SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


____________________________





FORM 10-K


____________________________





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





For the fiscal year ended May 31, 2011





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

_______________ to _______________





Commission File # 000-53375





GUINNESS EXPLORATION, INC.


(Exact name of small business issuer as specified in its charter)





Nevada


(State or other jurisdiction of incorporation or organization)





98-0465540


(IRS Employer Identification Number)





Suite 12E, Eclipse, 156 Vincent West


Auckland, New Zealand 1010


(Address of principal executive offices)





(509) 252-9157


(Issuer’s telephone number)





Securities registered pursuant to Section 12(b) of the Act: None





Securities registered pursuant to Section 12(g) of the Act:




Common Stock, $0.001 par value


(Title of class)





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




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





Table of Contents





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




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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:   Yes o  No x




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:




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





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




State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:





Based on the closing price on September 6, 2011 of $0.07, the aggregate market value of the 90,325,000 common shares held by non-affiliates was $6,322,750.





Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 129,325,000 Common shares were outstanding as of September 6, 2011.




Documents incorporated by reference: None



































ii
 Table of Contents








Table of Contents




PART IITEM 1.
Description of Business
1ITEM 1A.
Risk Factors
2ITEM 1B.
Unresolved Staff Comments
8ITEM 2.
Properties
9ITEM 3.
Legal Proceedings
19ITEM 4.
Submission of Matters to Vote of Security Holders
19PART IIITEM 5.
Market for Company’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
20ITEM 6.
Selected Financial Data
22ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
23ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk
34ITEM 8.
Financial Statements and  Supplementary Data:
34Report of Independent Registered Public Accounting Firm
35Balance Sheets at May 31, 2011 and May 31, 2010
36Statements of Operations for the years ended May 31, 2011 and May 31, 2010 and the Exploration Stage Period of July 15, 2005 to May 31, 2011
37Statement of Stockholders’ Equity
38Statements of Cash Flows for the years ended May 31, 2011 andMay 31, 2010 and the Exploration Stage Period of July 15, 2005 to

May 31, 2011
39Notes to Financial Statements
41ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
53ITEM 9A.
Controls and Procedures
53ITEM 9B.
Other Information
54PART IIIITEM 10.
Directors, Executive Officers and Corporate Governance
55ITEM 11.
Executive Compensation
57ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
58ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
59ITEM 14.
Principal Accounting Fees and Services
59PART IVITEM 15.
Exhibits, Financial Statements Schedules
60SIGNATURES
61
























iii
 Table of Contents





PARTI








ITEM 1.       DESCRIPTION OF BUSINESS





This current report on Form 10-K contains forward-looking statements as that term is defined in section 27A of the United States Securities Act of 1933, as amended, and section 21E of the United States Securities Exchange Act of 1934, as amended.  These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", ‘targets”, or "continue" or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" included in this report, which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, certain delays beyond the company's control with respect to mining operations, changes in the worldwide price of gold, silver, or certain other commodities; legislative, political or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; employee relations; contests over title to properties; and the risks involved in the exploration, development and mining business.





Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results and the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.





Unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.





OVERVIEW





Guinness Exploration, Inc. was incorporated in the State of Nevada on July 15, 2005 and incorporated its subsidiary, Nantawa Resources Inc., in Yukon, Canada on November 6, 2009. Guinness Exploration Inc. trades on the OTC-BB under the symbol GNXP. As used in this Report on Form 10-K and unless otherwise indicated, the terms "we", "us", "our", “Company”, and “Guinness” mean collectively Guinness Exploration, Inc., a Nevada corporation, and its wholly owned subsidiary, Nantawa Resources Inc., a Yukon corporation, unless otherwise indicated.





Our financial statements are prepared in accordance with U.S. generally accepted accounting principles and we have expensed all development expenses related to the establishment of the company. Our fiscal year end is May 31st. Since inception the Company has not been involved in any bankruptcy, receivership or similar proceedings. Since inception the Company has not been involved in any reclassification, consolidation, or merger arrangements.








1
 Table of Contents








Reports to security holders





We are not currently required to deliver an annual report to our security holders and do not expect to do so for the foreseeable future.





We are a reporting company and file Forms 10-Q quarterly reports and Forms 10-K annual reports with the SEC. We also file other reports including reports on Form 8-K, proxy and information statements and other information regarding the Company. The public may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549 and/or obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, we are an electronic filer and as such, all items filed by us are available through an Internet site maintained by the SEC which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which site is available at http://www.sec.gov.







ITEM 1A.     RISKFACTORS





The following risk factors should be considered in connection with an evaluation of the business of our business:





In addition to other information in this current report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition.  As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements.  Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition.  If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.





Risks Associated With Mining





Mineral exploration and development activities are speculative in nature





Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by our company may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in our company not receiving an adequate return of investment capital.





Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities and grades to justify commercial operations or that funds required for development can be obtained on a timely basis. Estimates of reserves, mineral deposits and production costs can also be affected by such factors as environmental permitting








2
 Table of Contents








regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. In addition, the grade of ore ultimately mined may differ from that indicated by drilling results. Short term factors relating to reserves, such as the need for orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on the results of operations. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.





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 could fail.





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





A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7, which can be viewed at 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 which are explored are ultimately developed into producing mines.





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





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, labour 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.














3
 Table of Contents








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





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





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





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





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





Mineral prices are subject to dramatic and unpredictable fluctuations.





We expect to derive revenues, if any, either from the sale of our mineral resource properties or from the extraction and sale of precious and base metals such as gold, silver and copper. 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 precious and base metals, and therefore the economic viability of any of our exploration properties and projects, cannot accurately be predicted.











4
 Table of Contents








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





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





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




Risks Related To Our Company




We have a limited operating history on which to base an evaluation of our business and prospects.




We have been in the business of exploring mineral resource properties since July 15, 2005 and we have not yet located any mineral reserve. As a result, we have never had any revenues from our operations. In addition, our operating history has been restricted to the acquisition and exploration of our mineral properties and this does not provide a meaningful basis for an evaluation of our prospects if we ever determine that we have a mineral reserve and commence the construction and operation of a mine. We have no way to evaluate the likelihood of whether our mineral properties contain any mineral reserve or, if they do that we will be able to build or operate a mine successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during the period when we are exploring our properties. We therefore expect to continue to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from mining operations and any dispositions of our properties, we will not be able to earn profits or continue operations. 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. There is no history upon which to base any assumption as to the likelihood that we will prove successful and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.














5
 Table of Contents








Our activities will be subject to environmental and other industry regulations which could have an adverse effect on our financial condition





Our company's activities are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailing disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations could have an adverse effect on the financial condition of our company.





The operations of our company include exploration and development activities and commencement of production on our properties, which requires permits from various federal, state, provincial and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.





Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.





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





We have not generated any revenue from operations since our incorporation and we anticipate that we will continue to incur operating expenses without revenues unless and until we are able to identify a mineral resource in a commercially exploitable quantity on one or more of our mineral properties and we build and operate a mine. At May 31, 2011, we had cash in the amount of $54,382 and net working capital of $56,566. We incurred a net loss of $(774,720) for the twelve month period ended May 31, 2011 and a net loss of $(2,284,328) since inception on July 15, 2005. We may have to raise additional funds to meet our currently budgeted operating requirements for the next 12 months. As we cannot assure a lender that we will be able to successfully explore and develop our mineral 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 securities and shareholder loans, 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.











6
 Table of Contents








These circumstances have lead our independent registered public accounting firm, in their report included in this Form 10-K, to comment about our company’s ability to continue as a going concern. Management has plans to seek additional capital through private placements and/or public offerings of its capital stock. These conditions raise substantial doubt about our company’s ability to continue as a going concern. Although there are no assurances that management’s plans will be realized, management believes that our company will be able to continue operations in the future. Our consolidated financial statements do not include any adjustments relating to the recoverability and potential classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event our company cannot continue in existence. We continue to experience net operating losses.





We currently rely on certain key individuals and the loss of one of these key individuals could have an adverse effect on the Company





Our success depends to a certain degree upon certain key members of our management. These individuals are a significant factor in the our growth and success. The loss of the service of members of the management and advisory board could have a material adverse effect on our company. In particular, the success of our company is highly dependent upon the efforts of our President & CEO, the loss of whose services would have a material adverse effect on the success and development of our company. Additionally, we do not anticipate having key man insurance in place in respect of our directors and senior officers in the foreseeable future.





We require substantial funds merely to determine whether commercial precious metal deposits exist on our properties





Any potential development and production of our exploration properties depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified engineers and geologists. Such programs require substantial additional funds. Any decision to further expand our operations on these exploration properties is anticipated to involve consideration and evaluation of several significant factors including, but not limited to:





§
Costs of bringing each property into production, including exploration work, preparation of production feasibility studies, and construction of production facilities;


§
Availability and costs of financing;


§
Ongoing costs of production;


§
Market prices for the precious metals to be produced;


§
Environmental compliance regulations and restraints; and


§
Political climate and/or governmental regulation and control.








