adversely affected.




We no longer have any interest in any properties located in Finland and have allowed our options on these properties to lapse and revert back to the optionors so that we can pursue the development of our interests in the mineral rights on properties located in northeastern Peru.  As a result of our decision to not pursue the development of any interests in properties located in Finland, we dissolved our wholly-owned subsidiary, FinMetal OY, a corporation organized under the laws of Finland, effective July 17, 2009.  A description of each of the options we exercised to acquire our fifty percent interest in certain mining and mineral rights underlying properties located in Peru is set forth below.




We, as part of business activities, also intend to evaluate opportunities to acquire additional mining properties in Colombia, South America, some of which may be mineral deposits that are fully defined and have already completed the feasibility stage of development and are ready to produce.  In other cases, the mineral deposits we may seek to acquire may have a significant amount of proven and probable reserves with what we believe to be excellent potential for expansion.  We may also seek to acquire other drill-ready exploration projects that contain little or no proven reserves, but that are strategically positioned to offer what we perceive as exceptional potential at a comparatively minimal expense.  In order to acquire any additional mining properties or exploration projects, we will need to secure additional financing and there is no assurance that we will be able to do so.  While we have taken preliminary steps to research and review possible exploration projects, we have not made any material progress in indentifying any specific properties targeted for acquisition due to our current financial position.  In furtherance of this plan, we established our principal place of business in Medellin, Colombia.




We entered into an agreement (the “Agreement”) effective as of April 1, 2011 with Sapo Holdings SA (“Sapo”) to provide us guidance and expertise in evaluating and identifying potential properties for our review.  The Agreement is for a one year term.  Sapo is a consulting firm based in Colombia that has expertise indentifying potential exploration projects and working with professionals engaged in mineral exploration to providing staffing to and administration  of mineral exploration projects.  In exchange for providing us with theses services, we agreed to compensate Sapo 10% over the costs incurred for such exploration services, which would include hiring a field crew, technical staff and equipment, a monthly fee of $5,000 for project supervision services and a monthly fee of $17,500 for project administration, which would include secretarial services, office equipment, rent, public relations and utilities and local transportation.  The Agreement can be terminated by either party with or without cause upon 60 days written notice to the other party.








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Name Change




On November 8, 2010, we filed Articles of Merger with the Secretary of State of Nevada to effectuate a merger whereby we would merge with our wholly-owned subsidiary, First Colombia Gold Corp., through a parent/subsidiary merger, with us as the surviving corporation.  This merger became effective on November 29, 2010.  Shareholder approval for this merger was not required under Nevada Revised Statutes Section 92A.180.  At the effective time of this merger, our name was changed to “First Colombia Gold Corp.” and our Articles of Incorporation were amended to reflect this name change.  We decided to change our corporate name to better reflect our decision to expand our business plan to pursue the acquisition and development of the mineral and mining rights underlying properties located in Colombia.




Summary of our Mineral Property Interests




A description of each of our options to acquire the mineral and mining rights underlying properties located in Peru and the conditions that we must meet in order to exercise these options is set forth in Item 2 of this annual report.




Effect of Governmental Regulation on Our Business




Peru




We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in Peru.  The discussion that follows is a summary of the most significant government regulations which we anticipate will impact our operations.




Peru is located on the western coast of South America and has a population of approximately 28 million people.  It covers a geographic area of approximately 1.3 million square kilometers and is bordered by Bolivia, Brazil, Chile, Colombia and Ecuador.  Lima is the capital of Peru and its principal city with a population of approximately 7 million people.




Peru has become a leading country for mining activities.  No special taxes or registration requirements are imposed on foreign-owned companies and foreign investment is treated as equal to domestic capital.  Peruvian law allows for full repatriation of capital and profits and the country’s mining legislation provides access to mining concessions under an efficient registration system.




Peruvian Mining Law




According to the Peruvian Mining Act, the right to explore and/or exploit minerals is granted by the government by way of concessions.  Under Peruvian regulations a mining concession is a property right, independent from the ownership of surface land on which it is located.  There are no restrictions or special requirements applicable to foreign companies or individuals regarding the holding of mining concessions in Peru unless the concessions are within 50 kilometers of Peru’s borders.  The rights granted by a mining concession can be transferred, or sold and, in general, may be the subject of any transaction or contract.  Mining concessions may be privately owned and no state participation is required.




The application for a mining concession involves the filing of certaindocuments before the mining administrative authority.  The mining concession boundaries are specified in the application documents, with no requirement to mark the concession boundaries in the field since the boundaries are fixed by UTM coordinates.  In order to conduct exploration or mining activities, the holder of a mining concession must purchase the surface land required for the project or reach an agreement with the owner for its temporary use.  If any of this is not possible, a legal easement may be requested from the mining authorities, although these easements have been rarely granted.








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Mining concessions are irrevocable as long as their holders pay an annual fee of US $3 per hectare and reach minimum production levels within the terms set forth by law or otherwise pay penalties, as applicable.  Non-compliance with any of these mining obligations for two consecutive years will result in the cancellation of the mining concession.




Pursuant to the original legal framework in force since 1992, holders of mining concessions are obliged to achieve a minimum production of US $100 per hectare per year within six years following the year in which the respective mining concession title is granted.  If this minimum production is not reached, as of the first six months of the seventh year, the holder of the concession shall pay a US $6 penalty per hectare per year until such production is reached and penalties increase to US $20 in the twelfth year.  Likewise, it is possible to avoid payment of the penalty if evidence is submitted to the mining authorities that an amount ten times the applicable penalty or more had been invested.




However, this regime has been recently and partially amended providing for, among other matters, increased minimum production levels, new terms for obtaining such minimum production, increased penalties in case such minimum production is not reached, and even the cancellation of mining concessions if minimum production is not reached within certain terms.  Pursuant to this new regime, the holder of the mining concession should achieve a minimum production of at least one tax unit (S/.3,600,000 approximately US $1,309) per hectare per year, within a ten-year term following the year in which the mining concession title is granted.  If such minimum production is not reached within the referred term, the holder of the concession shall pay penalties equivalent to 10% of the tax unit.




If the minimum production is not reached within a fifteen-year term following the granting of the concession title, the mining concession shall be cancelled by the mining authority, unless (i) a qualified force majeure event is evidenced to and approved by the mining authority, or (ii) by paying the applicable penalties and concurrently evidencing minimum investments of at least ten times the amount of the applicable penalties; in which cases the concession may not be cancelled up to a maximum term of five additional years.  If minimum production is not reached within a twenty-year term following the granting of the concession title, the concession shall inevitably be cancelled.




This amended regime is currently applicable to all new mining concessions granted since October 11, 2008. Regarding those mining concessions existing prior to such date, the new term for obtaining the increased minimum production level or otherwise being required to pay the increased penalties pursuant to the amended regime shall be counted as from the first business day of 2009.  Nevertheless, until such new term for obtaining the increased minimum production level does not expire, the minimum production level, the term for obtaining such minimum production, the amount of the penalties and the causes for cancellation of the mining concessions shall continue to be those provided in the original legal framework existing since 1992.




The amended regime shall not be applicable to those concessions handed by the Peruvian State through private investment promotion procedures, which shall maintain the production and investment obligations contained in their respective agreements, or to titleholders of concessions with mining stability agreements in force.




Environmental Laws




The Peruvian Ministry of Energy and Mines (“MEM”) regulates environmental affairs in the mining sector, including establishing an environmental protection regulations while the Enviormental Assessment and Supervisory Bureau (“OEFA”), which forms part of the Ministry of the Environment, is in charge of supervising compliance with, and sanctioning any violation of, environmental regulations.










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Each stage of exploration or mining requires some type of authorization or permit, beginning with an application for an environmental permit for initial exploration and continuing with an Environmental Impact Assessment (“EIA”) for mining, which includes public hearings.




For permitting purposes, exploration activities in Peru are classified in two categories:




·
Category I projects:  Mining exploration activities that comprise any of the following:  (i) a maximum of twenty drilling platforms; (ii) a disturbed area of less than ten hectares considering drilling platforms, trenches, auxiliary facilities and access means; and, (iii) the construction of tunnels with a total maximum length of fifty meters.  Holders of these projects must submit an Environmental Impact Statement (“EIS”) before the MEM, which in principle, is subject to automatic approval upon its filing, and subject to subsequent (ex post) review by the latter.  Nevertheless, in any of the following cases, the project shall not be subject to automatic approval and shall necessarily obtain an express prior approval by MEM, which should be granted, in principle, within a term of two months since filing the EIS: (i) the project is located in a protected natural area or its buffer zone; (ii) the project is oriented to determining the existence of radioactive minerals; (iii) the platforms, drill holes, trenches, tunnels or other components would be located within certain specially environmental sensitive areas specified in the applicable regulations (e.g., glaciers, springs, water wells, groundwater wells, protection lands, primary woods, etc.); (iv) the project covers areas where mining environmental contingencies or non-environmental rehabilitated previous mining works, already exist.




·
Category II projects:  Mining exploration activities that comprise any of the following: (i) more than twenty drilling platforms; (ii) a disturbed area of more than 10 hectares considering drilling plants, trenches, auxiliary facilities and access means; and, (iii) the construction of tunnels over a total length of fifty meters.




Before initiating construction or exploitation activities and before the expansion of existing operations, an EIA approval should be obtained.  This process of authorization involves public hearings in the place where the project is located and, in general, should conclude within a term of 120 calendar days, although such process can require between eight months and one year.




Holders of mining activities performing mining exploration are required to conduct remediation works of disturbed areas, as part of the progressive closure of the project.  Likewise, they are required to undertake the final closure and post closure actions as set forth in the terms and conditions in the approved environmental instrument.




If the holder carries out mining exploration activities involving the removal of more than 10,000 tonnes of material, or more than 1,000 tonnes of material with a potential neutralization (“PN”) over potential acidity (“PA”) relation lower than 3 (PN/PA<3), then they shall be required to file a Mine Closure Plan along with the corresponding environmental instrument, as well as to establish a financial guarantee to secure compliance with such Mine Closure Plan.




Holders of mining exploitation activities must file a Mine Closure Plan with before the MEM within one year of the approval of their EIA.  The Mine Closure Plan must be implemented from the beginning of the mining operation.  Semi-annual reports must be filed evidencing compliance with the Mine Closure Plan.  An environmental guarantee covering the Mine Closure Plan ‘s estimated costs is also required to be granted.








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Mining Royalties




Peruvian law requires that concession holders pay a mining royalty as consideration for the extraction of mineral resources.  The mining royalty is payable monthly on a variable cumulative rate of 1% to 3% of the value of the ore concentrate or equivalent, calculated in accordance with price quotations in international markets, subject to certain deductions such as indirect taxes, insurance, freight and other specified expenses.  The mining royalty payable is determined based on the following schedule: (i) under US $60 million of annual sales of concentrates: 1% royalty; (ii) in excess of US $60 million and up to US $120 million of annual sales: 2% royalty; and (iii) in excess of US $120 million of annual sales: 3% royalty.




Colombia




General Information




Colombia is a democratic republic located in the northwest part of South America, whose capital and principal city is Bogotá, D.C. Foreign investment is subject to the same treatment as domestic investment. Most sectors are open to foreign investment with the exception of defense, national security and some activities related to toxic waste and real estate. Foreign investments must be registered with the Central Bank of Colombia. Profits associated with registered foreign investments can be remitted in convertible currency. There is no limitation on the repatriation of capital or profits.




Colombian source income received by branches of foreign companies is subject to a 33% income tax rate on profits. The tax is payable on non-recurring profits received by foreign branches in Colombia.




Mining Industry




Under Colombian mining law, generally the State is the owner of all minerals whether they are located on the soil or subsoil.




The Colombian mining regime is divided into two principal applicable sub-regimes: i) Decree 2655 of 1988, and ii) Law 685 of 2001, which has been partially amended by Law 1382 enacted on February 9, 2010. The first one applies to those mining titles issued before 2001 and the second to those issued after 2001.




Foreign individuals and companies may apply for claims and hold mining title on the same basis as local investors. Surface rights are not governed by the Mining Code and must be acquired directly from the surface rights holders, however the Mining Code provides holders of mining titles with rights of easements and expropriation which may be exercised through the competent mining authority.




The 1988 Mining Code establishes four types of mining title: permits, exploration licenses, exploitation licenses and concession contracts. An exploration license grants the holder the exclusive right to perform, in a prescribed area, work directed to identifying commercially exploitable mineral deposits and reserves.




There are three types of exploration licenses: small, medium, and large mining activity licenses. The type of exploration license is determined by the extension of the area to be explored and the anticipated volume or tonnage of materials to be extracted from the mine to be developed on the property. During the term of the exploration license, reports on work performed on the property must be filed with the mining authorities. The Mining Authority subsequently makes a definitive project classification based on the information filed. The Ministry has the right to reclassify the project every five years during the exploration phase. There is a maximum size area for each type of exploration license. The terms of the exploration licenses are determined by area covered as follows:


Original Area
Type
Term
ExtensionUp to 100 hectares
Small
1 year
1 year100 hectares up to 1,000 hectares
Medium
2 years
1 year1,000 hectares or more
Large
5 years
N/A


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On expiry of an exploration license for small mining activity and any extensions thereof, the license can be converted, on compliance with prescribed conditions, into an exploitation license. An exploitation license has a term of ten years. On its expiry, the holder can apply for a ten-year extension or conversion of the license into a concession contract. On expiry of an exploration license for medium and large mining activities and any extensions thereof, the license is required to be converted to a mining concession on compliance with prescribed conditions. There are two types of mining contracts: concession contracts issued by the Ministry of Mines and Energy and those contracts issued by entities to which the Ministry has assigned its rights. A concession contract gives the holder the exclusive right to extract certain minerals and conduct the activities necessary for exploitation, transport and shipment of the same. Concession contracts have a term of 30 years.




In June of 2001, the current Mining Code (Law 685, 2001) was enacted which simplified procedures for concessions. The separation of concessions into three different levels for small, medium and large mining no longer exists. There is now only one title which, once bestowed, has a duration of 30 years and can be extended a further 30 years, and further first rights for subsequent periods of 30 years. Despite these time limits, mining can start any time within this phase.




Pursuant to Law 685 of 2001, the 30-year term is divided into three phases: i) the exploration period with a term of three years, ii) the construction and installation period necessary for the exploitation works with a term of three years and iii) the exploitation period with a term of 24 years, or whichever is left after the extensions of the initial two phases. The transition between the exploration phase and the construction phase requires the approval of the Works and Investments plan (PTO) by the mining authority.




Regarding mining area claims filed under the 1988 Mining Code, the 2001 Mining Code allowed


companies to elect to maintain existing claims under the 1988 law or elect to comply with the new law.




Pursuant to Law 1382 of 2010, which partially amended law 685, 2001, the concessionaire may request up to four extensions of two years each of the exploration phase in order to complete and carry out the studies and works aimed at the establishment of the existence of minerals. The concessionaire may also request an extension of the construction and installation period for a term of up to one year. In this event, the commencement of the exploitation period will be postponed until the expiry of the granted extension.




Extensions must be requested by the concessionaire at least three months prior to the date of termination of the respective stage. If the concessionaire does not receive a response from the mining authority before the termination of the stage, the extension is deemed to be approved. The concessionaire must be in full compliance of all its obligations under the concession agreement in order to be granted the extension.




Law 1382 of 2010 reduced the extension of the exploitation period to 20 years for concession contracts executed after February 9,, 2010. Once the extension of the exploitation period is overdue the concessionaire will have a preferential right to enter into a new agreement over the same area in order to continue with the exploitation works. If the mining authority does not grant the extension of the exploitation period, the concession agreement will terminate. If the mining authority does not approve the extension of the exploration or the construction and installation period, the concessionaire shall proceed with the subsequent stages. The concessionaire has the right to terminate the concession agreement provided it has complied with all its obligations under the concession agreement to the date of termination.




There are various government fees and royalties payable by mining titleholders. Holders of exploration licenses for large mining activities must pay a fee equal to the prescribed minimum daily wage multiplied by the number of hectares covered by the license. The fee is payable annually until the commencement of commercial production from the property. Mining title holder is in the obligation of paying to the Government, on commencement of production, a royalty at a rate of 4% calculated over the 80% of the London Metal Exchange gold price on the ounces produced.








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Environmental Policy




With respect to environmental issues, mining companies in Colombia are subject to the authority of the Ministry of Environment. Housing and Territorial Development, the Regional Development Companies and some municipalities and metropolitan districts. An environmental license is required for the exploitation stage.




The National Code of Renewable Natural Resources and Environmental Protection forms the basis of environmental policy in Colombia and there is an interest in preserving natural resources from development activities. Environmental regulations are set forth in Law 99, 1993 which provides the legal basis for the environmental impact study to be presented at the end of the exploration phase if the concession is to proceed to the construction phase, and this must be approved and an environmental license issued before the exploitation phase can begin. Granting of environmental license was formerly governed by Decree 1220, 2005, and is currently governed by Decree 2820, 2010. The use of natural renewable resources for Exploration activities require a permit from the environmental authorities. The use of natural renewable resources under Exploitation activities is granted under a global environmental license.




Where there is a breach of environmental laws, an affected third party or the government may initiate judicial action against a polluting entity, including actions for protection of a civil rights, civil liability lawsuits, class actions, group actions, executive or police measures and criminal filings. Environmental laws are a matter of public interest and are not subject to settlement. Historically, environmental authorities have taken a relaxed approach in the enforcement of environmental regulations. Recently growing concern with respect to the environmental sustainability of projects, undertakings and industrial activities has resulted in increased enforcement and prosecution. Sanctions included daily penalties, suspension or revocation of the license, concession, permit, or authorization, temporary or final closure of the establishment, work demolition at the cost of the infringer, and confiscation of products or implements used to commit infringement.




Competition




We are an exploration stage mineral resource exploration company that competes with other mineral resource exploration companies for financing and for the acquisition of new mineral properties.  Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us.  Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties.  In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties.  This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development.  This competition could adversely impact on our ability to achieve the financing necessary for us to conduct further exploration of our mineral properties.  We will also compete with other mineral exploration companies for financing from a limited number of investors that are prepared to make investments in mineral exploration companies.  The presence of competing mineral exploration companies may impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors.  We will also compete with other mineral companies for available resources, including, but not limited to, professional geologists, camp staff, mineral exploration supplies and drill rigs.




Intellectual Property




We do not own, either legally or beneficially, any patent or trademark.




Employees




We have no full-time employees at the present time.   Our executive officers do not devote their services full time to our operations.  We engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our exploration programs.  As of December 31, 2010, we engaged twocontractors that provided work to us on a recurring basis.










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Research and Development Expenditures




We have not incurred any research or development expenditures since our incorporation.




Subsidiaries




During 2010, we acquired a 50% interest in the issued and outstanding stock of Beardmore Holdings, Inc. (“Beardmore”), a corporation incorporated under the laws of Panama.  The remaining 50% interest in the issued and outstanding stock of Beardmore is owned by Temasek Investments Inc., a company incorporated under the laws of Panama and the beneficial owner of shares in an amount greater than 5% of our outstanding common stock.  Beardmore indirectly owns the mineral rights to certain properties located in Peru held by its subsidiary, Rio Santiago Minerales S.A.C.




ITEM 1A.Risk Factors.




You should carefully consider the following risk factors in evaluating our business and us.  The factors listed below represent certain important factors that we believe could cause our business results to differ.  These factors are not intended to represent a complete list of the general or specific risks that may affect us.  It should be recognized that other risks may be significant, presently or in the future, and the risks set forth below may affect us to a greater extent than indicated.  If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected.  You should also consider the other information included in this Annual Report and subsequent quarterly reports filed with the SEC.




Risk Factors




Risks Associated With Our Business




Our accountants have raised substantial doubt with respect to our ability to continue as a going concern.




As noted in our consolidated financial statements, we have incurred a net loss of $10,846,392 for the period from inception on September 5, 1997 to December 31, 2010 and have presently no source of revenue.  At December 31, 2010, we had a working capital deficit of $793,145.  As of December 31, 2010, we had cash and cash equivalents in the amount of US $70,019.  We will have to raise additional funds to meet our currently budgeted operating requirements for the next twelve months.




The audit report of James Stafford, Chartered Accountants for the fiscal year ended December 31, 2010 contained a paragraph that emphasizes the substantial doubt as to our continuance as a going concern.  This is a significant risk that we may not be able to generate or raise enough capital to remain operational for an indefinite period of time.




In preparing our consolidated financial statements for fiscal 2010, our management identified material weaknesses in our internal control over financial reporting, and our failure to remedy these or other material weaknesses could result in material misstatements in our consolidated financial statements and the loss of investor confidence in our reported financial information.


Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management identified material weaknesses in our internal control over financial reporting as of December 31, 2010. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.




The material weaknesses identified by management as of December 31, 2010 consisted of ineffective controls over the period-end financial close and reporting process as of December 31, 2010. As a result of these material weaknesses, our management concluded as of December 31, 2010 that our internal control over financial reporting was not effective based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—An Integrated Framework.








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As a result of management’s assessment of internal control over financial reporting, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.




We are in the process of considering the appropriate remedial measures to be taken to address these material weaknesses. We cannot be certain that the measures we take will be effective or will ensure that restatements will not occur in the future. If remedial measures are insufficient to address these material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results. Any future restatement of consolidated financial statements could place a significant strain on our internal resources and harm our operating results. Further, any additional or unremedied material weakness may preclude us from meeting our reporting obligations on a timely basis. As a result of our inability to timely file our annual report on Form 10-K for the year ended December 31, 2010, we were not in compliance with SEC reporting requirements.




Any failure to address the identified material weaknesses or any additional material weaknesses in our internal control could also adversely affect the results of the periodic management evaluations regarding the effectiveness of our internal control over financial reporting that are required to be included in our annual reports on Form 10-K. Internal control deficiencies could also cause investors to lose confidence in our reported financial information. We can give no assurance that the measures we may take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.




Due to our failure to satisfy the conditions required to exercise the option to acquire the remaining fifty percent property interest in certain mining rights to properties in Peru, we may be unable to recover the partial consideration paid in order to exercise these options and our property interest in theses properties will be limited to a fifty percent interest.




We hold a fifty percent interest indirectly in certain mining and mineral rights underlying properties located in northeastern Peru and previously held the option to acquire to remaining fifty percent interest.  As a result of our failure to meet the requirements of the agreement to exercise the option to acquire the remaining fifty percent interest, these options have lapsed and we have lost our right to exercise the options to acquire the remaining fifty percent interest in certain mining and mineral rights underlying these properties located in northeastern Peru.  We paid as partial consideration to exercise the option to acquire the remaining fifty percent interest in these mining and mineral rights $250,000 in cash and issued 5,000,000 shares of our common stock, a $250,000 Convertible Note and a $3,250,000 Convertible Note.  We may be unable to recover the partial consideration paid to exercise these options.  In the event that we are unable to recover this consideration paid, this will have a significant adverse impact on our financial condition. We are considering our options and may seek to enter into negotiations with Temasek in order to further amend the Option Agreement in order to revive the third and fourth twenty-five percent options.  There can be no assurance that we will be successful in amending the Option Agreement or securing the necessary funding to exercise the third or fourth twenty-five percent options should we be successful in reviving these options.




We have a limited operating history and have incurred losses that we expect to continue into the future.




We have not yet located any mineral reserve and we have never had any revenues from our operations. In addition, we have a very limited operating history upon which an evaluation of our future success or failure can be made.  We have only recently taken steps in a plan to engage in the acquisition of interests in exploration and development properties in Peru, and it is too early to determine whether such steps will prove successful.  Our business plan is in its early stages and faces numerous regulatory, practical, legal and other obstacles.  At this early stage of our operation, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start-up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties, and our failure to do so could have a materially adverse effect on our financial condition.








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No assurance can be given that we will be able to successfully complete the purchase of mining rights to any properties, including the ones for which we currently hold options.  Our ability to achieve and maintain profitability and positive cash flow over time will be dependent upon, among other things, our ability to (i) identify and acquire gold mining properties or interests therein that ultimately have probable or proven gold reserves, (ii) sell such gold mining properties or interests to strategic partners or third parties or commence mining of gold, (iii) produce and sell gold at profitable margins, and (iv) raise the necessary capital to operate during this possible extended period of time.  At this stage in our development, it cannot be predicted how much financing will be required to accomplish these objectives.




We have no known reserves and we may not find any mineral resources or, if we find mineral resources, the deposits may be uneconomic or production from those deposits may not be profitable.




Our due diligence activities have been limited, and to a great extent, have relied upon information provided to us by third parties.  We have not established that any of the properties for which we hold options contain adequate amounts of gold or other mineral reserves to make mining any of the properties economically feasible to recover that gold or other mineral reserves, or to make a profit in doing so.  If we do not, our business will fail.  If we cannot find economic mineral resources or if it is not economic to recover the mineral resources, we will have to cease operations.




We may not have access to all of the supplies and materials we need to begin exploration that could cause us to delay or suspend operations.




Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment, such as bulldozers and excavators, that we might need to conduct exploration.  We have not attempted to locate or negotiate with any suppliers of products, equipment or materials.  We will attempt to locate products, equipment and materials.  If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need.




We do not have enough money to complete our exploration and consequently may have to cease or suspend our operations unless we are able to raise additional financing.




As we cannot assure a lender that we will be able to successfully explore and develop our mineral properties, 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 and debt 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 properties, 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.





Our success is dependent upon a limited number of people.




The ability to identify, negotiate and consummate transactions that will benefit us is dependent upon the efforts of our management team.  The loss of the services of any member of our management could have a material adverse effect on us.




Our business will be harmed if we are unable to manage growth.




Our business may experience periods of rapid growth that will place significant demands on our managerial, operational and financial resources.  In order to manage this possible growth, we must continue to improve and expand our management, operational and financial systems and controls, particularly those related to subsidiaries that will be doing business in Peru.  We will need to expand, train and manage our employee base.  We must carefully manage our mining exploration activities.  No assurance can be given that we will be able to timely and effectively meet such demands.








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We may not be able to attract and retain qualified personnel necessary for the implementation of its business strategy and gold exploration programs.




Our future success depends largely upon the continued service of board members, executive officers and other key personnel.  Our success also depends on our ability to continue to attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations in Peru.  Personnel represents a significant asset, and the competition for such personnel is intense in the gold exploration industry.  We may have particular difficulty attracting and retaining key personnel in the initial phases of our operations, particularly in Peru.




Our officers and directors do not devote full time to our operations.




Our officers do not devote their full time to our operations.  Until such time that we can afford executive compensation commensurate with that being paid in the marketplace, our officers will not devote their full time and attention to our operations.  No assurance can be given as to when we will be financially able to engage our officers on a full-time basis or engage additional officers.




Because almost all of our officers and directors are located outside of the United States, you may have no or limited effective recourse against us or our management for misconduct and may not be able to enforce judgment and civil liabilities against our officers, director, experts and agents.




With the exception of our Chief Financial Officer, our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our officers or our directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.




Risks Associated With Mining




All of our properties are in the exploration stage.  There is no assurance that we can establish the existence of any mineral resource on any of our properties 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 will fail.




We have not established that any of our properties contain any commercially exploitable mineral reserve, nor can there be any assurance that we will be able to do so. If we do not, our business will fail.  A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7 (which can be viewed over the Internet at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) 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 one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties that are explored are ultimately developed into producing mines.  If we do discover mineral resources in commercially exploitable quantities on any of our properties, 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.




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 properties, 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 do so.  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 reserve on any of our properties, 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 reserve and our business could fail.




If we do discover a mineral reserve on any of our properties, we will be required to expend substantial sums of money to establish the extent of the reserve, develop processes to extract it and develop extraction and processing facilities and infrastructure.  Although we may derive substantial benefits from the discovery of a reserve, there can be no assurance that it 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.




Because our property interest and exploration activities in Peru are subject to political, economic and other uncertainties, situations may arise that could have a significantly adverse material impact on us.




Our activities in Peru are subject to political, economic and other uncertainties, including the risk of expropriation, nationalization, renegotiation or nullification of existing contracts, mining licenses and permits or other agreements, changes in laws or taxation policies, currency exchange restrictions, changing political conditions and international monetary fluctuations.  Future government actions concerning the economy, taxation, or the operation and regulation of nationally important facilities such as mines could have a significant effect on our plans and on our ability to operate.  No assurance can be given that our plans and operations will not be adversely affected by future developments in Peru.




Because we presently do not carry title insurance and do not plan to secure any in the future, we are vulnerable to loss of title.




We do not maintain insurance against title.  Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties.  Disputes over land ownership are common, especially in the context of resource developments.  We cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that we will have or acquire valid title to these mining properties.  The possibility also exists that title to existing properties or future prospective properties may be lost due to an omission in the claim of title.  As a result, any claims against us may result in liabilities we will not be able to afford, resulting in the failure of our business.








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Because we are subject to various governmental regulations and environmental risks, we may incur substantial costs to remain in compliance.




Our activities in Peru are subject to Peruvian and local laws and regulations regarding environmental matters, the abstraction of water, and the discharge of mining wastes and materials.  Any significant mining operations will have some environmental impact, including land and habitat impact, arising from the use of land for mining and related activities, and certain impact on water resources near the project sites, resulting from water use, rock disposal and drainage run-off.  No assurance can be given that such environmental issues will not cause our operations in the future to fail.




The Peruvian and/or local government could require us to remedy any negative environmental impact.  The costs of such remediation could cause us to fail.  Future environmental laws and regulations could impose increased capital or operating costs on us and could restrict the development or operation of any gold mines.




We have, and will in the future, engage consultants to assist us with respect to our operations in Peru.  We are beginning to address the various regulatory and governmental agencies, and the rules and regulations of such agencies, in connection with the options for the properties in Peru.  No assurances can be given that we will be successful in our efforts.  Further, in order for us to operate and grow our business in Peru, we need to continually conform to the laws, rules and regulations of such country and local jurisdiction.  It is possible that the legal and regulatory environment pertaining to the exploration and development of gold mining properties will change.  Uncertainty and new regulations and rules could dramatically increase our cost of doing business, or prevent us from conducting its business; both situations could cause us to 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 liabilities may exceed our resources, which could cause our business to fail.




Mineral exploration, development and production involves 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, 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 could cause us to fail.




Mineral prices are subject to dramatic and unpredictable fluctuations.




We expect to derive revenues, if any, from the extraction and sale of precious and base metals such as gold and silver.  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 projects, cannot accurately be predicted.




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




The mineral exploration, development, and production industry is largely unintegrated.  We compete with other exploration companies looking for mineral resource properties.  While we compete with other exploration companies in the effort to locate and license 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 gold and other mineral products.  Therefore, we will likely be able to sell any gold or mineral products that we identify and produce.




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 as well as our ability to recruit and retain qualified personnel. 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.








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Risks Relating to our Common Stock




Trading on the OTC pink sheets 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 pink sheets electronic quotation system.  Trading in stock quoted on the OTC pink sheets 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 pink sheets is not a stock exchange, and trading of securities on the OTC pink sheets is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a stock exchange like Amex.  Accordingly, shareholders may have difficulty reselling any of the shares.




Because our common stock is quoted and traded on the OTC pink sheets, short selling could increase the volatility of our stock price.




Short selling occurs when a person sells shares of stock which the person does not yet own and promises to buy stock in the future to cover the sale.  The general objective of the person selling the shares short is to make a profit by buying the shares later, at a lower price, to cover the sale.  Significant amounts of short selling, or the perception that a significant amount of short sales could occur, could depress the market price of our common stock. In contrast, purchases to cover a short position may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock.  As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market.  If these activities are commenced, they may be discontinued at any time.  These transactions may be effected on the OTC pink sheets or any other available markets or exchanges.  Such short selling if it were to occur could impact the value of our stock in an extreme and volatile manner to the detriment of our shareholders.




We have never paid dividends and have no plans to in the future.




Holders of shares of our common stock are entitled to receive such dividends as may be declared by our board of directors.  To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future.  We intend to retain future earnings, if any, to provide funds for operation of our business.  Therefore, any return investors in our common stock will have to be in the form of appreciation, if any, in the market value of their shares of common stock.




We have additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock.




Our Articles of Incorporation authorize the issuance of 200,000,000 shares of our common stock and 200,000,000 shares of blank check preferred stock.  The common stock or blank check preferred stock can be issued by our board of directors, without stockholder approval.  Any future issuances of our common stock would further dilute the percentage ownership of our common stock held by public shareholders.




If we issue shares of blank check preferred stock with superior rights than our common stock, it could result in the decrease in the value of our common stock and delay or prevent a change in control of us.




Our board of directors is authorized to issue up to 200,000,000 shares of blank check preferred stock. Our board of directors has the power to establish the dividend rates, liquidation preferences, voting rights, redemption and conversion terms and privileges with respect to any series of blank check preferred stock. The issuance of any shares of blank check preferred stock having rights superior to those of the common stock may result in a decrease in the value or market price of the common stock.  Holders of blank check preferred stock may have the right to receive dividends, certain preferences in liquidation and conversion rights.  The issuance of blank check preferred stock could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of us without further vote or action by the shareholders and may adversely affect the voting and other rights of the holders of common stock.








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Because the SEC imposes additional sales practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This means that you may have difficulty in reselling your shares and may cause the price of the shares to decline.




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, FINRA 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, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers.  The FINRA 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.




Our stock price is likely to be highly volatile because of several factors, including a limited public float.




The market price of our common stock is likely to be highly volatile because there has been a relatively thin trading market for our stock, which causes trades of small blocks of stock to have a significant impact on our stock price.  You may not be able to resell shares of our common stock following periods of volatility because of the market’s adverse reaction to volatility.




Other factors that could cause such volatility may include, among other things:




·
actual or anticipated fluctuations in our operating results;




·
the absence of securities analysts covering us and distributing research and recommendations about us;




·
we expect our actual operating results to continue to fluctuate;




·
we may have a low trading volume for a number of reasons, including that a large amount of our stock is closely held;




·
overall stock market fluctuations;




·
economic conditions generally and in the mining industries in particular;




·
announcements concerning our business or those of our competitors or vendors;




·
our ability to raise capital when we require it, and to raise such capital on favorable terms;








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·
changes in financial estimates by securities analysts or our failure to perform as anticipated by the analysts;




·
conditions or trends in the industry;




·
litigation;




·
changes in market valuations of other similar companies;




·
announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships or joint ventures;




·
future sales of common stock;




·
actions initiated by the SEC or other regulatory bodies;




·
existence or lack of patents or proprietary rights;




·
departure of key personnel or failure to hire key personnel; and




·
general market conditions.




Any of these factors could have a significant and adverse impact on the market price of our common stock.  In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies.  These broad market fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance.




Indemnification of officers and directors.




Our Articles of Incorporation and Bylaws contain broad indemnification and liability limiting provisions regarding our officers, directors and employees, including the limitation of liability for certain violations of fiduciary duties.  Our shareholders therefore will have only limited recourse against the individuals.






ITEM 1B.Unresolved Staff Comments.




None.








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ITEM 2. Properties.




Description of our Mineral Property Interests




Our properties are located in northeastern Peru and are in the exploration stage.  These properties are without known reserves and the proposed plan of exploration detailed below is exploratory in nature.  These properties are described below.




Peru Property




Our property interests located in Peru are in the exploration state.  These properties are without known reserves and the proposed plan of exploration detailed below is exploratory in nature.  These properties are described below.




We entered into a Mineral Right Option Agreement with Temasek Investments Inc. (“Temasek”), a company incorporated under the laws of Panama, on September 18, 2008 (the “Effective Date”), as amended and supplemented by Amendment No. 1 dated May 12, 2009 (“Amendment No. 1”) and Amendment No. 2 dated February 3, 2010 (“Amendment No. 2”) (collectively, the “Option Agreement”), in order to acquire four separate options from Temasek, each providing for the acquisition of a twenty-five percent interest in certain mineral rights (the “Mineral Rights”) in certain properties in Peru, that would have potentially resulted in our acquisition of one hundred percent of the Mineral Rights.  The Mineral Rights are currently owned by Rio Santiago Minerales S.A.C. (“Rio Santiago”).  Beardmore Holdings, Inc. (“Beardmore”) owns 999 shares of the 1,000 shares of Rio Santiago that are issued and outstanding.  Temasek owns the single remaining share of Rio Santiago.  Our acquisition of each twenty-five percent interest in the Mineral Rights was structured to occur through the transfer to us of twenty-five percent of the outstanding shares of Beardmore upon the exercise of each twenty-five percent option.




A description of the Mineral Rights is set forth below:




Name
Area (ha)
Code
Title No
OwnerBianka 1
1000
01-03905-08
00074599
Rio Santiago Minerales S.A.C.Bianka 2
1000
01-03878-08
00074599
Rio Santiago Minerales S.A.C.Bianka 3
900
01-03879-08
00074599
Rio Santiago Minerales S.A.C.Bianka 4
1000
01-03883-08
00074599
Rio Santiago Minerales S.A.C.Bianka 6
1000
01-03881-08
00074599
Rio Santiago Minerales S.A.C.Bianka 7
1000
01-03888-08
00074599
Rio Santiago Minerales S.A.C.Dalma 1
1000
01-03859-08
00074599
Rio Santiago Minerales S.A.C.Dalma 2
1000
01-03863-08
00074599
Rio Santiago Minerales S.A.C.Dalma 3
1000
01-03857-08
00074599
Rio Santiago Minerales S.A.C.Dalma 4
800
01-03865-08
00074599
Rio Santiago Minerales S.A.C.Dalma 5
500
01-03866-08
00074599
Rio Santiago Minerales S.A.C.Dorotea 1
1000
01-03909-08
00074599
Rio Santiago Minerales S.A.C.Dorotea 2
900
01-03906-08
00074599
Rio Santiago Minerales S.A.C.Dorotea 3
1000
01-03904-08
00074599
Rio Santiago Minerales S.A.C.Dorotea 4
800
01-03908-08
00074599
Rio Santiago Minerales S.A.C.Dorotea 5
1000
01-03910-08
00074599
Rio Santiago Minerales S.A.C.Dorotea 6
1000
01-03901-08
00074599
Rio Santiago Minerales S.A.C.Dorotea 7
1000
01-03899-08
00074599
Rio Santiago Minerales S.A.C.