Risks Associated with Our Common Stock





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





Our common stock is quoted on the Over-The-Counter Bulletin Board service of the Financial Industry Regulatory Authority. Trading in stock quoted on the Over-The-Counter Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the Over-The-Counter Bulletin Board is not a stock exchange, and trading of securities on the Over-The-Counter Bulletin Board 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 their shares.








7
 Table of Contents








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





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





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






ITEM 1B.     UNRESOLVED STAFF COMMENTS





None.














8
 Table of Contents








ITEM 2.       PROPERTIES





Executive Offices





Our executive, administrative, and operating offices is located at Suite 12E, Eclipse, 156 Vincent West Auckland, New Zealand 1010. We are provided these premises by our CEO at no cost the Company. We believe these facilities are adequate for our current needs and that alternate facilities on similar terms would be readily available if needed.





Mineral Properties





Charlotte Project





The Charlotte Project (formerly named the Nantawa Project) is situated in the prolific Tintina Gold Belt, a 1,200 km long area extending from northern British Columbia, through the Yukon Territory and into southwest Alaska. The Tintina Gold Belt includes such world-class, multi-million ounce gold deposits as Pogo, Fort Knox, True North, and Donlin Creek. (A detailed description of the region and properties follows.)





Nantawa Modification Agreement





On October 12, 2010, Guinness signed the Nantawa Modification Agreement with Eagle Trail Properties Inc. (“ETPI”) in which Guinness received full vesting of a 49% interest in 175 full or fractional mineral claims/leases (now renamed the "Charlotte Project") located in the Mount Nansen area of the Whitehorse Mining District of the Yukon Territory, Canada (the “Mineral Claims”). The other 51% interest in the Mineral Claims was retained by ETPI. The Mineral Claims had been part of the Nantawa Agreement signed between the Company and ETPI on November 19, 2009 and amended February 4, 2010, under which the Company acquired the right to purchase the Mineral Claims and an additional set of 47 mineral claims/leases (the “Tawa Claims”) from ETPI for total consideration of US$1,005,668 (comprised of: US$943,868 cash, plus 60,000,000 restricted common shares of Guinness valued at US$0.00103 per share for a total share value of $61,800).





Cash payments under the Nantawa Agreement had been scheduled to be made in two equal installments of US$471,934, the first due by May 30, 2010 and the second due by February 28, 2011. The Company met its first payment, but projected it would not have the resources to fulfill the second payment by February 28, 2011 and the Board determined it was in the best interests of the Company to negotiate revised purchase terms from ETPI for the Mineral Claims.





To provide consideration to ETPI, the Company agreed to waive its rights under the Nantawa Agreement to the Tawa Claims, which had lapsed while in trust with ETPI.





In sum, the Nantawa Modification Agreement has resolved the Tawa Claims matter between the parties and has provided the Company an immediate vesting of a 49% interest in the Mineral Claims without the requirement to make further payments to ETPI.





A copy of the Nantawa Modification Agreement was filed as an Exhibit to a Form 8-K on October 12, 2010 and is incorporated herein by reference.











9
 Table of Contents








Ansell Agreement





On March 4, 2011, the Company executed an option agreement (the “Ansell Agreement”) with Ansell Capital Corp. (“Ansell”), ETPI and two individuals (the “Additional Parties”) which will provide funding for the Charlotte Project.




Subject to the terms of the Ansell Agreement (incorporated herein by reference), Guinness, ETPI and the Additional Parties (collectively the “CSG Group”), have agreed to grant Ansell an option to acquire up to an 85% undivided interest in the 128 mineral claims which form the Charlotte Project based on Ansell providing financing and expertise for development of the project. Under the Ansell Agreement, ETPI will hold the Charlotte Project claims (the “Properties”) in trust for all parties during the term of the Ansell Agreement. Upon Ansell earning an interest in the Properties, the parties have agreed to form a joint venture to further explore and develop the Properties, all upon and subject to the terms and conditions set out in the Ansell Agreement.





Ansell has received the required approval of the Canadian TSX Venture Exchange in connection with the Ansell Agreement and Ansell is now the Operator of the project and will bear all project expenditures.





The Ansell Agreement specifies the following primary three tiers for the exercise of the option by Ansell:





First Option (Article 4)




On, or before, June 1, 2014, Ansell may acquire a 49% earned interest, free and clear of all encumbrances (except existing royalties to be paid to ETPI specified in the Nantawa Agreement) (the “First Option), by:




(a)
incurring not less than $2,048,761(1) of exploration expenditures on, or before, June 1,2012;(b)
incurring not less than an additional $3,073,141(1) in exploration expenditures on, orbefore, June 1, 2014.(c)
paying the Additional Parties: (i) $512,190(1) on June 1, 2011; (ii) 12,000,000 units ofAnsell securities on June 1, 2011 (such payments having been made); and (iii) $512,190(1) on, or before, July 31, 2012.





Second Option (Article 5)




Upon notice to the CSG Group (the “Third Option Commencement Date”), over a period of five years, Ansell may acquire an additional 26% earned interest, for an aggregate 75% earned interest, free and clear of all encumbrances except (except existing royalties to be paid to ETPI specified in the Nantawa Agreement) (the “Second Option”), by:




(a)
having exercised the First Option;(b)
solely funding all exploration expenditures and all joint venture expenditures defined in the joint venture agreement included in the Ansell Agreement (the “JVA”);





10
 Table of Contents


(c)
delivering a suitable feasibility study, as defined in the Ansell Agreement, to each member of the CSG Group, or, incurring the following exploration expenditures: (i) not less than $1,024,380 in Expenditures on, or before, the first anniversary of the Second Option Commencement Date; (ii) not less than $1,024,380 in exploration expenditures on or before the second anniversary of the Second Option Commencement Date; (iii) not less than $1,024,380 in Expenditures on or before the third anniversary of the Second Option Commencement Date; and (iv) not less than $1,024,380 in Expenditures on or before the fourth anniversary of the Second Option Commencement Date; and then delivering a suitable feasibility study, as defined in the Ansell Agreement, to each member of the CSG Group.



(1)(based on a foreign exchange rate of Cdn$1.00 to US$0.97620 on February 28, 2011)





Third Option (Article 6)




Upon notice to the CSG Group (the “Third Option Commencement Date”), over a period of two years, Ansell may acquire an additional 10% earned interest, for an aggregate 85% earned interest, free and clear of all encumbrances except (except existing royalties to be paid to ETPI specified in the Nantawa Agreement) (the “Third Option”), by:




(a)
having exercised the Second Option;(b)
solely funding all exploration expenditures and all expenditures agreed under the JVA, if any, prior to delivery of notice of exercise of the Third Option; and(c)
obtaining a commitment letter which evidences the existence of project financing, as defined in the Ansell Agreement on, or before, the three years from the Third Option Commencement Date.





Subject to Ansell acquiring an 85% interest in and to the Charlotte Project, Guinness will retain a 5% carried working interest in and to the Charlotte Project.





Ansell Capital Corp. (TSX-V: ACP) is a publicly traded Canadian exploration company focused on exploring and developing gold/silver properties with the potential to host world class, economic deposits. Ansell's current projects are the Charlotte Project, Yukon, and the Kuyakuz Mountain Project, located in British Columbia. More information on Ansell can be found at: http://www.ansellcapital.com








Exploration properties description and location





The Charlotte Project is located in the Whitehorse Mining District on NTS map sheet 105I-03 (Figures 1).  The complete claim group includes 128 full or fractional quartz mineral claims (Table 1). Total size of the claim group is  2,336.14 square hectares.  The central block of the  Charlotte Project is some 185 km NNW of Whitehorse. The Charlotte Project claim group measure 8.7 km in the NS direction and 5.1 km in the EW direction. The approximate geographical location of the Charlotte Project claim block is shown in Table 2.








11
 Table of Contents








Figure 1:   Road access to the Charlotte Project


(Modified from Eaton and Archer, 1989 and Stroshein, 2007a)