Under the terms of the Option Agreement, to date, we have acquired an aggregate fifty percent interest in the Mineral Rights through our acquisition of fifty percent of the outstanding shares of Beardmore.  We exercised the initial twenty-five percent option, which provided for the acquisition of a twenty-five percent interest in the Mineral Rights, by paying Temasek a total of $500,000 and issuing 2,500,000 shares of our common stock to Temasek on or about January 12, 2009 in accordance with the terms of the Option Agreement.We exercised the second twenty-five percent option, which resulted in our acquisition of an aggregate fifty percent interest in the Mineral Rights, by paying Temasek a total of $750,000 and issuing 3,500,000 shares of our common stock to Temasek on or about March 22, 2010 in accordance with the terms of the Option Agreement.








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Under the terms of the Option Agreement, as amended, we would have been able to exercise the third, twenty-five percent option, resulting in the acquisition of a seventy-five percent interest in the Mineral Rights, if we had fulfilled all of the following conditions:


·
Complete the exercise of the second, twenty-five percent option, resulting in the acquisition of a fifty percent interest in the Mineral Rights (which was completed on March 22, 2010);
  ·
Issue 5,000,000 shares of our common stock to Temasek, or whoever persons Temasek indicates, by March 5, 2010, which date was within 30 days of the effective date of Amendment No. 2 (which shares were issued on March 9, 2010);
  ·
Pay $250,000 to the order and the direction of Temasek by March 5, 2010, which date was within 30 days of the effective date of Amendment No. 2 (which payment was made on March 22, 2010); and
  ·
Pay $1,000,000 to the order and the direction of Temasek on or before March 18, 2010, which date was within eighteen months of the Effective Date.


We would have been able to exercise the fourth, twenty-five percent option, resulting in the acquisition of a one hundred percent interest in the Mineral Rights, if we had fulfilled all of the following conditions prior to March 18, 2010, which date was within eighteen months of the Effective Date:




·
Exercise and complete the initial, second, and third, twenty-five percent options;




·
Pay an additional amount $2,500,000 to Temasek; and




·
Issue 5,500,000 additional shares of common stock to Temasek.




On June 25, 2010 (“Amendment Effective Date”), we entered into an amendment (“Amendment No. 3”) to the Mineral Rights Option Agreement.  Under the terms of Amendment No. 3, we would have completed the exercise of the third and fourth twenty-five percent options, resulting in our acquisition of a one-hundred percent interest in the Mineral Rights, after fulfilling the following conditions (collectively the “Option Requirements”) within ten business days of the Amendment Effective Date:




·
Issuance to Temasek of a total of 6,000,000 shares of our common stock (in addition to the 5,000,000 shares previously issued by us to Temasek in March 2010, for a total share consideration for the purchase of the Mineral Rights of 11,000,000 shares);




·
Payment to Temasek of US $250,000 (of which such payment was acknowledged by Temasek to have been made in March 2010);




·
Issuance of a convertible note for US $250,000 (the “$250,000 Convertible Note”) payable to the order and the direction of Temasek (which was issued on June 25, 2010); and




·
Issuance of a convertible note for US $3,250,000 (the “$3,250,000 Convertible Note” and, collectively with the $250,000 Convertible Note, the “Convertible Notes”) payable to the order and the direction of Temasek (which was issued on June 25, 2010).




The $250,000 Convertible Note has a term of ninety days and accrues interest at a rate of 12% per annum.  Both principle and interest under the $250,000 Convertible Note are to be paid upon maturity.




The $3,250,000 Convertible Note has a term of three years and accrues interest at a rate of 12% per annum.  Interest is payable annually and the principal is to be paid upon maturity.




Any interest and principal due under either of the Convertible Notes is convertible (at Temasek’s option) into units which consist of one (1) share of the Company’s common stock and one (1) warrant to purchase one (1) share of the Company’s common stock at an exercise price of $0.50 per share.  The conversion price per unit is fixed at $0.25 per unit.








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As of the date we were required to fulfill the Option Requirements under Amendment No. 3, we did not issue the 6,000,000 shares of our common stock required to exercise the third and fourth twenty-five percent options within the time periods set forth in the Option Agreement.  As a result, the options to acquire the third and fourth twenty-five percent options lapsed as of July 5, 2010.  We are considering our options and may seek to enter into negotiations with Temasek in order to further amend the Option Agreement in order revive the third and fourth twenty-five percent options.  There can be no assurance that we will be successful in amending the Option Agreement or securing the necessary funding to exercise the third or fourth twenty-five percent options should we be successful in reviving these options.  In the event that we are unable to enter into another amendment to the Option Agreement, our ownership interest in the Mineral Rights would be limited to our fifty percent interest, we would be without the ability to acquire the third and fourth twenty-five percent options to acquire an aggregate seventy-five and one hundred percent interest in the Mineral Rights, respectively, and not be entitled to recover the $250,000 previously paid to Temasek and the 5,000,000 shares of our common stock, $250,000 Convertible Note and $3,250,000 Convertible Note previously issued to Temasek as partial consideration for the exercise of the third twenty-five percent option.




Should  we be able to revive these options and complete the acquisition of a one hundred percent interest in the Mineral Rights, Temasek will hold its single share of Rio Santiago in trust for our sole benefit and hold the share strictly in accordance with our instructions.




If we are able to complete the acquisition of a one hundred percent interest in the Mineral Rights, Temasek will be entitled to an annual 2.5% net returns royalty.  However, if we pay Temasek $2,000,000 within ninety days of our acquisition of a one hundred percent interest in the Mineral Rights, Temasek will only be entitled to an annual 1.0% net returns royalty.




If we fail to acquire a one hundred percent interest in the Mineral Rights after having acquired a fifty percent interest in the Mineral Rights, the Option Agreement provides that we and Temasek will form a joint venture for the purpose of placing the Peru Property into commercial production.  As of the filing date of this report, we have not entered into a joint venture with Temasek.  Upon our entry into a joint venture with Temasek, our responsibilities under the joint venture would include developing a feasible mining project and all necessary facilities, and Temasek shall retain a carried free interest in the mining rights.  If we enter into a joint venture with Temasek, but do not develop a feasible mining project within three years of the Effective Date (or by September 18, 2011), we will be required to pay Temasek an advance minimum mining royalty of $500,000 per year, which will be deducted from Temasek’s net return royalty.




Planned Exploration Program




The principle objective of our planned exploration and development program currently is to drill to determine if trial mining tests are warranted. This requires that we design an exploration program and undertake the following actions:




·
Drill an area on the property where known mineralization exists at closely-spaced centers in accordance with mining industry standards;




·
Extend the resource though a wider-spaced program of reconnaissance drilling so as to indicate the potential size of the deposit;




·
Perform additional geotechnical and metallurgical studies to complement existing information in order to prepare the optimum processing route to be adopted in the exploitation phase; and




·
Prepare scoping, prefeasibility, and full feasibility studies.




Our activities concerning our property interests in Peru during 2010 primarily related to preliminary work performed in order to position us to determine how best to proceed with an initial drilling program.  The preliminary work undertaken by us in 2010 included the following activities:




·
Retaining Rio Minera Marañón to set up an exploration base in the town of Saramiriza, which is located in the center of the Manseriche alluvial camp on the western bank of the Marañón;




·
Implemented a community relations program to inform local communities of the planned project and what potential opportunities that may exist for community involvement in the implementation phases of the development program;








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·
Completed the field work for the Semidetailed Environmental Impact Assessment which allows us to undertake extensive drilling and bulk sampling programs;




·
Contracted various consulting firms and experienced and knowledgeable individuals with specific skills in the exploration of alluvial deposits to assist us with the exploration and development of the Peru property; and




·
Identified prospective paleo channels which are areas believed to contain in higher concentrations of mineralization and will serve as the initial drill targets for a Phase I drilling program.




Based on this preliminary work, we identified a 0.6 square kilometer targeted area within the Dorotea 6 and Dorotea 7 concessions to be the subject of aPhase I drilling program designed to consist of ten holes.  The drill holes are planned for the following locations:




Drill Hole
Longitude
Latitude1
243485
94800002
244518
94800003
245203
94797724
245203
94796785
245203
94794506
245203
94791467
245516
94798318
245516
94794849
245516
947917010
245821
9478993






The cost of the 10-hole Phase I drilling program is anticipated to be $75,000.  A churn drill and ancillary equipment were moved onto the targeted area during the first quarter of 2011 and the Phase I drilling program commenced in March 2011.  Our current cash on hand is insufficient to complete the Phase I drilling program and we require additional financing in order to complete the Phase I drilling program.  While we have commenced the Phase I drilling program, we must secure additional financing in the near future in order to complete this planned work and be able to sustain any drilling activity or we will be forced to cease our exploration and development program..




Concurrent with the drilling, pitting is planned to be carried out at locations, if any, where significant gold mineralization was encountered in drilling.  Pitting on the same site as a Bangka drill holes is required to determine if comparable gold values for the bulk sample from the pit and the drill sample, coincide with each other.   We plan to collect bulk samples by excavating small pits and shafts to be used for metallurgical testing as well as to confirm any of our drill results.  The association of the gold with magnetic minerals provides us with a potential means of locating concentrations of gold mineralization.




Provided we are successful in securing additional financing, we plan to begin during the third quarter of 2011 ground magnetic surveys over areas where we believe mineralized gravels are likely to exist in order to obtain a “magnetic fingerprint”.




In the event that the Phase I drilling program is completed and provides data that reflects positively on the potential gold values of this project, we plan to design a Phase II drilling campaign to expand the Phase I drill program beyond the initial 10 hole test area to other areas of suspected high mineralization within the property, which consists of a total of 16,900 hectares (169 sq. km. or 65 sq. mi.), in order to further define the resource and potential of the project.






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In the event that we complete the Phase I drilling program, but the results prove not to be sufficiently positive to warrant proceeding with a further exploration on the Peru property, we intend to seek out and acquire interests in other mineral exploration properties which, in the opinion of our management, offer attractive mineral exploration opportunities.  Presently, we have not given any material consideration to the acquisition of other exploration properties.




We caution that in the absence of significant additional drilling, we will be unable to quantify the boundaries of any alluvial gold mineralization and identify concentrations associated with paleo channels.  Any results we receive from the Phase I drilling campaign will not be sufficient to indicate the presence of a commercially viable mineral deposit.  Our exploration programs are designed to build data in order to compile an estimate of probable reserves and make a later determination as to whether a commercially viable mineral deposit exists on the properties underlying our mineral property interests in Peru.  A great deal of further exploration is required before a final evaluation as to the economic and legal feasibility of future exploration is determined.




Due to the extensive and expensive development programs required to prove mineral resources and reserves, as is typical in the mining business, companies such as ours sometimes are able to acquire deposits at significant discounts of the known in-the-ground value of the gold, silver, or other minerals.   In the event that we do locate a commercially exploitable mineral deposit, we may determine that it is commercially advantageous to sell our property interests rather than enter into production of any commercially mineral deposits on the property ourselves.




Our current cash on hand is insufficient to complete any of the activities set forth in our planned exploration program.  While we have commenced our exploration and development program, we may be forced to cease our planned exploration program until such time that we are able to secure sufficient financing.  Provided we are able to secure additional financing, we anticipate that we will incur the following costs for the next twelve months to fully executed our planned activities:




ActivityPROJECT COSTS:Property-related costs


150,000Environmental/Social permits


200,000Exploration


300,000Field Costs


100,000Travel expenses


100,000Community relations


50,000Administration on site


50,000Personnel


200,000ADMINISTRATION


250,000EQUIPMENT PURCHASE


250,000TOTAL


1,650,000




Location and Access




The Mineral Rights are located in the Manseriche and Condercanqui gold camps along the Rio Marañón in northeastern Peru.  These areas lie near the Manseriche gorge which cuts through the last ridge of hills that marks the interface between the Andean highlands and the Amazon foreland basin.  These camps straddle the boundary of the Loreto (eastern) and Amazonas (western) departments of northeastern Peru approximately 350km from the regional center of Iquitos which lies on the Amazon River.




Both Iquitos to the east as well as Tarapoto to the south are served with daily flights from Lima.  The project area can be reached from either of these towns by charter flights while supplies and heavy equipment can be barged in from either Yurimaguas (on the Rio Huallaga) or Iquitos, or trucked in from Bagua on a fair weather road to the village of Saramiriza located in the center of the Manseriche gold camp along the southwestern bank of the Rio Marañón.






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The general location of the Mineral Rights within Peru is indentified on the map below:






graphic1





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The specific location of the Mineral Rights is indentified on the map below:









Previous Exploration History




According to reports publicly available, the first record of gold production from the Manseriche camp was in the 1940’s, when a German-owned company operated a dragline on the Rio Marañón river.  Since then, Canadian, Brazilian, Swiss and Peruvian interests have operated various types of equipment on the Rio Marañón river with various degrees of success.




The most notable operation was that of a Peruvian company, Monica de Iquitos, who completed approximately 500 drill holes and established a considerable resource south of the town of Saramiriza.  This work was verified and confirmed by a Russian government consulting company, Sojuzkarta, which twinned some holes and took bulk samples by backhoe.  Their drill results as well as those from the collection of bulk samples were used to estimate a grade of 295mg/m3 based on a finess of 850 for correction to pure gold.




Subsequent studies have indicated that grades tended to increase with depth, and that much of the gold tends to be considerably fine in size, indicating the possibility of increased recovery, and therefore grade, with appropriate recovery techniques, e.g., jigs and bowl concentrators.




Geology and Mineralization




The Alegría, Condorcanqui, and Manseriche gold camps form part of the Marañón-Santiago Alluvial District (see Marañón-Santiago River Basin Map), one of four major alluvial gold fields in Peru (the others are, Iquitos, Ucayali, and Madre de Dios-Pando).




Such large-scale alluvial gold fields tend to form in environments associated with convergent plate boundaries, particularly at the interface between fold belts and foreland basins.  An essential requirement for the development of such gold deposits is a gold-rich hinterland and a river system that can transfer gold from the zone of production in the upper reaches of the drainage basin, along the main trunk of the river system to the zone of deposition, usually where the river profile flattens-out at the limit between the highlands and alluvial plains. The Manseriche camp is indeed located exactly at such a juncture.








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The Marañón -Santiago drainage basin covers an area of some 120,000 km2 and contains a number of gold deposits as well as some of the largest gold deposits and gold mining operations in the world, including Newmont’s Yanacocha (40m oz Au), Goldfield’s Cerro Corona (which currently produce 350 000 oz Au per annum), and Kinross’/ Aurelian’s Fruta del Norte deposit (14m oz Au).




The age of most of the gold mineralization in the highlands of the Marañón-Santiago river system is tertiary, and specifically Miocene.  However, Eocene-aged tectonism resulted in the formation of the eastern foothills of the Andes ,which effectively formed a barrier directing all erosion from the hinterland towards a basin on the western side of the Manseriche Gorge.  Glacial erosion of the gold deposits in the hinterland resulted in tills and moraines, which were subsequently concentrated in glacio-fluvial deposits by melting ice and intense rains in interglacial periods of which a number have been identified in Peru.  These sediments were retained by the eastern fold belt of anticlines.  The Pajacuse thrust event during the Pliocene then led to the breaching of the closed basin and the subsequent formation of the Manseriche Gorge.  This released the gold-rich glacio-fluvial sediments to be reconcentrated and deposited in the Rio Marañón flood plain east of the Gorge.




All the gold that is eroded form the primary deposits in this drainage basin has only one exit point, and that is through the Manseriche gorge.  Moreover, it is also at this focus point that the fast-running waters from the highlands are slowed down to a languid pace resulting in the deposition of the high-energy sedimentary load and its golden cargo.  It is the sequence of constant erosion, glacio-fluvial concentration, fluvial transport, collection in an intermediate (or series of intermediate) basin(s), and final alluvial concentration in the Rio Marañón flood plain, that provided the mixing and concentration which accounts for the regular gold values in the sands and gravels as indicated by all the work carried out to date.




A map below detailing the geology in the approximately area of the Mineral Rights is set forth below:













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ITEM 3. Legal Proceedings.




None.






ITEM 4. Removed.




PART II






ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.




Market Prices




Our common stock is currently quoted on the OTC pink sheets electronic quotation system under the symbol “FCGD.”  Prior to February 24, 2011, our shares were quoted on the over-the-counter bulletin board service of the Financial Industry Regulatory Authority (the “OTCBB”).  From January 1, 2009 to November 29, 2010 we operated under the name Amazon Goldsands Ltd. and our common stock was quoted on the OTCBB under the symbol “AZNG.”




The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by either the OTC pink sheets or OTCBB.  These quotations below reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.




Fiscal Year Ended December 31, 2010High Bid
Low BidFiscal Quarter Ended:March 31, 2010
$0.30
$0.10June 30, 2010
$0.31
$0.01September 30, 2010
$0.31
$0.0001December 31, 2010
$0.23
$0.00Fiscal Year Ended December 31, 2009High Bid
Low BidFiscal Quarter Ended:March 31, 2009
$0.40
$0.11June 30, 2009
$0.18
$0.06September 30, 2009
$0.27
$0.11December 31, 2009
$0.26
$0.13




Holders of Common Stock




As of May 24, 2011, we had approximately one hundred five (105) holders of record of our common stock.  Several other shareholders hold shares in street name.




Dividend Policy




To date, we have not declared or paid cash dividends on our shares of common stock.  The holders of our common stock will be entitled to non-cumulative dividends on the shares of common stock, when and as declared by our board of directors, in its discretion.  We intend to retain all future earnings, if any, for our business and do not anticipate paying cash dividends in the foreseeable future.








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Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and such other factors as our board of directors may deem relevant.




Securities Authorized for Issuance under Equity Compensation Plans




Our board of directors adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”) in April 2007.  The number of shares of common stock issuable under the Stock Incentive Plan was reduced from 10,000,000 shares to 500,000 shares resulting from the one share-for-twenty shares reverse stock split of our Common Stock (“reverse split”) which became effective at the close of business on June 6, 2008.  As of December 31, 2010, there were no outstanding awards granted under the Stock Incentive Plan.  After an adjustment to give effect to the reverse split, 500,000 shares remain available under the Stock Incentive Plan for future equity grants as of December 31, 2010.