12
 Table of Contents





Table 1:   Claim list for Charlotte Project





No.
Claim
Registered Claim

Owner
Grant

Number
Expiry Date
Area (Ha)
Comments1
ROSE
Eagle Trail Properties Inc.
04241
09/10/2019
20.42
Lease2
GOLDEN EAGLE
Eagle Trail Properties Inc.
04278
09/10/2019
20.96
Lease3
WAR EAGLE
Eagle Trail Properties Inc.
04279
09/10/2019
20.77
Lease4
SHAMROCK
Eagle Trail Properties Inc.
04354
09/10/2019
20.73
Lease5
SPOT
Eagle Trail Properties Inc.
04361
09/10/2019
19.92
Lease6
ARLEP
Eagle Trail Properties Inc.
04368
09/10/2019
14.48
Lease7
PHYLLIS
Eagle Trail Properties Inc.
04369
09/10/2019
20.26
Lease8
RUB
Eagle Trail Properties Inc.
55633
09/10/2019
1.84
Lease9
PUB
Eagle Trail Properties Inc.
55663
09/10/2019
1.93
Lease10
SUN DOG
Eagle Trail Properties Inc.
55665
09/10/2019
3.20
Lease11
CUB
Eagle Trail Properties Inc.
55666
09/10/2019
1.29
Lease12
JAM
Eagle Trail Properties Inc.
55890
09/10/2019
11.64
Lease13
PAM
Eagle Trail Properties Inc.
55892
09/10/2019
2.64
Lease14
DOME 1
Eagle Trail Properties Inc.
73537
06/02/2014
15.10
-15
DOME 2
Eagle Trail Properties Inc.
73538
06/02/2014
15.51
-16
DOME 3
Eagle Trail Properties Inc.
73539
06/02/2014
17.29
-17
DOME 4
Eagle Trail Properties Inc.
73540
06/02/2014
17.98
-18
DOME 6
Eagle Trail Properties Inc.
73542
06/02/2014
17.32
-19
DOME 7
Eagle Trail Properties Inc.
73543
06/02/2014
25.34
-20
DOME 8
Eagle Trail Properties Inc.
73694
06/02/2014
12.47
-21
DOME 14
Eagle Trail Properties Inc.
73700
06/02/2014
21.07
-22
DOME 16
Eagle Trail Properties Inc.
73702
06/02/2014
20.61
-23
DOME 17
Eagle Trail Properties Inc.
73703
06/02/2014
18.41
-24
DOME 18
Eagle Trail Properties Inc.
73704
06/02/2014
18.56
-25
DOME 19
Eagle Trail Properties Inc.
73705
06/02/2014
16.73
-26
DOME 20
Eagle Trail Properties Inc.
73706
06/02/2014
13.42
-27
JOANNE 1
Eagle Trail Properties Inc.
74283
06/02/2014
19.79
-28
JOANNE 2
Eagle Trail Properties Inc.
74284
06/02/2014
19.51
-29
JOANNE 3
Eagle Trail Properties Inc.
74285
06/02/2014
20.36
-30
JOANNE 4
Eagle Trail Properties Inc.
74286
06/02/2014
14.78
-31
JOANNE 5
Eagle Trail Properties Inc.
74287
06/02/2014
19.83
-32
JOANNE 6
Eagle Trail Properties Inc.
74288
06/02/2014
19.69
-33
DOME 25
Eagle Trail Properties Inc.
77746
06/02/2014
15.19
-34
DOME 26
Eagle Trail Properties Inc.
77747
06/02/2014
22.54
-35
DOME 27
Eagle Trail Properties Inc.
77748
06/02/2014
20.32
-36
DOME 28
Eagle Trail Properties Inc.
77749
06/02/2014
21.74
-37
DOME 33
Eagle Trail Properties Inc.
77754
06/02/2014
25.50
-38
DOME 34
Eagle Trail Properties Inc.
77755
06/02/2014
23.29
-39
DOME 35
Eagle Trail Properties Inc.
77756
06/02/2014
22.39
-40
DOME 36
Eagle Trail Properties Inc.
77757
06/02/2014
23.97
-

















13
 Table of Contents








No.
Claim
Registered Claim

Owner
Grant

Number
Expiry Date
Area (Ha)
Comments41
DOME 37
Eagle Trail Properties Inc.
77758
06/02/2014
14.23
-42
DOME 38
Eagle Trail Properties Inc.
77759
06/02/2014
18.48
-43
DOME 39
Eagle Trail Properties Inc.
77760
06/02/2014
14.95
-44
DOME 40
Eagle Trail Properties Inc.
77761
06/02/2014
20.51
-45
DOME 41
Eagle Trail Properties Inc.
77762
06/02/2014
20.76
-46
DOME 42
Eagle Trail Properties Inc.
77763
06/02/2014
19.93
-47
DOME 43
Eagle Trail Properties Inc.
77764
06/02/2014
20.47
-48
DOME 49
Eagle Trail Properties Inc.
77770
06/02/2014
8.18
-49
DOME 50
Eagle Trail Properties Inc.
77771
06/02/2014
18.83
-50
DOME 51
Eagle Trail Properties Inc.
77772
06/02/2014
19.05
-51
DOME 52
Eagle Trail Properties Inc.
77773
06/02/2014
21.85
-52
DOME 53
Eagle Trail Properties Inc.
77774
06/02/2014
22.80
-53
DOME 54
Eagle Trail Properties Inc.
77775
06/02/2014
14.69
-54
DOME 55
Eagle Trail Properties Inc.
77776
06/02/2014
13.09
-55
DOME 56
Eagle Trail Properties Inc.
77777
06/02/2014
13.35
-56
DOME 57
Eagle Trail Properties Inc.
77778
06/02/2014
20.47
-57
DOME 58
Eagle Trail Properties Inc.
77779
06/02/2014
19.41
-58
DOME 60
Eagle Trail Properties Inc.
77781
06/02/2014
20.06
-59
DOME 61
Eagle Trail Properties Inc.
77782
06/02/2014
18.91
-60
DOME 63
Eagle Trail Properties Inc.
77784
06/02/2014
22.51
-61
DOME 64
Eagle Trail Properties Inc.
77785
06/02/2014
22.88
-62
DOME 65
Eagle Trail Properties Inc.
77786
06/02/2014
20.66
-63
DOME 66
Eagle Trail Properties Inc.
77787
06/02/2014
21.18
-64
DOME 78
Eagle Trail Properties Inc.
81842
06/02/2014
25.41
-65
DOME 79
Eagle Trail Properties Inc.
81843
06/02/2014
24.10
-66
DOME 80
Eagle Trail Properties Inc.
81844
06/02/2014
24.20
-67
DOME 81
Eagle Trail Properties Inc.
81845
06/02/2014
22.52
-68
DOME 82
Eagle Trail Properties Inc.
81846
06/02/2014
23.26
-69
DOME 83
Eagle Trail Properties Inc.
81847
06/02/2014
18.72
-70
DOME 84
Eagle Trail Properties Inc.
81848
06/02/2014
19.37
-71
DOME 86
Eagle Trail Properties Inc.
81850
06/02/2014
20.76
-72
HIW 9
Eagle Trail Properties Inc.
YA23835
06/02/2014
19.44
-73
HIW 10
Eagle Trail Properties Inc.
YA23836
06/02/2014
20.83
Fractions74
HIW 11
Eagle Trail Properties Inc.
YA23837
06/02/2014
21.55
Fractions75
HIW 12
Eagle Trail Properties Inc.
YA23838
06/02/2014
19.93
Fractions76
HIW 13
Eagle Trail Properties Inc.
YA23839
06/02/2014
20.72
-77
HIW 14
Eagle Trail Properties Inc.
YA23840
06/02/2014
19.55
-78
HIW 15
Eagle Trail Properties Inc.
YA23841
06/02/2014
20.15
-79
HIW 16
Eagle Trail Properties Inc.
YA23842
06/02/2014
19.86
-80
HIW 17
Eagle Trail Properties Inc.
YA23843
06/02/2014
19.92
-














14
 Table of Contents








No.
Claim
Registered Claim

Owner
Grant

Number
Expiry Date
Area (Ha)
Comments81
HIW 1
Eagle Trail Properties Inc.
YA24813
06/02/2014
4.74
Fractions82
HIW 2
Eagle Trail Properties Inc.
YA24814
06/02/2014
5.15
Fractions83
HIW 7
Eagle Trail Properties Inc.
YA24819
06/02/2014
3.01
Fractions84
DD 1
Eagle Trail Properties Inc.
YA59596
06/02/2014
20.62
-85
DD 2
Eagle Trail Properties Inc.
YA59597
06/02/2014
22.35
-86
DD 15
Eagle Trail Properties Inc.
YA59610
06/02/2014
19.20
-87
DD 16
Eagle Trail Properties Inc.
YA59611
06/02/2014
19.21
-88
DD 17
Eagle Trail Properties Inc.
YA59612
06/02/2014
19.37
-89
DD 18
Eagle Trail Properties Inc.
YA59613
06/02/2014
19.85
-90
DD 19
Eagle Trail Properties Inc.
YA59614
06/02/2014
20.17
-91
DD 20
Eagle Trail Properties Inc.
YA59615
06/02/2014
19.90
-92
DD 21
Eagle Trail Properties Inc.
YA59616
06/02/2014
19.64
-93
DD 22
Eagle Trail Properties Inc.
YA59617
06/02/2014
19.17
-94
DD 23
Eagle Trail Properties Inc.
YA59618
06/02/2014
18.69
-95
DD 24
Eagle Trail Properties Inc.
YA59619
06/02/2014
18.30
-96
DD 25
Eagle Trail Properties Inc.
YA59620
06/02/2014
18.18
-97
DD 26
Eagle Trail Properties Inc.
YA59621
06/02/2014
17.65
-98
DD 27
Eagle Trail Properties Inc.
YA59622
06/02/2014
19.49
-99
DD 28
Eagle Trail Properties Inc.
YA59623
06/02/2014
18.71
-100
TBR 1
Eagle Trail Properties Inc.
YA86690
06/02/2014
8.92
-101
TBR 2
Eagle Trail Properties Inc.
YA86691
06/02/2014
20.16
-102
TBR 3
Eagle Trail Properties Inc.
YA86692
06/02/2014
20.03
-103
TBR 4
Eagle Trail Properties Inc.
YA86693
06/02/2014
20.84
-104
TBR 5
Eagle Trail Properties Inc.
YA86694
06/02/2014
18.34
-105
TBR 6
Eagle Trail Properties Inc.
YA86695
06/02/2014
20.92
-106
TBR 7
Eagle Trail Properties Inc.
YA86696
06/02/2014
15.96
-107
TBR 8
Eagle Trail Properties Inc.
YA86697
06/02/2014
21.79
-108
ONT 38
Eagle Trail Properties Inc.
YA87204
06/02/2014
20.26
-109
ONT 40
Eagle Trail Properties Inc.
YA87206
06/02/2014
18.34
-110
ONT 42
Eagle Trail Properties Inc.
YA87208
06/02/2014
5.73
-111
EEK 1
Eagle Trail Properties Inc.
YA87210
06/02/2014
21.07
-112
EEK 2
Eagle Trail Properties Inc.
YA87211
06/02/2014
20.08
-113
EEK 3
Eagle Trail Properties Inc.
YA87212
06/02/2014
20.70
-114
EEK 4
Eagle Trail Properties Inc.
YA87213
06/02/2014
20.68
-115
EEK 5
Eagle Trail Properties Inc.
YA87214
06/02/2014
20.80
-116
EEK 6
Eagle Trail Properties Inc.
YA87215
06/02/2014
19.58
-117
EEK 7
Eagle Trail Properties Inc.
YA87216
06/02/2014
19.97
-118
EEK 8
Eagle Trail Properties Inc.
YA87217
06/02/2014
21.91
-119
EEK 9
Eagle Trail Properties Inc.
YA87218
06/02/2014
22.64
-120
EEK 14
Eagle Trail Properties Inc.
YA87223
06/02/2014
21.36
-

















15
 Table of Contents








No.
Claim
Registered Claim

Owner
Grant

Number
Expiry Date
Area (Ha)
Comments121
EEK 15
Eagle Trail Properties Inc.
YA87224
06/02/2014
21.22
-122
EEK 16
Eagle Trail Properties Inc.
YA87225
06/02/2014
21.76
-123
EEK 17
Eagle Trail Properties Inc.
YA87226
06/02/2014
20.01
-124
EEK 18
Eagle Trail Properties Inc.
YA87227
06/02/2014
20.74
-125
ONT 44
Eagle Trail Properties Inc.
YA92655
06/02/2014
16.80
-126
ONT 45
Eagle Trail Properties Inc.
YA92656
06/02/2014
12.91
-127
ONT 46
Eagle Trail Properties Inc.
YA92657
06/02/2014
18.48
-128
ONT 47
Eagle Trail Properties Inc.
YA92658
06/02/2014
14.41
-Total



2,336.14





Table 2:   Coordinates of the corners of the Charlotte Project claim block





Corner
N-S
E-WNW
62o06.0’ N
137o12.0’ WNE
62o05.5’ N
137o05.8’ WSE
62o01.2’ N
137o05.3’ WSW
62o02.4’ N
137o11.7’ W





Accessibility, Climate, Local Resources, Infrastructure and Physiography




The Charlotte Project is located approximately 180 km northwest of Whitehorse and 60 km west of the Village of Carmacks in the Yukon Territory. This property is accessible from Whitehorse via the Klondike highway to the town of Carmacks and then via an all weather gravel road. Carmacks is 170 km north of Whitehorse. Whitehorse is connected to Vancouver, Edmonton, and Calgary by air service. The Charlotte Project is facilitated with an extensive network of gravel and dirt roads (Figure 1).





The Charlotte Project lies northwest of the maximum advance of the Wisconsin ice sheet, and, consequently, are not affected by the Pleistocene continental glaciations (Figure 2; Eaton and Archer, 1989). This resulted in deep weathering in the properties reaching to depths of over 70 m from the topographic surface (Denholm et al, 2000; Roder, 1996). In mineralized zones, sulphides are commonly altered into limonite and other oxides (Denholm et al, 2000; Melling, 1995; Roder, 1996). The topography in the two properties is hilly with rounded ridges and shallow valleys. Local elevation ranges from 1030 m to 1560 m (Melling, 1995; Rodger, 1996).





Permafrost is widespread in the area and varies according to the amount of vegetation and slope facing direction (Stroshein, 2007b). In the north-facing slopes, permafrost is frozen all year around and in the south-facing slopes permafrost thaw to a depth of 1-2 m in the summer (Eaton and Archer, 1989; Roder, 1996).





The average precipitation in the Charlotte Project is approximately 25 cm, most of which falls as rain in the summer months (Stroshein, 2007b). Snow fall is normally 30-40 cm deep in late winter. The average monthly temperature ranges from -25oC in January to 15oC in July (Stroshein, 2007b).











16
 Table of Contents





The Charlotte Project is situated in the traditional Territory of the Little Salmon/Carmacks First Nation (Stroshein, 2007b). At the mine site, there is no infrastructure other than the mine plant and buildings. The village of Carmacks has been established since 1893 and has provided fuel for river steamboats, a roadhouse on the Whitehorse to Dawson stage run, and an area service center (Campbell, 1994). In the Village of Carmacks, there reside approximately 500 people. The village is also the main and administrative center of the Little Salmon Traditional Lands.






























































17
 Table of Contents








Figure 2:   Glaciation, Dawson Range, Yukon Territory























18
 Table of Contents





The Company does not have any investments or interests in real estate, nor real estate mortgages, nor in securities, nor interests in persons primarily engaged in real estate activities and therefore has no investment policies related to such matters. There is no limitation on the Company acquiring such interests and there is no limitation on the percentage of assets which the Company might invest in any one of such investments. Additionally, there is no requirement for the Board of Directors to seek approval through a vote of security holders for changes to any such policies if such investment policies were implemented in the future. It is not a policy of the Company to acquire assets neither primarily for possible capital gains nor primarily for income. At this time the Company has no intention of investing in any of the aforementioned investments.






ITEM 3.       LEGAL PROCEEDINGS





There are no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our officer and director, or any registered or beneficial shareholders are an adverse party or has a material interest adverse to us.






ITEM 4.       SUBMISSION OF MATTERS TO A VOTEOF SECURITY HOLDERS





During the year ended May 31, 2011, no matters were submitted to a vote of the Company's security holders, through the solicitation of proxies or otherwise.





























































19
 Table of Contents








PART II








ITEM 5.       MARKET FOR COMMONEQUITY AND RELATED STOCKHOLDER MATTERS




Market Information


The Company’s shares were cleared for trading by the Financial Industry Regulatory Authority (‘FINRA’) on November 8, 2007 under the symbol “GNXP”. Our common shares are quoted on the Over-the-Counter Bulletin Board (‘OTC-BB’) and the following table sets forth the range of high and low bid quotations, obtained from www.finance.yahoo.com, for our common stock as reported each of the periods indicated. The market for our shares is limited, volatile and sporadic. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.




National Association of Securities Dealers

OTC Bulletin Board(1)QuotesQuarter Ended

High

Trade

Low

Trade

Closing

TradeNovember 30, 2007
$
n/a(2)
$
n/a(2)
$
n/a(2)February 28, 2008

n/a(2)

n/a(2)

n/a(2)May 31, 2008

n/a(2)

n/a(2)

n/a(2)August 31, 2008
$
n/a(2)
$
n/a(2)
$
n/a(2)November 30, 2008

n/a(2)

n/a(2)

n/a(2)February 28, 2009

n/a(2)

n/a(2)

n/a(2)May 31, 2009

n/a(2)

n/a(2)

n/a(2)August 31, 2009
$
n/a(2)
$
n/a(2)
$
n/a(2)November 30, 2009

0.70

0.50

0.65February 28, 2010

1.30

0.40

1.05May 31, 2010

1.25

0.46

0.59August 31, 2010
$
0.89
$
0.35
$
0.35November 30, 2010

0.40

0.17

0.19February 28, 2011

0.19

0.06

0.11May 31, 2011

0.12

0.06

0.07




Notes:(1)
Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.(2)
No trades occurred during this period.


Our common shares are issued in registered form.  The registrar and transfer agent for our common shares is: Empire Stock Transfer Inc., 1859 Whitney Mesa Dr., Henderson, NV, USA 89014, Tel: 702.818.5898, Fax: 702.974.1444, email:www.empirestock.com





Shareholders





As of May 31, 2011, there were 10 registered shareholders of our common shares.





20
 Table of Contents








Dividend Policy





There are no restrictions that would limit the Company from paying dividends. We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.





Securities Authorized for Issuance Under Equity Compensation Plans




Other than our Option Plan, during the most recent fiscal year ended, the Company did not have any compensation plans nor individual compensation arrangements under which it might authorize the issuance of equity securities, or registration rights to employees or non-employees in exchange for consideration in the form of goods or services. With respect to our Option Plan: On July 12, 2010, the board approved and adopted the Company’s 2010 Equity Incentive Plan (the “Plan”), pursuant to which up to an aggregate of 10,000,000 options with a maximum exercise term of 10 years for 10,000,000 shares of the Corporation’s common stock are reserved for issuance to employees and non-employees, directors of, and consultants to the Company in connection with their retention and/or continued employment by the Company. On May 31, 2011, 2,225,000 options vested under the Plan. This was recorded in these financial statements as an addition of $50,265 to Exploration Expenses and $169,473 to Professional Fees for the year ended May 31, 2011.