The Stock Incentive Plan authorizes us to grant awards in the form of shares of common stock, including unrestricted shares of common stock; options to purchase shares of common stock; stock appreciation rights or similar rights with a fixed or variable price related to the fair market value of the shares of common stock and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions; any other security with the value derived from the value of the shares of common stock, such as restricted stock and restricted stock units; deferred stock units; dividend equivalent rights; or any combination of the foregoing.




The Stock Incentive Plan allows for the grant of incentive stock options, non-qualified stock options and restricted stock awards.  The exercise price of any option shall be determined at the time the option is granted by the board of directors. However, the exercise price may generally not be less than 100 percent of the fair market value of the shares of common stock on the date of the grant. Each option expires on the date determined by the board of directors, but not later than ten years after the grant date. The board of directors may determine in its discretion whether any option shall be subject to vesting and the terms and conditions of any such vesting.  The Stock Incentive Plan also provides for the immediate vesting of options, as well as authorizes the board of directors, or any committee thereof, to cancel outstanding options or to make adjustments to the transfer restrictions on those options in the event of certain changes in corporate control of the company.  Awards, including options, made under the Stock Incentive Plan are not assignable and also subject to any restrictions and conditions imposed by the board of directors, or any committee thereof.




The following table sets forth certain information regarding the Stock Incentive Plan as of December 31, 2010:




Plan category

Number of securities

to be issued upon

exercise of outstanding options, warrants

and rights

(a)

Weighted-average

exercise price of

outstanding options,

warrants and rights

(b)

Number of securities

remaining available for

future issuance under

equity compensation plans

(excluding securities

reflected in column (a))

(c)Equity compensation plans approved by stockholders

-

-

-Equity compensation plans not approved by stockholders 1

-

-

500,000Total

-

-

500,000







________________

1The Stock Incentive Plan was approved by our board of directors in April 2007 and 500,000 shares remain available for future awards under the Stock Incentive Plan as of December 31, 2010.








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Recent Issuances of Unregistered Securities




Other than as described below, there were no issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.




During the reporting period, we issued a total of 1,650,000 shares of our common stock to two non-U.S. Persons who exercised warrants to purchase shares of our common stock that were issued in a prior private placement.  These warrants had an exercise price of $0.10 and the aggregate purchase price we received from the exercise of these warrants and the sale of the underlying shares of common stock was $165,000. These shares were offered and sold in a private transaction and issued in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation S promulgated under the Securities Act.  The investors represented that they were acquiring the Units for investment only and not with a view toward resale or distribution. We requested our stock transfer agent to affix appropriate restricted legends to the stock certificate issued to the investors.  The investors were given adequate access to sufficient information about us to make an informed investment decision.  Neither we nor anyone acting on our behalf offered or sold these shares by any form of general solicitation or general advertising.




Subsequent to the reporting period, we issued 1,000,000 shares of our common stock to one non-U.S. Person investor who exercised warrants to purchase shares of our common stock that were issued in a prior private placement.  These warrants had an exercise price of $0.10 and the aggregate purchase price we received from the exercise of these warrants and the sale of the underlying shares of common stock was $100,000. These shares were offered and sold in a private transaction and issued in reliance on the exemption provided by Section 4(2) of the Securities Act and Regulation S promulgated under the Securities Act.  The investor represented that they were acquiring the Units for investment only and not with a view toward resale or distribution. We requested our stock transfer agent to affix appropriate restricted legends to the stock certificate issued to the investor.  The investor was given adequate access to sufficient information about us to make an informed investment decision.  Neither we nor anyone acting on our behalf offered or sold these shares by any form of general solicitation or general advertising.




ITEM 6.Selected Financial Data.




Not applicable.










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ITEM 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.




The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this Annual Report on Form 10-K.




For the Years Ended December 31, 2010 and 2009




Revenues




We have not generated any revenues from our operations in either of the past two fiscal years.




Operating Expenses




We reported operating expenses in the amount of $1,132,188 for the year ended December 31, 2010, compared to operating expenses of $829,031 for the year ended December 31, 2009.  Operating expenses were higher for the year ended December 31, 2010, as compared to the year ended December 31, 2009, primarily as a result of a increase in bank and interest charges.
  We incurred bank charges and interest of $663,090, for the year ended December 31, 2010, compared to $1,516 for the year ended December 31, 2009.  The increase in bank charges and interest is attributable to accrued interest charges of $660,493 on the convertible promissory notes issued in June 2010 and other bank fees of $2,597.
  The increase in operating expenses was partially offset by a decrease in mineral property exploration expenditures, professional fees and consulting and management fees during the reporting period.
  We incurred property exploration expenditures of $35,775, for the year ended December 31, 2010, compared to $191,937 for the year ended December 31, 2009.  The decrease in mineral property exploration expenditures is attributable toa decrease in the exploration activities being conducted in Peru.  The focus of the activity was shifted to the evaluation of properties and other mineral rights opportunities that could be pursued.
  Our expenditures were also lower as a result of reduced consulting and management fees incurred during the reporting period.We incurred consulting and management fees of $280,122, for the year ended December 31, 2010, compared to $370,716 for the year ended December 31, 2009.  The decrease in consulting and management fees is attributable tothe decrease in exploration activities in Peru and consulting services required to support these activities.  This also resulted in a decrease in expense for administrative and management services during the period.
  We incurred professional fees of $88,450, for the year ended December 31, 2010, compared to $139,927 for the year ended December 31, 2009.  The decrease in professional fees is attributable tolower accounting, financial reporting and legal services expense for the year.


Other Items




We reported no other items for the year ended December 31, 2010 and other loss of $8,597 for the year ended December 31, 2009.  Other loss during the year ended December 31, 2008 consisted of an expense for the write-down of assets.




Net (Income) Loss




As a result of the above, for the year ended December 31, 2010 we reported a net operating loss of $1,132,188.  For the year ended December 31, 2009, we reported a net operating loss before incomes taxes of $837,628 and a net income of $1,482,243 for the reporting period after offsetting a future income tax recovery of $2,319,871.








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We had a future income tax recovery of $0 and $2,319,871 for the years ended December 31, 2010 and December 31, 2009 respectively as a result of  applying previously unrecognized future income tax assets against the future income tax liability from the acquisition of an equity interest in Beardmore Holdings, Inc.




Liquidity and Capital Resources




At December 31, 2010, we had cash and cash equivalents of $70,019, compared to $4,214 at December 31, 2009, and a working capital deficit of $793,145, compared to a working capital deficit of $808,681 at December 31, 2009.  Our proposed plan of exploration anticipates that we will incur exploration related expenditures of $1,650,000 over the next twelve months.  We may be required to make payments if we are able to revive our options and increase our ownership interest in the Mineral Rights from a fifty percent interest to either a seventy-five or one hundred percent interest in the Mineral Rights.  We anticipate spending approximately $70,000 in ongoing general and administrative expenses per month for the next twelve months, for a total anticipated expenditure of $840,000 over the next twelve months.  The general and administrative expenses for the year will consist primarily of professional fees for the audit and legal work relating to our regulatory filings throughout the year, as well as transfer agent fees and general office expenses.  Our current cash on hand is insufficient to be able to make our planned exploration expenditures and to pay for our general administrative expenses over the next twelve months.  Accordingly, we must obtain additional financing in order to continue our plan of operations during and beyond the next twelve months. We believe that debt financing will not be an alternative for funding additional phases of exploration as we have limited tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock.  We are currently seeking additional funding in the form of equity financing from the sale of our common stock, but cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our complete exploration program. In the absence of such financing, we will not be able to pursue our exploration program and maintain our mineral property interests in good standing.  If we do not fulfill the terms of any of these option agreements according to our business plan, then our ability to commence or continue operations could be materially limited.  We also may be forced to abandon our mineral property interests.   If we are unable to raise additional capital in the near future, we will experience liquidity problems and management expects that we will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures.




We may consider entering into a joint venture arrangement to provide the required funding to explore the properties underlying our mineral property interests. We have not undertaken any efforts to locate a joint venture participant. Even if we determine to pursue a joint venture participant, there is no assurance that any third party would enter into a joint venture agreement with us in order to fund exploration of the properties underlying our mineral property interests. If we enter into a joint venture arrangement, we would likely have to assign a percentage of our interest in our mineral property interests to the joint venture participant.




Cash Used in Operating Activities




Operating activities in the year ended December 31, 2010 and 2009 used cash of $874,195 and $307,740, respectively, which reflect our recurring operating losses.  A decrease in our accounts payable and accrued liabilities and net loss reported for year ended December 31, 2010 was the primary reason for our negative operating cash flow.




Cash Used in Investing Activities




For the year ended December 31, 2010, we used $1,000,000 in investing activities, as compared to $298,031 used in investing activities during the year ended December 31, 2009.  For the year ended December 31, 2010, we expended $1,000,000 for the business acquisitionof  an equity  interest in Beardmore Holdings, Inc., as compared to $249,422 for the acquisition of mineral rights and $48,609 on mineral property exploration for the year ended December 31, 2009.  We acquired a 50% interest in the issued and outstanding stock of Beardmore.  The remaining 50% interest in the issued and outstanding stock of Beardmore is owned by Temasek Investments Inc.  Beardmore indirectly owns the mineral rights to certain properties located in Peru held by its subsidiary, Rio Santiago Minerales S.A.C.








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Cash from Financing Activities




As we have had no revenues since inception, we have financed our operations primarily by using existing capital reserves and through private placements of our stock.  Net cash flows provided by financing activities for the year ended December 31, 2010 was $1,940,000, which consisted entirely of proceeds from the issuance of common stock.  Net cash flows provided by financing activities for the year ended December 31, 2009 was $117,082, which consisted of $730,665 in proceeds from the issuance of common stock that was offset by $613,583 in share subscription received in advance.




Off Balance Sheet Arrangements




We do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effects on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.




Going Concern




We have incurred net losses for the period from inception on September 5, 1997 to December 31, 2010 of $10,846,392 and have no source of revenue.  The continuity of our future operations is dependent on our ability to obtain financing and upon future acquisition, exploration and development of profitable operations from our mineral properties.  These conditions raise substantial doubt about our ability to continue as a going concern.




Critical Accounting Policies




In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis.  The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:




Mineral property costs




Mineral property acquisition costs are initially capitalized as tangible assets when purchased.  At the end of each fiscal quarter end, we assess the carrying costs for impairment.  If proven and probable reserves are established for a property and it has been determined that a mineral property can be economically developed, costs will be amortized using the units-of-production method over the estimated life of the probable reserve.




Mineral property exploration costs are expensed as incurred.




Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis.  Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards.  Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.




As of the date of these consolidated financial statements, we have not established any proven or probable reserves on our mineral properties and incurred only acquisition and exploration costs.




Although we have 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 the Company’s title.  Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.








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Convertible debt




We have adopted the Financial Accounting Standards Board (“FASB”) ASC 470-20, “Debt with Conversion and Other Options” and applies this guidance retrospectively to all periods presented upon those fiscal years.  ASC 470-20 requires the liability and equity components to be separately accounted for in a manner that will reflect the entity’s nonconvertible debt borrowing rate.  We will allocate a portion of the proceeds received from the issuance of convertible notes between a liability and equity component by determining the fair value of the liability component using our nonconvertible debt borrowing rate.  The difference between the proceeds of the notes and the fair value of the liability component will be recorded as a discount on the debt with a corresponding offset to paid-in capital.  The resulting discount will be accreted by recording additional non-cash interest expense over the expected life of the convertible notes using the effective interest rate method.




Foreign currency translation




Our functional and reporting currency is U.S. dollars.  Our consolidated financial statements are translated to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters.”  Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date.  Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.  We have not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.




Changes in Accounting Policies


In June 2009, the FASB issued the Statement of Financial Accounting Standard (“SFAS”) No. 166, “Accounting for Transfer of Financial Assets – an amendment of FASB Statement”.  SFAS No. 166 removes the concept of a qualifying special-purpose entity from ASC 860-10, “Transfers and Servicing” and removes the exception from applying ASC 810-10, “Consolidation”. This statement also clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting.  SFAS No. 166, which is referenced in ASC 105-10-65, has not yet been adopted into the Codification and remains authoritative.  This statement is effective January 1, 2010.  The adoption of SFAS No. 166 did not have a material impact on our consolidated financial statements.
  In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”. SFAS No. 167, which amends ASC 810-10, “Consolidation”, prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (“VIE”) and eliminates the quantitative model.  The new model identifies two primary characteristics of a controlling financial interest: (1) provides a company with the power to direct significant activities of the VIE, and (2) obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE.  SFAS No. 167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE.  A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE.  SFAS No. 167, which is referenced in ASC 105-10-65, has not yet been adopted into the Codification and remains authoritative.  SFAS No. 167 is effective January 1, 2010.  The adoption of SFAS No. 167 did not have a material impact on our consolidated financial statements.
  In August 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Fair Value Measurement and Disclosure (Topic 820) – Measuring Liabilities at Fair Value”, which provides valuation techniques to measure fair value in circumstances in which a quoted price in an active market for the identical liability is not available.  The guidance provided in this update is effective January 1, 2010.  The adoption of ASU No. 2009-05 did not have a material impact on our consolidated financial statements.
 
 On January 1, 2010, we adopted ASU No. 2010-01, “Equity (ASC Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash”, which clarifies that the stock portion of a distribution to shareholders that allow them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected prospectively in earnings per share and is not considered a stock dividend for purposes of ASC Topic 505 and ASC Topic 260. The adoption of ASU No. 2010-01 did not have a material impact on our consolidated financial statements.






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On January 1, 2010, we adopted ASU No. 2010-02,“Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification”.  ASU No. 2010-02 addresses implementation issues related to the changes in ownership provisions in the Consolidation—Overall Subtopic (Subtopic 810-10) of the FASB ASC, originally issued as SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. Subtopic 810-10 establishes the accounting and reporting guidance for noncontrolling interests and changes in ownership interests of a subsidiary.  An entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary.  Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value.  The gain or loss includes any gain or loss associated with the difference between the fair value of the retained investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated.  In contrast, an entity is required to account for a decrease in ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction.  The adoption of ASU No. 2010-02 did not have a material impact on our consolidated financial statements.
 
 In February 2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives”. ASU No. 2010-11 clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Specifically, only one form of embedded credit derivative qualifies for the exemption – one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The amendments in ASU No. 2010-11 are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after  March 5, 2010. The adoption of ASU No. 2010-11 did not have a material impact on our consolidated financial statements.




Recent Accounting Pronouncements




In December 2010, the FASB issued ASU No. 2010-29, “Business Combination (Topic 805)”, which specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.  The amendments of ASU No. 2010-29 also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.  ASU No. 2010-29 is effective prospectively for business combinations for which the acquisition date is on of after the beginning of the first annual reporting period beginning on or after December 15, 2010.  Early adoption is permitted.  The adoption of ASU No. 2010-29 is not expected to have a material impact on our consolidated financial statements.




In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements”, which eliminates the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events.  ASU No. 2010-09 is effective for its fiscal quarter beginning after December 15, 2010.  The adoption of ASU No. 2010-09 is not expected to have a material impact on our consolidated financial statements.




In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurement and Disclosures (Topic 820): Improving Disclosure and Fair Value Measurements”, which requires that purchases, sales, issuances, and settlements for Level 3 measurements be disclosed.  ASU No. 2010-06 is effective for its fiscal quarter beginning after December 15, 2010.  The adoption of ASU No. 2010-06 is not expected to have a material impact on our consolidated financial statements.








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ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk.




Not applicable.




ITEM 8. Financial Statements and Supplementary Data.




The financial statements are listed in Part IV Item 15 of this Annual Report on Form 10-K and are incorporated by reference in this Item 8.




ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.




None.




ITEM 9A.Controls and Procedures.




Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures




Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934.  Based on their evaluation as of December 31, 2010, the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal financial officer concluded that our disclosure controlsand procedures were not effective at a reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, including this Annual Report, were recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.  The conclusion of our management was based on the material weaknesses described below is Management’s Report on Internal Control Over Financial reporting.
  We are in the process of considering changes in our disclosure controls and procedures and compiling a plan to remediate these material weaknesses.




Management’s Report on Internal Control Over Financial Reporting




Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:




·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;




·
Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and




·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.




All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.








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In connection with the filing of our Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010.  In making this assessment, our management used the criteria set forth by Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework.  Based on our assessment using those criteria, management believes that, as of December 31, 2010, our internal control over financial reporting is not effective based on those criteria because of the material weaknesses discussed below.
  Financial Statement Close Process:Internal controls over the financial statement close process were not effective and represented a material weakness in internal control over financial reporting at December 31, 2010. The primary factors contributing to this material weakness were: (i) a change in accounting personnel during the year, including the Chief Financial Officer, (ii) the Company direct and indirect subsidiaries did not maintain a sufficient complement of personnel with a level of knowledge of the Company’s accounting records and technical competence to ensure proper application of U.S. generally accepted accounting principles, (iii) the Company did not maintain sufficient written policies and procedures, and support.
  Lack of resources to Manage Financial Close:  As a small company, we historically have retained only a couple outside consultants to provide accounting and finance services.  As a result, we did not have a sufficient complement of personnel with the appropriate level of expertise to assist with the financial close process.
  Notwithstanding the conclusion that our disclosure controls and procedures and internal control over financial reporting were not effective as of the end of the period covered by this report, the Chief Executive Officer and the Chief Financial Officer believe that the consolidated financial statements and other information contained in this annual report present fairly, in all material respects, our business, financial condition and results of operations.


Changes in Internal Control Over Financial Reporting




There have been no changes in our internal controls over financial reporting during the quarter ended December 31, 2010, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.




ITEM 9B.Other Information.




None.












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PART III




ITEM 10. Directors, Executive Officers and Corporate Governance.




The following information sets forth the names of our current director and executive officers, their ages and their present positions.




Name
Age
Position
Served

SinceNorman Bracht
66
Chief Executive Officer, Director
2010Tony Langford
45
Chief Financial Officer, Secretary & Treasurer
2010Robert Van Tassell
75
Director
2006




Norman Bracht.  Mr. Bracht has served on our Board of Directors and as our Chief Executive Officer since October 22, 2010.  Since 2006, Mr. Bracht has served as a consultant to F.A. Uribe & Cia Ltd., a candle manufacturer based in Pasto, Colombia.  Prior to this time from 2004 to 2005, Mr. Bracht served as general manager of Almacenes Herlu S.A., a private clothing store located in Pasto, Colombia.  Mr. Bracht has prior experience working as a general manager overseeing gold exploration projects for Lencol Ltda., Bogota from 2002 to 2004 and Oronorte S.A. Colombia from 1990 to 1993.  Mr. Bracht earned his Bachelor of Arts degree from the University of Guelph, located in Guelph, Ontario.




Mr. Bracht resides in Colombia and brings to the Board a depth of knowledge of the social and political conditions presently existing in Colombia, an area the Company has identified to expand its operations and evaluate possible opportunities to acquire mining properties.  Mr. Bracht’s leadership skills demonstrated by his service as a general manager of companies that had mineral exploration operations in Colombia makes him an asset to the Board.




Tony Langford.  Mr. Langford has served as our Chief Financial Officer, Secretary, and Treasurer since July 24, 2010.  Mr. Langford is President of The Langford Group, Inc., a professional services firm providing financial accounting services to small and middle market public companies, and the Chief Operating Officer of 123Edgar Direct.  He previously served as the Chief Financial Officer of Home School Holdings, Inc., from May 2009 to June 2010.  Mr. Langford was a Technical Consultant with Spherion Corporation from January 2007 through August 2008 and was assigned to projects within the global information technology organization of an insurance-based financial services provider which is based in the EU.  Prior to that, he held the position of Director of Information Technology with Siemens Medical Solutions, USA from July 2001 through October 2006.  Mr. Langford is a Certified Public Accountant in the State of Illinois and is a member of the American Institute of Certified Public Accountants (AICPA) and the Illinois CPA Society (ICPAS).  Mr. Langford earned his Bachelors of Science in Commerce from DePaul University in Chicago, Illinois in 1989.




Robert Van Tassell.  Mr. Van Tassell has served on our Board of Directors since December 2006. Mr. Van Tassell has been involved in the Canadian mining industry for over fifty years. Before retiring from full-time ventures in 1998, he spent the prior sixteen years (1982-1998) as Vice President of Exploration for the precious metals venture Goldcorp Inc., formerly known as Dickenson Mines. Exploration teams led by Mr. Van Tassell are credited with such significant discoveries as the Husky Mine, the Minto copper deposit currently being mined by Captstone Mining , and more recently, Goldcorp’s High Grade Zone. From 1984 through 1993, Mr. Van Tassell served as a board member of the Prospectors and Developers Association of Canada (PDAC), including as Chairman of the PDAC’s Program and Environmental Committees. Mr. Van Tassell also served as a director of the Yukon Chamber of mines for eleven years, two of them as President. He served four terms on the board of the Northern Resource Conferences, two of them as Chairman, and has taught introductory and advanced prospecting courses for the Chamber of Mines. He is a Life Member of the CIM and a member of the Geological Association of Canada.




Mr. Van Tassell has been credited with leading the discovery of several mines in Canada and has served as Vice President of Exploration with a world leading mining company.  Mr. Van Tassell brings to our Board a depth of understanding as to our company’s business, history and organization and the various challenges we face in the current economic environment.








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Our Directors are elected annually and hold office until the next annual meeting of our stockholders or until their successors are elected and qualified. Officers are elected annually and serve at the discretion of the Board of Directors. Board vacancies are filled by a majority vote of the Board.




Family Relationships




There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.




Audit Committee




We do not have a separately-designated standing audit committee.  The Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of that would generally be performed by an audit committee.  The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting.  In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.




For the fiscal year ended December 31, 2010, the Board:




·
Reviewed and discussed the audited consolidated financial statements with management, and




·
Reviewed and discussed the written disclosures and the letter from our independent auditors on the matters relating to the auditor’s independence.




Based upon the Board’s review and discussion of the matters above, the Board authorized inclusion of the audited consolidated financial statements for the year ended December 31, 2010 to be included in the Annual Report on Form 10-K and filed with the Securities and Exchange Commission.




Our Board of Directors examined the Commission’s definition of “audit committee financial expert” and concluded that we do not currently have a person that qualifies as such an expert.  Currently, there are only two directors serving on our Board, and we are not in a position at this time to attract, retain and compensate additional directors in order to acquire a director who qualifies as an “audit committee financial expert,” but we intend to retain an additional director who will qualify as such an expert, as soon as reasonably practicable.  While our current directors do not meet the qualifications of an “audit committee financial expert,” they have, by virtue of their past employment experience, knowledge of financial statements, finance, and accounting, and have significant employment experience involving financial oversight responsibilities. Accordingly, we believe that our current directors capably fulfill their duties and responsibilities in the absence of such an expert.




Section 16(a) Beneficial Ownership Reporting




Section 16(a) of the Securities Act of 1934, as amended, requires our executive officers and directors, and persons who own more than ten percent (10%) of our common stock, to file with the Securities and Exchange Commission reports of ownership of, and transactions in, our securities and to provide us with copies of those filings.  To our knowledge, based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended December 31, 2010, all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with, with the following exceptions: our Chief Financial Officer, Secretary, and Treasurer, Mr. Tony Langford, failed to file his initial report on Form 3 in a timely fashion during fiscal 2010.




Code of Ethics and Conduct




Our Board of Directors has adopted a Code of Ethics and Conductthat is applicable to all of our employees, officers and directors.  Our Code of Ethics and Conductis intended to ensure that our employees act in accordance with the highest ethical standards.  The Code of Ethics and Conductwas filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.








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ITEM 11. Executive Compensation.




The following table presents information concerning the total compensation of the Company’s Chief Executive Officer, Chief Financial Officer and the other most highly compensated officers during the last fiscal year (the “Named Executive Officers”) for services rendered to the Company in all capacities for the years ended December 31, 2010 and 2009:




Summary Compensation Table




Name (a)
Year
Salary

($) (1)
Bonus

($) (1)
Stock

Awards

($)
Option

Awards

($)
All Other

Compensation

($) (2)
Total

($)Norman Bracht

CEO (3)
2010

2009
-

-
-

-
-

-
-

-
5,000

-
5,000

-Robert Van Tassell

Former CEO (4)
2010

2009
-

-
-

-
-

-
-

-
-

8,595
-

8,595Kenneth Phillippe

Former CEO, CFO, Secretary, Treasurer (5)
2010

2009
-

-
-

-
-

-
-

-
37,800

37,800
37,800

37,800Tony Langford

CFO, Secretary, & Treasurer (6)
2010

2009
-

-
-

-
-

-
-

-
12,500

-
12,500

-


___________


(1)
No executive officers received any salary or bonus during the fiscal years ended December 31, 2010 or 2009.




(2)
The amounts listed under the Column entitled “All Other Compensation” in the “Summary Compensation Table” related to the payment of consulting and/or management fees during the period reported.




(3)
Mr. Bracht was appointed as our Chief Executive Officer on October 22, 2010.




(4)
Mr. Van Tassell served as our Chief Executive Officer from August 16, 2010 until his resignation on October 22, 2010.




(5)
Mr. Phillippe served as our Chief Executive Officer, Chief Financial Officer, Principal Executive Officer, President, Secretary, and Treasurer from November 17, 2009, until his resignation on July 21, 2010.




(6)
Mr. Langford was appointed as our Chief Financial Officer, Secretary, and Treasurer on July 24, 2010.




Compensation Components




Base Salary.  At this time, we do not compensate our executive officers by the payment of salaries, but did compensate Mr. Langford for his service as of our Chief Financial Officer in 2010 through the indirect payment fees to a company controlled by Mr. Langford.  Mr. Langford is the President and Chief Executive Officer of The Langford Group, Inc. (“Langford Group”).  On August 25, 2010, we entered into a Consulting Agreement (the “Agreement”) with Langford Group.  The Agreement was effective as of July 24, 2010 and terminated on October 24, 2010.  Pursuant to the terms of the Agreement, Langford Group was retained to provide us with financial management services.  As compensation for such services, Langford Group received a monthly management fee of $2,500 U.S. Dollars, payable on the 15th day of the month to which payment of such management fee relates.  Despite the termination of the Agreement, we continue to pay Langford Group the monthly management fee of $2,500 U.S. Dollars.




Compensation received by Mr. Phillippe for the years ended December 31, 2010 and 2009 related to consulting fees paid during the reporting period for his service as an executive officer.




Mr. Bracht was paid $5,000 in consulting fees for the year ended December 31 ,2010.




Bonuses.  At this time, we do not compensate our executive officers by the payment of bonus compensation.






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Stock Options.  Stock option awards are determined by the Board of Directors based on numerous factors, some of which include responsibilities incumbent with the role of each executive to the Company and tenure with the Company.  We did not grant any stock options to our executive officers during 2010.




At no time during the last fiscal year was any outstanding option repriced or otherwise modified. There was no tandem feature, reload feature, or tax-reimbursement feature associated with any of the stock options we granted to our executive officers or otherwise.




Other. At this time, we have no profit sharing plan in place.




Outstanding Equity Awards at Fiscal Year-End




There were no outstanding equity awards issued to any of our named executive officers at December 31, 2010.




Stock Option Plans




In 2007, our Board adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan authorizes us to reserve shares for future grants under it, of which 500,000 shares remain available for issuance.




The Stock Incentive Plan authorizes us to grant (i) to the key employees incentive stock options to purchase shares of common stock and non-qualified stock options to purchase shares of common stock and restricted stock awards, and (ii) to non-employee directors and consultants’ non-qualified stock options and restricted stock. The Plan Administrator will administer the Plan by making recommendations to the board or determinations regarding the persons to whom options or restricted stock should be granted and the amount, terms, conditions and restrictions of the awards.




Incentive stock options granted under the Stock Incentive Plan must have an exercise price at least equal to 100% of the fair market value of the common stock as of the date of grant. Incentive stock options granted to any person who owns, immediately after the grant, stock possessing more than 10% of the combined voting power of all classes of our stock, or of any parent or subsidiary corporation, must have an exercise price at least equal to 110% of the fair market value of the common stock on the date of grant. Non-statutory stock options may have exercise prices as determined by the Plan Administrator.




The Plan Administrator is also authorized to grant restricted stock awards under the Stock Incentive Plan. A restricted stock award is a grant of shares of the common stock that is subject to restrictions on transferability, risk of forfeiture and other restrictions and that may be forfeited in the event of certain terminations of employment or service prior to the end of a restricted period specified by the Plan Administrator.




Equity Compensation Plan Information


as of December 31, 2010




Plan category

Number of securities

to be issued

upon exercise of

outstanding options,

warrants and rights

(a)


Weighted-average

exercise price of

outstanding options,

warrants and rights

(b)


Number of securities

remaining available for

future issuance under

equity compensation plans

(excluding securities

reflected in column (a))

(c)Equity compensation plans approved by security holders


-


$
-



-Equity compensation plans not approved by security holders


-


$
-



500,000Total


-


$
-



500,000








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Compensation of Directors




Our directors did not receive any compensation for their service during the year ended December 31, 2010.  No options were granted or exercised in 2010.




Employment Contracts; Termination of Employment and Change-in-Control Arrangements






We do not have any employment agreements with any of our executive officers, but have entered  into a consulting agreement with a company controlled by Mr. Langford that is described above.




ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.




The following table sets forth, as of May 24, 2011, the number and percentage of outstanding shares of common stock beneficially owned by (a) each person known by us to beneficially own more than five percent of such stock, (b) each director of the Company, (c) each named officer of the Company, and (d) all our directors and executive officers as a group. We have no other class of capital stock outstanding.




Amount and Nature of Beneficial OwnershipName and Address of Beneficial Owner(1)

Shares Owned (2)


Options Exercisable

Within 60 Days (3)


Percent of

ClassDirectors and Executive OfficersNorman Bracht


0



-



-Tony Langford


0



-



-Robert Van Tassell


5,000



-



*All current directors and executive officers as a group three persons


5,000



-



*More Than 5% Beneficial OwnersTemasek Investments Inc.

Suite 1-A, #5

Calle Eusebio A. Morales

El Cangrejo, Panama City

Panama


2,500,000



-



6.4
%




*     Represents less than 1% of the class.
 (1) Unless otherwise provided, the address of each person is c/o Alcalá Centro de Negocios, Cra 43 B # 14-51 Office 705, Medellin, Colombia.
 (2) Except as otherwise indicated, all shares shown in the table are owned with sole voting and investment power.
 (3) This column represents shares not included in “Shares Owned” that may be acquired by the exercise of options within 60 days of May 24, 2011.




The above beneficial ownership information is based on information furnished by the specified persons and is determined in accordance with Rule 13d-3 under the Exchange Act, as required for purposes of this annual report; accordingly, it includes shares of First Colombia Gold Corp. common stock that are issuable upon the exercise of stock options exercisable within 60 days of May 24, 2011. Such information is not necessarily to be construed as an admission of beneficial ownership for other purposes.








- 43 -
 Table of Contents









ITEM 13. Certain Relationships and Related Transactions, and Director Independence.




Except as set forth below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since the beginning of our last fiscal year on January 1, 2010 or in any presently proposed transaction which, in either case, has or will materially affect us.




Mineral Right Option Agreement with Temasek Investments Inc.  As described above in Item 2 of this annual report, we entered into a Mineral Right Option Agreement with Temasek Investments Inc. (“Temasek”), a company incorporated under the laws of Panama, on September 18, 2008 (the “Effective Date”), as amended and supplemented by Amendment No. 1 dated May 12, 2009 (“Amendment No. 1”), Amendment No. 2 dated February 3, 2010 (“Amendment No. 2”), and Amendment No. 3 dated June 25, 2010 (collectively, the “Option Agreement”).  Pursuant to the Option Agreement, we acquired four separate options from Temasek, each providing for the acquisition of a twenty-five percent interest in certain mineral rights (the “Mineral Rights”) in certain properties in Peru (the “Peru Property”) potentially resulting in our acquisition of one hundred percent of the Mineral Rights.  Our acquisition of each twenty-five percent interest in the Mineral Rights was structured to occur through the transfer to us of twenty-five percent of the outstanding shares of Beardmore Holdings, Inc. upon the exercise of each twenty-five percent option.




We exercised the initial twenty-five percent option, which provided for the acquisition of a twenty-five percent interest in the Mineral Rights, by paying Temasek a total of $500,000 and issuing 2,500,000 shares of our common stock to Temasek on or about January 12, 2009 in accordance with the terms of the Option Agreement.  The issuance of these shares resulted in Temasek owning more than 5% of our common stock.  We exercised the second twenty-five percent option, which resulted in our acquisition of an aggregate fifty percent interest in the Mineral Rights, by paying Temasek a total of $750,000 and issuing 3,500,000 shares of our common stock to Temasek on or about March 22, 2010 in accordance with the terms of the Option Agreement.




As of the date we were required to fulfill the option requirements under Amendment No. 3, we did not issue the 6,000,000 shares of our common stock required to exercise the third and fourth twenty-five percent options within the time periods set forth in the Option Agreement.  As a result, the options to acquire the third and fourth twenty-five percent options lapsed as of July 5, 2010.  We are considering our options and may seek to enter into negotiations with Temasek in order to further amend the Option Agreement in order to revive the third and fourth twenty-five percent options.  There can be no assurance that we will be successful in amending the Option Agreement or securing the necessary funding to exercise the third or fourth twenty-five percent options should we be successful in reviving these options.  In the event that we are unable to enter into another amendment to the Option Agreement, our ownership interest in the Mineral Rights would be limited to our fifty percent interest, we would be without the ability to acquire the third and fourth twenty-five percent options to acquire an aggregate seventy-five and one hundred percent interest in the Mineral Rights, respectively, and not be entitled to recover the $250,000 previously paid to Temasek and the 5,000,000 shares of our common stock, $250,000 Convertible Note and $3,250,000 Convertible Note previously issued to Temasek as partial consideration for the exercise of the third and fourth twenty-five percent option.




Consulting Agreement.  On August 25, 2010, we entered into a Consulting Agreement (the “Agreement”) with The Langford Group, Inc. (“Langford Group”).  The Agreement was effective as of July 24, 2010, and terminated on October 24, 2010.  Tony Langford, the Chief Financial Officer of the Company, is the President and Chief Executive Officer of Langford Group.  Pursuant to the terms of the Agreement, Langford Group was retained to provide the Company with financial management services.  As compensation for such services, Langford Group received a monthly management fee of $2,500 U.S. Dollars.








- 44 -
 Table of Contents









ITEM 14. Principal Accounting Fees and Services.




The following table is a summary of the fees billed to us by James Stafford, Chartered Accountants for professional services for the fiscal year ended December 31, 2010 and for professional services for the fiscal year ended December 31, 2009:


Fiscal

2010 Fees


Fiscal

2009 FeesFee CategoryAudit Fees

$
14,000


$
34,214Audit-Related Fees

$
12,399



-Tax Fees


-



-All Other Fees


-



-Total Fees

$
26,399


$
32,214


Audit Fees. Consists of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by our independent registered public accounting firms in connection with statutory and regulatory filings or engagements.




Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits, accounting consultations in connection with acquisitions, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.




Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance, tax audit defense, customs and duties, mergers and acquisitions, and international tax planning.




All Other Fees. Consists of fees for products and services other than the services reported above.




Our practice is to consider and approve in advance all proposed audit and non-audit services to be provided by our independent registered public accounting firm.




The audit report of James Stafford, Chartered Accountants on the consolidated financial statements of the Company for the years ended December 31, 2010 and 2009 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit reports on the consolidated financial statements of the Company for the fiscal years ended December 31, 2010 and December 31, 2009 contained an uncertainty about the Company’s ability to continue as a going concern.




During our fiscal years ended December 31, 2010 and 2009, there were no reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).








- 45 -
 Table of Contents







PART IV




ITEM 15. Exhibits, Financial Statement Schedules.




(a)(1)




Index to Financial Statements

Page (s)Report of Independent Registered Public Accounting Firm

F-1Financial Statements:Consolidated Balance Sheets - December 31, 2010 and 2009

F-2Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008 and from Inception on September 5, 1997 to December 31, 2010

F-3Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) from Inception on September 5, 1997 to December 31, 2010

F-4Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008 and from Inception on September 5, 1997 to December 31, 2010

F-5Notes to Consolidated Financial Statements

F-6





(a)(2)           Not Applicable.




(a)(3)           Exhibits.


See (b) below.


(b)            Exhibits.


See the Exhibit Index following the signature page of this report, which is incorporated herein by reference.


(c)            Financial Statements Excluded From Annual Report to Shareholders




Not Applicable.






- 46 -
 Table of Contents






James StaffordJames Stafford, Inc.

Chartered Accountants

Suite 350 – 1111 Melville Street

Vancouver, British Columbia

Canada V6E 3V6

Telephone +1 604 669 0711

Facsimile +1 604 669 0754

www.jamesstafford.ca
 
 Report of Independent Registered Public Accounting Firm
 
 
 To the Board of Directors and Stockholders’ of
 First Colombia Gold Corp.
 (formerly Amazon Goldsands Ltd.)
 (An Exploration Stage Company)
 
 
 We have audited the accompanying consolidated balance sheets of First Colombia Gold Corp. (formerly Amazon Goldsands Ltd.)(An Exploration Stage Company) (the “Company”) as at 31 December 2010 and 2009 and the related consolidated statements of operations, cash flows and changes in stockholders’ equity (deficiency) for the years then ended.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The consolidated financial statements of the Company for the year ended 31 December 2008 were audited by other auditors whose report dated 31 March 2009 expressed an unqualified opinion on those statements.
 
 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2010 and 2009 and the results of its operations, its cash flows and its changes in stockholders’ equity (deficiency) for the years then ended in conformity with accounting principles generally accepted in the United Statements of America.
 