Purchases of Equity Securities by the Issuer and Affiliated Purchasers





We did not purchase any of our shares of common stock or other securities during the fiscal year ended May 31, 2011.





Section 15(g) of the Securities Exchange Act of 1934





The Company’s shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, which imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by this Section 15(g), the broker/dealer must make a special suitability determination for the purchase and must have received the purchaser's written agreement to the transaction prior to the sale. Consequently, Section 15(g) may affect the ability of broker/dealers to sell the Company’s securities and also may affect your ability to sell your shares in the secondary market.





Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and the secondary market; terms important to an understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customer’s rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.





Recent Sales of Unregistered Securities





None.






21
 Table of Contents








ITEM 6.       SELECTED FINANCIAL DATA





Fiscal

2011
Fiscal

2010
Fiscal

2009
Fiscal

2008
Fiscal

2007$
$
$
$
$Operating Revenue:Quarter I - Three Months to August 31
-
-
-
-
-Quarter II - Three Months to November 30
-
-
-
-
-Quarter III- Three Months to February 28
-
-
-
-
-Full Year – Twelve Months to May 31
-
-
-
-
-Net Income/(Loss):Quarter I - Three Months to August 31
(119,404)
(7,553)
(6,619)
(8,011)
(1,855)Quarter II - Three Months to November 30
(398,506)
(12,635)
(8,604)
(3,309)
(5,025)Quarter III- Three Months to February 28
(70,466)
(1,096,370)
(4,137)
(2,517)
(20,807)Full Year – Twelve Months to May 31
(774,720)
(1,396,663)
(23,112)
(37,913)
(51,071)Net Earnings/(Loss) per share:Quarter I - Three Months to August 31
Nil
Nil
Nil
Nil
NilQuarter II - Three Months to November 30
Nil
Nil
Nil
Nil
NilQuarter III- Three Months to February 28
Nil
(0.01)
Nil
Nil
NilFull Year – Twelve Months to May 31
(0.01)
(0.01)
Nil
Nil
NilCash:Quarter I - Three Months to August 31
452,845
13,955
185
523
31,196Quarter II - Three Months to November 30
90,486
4093
32,652
3,360
17,656Quarter III- Three Months to February 28
24,535
833,427
23,400
2,263
6,670Full Year – Twelve Months to May 31
54,382
973,227
20,638
9,503
6,407Total assets:Quarter I - Three Months to August 31
552,128
20,375
1,964
16,508
52,181Quarter II - Three Months to November 30
103,817
10674
37,002
19,526
46,641Quarter III- Three Months to February 28
28,436
861,399
29,649
18,248
26,480Full Year – Twelve Months to May 31
57,501
1,164,953
26,841
10,618
22,706Total stockholders’ equity:Quarter I - Three Months to August 31
486,288
(66,998)
(42,951)
(6,430)
50,798Quarter II - Three Months to November 30
87,782
(79632)
(51,555)
(6,852)
45,772Quarter III- Three Months to February 28
19,643
385,798
(55,692)
(9,369)
24,966Full Year – Twelve Months to May 31
56,566
605,692
(59,444)
(36,332)
1,581Total liabilities and stockholders’ equity:Quarter I - Three Months to August 31
552,128
20,375
1,964
16,508
52,181Quarter II - Three Months to November 30
103,817
10,674
37,002
19,526
46,641Quarter III- Three Months to February 28
28,436
861,399
29,649
18,248
26,480Full Year – Twelve Months to May 31
57,501
1,164,953
26,841
10,618
22,706Cash dividends per share:Quarter I - Three Months to August 31
-
-
-
-
-Quarter II - Three Months to November 30
-
-
-
-
-Quarter III- Three Months to February 28
-
-
-
-
-Full Year – Twelve Months to May 31
-
-
-
-
-







22
 Table of Contents








ITEM 7.       MANAGEMENTS’ DISCUSSION AND ANALYSIS





Overview





This Annual Report on Form 10-K contains "forward-looking statements" relating to the registrant which represent the registrant's current expectations or beliefs including, statements concerning registrant’s operations, performance, financial condition and growth. For this purpose, any statement contained in this annual report on Form 10-K that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "anticipation", "intend", "could", "estimate", or "continue" or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel and variability of quarterly results, ability of registrant to continue its growth strategy and competition, certain of which are beyond the registrant's control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.





We are a start-up, exploration stage company with a limited operating history. We intend to pursue exploration opportunities regarding mineral exploration projects as opportunities arise.





Our financial statements are prepared in accordance with U.S. generally accepted accounting principles and we have expensed all development expenses related to the establishment of the company.





Project Funding


As reported in a Form 8-K filed May 3, 2011,Guinness' partner Ansell Capital Corp (TSXV: ACP)(‘Ansell’)successfully raised Cdn$5,582,000 (US$5,297,318) to fund exploration work at the Charlotte Project located in the Whitehorse Mining District of the Yukon Territory. This funding initiative fulfills a key term of the Ansell Agreement and provides sufficient capital for the first stage of development at the Charlotte Project.





Charlotte Project Assay Results


Assay results from the Charlotte Project 2011 and 2010 summer exploration programs  have yielded promising data and are as follows:





2011 PROGRAM:





On September 6, 2011, Ansell Capital Corp. in its role as operator of the Charlotte Project, released the following drill results from the first nine holes of its Charlotte Project 2011 exploration program:





"Assays have been received for the first nine diamond drill holes, totalling 1492 metres, from the recently completed 20 hole drill program on the Flex Zone at the Charlotte property located in the prolific Tintina belt. Previous historical drilling by other operators in the general area returned encouraging results such as drill holes DDH-10-243, which contained an intersection of 28.9 metres averaging 5.06 grams per tonne (g/t) gold and DDH-10-248, which contained 8.60 metres averaging 5.00 g/t gold.





Drilling this year has intersected broad well-mineralized zones, enhancing the potential for a bulk mineable deposit to be hosted on the property.











23
 Table of Contents








Highlights include:





●           DDH-11-257                      11.04 g/t Au over 23.05 m


●           DDH-11-254                      3.38 g/t Au over 12.40 m


●           DDH-11-255                      2.29 g/t Au over 18.45 m


●           DDH-11-259                      3.00 g/t Au over 14.55 m


●           DDH-11-258                      2.45 g/t Au over 12.50 m and


●           DDH-11-262                      11.71 g/t Au over 6.60 m.




Detailed results are shown in the following table:





Hole

From
To
Width
Au(m)
(m)
(m)
g/tDDH-11-254

92.40
104.80
12.40
3.38Az 060
includes
97.20
98.50
1.30
22.21Dip -65118.00
125.30
7.30
1.11148.60
154.00
5.40
3.09includes
150.60
154.00
3.40
4.45DDH-11-255

108.10
111.00
2.90
1.03Az 078Dip -65

112.90
114.25
1.35
1.22118.15
136.60
18.45
2.29includes
126.00
133.50
7.50
5.14DDH-11-256

23.30
27.90
4.60
0.41Az 078Dip -50

56.90
58.60
1.70
1.4771.15
81.10
9.95
3.83includes
77.50
81.10
3.60
7.6391.60
97.00
5.40
1.13includes
93.00
93.50
0.50
9.64DDH-11-257

20.12
22.12
2.00
0.80Az 038Dip -50

30.30
53.35
23.05
11.04includes
47.66
52.85
5.19
43.16DDH-11-258

29.82
32.90
3.08
3.29Az 045
includes
31.80
32.90
1.10
8.26Dip -5250.90
63.40
12.50
2.45includes
57.90
63.40
5.50
4.31includes
61.85
62.55
0.70
16.0069.20
77.15
7.95
1.78includes
75.00
75.90
0.90
10.3085.00
88.05
3.05
0.44


(continued)





24
 Table of Contents







Hole

From
To
Width
Au(m)
(m)
(m)
g/tDDH-11-259

55.90
70.45
14.55
3.00Az 079
includes
58.10
60.30
2.20
16.26Dip -5083.50
92.15
8.65
3.41includes
88.30
92.15
3.85
6.94includes
89.85
90.55
0.70
18.60120.20
122.70
2.50
1.64127.30
133.23
5.93
1.21includes
128.15
129.40
1.25
4.56DDH-11-260b

45.12
63.41
18.29
1.45Az 071
includes
58.75
63.41
4.66
4.37Dip -50119.00
126.70
7.70
3.10includes
121.65
122.95
1.30
16.21254.74
264.60
9.86
0.36DDH-11-261

24.90
25.25
0.35
9.70Az 045Dip -50

53.10
69.00
15.90
0.89116.58
119.80
3.22
2.16DDH-11-262

97.85
99.60
1.75
0.90Az 045Dip -50

107.40
114.00
6.60
11.71includes
107.40
108.60
1.20
62.80





Intersection widths reported are downhole widths. A minimum of 0.2 g/t Au was applied to calculate the average grade of each section, with no included internal waste.




It should be noted that no cutting of high grade samples has been applied. At this time, Ansell has insufficient data to apply a cutting factor that is statistically relevant to this property.