 The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, conditions exist which raise substantial doubt about the Company’s ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management’s plans in regards to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 graphic4
 Chartered Accountants
 
 Vancouver, Canada
 8 April 2011, except for Note 16, as to which the date is 24 May 2011











F - 1
 Table of Contents








First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Consolidated Balance Sheets
 (Expressed in U.S. Dollars)


As at

31 December

2010


As at

31 December

2009$



$AssetsCurrentCash and cash equivalents (Note 2)


70,019



4,214Mineral property interests(Note 3)


11,976,434



7,361,401Property and equipment(Note 4)


11,988



17,125Website development cost (Note 5)


-



10,83312,058,441



7,393,573LiabilitiesCurrentAccounts payable and accrued liabilities (Note 6)


394,534



812,895Current portion of convertible promissory notes (Note 7)


468,630



-863,164



812,895Convertible promissory notes(Note 7)


1,451,863



-Due to related parties(Note 8)


109,691



109,7672,424,718



922,662Stockholders’ equityCommon stock (Note 9)Authorized200,000,000 common shares, par value $0.00001 and200,000,000 blank check preferred shares, par value $0.001Issued and outstanding31 December 2010 – 38,503,585 common shares, par value $0.0000131 December 2009 – 13,103,585 common shares, par value $0.00001


385



131Additional paid in capital


18,229,730



12,809,984Deficit, accumulated during the exploration stage


(10,846,392
)


(9,714,204
)7,383,723



3,095,911Non-controlling interest(Note 14)


2,250,000



3,375,0009,633,723



6,470,91112,058,441



7,393,573




Nature, Basis of Presentation and Continuance of Operations(Note 1), Commitments and Contingencies(Note 10) and Subsequent Events (Note 16)




The accompanying notes are an integral part of the consolidated financial statements.






F - 2
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Consolidated Statements of Operations
 (Expressed in U.S. Dollars)


For the period

from the date

of inception

on 5

September

1997 to

31 December

2010

(Unaudited)


For the

year ended

31 December

2010


For the

year ended

31 December

2009


For the

year ended

31 December

2008$



$



$



$ExpensesAmortization – property and equipment (Note 4)


37,621



5,137



8,839



13,777Amortization – website development cost (Note 5)


40,001



10,833



13,334



11,667Bank charges and interest (Note 7)


672,687



663,090



1,516



2,838Consulting and management fees (recovery) (Note 8)


5,211,414



280,122



370,716



(2,048,882
)Foreign exchange (gain) loss


21,787



956



4,485



(2,412
)Investor communication and promotion


632,571



14,000



61,347



251,304Office and administrative (recovery)


116,721



386



(6,512
)


47,665Professional fees


664,661



88,450



139,927



211,165Rent


56,416



2,000



12,000



18,806Telephone


54,659



-



276



19,257Transfer agent and filing fees


53,729



11,439



5,048



4,984Travel and accommodation


377,754



-



1,118



105,077Website maintenance


86,000



20,000



25,000



20,000Mineral property exploration expenditures (Note 3)


5,270,919



35,775



191,937



380,685Net operating loss before other items


(13,296,940
)


(1,132,188
)


(829,031
)


964,069Other itemsForgiveness of debt


39,000



-



-



15,000Gain on sale of oil and gas property


10,745



-



-



-Interest income


102,561



-



-



9,510Recovery of expenses


4,982



-



-



-Write-down of incorporation cost


(12,500
)


-



-



-Write-down of assets


(14,111
)


-



(8,597
)


(5,514
)Net operating income (loss) before income taxes


(13,166,263
)


(1,132,188
)


(837,628
)


983,065Future income tax recovery(Note 13)


2,319,871



-



2,319,871



-Net operating income (loss) and comprehensive income (loss) for the period


(10,846,392
)


(1,132,188
)


1,482,243



983,065Basic and diluted income (loss) per common share






(0.04
)


0.15



0.39Weighted average number of common shares used in per share calculations






31,638,831



10,110,386



2,537,534






The accompanying notes are an integral part of the consolidated financial statements.






F - 3
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Consolidated Statements of Cash Flows


(Expressed in U.S. Dollars)




For the

period from

the date of

inception on

5 September

1997 to 31

December

2010

(Unaudited)


For the

year ended

31 December

2010


For the

year ended

31 December

2009


For the

year ended

31 December

2008$



$



$



$Cash flows used in operating activitiesNet income (loss) for the period


(10,846,392
)


(1,132,188
)


1,482,243



983,065Adjustments to reconcile income (loss) to net cash used by operating activitiesAmortization


77,622



15,970



22,173



25,444Accrued interest


660,493



660,493



-



-Consulting fees


40,200



-



-



-Forgiveness of debt


(24,000
)


-



-



-Future income tax recovery


(2,319,871
)


-



(2,319,871
)


-Gain on sale of oil and gas property


(10,745
)


-



-



-Mineral property acquisition


1,816,000



-



-



3,940Stock-based compensation (recovery)


3,587,000



-



-



(2,519,736
)Write-down of assets


3,940



-



-



-Changes in operating assets and liabilitiesDecrease in taxes recoverable


-



-



4,394



14,832Decrease in exploration program advances


-



-



-



87,600Decrease in prepaid expenses and deposits


-



-



1,962



3,761Increase (decrease) in accounts payable and accrued liabilities


344,704



(418,394
)


450,294



(334,610
)Increase (decrease) in due to related parties


50,989



(76
)


51,065



(54,365
)(6,620,060
)


(874,195
)


(307,740
)


(1,790,069
)Cash flows from financing activitiesShares subscriptions received in advance


-



-



(613,583
)


613,583Cost of repurchase of common stock


(1,000
)


-



-



-Proceeds from issuance of common stock, net of share issue costs


8,311,915



1,940,000



730,665



-8,310,915



1,940,000



117,082



613,583Cash flows used in investing activitiesProceeds from sale of oil and gas property


46,200



-



-



-Oil and gas property acquisitions


(2,846
)


-



-



-Oil and gas exploration


(22,609
)


-



-



-Mineral property exploration


(48,609
)


-



(48,609
)


-Business acquisition, net of cash received


(1,499,422
)


(1,000,000
)


(249,422
)


(250,000
)Purchase of equipment


(53,550
)


-



-



(8,467
)Website development cost


(40,000
)


-



-



(30,000
)(1,620,836
)


(1,000,000
)


(298,031
)


(288,467
)Increase (decrease) in cash and cash equivalents


70,019



65,805



(488,689
)


(1,464,953
)Cash and cash equivalents, beginning of period


-



4,214



492,903



1,957,856Cash and cash equivalents, end of period


70,019



70,019



4,214



492,903




Supplemental Disclosures with Respect to Cash Flows(Note 12)




The accompanying notes are an integral part of the consolidated financial statements.






F - 4
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)


(Expressed in U.S. Dollars)




Number

of shares

issued

Common

stock

Additional

paid-in

capital

Deferred

stock-based

compensation

Share

subscriptions

received in

advance

Deficit,

accumulated

during the

exploration

stage

Total

stockholders’

equity

(deficiency)$


$


$


$


$


$Balance at 5 September 1997 (inception)


-


-


-


-


-


-


-Common shares issued for cash ($0.25 per share)


4,000


1


999


-


-


-


1,000Net loss for the period


-


-


-


-


-


(2,522
)

(2,522
)Balance at 30 September 1997


4,000


1


999


-


-


(2,522
)

(1,522
)Common shares issued for acquisition of oil and gas properties ($25 per share)


400


-


10,000


-


-


-


10,000Common shares issued for cash ($0.25 per share)


4,000


1


999


-


-


-


1,000Net loss for the year


-


-


-


-


-


(1,246
)

(1,246
)Balance at 30 September 1998


8,400


2


11,998


-


-


(3,768
)

8,232Common shares issued for cash ($25 per share)


4,000


1


99,999


-


-





100,000Common shares repurchased for cash ($0.25 per share)


(4,000
)

(1
)

(999
)

-


-


-


(1,000
)Net loss for the year


-


-


-


-


-


(9,569
)

(9,569
)Balance at 30 September 1999


8,400


2


110,998


-


-


(13,337
)

97,663Net loss for the year


-


-


-


-


-


(34,290
)

(34,290
)Balance at 30 September 2000


8,400


2


110,998


-


-


(47,627
)

63,373Net loss for the year


-


-


-


-


-


(14,296
)

(14,296
)Balance at 30 September 2001


8,400


2


110,998


-


-


(61,923
)

49,077Net income for the year


-


-


-


-


-


10,954


10,954Balance at 30 September 2002


8,400


2


110,998


-


-


(50,969
)

60,031Net income for the year


-


-


-


-


-


2,387


2,387Balance at 30 September 2003


8,400


2


110,998


-


-


(48,582
)

62,418Common shares issued for cash ($1.50 per share) and for services ($6 per share)


8,569


1


62,699


-


-


-


62,700Donated capital


-


-


5,000


-


-


-


5,000Net loss for the year


-


-


-


-


-


(64,175
)

(64,175
)Balance at 30 September 2004


16,969


3


178,697


-


-


(112,757
)

65,943Donated capital


-


-


3,000


-


-


-


3,000Net loss for the period


-


-


-


-


-


(7,750
)

(7,750
)Balance at 31 December 2004


16,969


3


181,697


-


-


(120,507
)

61,193Common shares repurchased ($0.25 per share)


(4,000
)

(1
)

(999
)

-


-


-


(1,000
)Donated capital


-


-


8,200


-


-


-


8,200Net loss for the year


-


-


-


-


-


(40,652
)

(40,652
)Balance at 31 December 2005


12,969


2


188,898


-


-


(161,159
)

27,741




The accompanying notes are an integral part of the consolidated financial statements.






F - 5
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)


(Expressed in U.S. Dollars)




Number

of shares

issued

Common

stock

Additional

paid-in

capital

Deferred

stock-based

compensation

Share

subscriptions

received in

advance

Deficit,

accumulated

during the

exploration

stage

Non-

controlling

interest

Total

stockholders’

equity

(deficiency)$


$


$


$


$


$


$Balance at 31 December 2005


12,969


2


188,898


-


-


(161,159
)

-


27,741Common shares issued for cash ($0.125 per share)


1,200,000


12


149,988


-


-


-


-


150,000Common shares cancelled


(8,467
)

(1
)

1


-


-


-


-


-Common shares issued for purchase of Finmetal OY (deemed at $25.60 per share)


50,000


1


1,279,999


-


-


-


-


1,280,000Common shares issued as stock-based compensation (deemed at $24.80 per share)


97,500


1


2,417,999


(2,321,280
)

-


-


-


96,720Common shares issued for cash ($10 per share)


279,950


2


2,799,498


-


-


-


-


2,799,500Share issue costs





-


(254,500
)

-


-


-


-


(254,500
)Net loss for the year


-


-


-


-


-


(2,506,896
)

-


(2,506,896
)Balance at 31 December 2006


1,631,952


17


6,581,883


(2,321,280
)

-


(2,668,055
)

-


1,592,565Common shares issued for cash ($25 per unit) (Note 9)


121,800


1


2,944,578


-


-


-


-


2,944,579Share issue costs


-


-


(212,450
)

-


-


-


-


(212,450
)Warrants issued (Note 9)


-


-


100,421


-


-


-


-


100,421Common shares issued as stock-based compensation (deemed at $29 per share) (Note 9)


46,250


1


1,341,249


(1,341,250
)

-


-


-


-Common shares issued for finder’s fee for mineral interests (deemed at $26.80)  per share (Notes 3, 9 and 12)


20,000


1


535,999


-


-


-


-


536,000Stock-based compensation


-


-


3,023,282


2,936,734


-


-


-


5,960,016Stock awards cancelled


(97,500
)

(1
)

1


-


-


-


-


-Net loss for the year


-


-


-


-


-


(9,511,457
)

-


(9,511,457
)Balance at 31 December 2007


1,722,502


18


14,314,963


(725,796
)

-


(12,179,512
)

-


1,409,674Stock-based compensation


-


-


-


725,796


-


-


-


725,796Stock awards cancelled


(31,250
)

(1
)

1


-


-


-


-


-Stock options forfeited


-


-


(3,245,532
)

-


-


-


-


(3,245,532
)Common shares issued for acquisition of mineral rights ($0.25 per share) (Notes 3, 9 and 12)


2,500,000


25


624,975


-


-


-


-


625,000Share subscriptions received in advance


-


-


-


-


613,583


-


-


613,583Net income for the year


-


-


-


-





983,065


-


983,065Balance at 31 December 2008


4,191,252


42


11,694,408


-


613,583


(11,196,447
)

-


1,111,586Common shares issued for cash ($0.15 per unit) (Note 9)


5,412,333


54


811,796


-


(613,583
)

-


-


198,267Share issue costs


-


-


(81,185
)

-


-


-


-


(81,185
)Common shares issued for acquisition of mineral rights ($0.11 per share) (Notes 3, 9 and 12)


3,500,000


35


384,965


-


-


-


-


385,000Business acquisition


-


-


-


-


-


-


3,375,000


3,375,000Net income for the year


-


-


-


-


-


1,482,243


-


1,482,243Balance at 31 December 2009


13,103,585


131


12,809,984


-


-


(9,714,204
)

3,375,000


6,470,911




The accompanying notes are an integral part of the consolidated financial statements.






F - 6
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)


(Expressed in U.S. Dollars)




Number of

shares

issued


Common

stock


Additional

paid-in

capital


Deferred

stock-based compensation


Share

subscriptions received in

advance


Deficit, accumulated

during the exploration

stage


Non-

controlling

interest


Total

stockholders’ equity

(deficiency)Balance at 31 December 2009


13,103,585



131



12,809,984



-



-



(9,714,204
)


3,375,000



6,470,911Business acquisition ($0.25 per share) (Notes 3, 9, 12and 14)


5,000,000



50



1,239,950



-



-



-



(1,125,000
)


115,000Common shares issued for cash ($0.10 per unit) (Note 9)


18,750,000



188



1,015,720



-



-



-



-



1,015,908Warrants issued (Note 9)


-



-



859,092



-



-



-



-



859,092Warrants exercised (Note 9)


1,650,000



16



164,984



-



-



-



-



165,000Share issue costs


-



-



(100,000
)


-



-



-



-



(100,000
)Beneficial conversion feature (Notes 7 and 12)


-



-



2,294,997



-



-



-



-



2,294,997Net loss for the year


-



-



-



-



-



(1,132,188
)


-



(1,132,188
)Balance at 31 December 2010


38,503,585



385



18,284,727



-



-



(10,846,392
)


2,250,000



9,633,723












The accompanying notes are an integral part of the consolidated financial statements.








F - 7
 Table of Contents








First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






1.        Nature, Basis of Presentation and Continuance of Operations




First Colombia Gold Corp. (the “Company”) was incorporated under the laws of the State of Nevada, U.S.A. under the name “Gondwana Energy, Ltd.” on 5 September 1997.  On 23 January 2007, the Company changed its name to “Finmetal Mining Ltd.”.  On 27 November 2006, the Company completed the acquisition of 100% of the shares of Finmetal Mining OY (“Finmetal OY”), a company incorporated under the laws of Finland.  During the fiscal year ended 31 December 2006, the Company changed its operational focus from development of oil and gas properties, to acquisition of, exploration for and development of mineral properties in Finland.  On 22 May 2008, the Company changed its name to “Amazon Goldsands Ltd.” and on 18 September 2008, the Company entered into a Mineral Rights Option Agreement and concurrently re-focused on the acquisition of, exploration for and development of mineral properties located in Peru.  On 29 November 2010, the Company changed its name to “First Colombia Gold Corp.”. The Company changed their name pursuant to a parent/subsidiary merger between the Company (as Amazon Goldsands Ltd.) and its wholly-owned non-operating subsidiary, First Colombia Gold Corp., which was established for the purpose of giving effect to this name change.  The Company is currently in the exploration stage.




The Company is an exploration stage enterprise, as defined in Accounting Standards Codification (the “Codification” or “ASC”) 915-10, “Development Stage Entities”. The Company is devoting all of its present efforts in securing and establishing a new business, and its planned principle operations have not commenced, and, accordingly, no revenue has been derived during the organization period.




The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Finmetal OY, a company incorporated under the laws of Finland, since its date of acquisition on 27 November 2006.  The Company also follows ASC 810-10,“Consolidation” and fully consolidates the assets, liabilities, revenues and expenses of Beardmore Holdings, Inc. (“Beardmore”), a company incorporated under the laws of Panama.  The Company owns a 50% interest in Beardmore.  It recognizes the other owner’s equity under the heading non-controlling interest (Note 14).




The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to exploration stage enterprises, and are expressed in U.S. dollars.  The Company’s fiscal year end is 31 December.




The Company’s consolidated financial statements as at 31 December 2010 and for the year then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  The Company had a net loss of $1,132,188 for the year ended 31 December 2010 (2009 – net income of $1,482,243, 2008 – net income of $983,065, cumulative – net loss of $10,846,392) and has a working capital deficit of $793,145 at 31 December 2010 (2009 – $808,681).








F - 8
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital.  Management believes that the Company’s capital resources should be adequate to continue operating and maintaining its business strategy during the fiscal year ending 31 December 2011.  However, if the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures.  These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.




2. Significant Accounting Policies




The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements.




Principles of consolidation




All inter-company balances and transactions have been eliminated in these consolidated financial statements.




Cash and cash equivalents




The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at 31 December 2010, the Company had cash and cash equivalents in the amount of $70,019 (2009 – $4,214).




Website and software development costs




The Company recognizes the costs incurred in the development of the Company’s website in accordance with ASC 350-50, “Website Development Costs”.  Accordingly, direct costs incurred during the application stage of development are capitalized and amortized over the estimated useful life of three years on a straight line basis.  Fees incurred for website hosting are expensed over the period of the benefit.  Costs of operating a website are expensed as incurred.




Property and equipment




Furniture, computer equipment, office equipment and computer software are carried at cost and are amortized over their estimated useful lives at rates as follows:




Furniture, computer and office equipment


30
%Computer software


100
%




The property and equipment is written down to its net realizable value if it is determined that its carrying value exceeds estimated future benefits to the Company.










F - 9
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






Segments of an enterprise and related information




ASC 280, “Segment Reporting”establishes guidance for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public.  It also establishes standards for disclosures -regarding products and services, geographic areas and major customers.  ASC 280 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.




Mineral property costs




Mineral property acquisition costs are initially capitalized as tangible assets when purchased.  At the end of each fiscal quarter, the Company assesses the carrying costs for impairment.  If proven and probable reserves are established for a property and it has been determined that a mineral property can be economically developed, costs will be amortized using the units-of-production method over the estimated life of the probable reserve.




Mineral property exploration costs are expensed as incurred.




Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis.  Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards.  Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.




As of the date of these consolidated financial statements, the Company has not established any proven or probable reserves on its mineral properties and incurred only acquisition and exploration costs.




Although the 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 the Company’s title.  Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.




Environmental costs




Environmental expenditures that are related to current operations are charged to operations or capitalized as appropriate.  Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are charged to operations.  Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated.  Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to a plan of action based on the then known facts.









F - 10
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






Foreign currency translation




The Company’s functional and reporting currency is U.S. dollars.  The consolidated financial statements of the Company are translated to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters.”  Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date.  Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.  The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.




Comprehensive loss




ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.  As at 31 December 2010 and 2009, the Company had no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the consolidated financial statements.




Stock-based compensation




Effective 1 January 2006, the Company adopted the provisions of ASC 718, “Compensation – Stock Compensation”, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting period of the equity grant). The Company adopted ASC 718 using the modified prospective method, which requires the Company to record compensation expense over the vesting period for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption.  Accordingly, the financial statements for the periods prior to 1 January 2006 have not been restated to reflect the fair value method of expensing share-based compensation.  The adoption of ASC 718 did not change the way the Company accounts for share-based payments to non-employees, with guidance provided by ASC 505-50, “Equity-Based Payments to Non-Employees”.




Basic and diluted net income (loss) per share




The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share”.  ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.  Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excluded all dilutive potential shares if their effect was anti-dilutive.










F - 11
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






Income taxes




Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC 740, “Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes.  Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.




Long-lived assets impairment




Long-term assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets”.




Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value. Fair value is generally determined using a discounted cash flow analysis.




Asset retirement obligations




The Company has adopted ASC 410, “Assets Retirement and Environmental Obligations”, which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. ASC 410 requires the Company to record a liability for the present value of the estimated site restoration costs with a corresponding increase to the carrying amount of the related long-lived assets. The liability will be accreted and the asset will be depreciated over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made. As at 31 December 2010 and 2009, the Company did not have any asset retirement obligations.




Convertible debt




The Company has adopted the Financial Accounting Standards Board (“FASB”) ASC 470-20, “Debt with Conversion and Other Options” and applies this guidance retrospectively to all periods presented upon those fiscal years.  ASC 470-20 requires the liability and equity components to be separately accounted for in a manner that will reflect the entity’s nonconvertible debt borrowing rate.  The Company will allocate a portion of the proceeds received from the issuance of convertible notes between a liability and equity component by determining the fair value of the liability component using the Company’s nonconvertible debt borrowing rate.  The difference between the proceeds of the notes and the fair value of the liability component will be recorded as a discount on the debt with a corresponding offset to paid-in capital.  The resulting discount will be accreted by recording additional non-cash interest expense over the expected life of the convertible notes using the effective interest rate method.








F - 12
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






Financial instruments




The carrying value of cash and cash equivalents, accounts payable and current portion of convertible promissory notes approximates their fair value because of the short maturity of these instruments.  The Company’s operations are in South America and virtually all of its assets and liabilities are giving rise to significant exposure to market risks from changes in foreign currency rates.  The Company’s financial risk is the risk that arises from fluctuations in foreign exchange rates and the degree of volatility of these rates.  Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.




Use of estimates




The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from those estimates.




Comparative figures




Certain comparative figures have been adjusted to conform to the current year’s presentation.




Changes in accounting policies




In June 2009, the FASB issued the Statement of Financial Accounting Standard (“SFAS”) No. 166, “Accounting for Transfer of Financial Assets – an amendment of FASB Statement”.  SFAS No. 166 removes the concept of a qualifying special-purpose entity from ASC 860-10, “Transfers and Servicing” and removes the exception from applying ASC 810-10, “Consolidation”. This statement also clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting.  SFAS No. 166, which is referenced in ASC 105-10-65, has not yet been adopted into the Codification and remains authoritative.  This statement is effective 1 January 2010.  The adoption of SFAS No. 166 did not have a material impact on the Company’s consolidated financial statements.




In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”. SFAS No. 167, which amends ASC 810-10, “Consolidation”, prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (“VIE”) and eliminates the quantitative model.  The new model identifies two primary characteristics of a controlling financial interest: (1) provides a company with the power to direct significant activities of the VIE, and (2) obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE.  SFAS No. 167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE.  A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE.  SFAS No. 167, which is referenced in ASC 105-10-65, has not yet been adopted into the Codification and remains authoritative.  SFAS No. 167 is effective 1 January 2010.  The adoption of SFAS No. 167 did not have a material impact on the Company’s consolidated financial statements.








F - 13
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






In August 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Fair Value Measurement and Disclosure (Topic 820) – Measuring Liabilities at Fair Value”, which provides valuation techniques to measure fair value in circumstances in which a quoted price in an active market for the identical liability is not available.  The guidance provided in this update is effective 1 January 2010.  The adoption of ASU No. 2009-05 did not have a material impact on the Company’s consolidated financial statements.




On 1 January 2010, the Company adopted ASU No. 2010-01, “Equity (ASC Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash”, which clarifies that the stock portion of a distribution to shareholders that allow them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected prospectively in earnings per share and is not considered a stock dividend for purposes of ASC Topic 505 and ASC Topic 260. The adoption of ASU No. 2010-01 did not have a material impact on the Company’s consolidated financial statements.




On 1 January 2010, the Company adopted ASU No. 2010-02,“Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification”.  ASU No. 2010-02 addresses implementation issues related to the changes in ownership provisions in the Consolidation—Overall Subtopic (Subtopic 810-10) of the FASB ASC, originally issued as SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. Subtopic 810-10 establishes the accounting and reporting guidance for noncontrolling interests and changes in ownership interests of a subsidiary.  An entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary.  Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value.  The gain or loss includes any gain or loss associated with the difference between the fair value of the retained investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated.  In contrast, an entity is required to account for a decrease in ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction.  The adoption of ASU No. 2010-02 did not have a material impact on the Company’s consolidated financial statements.




In February 2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives”. ASU No. 2010-11 clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Specifically, only one form of embedded credit derivative qualifies for the exemption – one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The amendments in ASU No. 2010-11 are effective for each reporting entity at the beginning of its first fiscal quarter beginning after 15 June 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after 5 March 2010. The adoption of ASU No. 2010-11 did not have a material impact on the Company’s consolidated financial statements.








F - 14
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






Recent accounting pronouncements




In December 2010, the FASB issued ASU No. 2010-29, “Business Combination (Topic 805)”, which specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.  The amendments of ASU No. 2010-29 also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.  ASU No. 2010-29 is effective prospectively for business combinations for which the acquisition date is on of after the beginning of the first annual reporting period beginning on or after 15 December 2010.  Early adoption is permitted.  The adoption of ASU No. 2010-29 is not expected to have a material impact on the Company’s consolidated financial statements.




In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements”, which eliminates the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events.  ASU No. 2010-09 is effective for its fiscal quarter beginning after 15 December 2010.  The adoption of ASU No. 2010-09 is not expected to have a material impact on the Company’s consolidated financial statements.




In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurement and Disclosures (Topic 820): Improving Disclosure and Fair Value Measurements”, which requires that purchases, sales, issuances, and settlements for Level 3 measurements be disclosed.  ASU No. 2010-06 is effective for its fiscal quarter beginning after 15 December 2010.  The adoption of ASU No. 2010-06 is not expected to have a material impact on the Company’s consolidated financial statements.




International Financial Reporting Standards




In November 2008, the Securities and Exchange Commission (“SEC”) issued for comment a proposed roadmap regarding potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.  Under the proposed roadmap, the Company would be required to prepare financial statements in accordance with IFRS in fiscal year 2014, including comparative information also prepared under IFRS for fiscal 2013 and 2012.  The Company is currently assessing the potential impact of IFRS on its consolidated financial statements and will continue to follow the proposed roadmap for future developments.










F - 15
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






3. Mineral Property Interests




The Temasek Properties




Effective 18 September 2008 (the “Effective Date”), the Company entered into a Mineral Right Option Agreement with Temasek Investments Inc. (“Temasek”), a company incorporated under the laws of Panama  (the “Temasek Agreement”).




Pursuant to the Temasek Agreement, the Company acquired four separate options from Temasek, each providing for the acquisition of a 25% interest in certain mineral rights in Peru potentially resulting in the acquisition of 100% of the mineral rights (the “Mineral Rights”).  The Mineral Rights are owned by Rio Santiago Minerales S.A.C. (“Rio Santiago”).  Beardmore, a wholly-owned subsidiary of Temasek, owns 999 shares of the 1,000 shares of Rio Santiago that are issued and outstanding.  Temasek owns the single remaining share of Rio Santiago.  The acquisition of each 25% interest in the Mineral Rights will occur through the transfer to the Company of 25% of the outstanding shares of Beardmore (Note 14).




The Company may exercise the initial 25% option to acquire a 25% interest in the Mineral Rights after fulfilling the following conditions:




·
Pay $250,000 (paid) to Temasek on the date the Agreement is executed;




·
Issue 2,500,000 common shares (issued) of the Company to Temasek within five business days from the Effective Date (Notes 9 and 12); and




·
Pay an additional $250,000 (paid) to Temasek within ninety days of the Effective Date.




The Company entered into an amending agreement dated 12 May 2009 with Temasek related to the Temasek Properties, further amended pursuant to an agreement dated 3 February 2010 (the “Second Amending Temasek Agreement”).  Under the Second Amending Temasek Agreement, the Company may now exercise the second 25% option resulting in the acquisition of a 50% interest in the Mineral Rights by fulfilling the following conditions as set out in the Second Amending Temasek Agreement within thirty days from the Effective Date:




·
Exercise and complete the initial 25% option (completed);




·
Issue 3,500,000 additional common shares of the Company to Temasek (issued) (Notes 9 and 12); and




·
Pay an additional $750,000 to Temasek by 5 March 2010 (paid).









F - 16
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






The Company entered into an amending agreement dated 25 June 2010 (the “Amendment Effective Date”) with Temasek related to the Temasek Properties (the “Third Amending Temasek Agreement”).  Under the Third Amending Temasek Agreement, the Company may now exercise the third and fourth 25% options resulting in the acquisition of a 100% interest in the Mineral Rights by fulfilling the following conditions as set out in the Third Amending Temasek Agreement within ten business days from the Amendment Effective Date:




·
Exercise and complete the initial and second 25% options (completed);




·
Issue 11,000,000 additional common shares of the Company to Temasek (5,000,000 common shares issued on 9 March 2010) (Notes 9 and 12);




·
Pay an additional $250,000 to Temasek (paid);




·
Issue a convertible note for $250,000 to Temasek (the “$250,000 Convertible Note”) (issued).  The $250,000 Convertible Note has a term of ninety days and will accrue interest at a rate of 12% per annum.  Both principal and interest under the $250,000 Convertible Note are payable upon maturity (Notes 7 and 12); and




·
Issue a convertible note for $3,250,000 to Temasek (the “$3,250,000 Convertible Note”) (issued).  The $3,250,000 Convertible Note has a term of three years and will accrue interest at a rate of 12% per annum. Interest will be payable annually and the principal is payable upon maturity (Notes 7 and 12).




Any principal and interest due under either of the Convertible Notes is convertible, at the option of Temasek, into units at a fixed conversion price of $0.25 per unit.  Each unit consists of one common share of the Company and one share purchase warrant.  Each whole warrant entitles the holder to purchase one additional common share of the Company at an exercise price of $0.50 per share.




Upon the acquisition of a 100% interest in the Mineral Rights, Temasek will hold its single share of Rio Santiago in trust for the Company’s sole benefit and hold the share strictly in accordance with the Company’s instructions. Upon the Company’s acquisition of a 100% interest in the Mineral Rights, Temasek is entitled to an annual 2.5% net returns royalty.  However, if the Company pays Temasek $2,000,000 within ninety days of the acquisition of a 100% interest in the Mineral Rights, Temasek will only be entitled to an annual 1% net returns royalty.




If the Company exercises the second 25% option, resulting in the Company’s acquisition of a 50% interest in the Mineral Rights, and fails to acquire a 100% interest in the Mineral Rights, the Company and Temasek will form  a joint venture in which the Company will be wholly responsible for developing a feasible mining project and all necessary facilities and Temasek shall retain a carried free interest in the mining rights. If the Company does not develop a feasible mining project within three years from the Effective Date, the Company will be responsible   to pay Temasek an advance minimum mining royalty of $500,000 per year, which will be deducted from Temasek’s net returns royalty.










F - 17
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






Temasek became a significant shareholder of the Company through the issuance of the 6,000,000 common shares on exercise of the option to acquire the initial and second 25% interests in the Mineral Rights and an additional 5,000,000 common shares on exercise of the partial payment toward the exercise of the option to acquire the third 25% interest (Note 9).




The Company is subject to certain outstanding and future commitments related to the Temasek Agreement. The Company is in the process of renegotiating the terms of the Temasek Agreement (Note 10).




During the year ended 31 December 2010, the Company incurred $35,775 (2009 – $191,937, 2008 - $Nil, cumulative - $227,712) in exploration expenditures related to the Temasek Properties, which has been included in the accounts payable and accrued liabilities as at 31 December 2010 (Note 6).




Expenditures related to the Temasek Properties for the year ended 31 December 2010 consist of project development of $14,875 (2009 - $Nil, 2008 - $Nil, cumulative - $14,875), logistics of $11,800 (2009 - $Nil, 2008 - $Nil, cumulative - $11,800), licenses of $Nil (2009 - $50,800, 2008 - $Nil, cumulative - $50,800), consulting of $9,100 (2009 - $6,169, 2008 - $Nil, cumulative - $15,269) and management fees of $Nil (2009 - $134,968, 2008 - $Nil, cumulative - $134,968).




4. Property and Equipment




Net Book ValueCost


Accumulated

amortization


31 December

2010


31 December

2009$



$



$



$Furniture, computer and office equipment


47,433



35,445



11,988



17,125




During the year ended 31 December 2010, total additions to property and equipment were $Nil (2009 – $Nil).




5. Website Development Cost




Net Book ValueCost


Accumulated

amortization


31 December 2010


31 December 2009$



$



$



$Website development


40,000



40,000



-



10,833




During the year ended 31 December 2010, total additions to website development cost were $Nil (2009 – $Nil).










F - 18
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






6. Accounts Payable and Accrued Liabilities




Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year.
 
 Included in accounts payable and accrued liabilities as at 31 December 2010 are amounts due to former officers of the Company of $9,646 (2009 – $62,734).  These amounts are non-interest bearing, unsecured and have no fixed terms of repayment.
 
 Included in accounts payable and accrued liabilities as at 31 December 2010 is an amount due to a company with former directors and officers in common with the Company of $Nil (2009 – $88,435).  The amount is non-interest bearing, unsecured and has no fixed terms of repayment.
 
 Included in accounts payable and accrued liabilities as at 31 December 2010 are amounts due to a director and officers of the Company of $10,000 (2009 – $Nil).  These amounts are non-interest bearing, unsecured and have no fixed terms of repayment.
 
 Included in accounts payable and accrued liabilities as at 31 December 2010 are exploration expenditures of $35,775 (2009 – $110,558) related to the Temasek Properties (Note 3).








F - 19
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






7. Convertible Promissory Notes




31 December

2010


31 December

2009$



$Issued on 25 June 2010 to Temasek bearing interest at a rate of 12% per annum on any unpaid principle balance, unsecured, with principal and interest amounts due upon maturity on 25 September 2010.  The Company is in the process of renegotiating the terms of the $250,000 Convertible Note (Note 10).  Temasek has the option to convert any portion of the unpaid principal and/or accrued interest into conversion units (the “Units”) at any time up to 25 June 2011 at $0.25 per Unit where each Unit consists of one common share of the Company and one share purchase warrant.  Each warrant entitles Temasek to purchase an additional common share of the Company at an exercise price of $0.50 per share commencing six months after the date of issuance until one year from the date of issuance.  During the year ended 31 December 2010, the Company accrued interest expense of $100,500 (2009 - $Nil), of which $84,883 relates to the amortization of debt discount (2009 - $Nil) (Notes 3 and 12).


188,466



-Issued on 25 June 2010 to Temasek bearing interest at a rate of 12% per annum on any unpaid principle balance, unsecured, with interest amount payable annually and principal amount due upon maturity on 25 June 2013.  Temasek has the option to convert any portion of the unpaid principal and/or accrued interest into Units at any time up to 25 June 2013 at $0.25 per Unit where each Unit consists of one common share of the Company and one share purchase warrant.  Each warrant entitles Temasek to purchase an additional common share of the Company at an exercise price of $0.50 per share commencing six months after the date of issuance until one year from the date of issuance.  During the year ended 31 December 2010, the Company accrued interest expense of $562,027 (2009 - $Nil), of which $359,014 relates to the amortization of debt discount (2009 - $Nil) (Notes 3 and 12).


1,732,027



-Less: current portion


(468,630
)


-1,451,863



-











F - 20
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






8. Due to Related Parties and Related Party Transactions




As at 31 December 2010, the amount due to related parties consists of $109,691 (2009 – $109,767) payable to companies controlled by shareholders and/or directors of Rio Santiago.




During the year ended 31 December 2010, the Company paid or accrued $Nil (2009 – $58,435) for consulting and management fees to a former officer and director of the Company.




During the year ended 31 December 2010, the Company paid or accrued $Nil (2009 – $8,595) for consulting fees to a former director of the Company.




During the year ended 31 December 2010, the Company paid or accrued $37,800 (2009 – $37,800) for financial and administrative fees to a former officer of the Company.




During the year ended 31 December 2010, the Company paid or accrued $12,500 (2009 – $Nil) for accounting and financial fees to an officer of the Company.




During the year ended 31 December 2010, the Company paid or accrued $5,000 (2009 – $Nil) for consulting fees to a director and officer of the Company.




9. Common Stock




Authorized




The total authorized capital consists of




·
200,000,000 common shares with par value of $0.00001


·
200,000,000 blank check preferred shares with par value of $0.001




Issued and outstanding




As at 31 December 2010, the total issued and outstanding capital stock is 38,503,585 common shares with a par value of $0.00001 per share.




On 14 December 2010, the Company issued 1,500,000 common shares upon the exercise of share purchase warrants with an exercise price of $0.10 per warrant for total proceeds of $150,000.




On 30 November 2010, the Company issued 150,000 common shares upon the exercise of share purchase warrants with an exercise price of $0.10 per warrant for total proceeds of $15,000.









F - 21
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






On 25 March 2010, the Company issued 18,750,000 units at a price of $0.10 per unit (the “Units”) for proceeds of $1,775,000, net of share issue costs of $100,000.  Each Unit consists of one common share with par value $0.00001 and one share purchase warrant.  Each share purchase warrant entitles the holder to purchase one common share at a price of $0.10 commencing six months from the closing date of the offering up to 25 March 2011.  During the year ended 31 December 2010, a total of 1,650,000 of the related share purchase warrants in this series were exercised.  As at 31 December 2010, a total of 17,100,000 of the related share purchase warrants in this series remain outstanding.




On 9 March 2010, the Company issued 5,000,000 common shares valued at $1,250,000 ($0.25 per common share) pursuant to the Temasek Agreement (Notes 3 and 12).  The fair value is equal to the market price of the Company’s stock on the date of the transaction.