Incomplete silver assays have also been received. Once full silver results are delivered and reviewed, a further release will be made. At that time it is anticipated that a thorough geological analysis of these results will also be reported.




Chris M. Healey. P Geo, a director of Ansell, is the qualified person responsible for the technical information in this release."








25
 Table of Contents








2010 PROGRAM:





2010 Assays Set #1:





During its summer 2010 drill program at its Charlotte Project near Mt. Nansen in the Yukon Territory, Canada, core drilling was conducted to confirm prior drill intercepts and to expand on known gold and silver mineralization along strike and down dip. The Company completed a total of 1,451.68 metres in fourteen diamond drill holes in the Flex zone, one of five known mineralized zones on the property.





The drill holes were chosen specifically to test a 450m strike length of the Flex Zone at various depths. The holes tested gold and silver grades and thicknesses to confirm previously drilled holes (to view a map of the property, drill hole locations and other information, visit www.guinnessexploration.com).





New holes confirmed and previous holes as set out below:




2010confirmationholes
Previous holesDDH 10-240
DDH 98-193DDH 10-241
DDH 98-194DDH 10-242
DDH 86-30DDH 10-243
DDH 94-139DDH 10-244
DDH 95-164DDH 10-245
DDH 94-141





Results are tabulated below. The 2010 confirmation holes are shown in regular font, with increased widths shown in bold font. Results of the previous holes are shown in an italics font for comparison on a hole by hole basis.





Drill Hole #
Dip
Azimuth

From:
To:
Width
Au (g/t)
Ag (g/t)DDH-10-240
-50 degrees
078

59.6
90.85
31.25
1.66
67.91Including
66.3
68
1.7
13.14
778.0373.5
74.35
0.85
3.09
81.678.8
79.3
0.5
8.68
172.989.9
90.85
0.95
2.21
103.6and
96
97.75
1.75
1.89
60confirming DDH 98-193




12.3
6.82
266.65DDH-10-241
-50 degrees
078

58.25
82.5
24.25
1.77
115.96Including
64.75
64.95
0.2
22.8
294667.15
68.6
1.45
2.56
97.481.6
82.5
0.9
23.81
973.44confirming DDH 98-194




9.9
5.9
87.1DDH-10-242
-50 degrees
045

15.85
21.5
5.65
8.61
186.2Including
15.85
17.95
2.1
9.73
33719.4
21.5
2.1
12.92
152.2336
36.7
0.7
3.56
58.8confirming DDH 86-30




8.07
3.85
209.13


(continued)






26
 Table of Contents






Drill Hole #
Dip
Azimuth

From:
To:
Width
Au (g/t)
Ag (g/t)DDH-10-243
-50 degrees
045

19.45
48.35
28.9
5.06
138.09Including
28.35
31.4
3.05
14.02
28.5733.25
34.65
1.4
6.58
29837.5
40.55
3.05
14.3
55.546.05
48.35
2.3
11.8
1215confirming DDH 94-139




22.05
4.15
161.24DDH-10-244
-50 degrees
045

12.2
20.75
8.55
2.19
64.2Including
14.55
15.75
1.2
4.37
193confirming DDH 95-164




10.01
5.31
70.9DDH-10-245
-60 degrees
045

57
62.35
5.35
20.91
131.54Including
58.8
61.85
3.05
35.6
18.1confirming DDH 94-141




7.62
6.01
246.12





The Flex Zone occurs as two sub-parallel anastamosing quartz-sulfide vein systems, known historically as the “Hanging Wall” and “Footwall” veins. Veins host strong gold and silver mineralization associated primarily with pyrite and lesser arsenopyrite, stibnite, galena and sphalerite. Veins often exhibit propylitic, phyillic, argillic and silicic alteration in broad alteration envelopes.





The Flex Zone is hosted in an assemblage of metamorphic rocks comprised dominantly of quartz-feldspar+/-chlorite gneiss which grades locally into quartzite. Dark green amphbolite gneiss, comprised of equal parts plagioclase and actinolite, is commonly intercalated with the quartz-feldspar gneiss. These older rocks are cut by narrow quartz-feldspar dykes and sills. The north end of the Flex Zone, in the vicinity of 10-240 and 241, is underlain by a quartz-feldspar porphyry stock at depth.





Guinness management is extremely pleased with these initial results. Consulting geologist John Hiner commented, “We are well pleased with the level of gold and silver values, and the values match well with previous results.  Although these intersections are not true widths, we have confirmed the mineralized zones in all five holes, and have increased mineralized thicknesses in three of the five holes reported to date. These zones are substantially wider than has been reported previously, and we believe we have now demonstrated that there is an excellent opportunity to define a bulk-mineable deposit at this project.”





2010 Assays Set #2:





The Company reported on the final eight holes completed during its 2010 drill program at the Company’s Charlotte Project near Mt. Nansen in the Yukon Territory, Canada. As reported in the news release dated October 18, 2010, core drilling was conducted to confirm prior drill intercepts and to expand on known gold and silver mineralization along strike and downdip. The Company completed a total of 1,451.68 metres in fourteen diamond drill holes in the Flex zone, one of five known mineralized zones on the property.








27
 Table of Contents








Core holes DDH-10-246 through DDH-10-253 were drilled as twins of previous holes or infills along strike.  Holes 246 and 247 were planned to confirm previously encountered mineralization at the southeast end of the Flex Zone.  The other holes were drilled to test for extensions of gold and silver mineralization downdip from known mineralization.  The holes are described in more detail as follows:





DDH-10-246 was drilled to confirm the southeast extension of the Flex Zone.  However due to poor hole conditions, the hole was abandoned before intersecting the target mineralized zone.





DDH-10-247 was a 35 metre step out to the northwest of the prior hole, and was planned as an infill hole on the Flex Zone.  This hole also had to be abandoned due to poor ground conditions prior to reaching the mineralized zone.





DDH-10-248 was drilled from the same drill pad as hole DDH-10-240, which was a twin of hole 98-193.  This hole was steepened to pierce the mineralized zone 75 metres downdip from the surface and 25 metres below hole 98-193.





DDH-10-249 was located to test a 25 metre downdip extension of mineralization encountered in historic hole 98-192.





DDH-10-250 was located at the same location as DDH-10-249, but steepened to test mineralization 75 metres downdip from the surface and 25 metres below hole 98-192.





DDH-10-251 was drilled at the same location as historic hole 98-195, but steepened to test the mineralization at 75 metres depth.





DDH-10-252 was drilled at the same site as historic hole 98-196, but steepened to test the mineralized zone at 75 metres depth.





DDH-10-253 was located 50 metres west of DDH-10-240 and DDH-10-248 to test gold and silver mineralization at 125 metres depth.





Gold and silver assays for the holes are tabulated below:





Hole Number
Azimuth

(degrees)
Dip

(Degrees)

From:
To:
Length

(m)
Au

(ppm)
Ag

(ppm)DDH-10-246
078
-50

26.3
42.05
15.75
0.71
49.0Including:
37.50
38.80
1.30
2.90
3.1038.80
39.25
0.45
5.68
7.40Twin of hole 98-239




8.40
3.63
114DDH-10-247
078
-50



No Significant Assays35 metre step-out from of hole 98-239



8.40
3.63
114DDH-10-248
078
-65

83.30
91.90
8.60
3.25
241Including:
83.30
84.00
0.70
1.36
13.184.00
85.00
1.00
3.35
12986.70
87.45
0.75
5.00
18887.45
88.45
1.00
5.70
630


(continued)






28
 Table of Contents







Hole Number
Azimuth

(degrees)
Dip

(Degrees)

From:
To:
Length

(m)
Au

(ppm)
Ag

(ppm)DDH-10-248
078
-65

101.4
115.65
14.25
2.13
82.8Including:
112.65
113.5
0.85
22.6
1078Test Below 98-193




12.3
6.8
267DDH-10-249
078
-48.8

76.15
83.65
7.50
3.81
38.2Including:
77.15
78.15
1
3.02
12578.15
78.65
0.50
6.06
22.5DDH-10-249
078
-48.8

86.4
91.4
5.00
3.52
119Including:
87.40
87.90
0.50
24.4
1058Test below 98-192




14.3
1.01
29.3DDH-10-250
076
-65

83.00
100.40
17.40
2.34
78.7Including:
91.40
92.12
0.72
6.00
49292.99
93.65
0.66
4.56
8.7093.65
94.10
0.45
23.1
52794.72
96.95
2.23
5.10
149DDH-10-250
076
-65

111.5
112.5
1.00
0.15
26.6DDH-10-250
076
-65

115
119.8
4.80
0.51
22.9Test Below 98-192




14.30
1.01
29.3DDH-10-251
078
-65

101.5
116.74
15.24
0.72
34.5Including:
114.75
116.74
1.99
2.05
184Test below 98-195




13.6
1.2
52.7DDH-10-252
078
-65

96.15
101.6
5.45
1.12
39.9Including:
99
100.2
1.2
2.22
86.6Test below 98-196




2.5
1.65
73.4DDH-10-253
078
-65

157.55
163.98
6.43
1.40
17.8Including:
161.27
162.55
1.28
2.07
12.7162.55
163.98
1.43
3.02
4.00Step-out test of 98-193




12.3
6.8
267





2010 Assays Set #3:





The Company reported on the assay results from trenching numerous mineralized zones at the Company’s Charlotte Project, Yukon Territory, Canada. Trenches were cut at the Huestis, Webber, Cabin, Orloff-King, Dickson, and GRW zones. Trench results confirm or extend known mineralization at the Huestis and Webber zones.  Trenches at the Cabin, Orloff-King, and GRW zones have successfully delineated new zones of gold and silver mineralization that is open to depth and along strike.  In particular, trenching at the GRW zone identified gold and silver in structural settings similar to the Flex zone (although of lower grade), which was drilled earlier in 2010 and additionally disclosed the presence of copper in intrusive rocks that were identified in the GRW trenches.  Selected trench results are presented in the table below:











29
 Table of Contents






Zone
Trench #
From
To
Width
Au (g/t)
Ag (g/t)Orloff King
OK10-1
45.5
49.2
3.7
1.50
40.3Orloff King
OK10-2
47.8
50.7
2.9
2.12
NaOrloff King
OK10-5
11.4
12.1
0.7
7.05
34.7Orloff King
OK10-9
57.5
65.5
8.0
1.57
5.17Cabin
CAB10-1
40.1
43
2.9
1.353
15.7Webber
WEB10-2
21.0
23.4
2.2
1.43
4.03





Virtually all of the trenches contained zones of anomalous gold and silver, ranging from 0.2 grams/tonne (‘g/t’) up to the level of results presented above. At Orloff King, Cabin, Webber, and GRW zones, the mineralized trends can be tracked from trench to trench. Work on trace element geochemistry continues, but early analysis suggests the presence of geochemical zonation that may be attributed to the presence of porphyry copper-gold mineralization in the vicinity of the GRW zone.





Trenching totalled 2,243 metres in 20 trenches. Of these, 16 trenches totalling 1,917 metres bottomed in bedrock while the remaining four trenches bottomed in permafrost and may be completed in following seasons. Ten trenches totalling 1,100 metres were cut on the Orloff-King Zone, of which 9 trenches totalling 1,052 metres reached bedrock. A total of five trenches, combined for 665 metres, were cut on the GRW zone and, of these, three bottomed in bedrock for a total of 466 metres completed to bedrock. The remaining five trenches were cut on the Webber, Huestis, and Cabin zones, and on geochemical anomalies scattered across the property.  All but one of these five trenches reached bedrock for a total of 400 metres of trenching completed to bedrock. A total of 554 unique samples were collected from trenches and submitted for assay.





Other Recent Developments





Nantawa Modification Agreement





On October 12, 2010, Guinness signed the Nantawa Modification Agreement with Eagle Trail Properties Inc. (“ETPI”) in which Guinness received full vesting of a 49% interest in 175 full or fractional mineral claims/leases (now renamed the "Charlotte Project") located in the Mount Nansen area of the Whitehorse Mining District of the Yukon Territory, Canada (the “Mineral Claims”). The other 51% interest in the Mineral Claims was retained by ETPI. The Mineral Claims had been part of the Nantawa Agreement signed between the Company and ETPI on November 19, 2009 and amended February 4, 2010, under which the Company acquired the right to purchase the Mineral Claims and an additional set of 47 mineral claims/leases (the “Tawa Claims”) from ETPI for total consideration of US$1,005,668 (comprised of: US$943,868 cash, plus 60,000,000 restricted common shares of Guinness valued at US$0.00103 per share for a total share value of $61,800).





Cash payments under the Nantawa Agreement had been scheduled to be made in two equal installments of US$471,934, the first due by May 30, 2010 and the second due by February 28, 2011. The Company met its first payment, but projected it would not have the resources to fulfill the second payment by February 28, 2011 and the Board determined it was in the best interests of the Company to negotiate revised purchase terms from ETPI for the Mineral Claims. To provide consideration to ETPI, the Company agreed to waive its rights under the Nantawa Agreement to the Tawa Claims, which had lapsed while in trust with ETPI.








30
 Table of Contents





In sum, the Nantawa Modification Agreement has resolved the Tawa Claims matter between the parties and has provided the Company an immediate vesting of a 49% interest in the Mineral Claims without the requirement to make further payments to ETPI.





A copy of the Nantawa Modification Agreement was filed as an Exhibit to a Form 8-K on October 12, 2010 and is incorporated herein by reference.




Staff changes




Effective October 12, 2010, Mr. John Hiner resigned his positions as Chief Geologist, Vice


President, Secretary and Treasurer for personal reasons and has remained with the Company as our primary geological consultant. On October 12, 2010, Mr. Nigel Mattison was appointed as Secretary and Treasurer.





Ansell Agreement





On March 4, 2011, the Company executed an option agreement (the “Ansell Agreement”) with Ansell Capital Corp. (“Ansell”), ETPI and two individuals (the “Additional Parties”) which will provide funding for the Charlotte Project. Subject to the terms of the Ansell Agreement (incorporated herein by reference), Guinness, ETPI and the Additional Parties (collectively the “CSG Group”), have agreed to grant Ansell an option to acquire up to an 85% undivided interest in the 128 mineral claims which form the Charlotte Project based on Ansell providing financing and expertise for development of the project. Under the Ansell Agreement, ETPI will hold the Charlotte Project claims (the “Properties”) in trust for all parties during the term of the Ansell Agreement. Upon Ansell earning an interest in the Properties, the parties have agreed to form a joint venture to further explore and develop the Properties, all upon and subject to the terms and conditions set out in the Ansell Agreement. Ansell has received the required approval of the Canadian TSX Venture Exchange in connection with the Ansell Agreement and Ansell is now become the Operator of the project and will bear all project expenditures.





Ansell Capital Corp. (TSX-V: ACP) is a publicly traded Canadian exploration company focused on exploring and developing gold/silver properties with the potential to host world class, economic deposits. Ansell's current projects are the Charlotte Project, Yukon, and the Kuyakuz Mountain Project, located in British Columbia. More information on Ansell can be found at: http://www.ansellcapital.com


























31
 Table of Contents








Results of Operations for the Fiscal Years ended May 31, 2011 and May 31, 2010 and the Exploration Stage Period of July 15, 2005 to May 31, 2011:





Our operating results for the years ended May 31, 2011 and May 31, 2010 and the Exploration Stage Period of July 15, 2005 to May 31, 2011 (the ‘Exploration Stage’) are summarized as follows:





May 31, 2011


May 31, 2010


Exploration

StageRevenue

$
-


$
-


$
-Expenses (including interest expense)

$
1,246,654


$
1,393,308


$
2,756,262Debt cancelation gain non-cash gain

$
(471,934
)

$
-


$
(471,934
)Net Loss

$
(774,720
)

$
(1,396,663
)

$
(2,284,328
)





Revenues





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





Expenses





Exploration Expenses


Exploration expenses were $850,347 and $177,415, respectively for the years ended May 31, 2011 and May 31, 2010. For the year ended May 31, 2011, exploration expenses included a non-cash charge of $50,265 related to the expensing of vested stock options. Exploration expenses for the Exploration Stage totaled $1,027,762. During the current year period, exploration expenses related to fees paid for geological consulting services and geological general contractor fees and expenditures. We do not expect to incur significant exploration expenses during the next twelve months.





Professional Fees


Profession fees were $301,952 and $136,206, respectively for the years ended May 31, 2011 and May 31, 2010. For the year ended May 31, 2011, professional fees included a non-cash charge of $169,473 related to the expensing of vested stock options. Professional fees for the Exploration Stage totaled $517,122. During the current year period, professional fees included fees paid to our CEO, Secretary and Treasurer, and were incurred for expenses for legal, auditor and accounting fees. In the next twelve months, we project professional fees will substantially decrease.





Administrative Expenses


Administrative expenses were $29,988 and $27,723, respectively for the years ended May 31, 2011 and May 31, 2010, respectively. During the Exploration Stage Period administrative expenses totaled $71,025. During the current period administrative fees were primarily composed of office expenses, bank charges and filing fees related to our SEC filings. We expect administrative fees to decrease moderately during the coming year.











32
 Table of Contents








Investor Relations


Investor Relations expenses comprise costs for press releases, maintenance of the Company’s website and other investor information initiatives. During the years ended May 31, 2011 and May 31, 2010, these expenses totaled $64,367 and $46,296, respectively. For the Exploration Stage Period, Investor Relations expenses totaled $110,663. We anticipate Investor Relations expenses decrease substantially during the coming year.





Impairment Losses on Mineral Properties


There were no impairments losses recorded for the year ended May 31, 2011. During the year ended May 31, 2010, the Company formalized its debt to ETPI by signing a promissory note in the amount of $943,868 plus share payments. To account for this event, $1,005,668 was entered as a mineral property asset, with a corresponding accounts payable entry. Additionally, to conform with generally accepted accounting principles, pertaining to the classification of the mineral properties as assets, an impairment charge of $1,005,668 was entered against this asset based on the Company’s impairment analysis as of May 31, 2010.





On April 6, 2006 we purchased a uranium property in Saskatchewan, Canada and on July 17, 2008 determined not to proceed with this property and formally abandoned the project. This abandonment is recorded in our financial statements as an Asset Impairment and totaled $15,985 and is included in the total loss for the Exploration Stage Period of $1,021,653.