During the year ended 31 December 2009, the Company issued 3,500,000 common shares valued at a $385,000 ($0.11 per common share) pursuant to the Temasek Agreement (Notes 3 and 12).  The fair value is equal to the market price of the Company’s stock on the date of the transaction.




During the year ended 31 December 2009, the Company issued 140,000 common shares for total proceeds of $18,900 ($0.15 per common share), net of share issue costs of $2,100.




During the year ended 31 December 2009, the Company issued 5,272,333 common shares for total proceeds of $711,765 ($0.15 per common share), net of share issue costs of $79,085.




During the year ended 31 December 2008, a total of 167,500 stock options expired.




During the year ended 31 December 2008, the Company issued 2,500,000 common shares valued at $625,000 ($0.25 per common share) pursuant to the Temasek Agreement (Notes 3 and 12).  The fair value is equal to the market price of the Company’s stock on the date of the transaction.




During the year ended 31 December 2008, the Company completed a one new for twenty old common share reverse stock split.  The Company’s share transactions, including the weighted average number of common shares outstanding calculation for purposes of determining earnings per share, have been restated retroactively to reflect all of the above corporate capital transactions in these interim consolidated financial statements.




Stock options




As at 31 December 2010, there were Nil incentive stock options outstanding (2009 – Nil).




During the year ended 31 December 2007, the Company adopted the Stock Incentive Plan (the “Plan”), which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance shares and performance units, and stock awards to officers, directors or employees of, as well as advisers and consultants to, the Company.









F - 22
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






During the year ended 31 December 2007, the Company granted 167,500 incentive stock options to officers, directors and consultants of the Company to purchase common stock of the Company at a price of $25 per common share on or before 17 April 2017 and vesting as to one-quarter of the common shares under the stock option on 17 April 2007 and one-quarter every six months thereafter in accordance with the terms and conditions of the Company’s Plan.  As at 31 December 2007, all of the related stock options in this series remain outstanding.




All stock options and rights are to vest over a period determined by the Board of Directors and expire not more than ten years from the date granted.  Pursuant to the Plan, the maximum aggregate number of shares that may be issued for awards is 500,000 and the maximum aggregate number of shares that may be issued for incentive stock options is 500,000.




During the year ended 31 December 2008, all of the related stock options in this series were forfeited.




The Company had no stock option activities during the years ended 31 December 2010 and 2009.




Warrants




As at 31 December 2010, there were 17,100,000 share purchase warrants outstanding (2009 – Nil).  Subsequent to the year ended 31 December 2010, a total of 16,100,000 share purchase warrants in this series expired (Note 16).


The following is a summary of warrant activities during the years ended 31 December 2010 and 2009:
 
 Number of

warrants


Weighted

average

exercise

price$Outstanding and exercisable at 1 January 2009


-



-Granted


-



-Exercised


-



-Expired


-



-Outstanding and exercisable at 31 December 2009


-



-Weighted average fair value of warrants granted during the year






-






F - 23
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






The following is a summary of warrant activities during the years ended 31 December 2010 and 2009:




Number of

warrants


Weighted

average

exercise

price$Outstanding and exercisable at 1 January 2010


-



-Granted


18,750,000



0.10Exercised


(1,650,000
)


0.10Expired


-



-Outstanding and exercisable at 31 December 2010


17,100,000



0.10Weighted average fair value of warrants granted during the year






0.05




The weighted average grant date fair value of warrants issued during the year ended 31 December 2010, amounted to $859,092 ($0.05 per warrant) (2009 – $Nil). The fair value of each warrant granted was determined using the Black-Scholes Option Pricing Model and the following weighted average assumptions:




2010


2009Risk free interest rate


0.44
%


-Expected life

1.00 year



-Annualized volatility


317.72
%


-Expected dividends


-



-











F - 24
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






10. Commitments and Contingencies


a.
During the year ended 31 December 2010, the Company entered into a three-month contract, commencing 24 July 2010, with a party to provide financial and administrative services for a monthly payment of $2,500.  Effective 20 October 2010, the contract for financial and administrative services was extended for an indefinite period.
 
 b.
The Company is subject to certain outstanding and future commitments related to the Temasek Agreement. The Company is in the process of renegotiating the terms of the Temasek Agreement (Note 3).
 
 c.
The Company is in default of certain outstanding commitments related to the $250,000 Convertible Note.  The Company is in the process of renegotiating the terms with Temasek (Note 7).
 
 11. Geographic Areas
 
 Prior to the operations of acquisition and exploration of mineral properties, the Company’s areas of operations were primarily in the South America.  Since the commencement of acquisition and exploration of mineral properties, during the year ended 31 December 2006, the Company’s principal mineral property activities have been in Finland.  During the year ended 31 December 2008, the Company re-focused its acquisition and exploration of mineral properties operations to Peru.






F - 25
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






The breakdown of net income (loss) by geographic area for the years ended 31 December 2010, 2009 and 2008 is as follows:




United States


Peru


Finland


Total$



$



$



$2010


(1,096,014
)


(36,174
)


-



(1,132,188
)2009


(634,476
)


(194,555
)


(8,597
)


(837,628
)2008


587,595



-



395,470



983,065




The breakdown of assets by geographic area for the year ended 31 December 2010 is as follows:




United States


Peru


Finland


Total$



$



$



$Current assets


70,008



11



-



70,019Equipment


11,988



-



-



11,988Mineral property costs


-



11,976,434



-



11,976,43481,996



11,976,445



-



12,058,441




The breakdown of assets by geographic area for the year ended 31 December 2009 is as follows:




United States


Peru


Finland


Total$



$



$



$Current assets


3,819



395



-



4,214Equipment


17,125



-



-



17,125Website


10,833



-



-



10,833Mineral property costs


-



7,361,401



-



7,361,40131,777



7,361,796



-



7,393,573












F - 26
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






12. Supplemental Disclosures with Respect to Cash Flows




For the

period from

the date of

inception on 5

September

1997 to

31 December

2010

(Unaudited)


For the

year

ended 31

December

2010


For the

year

ended 31

December

2009


For the

year

ended 31

December

2008$



$



$



$Supplemental cash flows informationInterest expense


1,906



-



-



-Foreign exchange (gain) loss


21,787



956



4,485



(2,412
)Income taxes paid


-



-



-



-Supplemental disclosure of non-cash investing and financingCommon shares issued for oil and gas property ($25 per share)


10,000



-



-



-Common shares issued for services ($6 per share)


50,000



-



-



-Donated consulting services


16,200



-



-



-Common shares cancelled and returned


(2
)


-



-



-Common shares issued for equity acquisition of Finmetal ($25.60 per share)


1,280,000



-



-



-Restricted shares issued ($24.80 per share)


2,418,000



-



-



-Common shares issued for finder’s fee ($10 per unit)


254,500



-



-



-Warrants issued


100,421



-



-



-Common shares issued for finder’s fee for mineral property interests ($26.80 per share)


536,000



-



-



-Common shares issued for acquisition of mineral rights (deemed at $0.25 per share)


1,875,000



1,250,000



-



625,000Common shares issued for acquisition of mineral rights (deemed at $0.11 per share)


385,000



-



385,000



-




During the year ended 31 December 2010, the Company accrued interest expense of $Nil (2009 – $Nil) related to unpaid amount of the Temasek option payment (Note 3).




During the year ended 31 December 2010, the Company issued 5,000,000 common shares valued at $1,250,000 pursuant to the Third Amending Temasek Agreement (Notes 3 and 9).




During the year ended 31 December 2010, the Company accrued interest expense of $660,493 (2009 – $Nil) related to the convertible debentures, of which $441,863 relates to the amortization of debt discount (Note 7).






F - 27
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






13. Income Taxes




The Company has losses carried forward for income tax purposes to 31 December 2010. The Company has fully reserved for any benefits of these losses.  The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate.  Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carry-forward period.  Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes.




The provision for refundable federal income tax consists of the following:


For the

year ended

31 December 2010


For the

year ended

31 December 2009


For the

year ended

31 December 2008$



$



$Refundable federal tax asset (liability) attributable to:Current operations


(383,497
)


(283,923
)


551,106Less: Change in valuation allowance and other


383,497



(2,035,948
)


(554,106
)Future income tax recovery


-



2,319,871



-




The composition of the Company’s deferred tax assets as at 31 December 2010 and 2009 are as follows:




As at

31 December

2010


As at

31 December

2009$



$Net income tax operating loss carryforward


5,688,553



5,305,056Statutory federal income tax rate


30% - 34
%


26% - 34
%Future income tax assets (liabilities)


854,141



470,644Less: Valuation allowance


(854,141
)


(470,644
)Future income tax assets (liabilities)


-



-









F - 28
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






14. Acquisition
 
 In January 2009, the Company acquired a 25% interest in Beardmore, the registered owner of 999 shares of the 1,000 shares of Rio Santiago that are issued and outstanding.  Rio Santiago is the beneficial owner of 100% interest in certain mineral rights in Peru.  The aggregate purchase price was $1,125,000, in which the Company paid $500,000 in cash and issued 2,500,000 common shares valued at $625,000 (Notes 3, 9 and 12).
 
 The Company follows ASC 810-10 and fully consolidates the assets, liabilities, revenues and expenses of Beardmore.  A valuation of certain assets was completed and the Company internally determined the fair value of others assets and liabilities.  In determining the fair value of acquired assets, standard valuation techniques were used including market and income approach.
 
 In January 2009, the purchase price allocation has been determined as follows:
 
 Assets purchased:Cash and cash equivalents

$
578Mineral property interests


6,927,792Total assets acquired

$
6,928,370Liabilities assumed:Accounts payable and accrued liabilities

$
49,797Due to related parties


58,702Future income tax liabilities


2,319,871Total liabilities assumed

$
2,428,370Non-controlling interest:

$
3,375,000Purchase price

$
1,125,000
 
 During the year 31 December 2010, the Company acquired an additional 25% interest in Beardmore from the non-controlling interest.  The aggregate purchase price was $1,135,000 paid by $750,000 in cash and 3,500,000 common shares of the Company valued at $385,000 (Notes 3, 9 and 12).  This resulted in a decrease in non-controlling interest of $1,125,000, a decrease in additional paid-in capital of $10,000 and an decrease in mineral properties of $1,135,000.
 
 The acquisition of Beardmore expands the Company’s business of acquiring and exploring mineral properties.  The Company also has the exclusive right to purchase the remaining 50% share interest in Beardmore, upon certain terms and conditions (Note 3).








F - 29
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






15. Fair Value of  Financial Instruments




A fair value hierarchy was established that prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements).




The fair values of the financial instruments were determined using the following input levels and valuation techniques:




Level 1:
classification is applied to any asset or liability that has a readily available quoted market price from an active market where there is significant transparency in the executed/quoted price.Level 2:
classification is applied to assets and liabilities that have evaluated prices where the data inputs to these valuations are observable either directly or indirectly, but do not represent quoted market prices from an active market.Level 3:
classification is applied to assets and liabilities when prices are not derived from existing market data and requires us to develop our own assumptions about how market participants would price the asset or liability.




As at 31 December 2010, the carrying amounts of cash and cash equivalents, accounts payable, amounts due to related parties and other liabilities approximated their estimated fair values because of the short maturity of these financial instruments.




The carrying amount of long-term debt and other financing was $1.45 million. The Company estimated the fair value of the beneficial conversion feature of the convertible promissory note at inception using both the quoted market price of the Company’s common shares and the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 0.29%, expected life of 1 year, expected volatility of 230% and expected dividends of 0%.  The fair value of the beneficial conversion feature was estimated at $2,240,000, and was recorded as a component of equity, of which $Nil would be a Level 1 fair value and $2,240,000 would be a Level 2 fair value.




Credit Risk




Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises primarily from the Company’s cash and cash equivalents. The Company manages its credit risk relating to cash and cash equivalents by dealing only with highly-rated United States financial institutions.  As a result, credit risk is considered insignificant.




Currency Risk




The Company is exposed to currency risk on its acquisition and exploration expenditures on its Peru properties since it has to convert US dollars raised through equity financing in US dollars to Peruvian Soles.  The Company’s expenditures will be negatively impacted if the Peruvian Soles increases versus the US dollar.




The majority of the Company’s cash flows and financial assets and liabilities are denominated in US dollars, which is the Company’s functional and reporting currency.  Foreign currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the US dollar.




The Company monitors and forecasts the values of net foreign currency cash flow and balance sheet exposures and from time to time could authorize the use of derivative financial instruments such as forward foreign exchange contracts to economically hedge a portion of foreign currency fluctuations.  Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.








F - 30
 Table of Contents







First Colombia Gold Corp.


(formerly Amazon Goldsands Ltd.)


(An Exploration Stage Company)


Notes to Consolidated Financial Statements


(Expressed in U.S. Dollars)


31 December 2010






Liquidity Risk




Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.  The Company manages liquidity risk by continuously monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities.




Other Risks




Unless otherwise noted, the Company is not exposed to significant interest rate risk and commodity price risk.




16. Subsequent Events




The following events occurred during the period from the year ended 31 December 2010 to the date the consolidated financial statements were available to be issued on 24 May 2011:




On 14 February 2011, the Company issued 1,000,000 common shares upon the exercise of share purchase warrants at an exercise price of $0.10 per warrant for total proceeds of $100,000.




On 25 March 2011, 16,100,000 share purchase warrants with an exercise price of $0.10 per warrant expired (Note 9).




On 1 April 2011, the Company entered into a twelve-month contract, commencing 1 April 2011, with a third party to provide exploration services at cost plus 10%, project supervision services for a monthly fee of $5,000 and project administration services for a monthly fee of $17,500.














F - 31
 Table of Contents










Glossary of CertainMining Terms




Bowl concentrators -
A device for removing gold from black sand concentrates.Churn drills -
A large drilling machine that bores large diameter holes in the ground. In mining, churn drills are used to drill into the soft carbonate rocks of lead and zinc hosted regions to extract bulk samples of the ore.Convergent plate boundaries -
The point at which the seismic plates of the earth’s crust are destroyed and recycled back into the interior of the earth as one plate dives under another.Drill-collar positions -
Points at which the drill collar is tightened or loosened to control the amount of force applied to the bit, used to carefully monitor the surface weight measured while the bit is just off the bottom of the wellbore.Eocene-aged tectonism -
Movement of the seismic plates of the Earth during the Eocene period.Fluvial transport -
The movement of sediment and minerals by water.Fold-belt of anticlines -
A fold or wrinkle in the earth’s surface that is convex up and has its oldest beds at its core.Glacio-fluvial -
Pertaining to streams fed by melting glaciers, or to the deposits and landforms produced by such streams.Gravel-bedrock contact -
Contact with the layer of earth’s surface defined as where gravel gives way to bedrock.Jig -
A piece of milling equipment used to concentrate ore on a screen submerged in water, either by the reciprocating motion of the screen or by the pulsation of water through it.Metallurgical -
Extraction of metal from ore.Mineral -
A naturally occurring homogeneous substance having definite physical properties and chemical composition and, if formed under favorable conditions, a definite crystal form.Mineral Reserve -
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.Miocene -
A geological epoch of the Neogene period and extends from about 23.03 to 5.33 million years before the presentMoraine -
Any glacially formed accumulation of unconsolidated glacial debris (soil and rock) which can occur in currently glaciated and formerly glaciated regions, such as those areas acted upon by a past ice age.Pliocene -
A period in the geologic timescale that extends from 5.332 million to 1.806 million years before present.Reverse circulation drilling (Becker)
Heavy duty percussive drill used for drilling in alluvial and glacial terrains.Scout drilling
Used to find and delineate targets for more defined drilling.Sedimentary features
Features that were part of the sediments when they were depositedTertiary
A geologic period 65 million to 1.8 million years agoTills
Areas of unstratified soil deposited by a glacier; consisting of sand and clay and gravel and boulders mixed together within a matrix of a fine powdery material.zone of deposition
The area at the end of a glacier or river where deposits of sediment occur.











- 47 -
 Table of Contents








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 on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, this 24th day of May, 2011.




FIRST COLOMBIA GOLD CORP.,


a Nevada corporation






By:           /s/Norman Bracht


Norman Bracht


Chief Executive Officer






Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by following persons on behalf of the Registrant and in the capacities and on the dates indicated.




Signature and Title

Date/s/ Norman Bracht

May 24, 2011Norman Bracht, Chief Executive Officer, Director

(Principal Executive Officer)/s/ Tony Langford

May 24, 2011Tony Langford, Chief Financial Officer, Secretary, & Treasurer

(Principal Financial Officer)/s/ Robert Van Tassell

May 24, 2011Robert Van Tassell, Director














- 48 -
 Table of Contents




FIRST COLOMBIA GOLD CORP.





EXHIBIT INDEX
 TO
 2010 ANNUAL REPORT ON FORM 10-K




Exhibit

Number

Description

Incorporated by Reference to:

Filed

Herewith2.1

Articles of Merger

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed May 27, 20082.2

Agreement and Plan of Merger

Exhibit 2.2 to the Company’s Current Report on Form 8-K filed May 27, 20082.3

Articles of Merger

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed November 9, 20102.4

Agreement and Plan of Merger

Exhibit 2.2 to the Company’s Current Report on Form 8-K filed November 9, 20103.1

Articles of Incorporation

Exhibit 3.1 to the Company’s Form 10 Registration Statement (SEC File No. 000-51203)3.2

Certificate of Amendment to Articles of Incorporation, evidencing name change to “FinMetal Mining Ltd.”

Exhibit 3.3 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.3.3

Certificate of Change Pursuant to NRS 78.209

Exhibit 3.1 to the Company’s Current Report on Form 8-K filed May 27, 20083.4

Amended and Restated By-laws of the Company

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 2, 200810.1

Agreement between the Company and Sapo Holdings SA dated April 1, 2011



X10.2

Mineral Right Option Agreement between the Company and Temasek Investments Inc.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 22, 200810.3

Amendment to Mineral Right Option Agreement between the Company and Temasek Investments, Inc.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 20, 2009.10.4

Second Amendment to Mineral Right Option Agreement, dated February 3, 2010

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 3, 201010.5

Third Amendment to Mineral Right Option Agreement, dated June 25, 2010

Exhibit 10.4 to the Company’s Current Report on Form 8-K filed June 29, 201010.6

Consulting Agreement, dated as of August 25, 2010, between Amazon Goldsands Ltd. and The Langford Group, Inc.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 26, 2010.10.7

2007 Stock Incentive Plan.

Exhibit 10.6 to the Company’s Annual Report on Form 10KSB for the Year ending December 31, 2007.14.1

Code of Ethics and Code of Conduct.

Exhibit 14.1 to the Company’s Annual Report on Form 10KSB for the Year ending December 31, 2005.21.1

Subsidiaries of First Colombia Gold Corp.



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31.1

Certificate of Norman Bracht, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



X31.2

Certificate of Tony Langford, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



X32.1

Certificate of Norman Bracht, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



X32.1

Certificate of Tony Langford, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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