Net Loss





We incurred a net loss of $(774,720) for the twelve months ended May 31, 2011 compared with a net loss of $(1,396,663) for the same period ended May 31, 2010. The net loss for the year ended May 31, 2011 included a non-cash gain of $471,934 related to the cancelation of the Note Payable owing to ETPI. The net loss for the Exploration Stage Period totaled $(2,284,328).





Liquidity and Capital Resources





Our financial position as at May 31, 2011 and May 31, 2010 are as follows:




Net Working Capital


As at

May 31, 2011


As at

May 31, 2010Current Assets

$
57,501


$
1,164,953Current Liabilities


935



559,261Net Working Capital


56,566



605,692





Our net working capital decreased from 605,692 at May 31, 2010 to $56,566 at May 31, 2011 as a result of funds expended for our exploration program.




Cash Flows




Year ended

May 31, 2011


Year ended

May 31, 2010Net cash (used) by Operating Activities

$
(924,701
)

$
(489,192
)Net cash (used) by Investing Activities


-



(471,934
)Net cash provided by Financing Activities


-



1,913,715Increase (Decrease) in Cash during the Year


(918,845
)


952,589Cash, Beginning of Year


973,227



20,638Cash, End of Year


54,382



973,227











33
 Table of Contents








Since the date of our inception to May 31, 2011, we have raised $2,053,500 though private placements of our common shares. As of May 31, 2011 we had cash on hand of $54,382 and prepaid expenses of $3,119.





Purchase of Significant Equipment





We currently do not have plans to purchase any significant equipment over the next twelve months.





Personnel Plan





We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors). We do and will continue to outsource contract employment as needed.





Off-Balance Sheet Arrangements





There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.





Material Events and Uncertainties





Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in mineral resource markets. The continuation of our business is dependent upon obtaining further financing, a successful program of exploration, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.





There are no assurances that we will be able to obtain further funds required for our continued operations. We will pursue various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.





Employees





As of May 31, 2011, we had two employees and used contracted services to perform geological work, legal services and our bookkeeping. Going forward, the Company will use consultants with specific skills to assist with various aspects of its project evaluation, due diligence, acquisition initiatives, corporate governance and property management.














34
 Table of Contents





Critical Accounting Policies




The Company’s financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.




Our significant accounting policies are summarized in NOTE 2 of our financial statements. While all these significant accounting policies impact its financial condition and results of operations, the Company views certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on the Company’s financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.





Off-Balance Sheet Arrangements





The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.








ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We have not entered into derivative contracts either to hedge existing risk or for speculative purposes.







ITEM 8.       FINANCIAL STATEMENTS






INDEX TO FINANCIAL STATEMENTS





PageReport of Independent Registered Public Accounting Firm
36Financial Statements for the years ended May 31, 2011 and May 31, 2010 and for the Exploration Stage of July 15, 2005 to May 31, 2011:Balance Sheets
37Statements of Operations
38Statement of Stockholders’ Equity
39Statements of Cash Flows
40Notes to Financial Statements
42








35
 Table of Contents





GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)




MADSEN & ASSOCIATES CPA’s INC.
684 East Vine Street, #3Certified Public Accountants
Murray, Utah, 84107Telephone 801-268-2632Fax 801-262-3978





To the Board of Directors and


Stockholders of Guinness Exploration, Inc. and Subsidiary


(An Exploration Stage Company)





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





We have audited the accompanying consolidated balance sheets of Guinness Exploration, Inc. and Subsidiary (An Exploration Stage Company) (The Company) as of May 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended May 31, 2011, and for the period from July 15, 2005 (date of inception) to May 31, 2011. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Guinness Exploration, Inc. and Subsidiary (An Exploration Stage Company) as of May 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended May 31, 2011, and the period from July 15, 2005 (date of inception) to May 31, 2011, in conformity with accounting principles generally accepted in the United States of America.





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company will need additional working capital for its planned activity, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in the notes to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.








“Madsen & Associates, CPA’s Inc.”


Murray, Utah


August 26, 2011














36
 Table of Contents








GUINNESS EXPLORATION, INC.AND SUBSIDIARY


(An Exploration Stage Company)




Consolidated Balance Sheets




May 31, 2011


May 31, 2010ASSETSCURRENT ASSETSCash

$
54,382


$
973,227Prepaid expenses


3,119



191,726Total current assets


57,501



1,164,953OTHER ASSETSMineral properties (Notes 2, 4, and 7)


—



—Total other assets


—



—Total assets

$
57,501


$
1,164,953LIABILITIES AND STOCKHOLDERS’ EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses

$
935


$
87,327Note payable (Note 6)


—



471,934Total current liabilities


935



559,261STOCKHOLDERS’ EQUITYPreferred stock, 100,000,000 shares with par value $0.001 authorized,zero shares issued and outstanding


—



—Common stock, 500,000,000 shares with par value $0.001 authorized,129,325,000 and 134,325,000 shares issued and outstanding atMay 31, 2011 and May 31, 2010 respectively (Notes 2 and 9)


129,325



134,325Paid-in Capital (Note 9)


2,205,713



1,980,975Accumulated deficit in the exploration stage


(2,284,328
)


(1,509,608
)Accumulated other comprehensive income (Note 2)


5,856



—Total stockholders’ equity


56,566



605,692Total liabilities and stockholders’ equity

$
57,501


$
1,164,953











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


consolidated financial statements


37
 Table of Contents





GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)




Consolidated Statements of Operations and Comprehensive Loss





Year ended

May 31, 2011


Year ended

May 31, 2010


July 15, 2005

(inception)

through

May 31, 2011EXPENSES:Exploration costs (Note 10)

$
850,347


$
177,415


$
1,027,762Professional fees (Note 10)


301,952



136,206



517,122Administrative expenses


29,988



27,723



71,025Investor relations


64,367



46,296



110,663Impairments mineral properties


—



1,005,668



1,021,653Total expenses

$
1,246,654


$
1,393,308


$
2,748,225Net (loss) from Operations

$
(1,246,654
)

$
(1,393,308
)

$
(2,748,225
)OTHER INCOME (EXPENSE):Cancelation of debt relating to property  purchase


471,934



—



471,934Interest expense


—



(3,355
)


(8,037
)NET (LOSS)

$
(774,720
)

$
(1,396,663
)

$
(2,284,328
)Loss per common share, basic and diluted (Note 2)

$
(0.01
)

$
(0.01
)

$Weighted average shares outstanding (Note 2 and 9)


131,831,849



133,926,648OTHER COMPREHENSIVE (LOSS):Net loss

$
(774,720
)

$
(1,396,663
)

$
(2,228,328
)Foreign currency translation adjustment


5,856



-



5,856Total other comprehensive (loss)

$
(768,864
)

$
(1,396,663
)

$
(2,278,472
)






































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


consolidated financial statements


38
 Table of Contents





GUINNESS EXPLORATION, INC.AND SUBSIDIARY


(An Exploration Stage Company)





Consolidated Statement of Stockholders’ Equity


From July 15, 2005 (Inception) through May 31, 2011




Common

Shares


Common

Stock


Paid-in

Capital


Accumulated

Other

Comprehensive

Income


Deficit

Accumulated During

Exploration

Stage


Total

Stockholders’

EquityCommon shares issued for cash at $0.001 on February 7, 2006


39,000,000


$
39,000


$
(36,000
)

$
—


$
—


$
3,000Common shares issued for cash at $0.02 during the Periodended May 31, 2006


32,825,000


$
32,825


$
17,675


$
—


$
—


$
50,500Net loss for the period from July 15, 2005 (inception)to May 31, 2006


—


$
—


$
—


$
—


$
(848
)

$
(848
)Balance, May 31, 2006


71,825,000


$
71,825


$
(18,325
)

$
—


$
(848
)

$
52,652Net loss for year ended May 31, 2007


—


$
—


$
—


$
—


$
(51,071
)

$
(51,071
)Balance, May 31, 2007


71,825,000


$
71,825


$
(18,325
)

$
—


$
(51,919
)

$
1,581Net loss for year ended May 31, 2008


—


$
—


$
—


$
—


$
(37,913
)

$
(37,913
)Balance, May 31, 2008


71,825,000


$
71,825


$
(18,325
)

$
—


$
(89,832
)

$
(36,332
)Net loss for year ended May 31, 2009


—


$
—


$
—


$
—


$
(23,113
)

$
(23,113
)Balance, May 31, 2009


71,825,000


$
71,825


$
(18,325
)

$
—


$
(112,945
)

$
(59,445
)Common shares issued for property purchase onDecember 29, 2009


60,000,000



60,000



1,800



—



—



61,800Common shares issued for cash at $0.77 on February 10, 2010


1,875,000



1,875



1,441,875



—



—



1,443,7501,875,000 common share purchase warrants issued at $0.03 per warrant on February 10, 2010


—



—



56,250



—



—



56,250Common shares issued for cash at $0.75 May 10, 2010


625,000



625



468,125



—



—



468,750625,000 common share purchase warrants issued at $0.25 per warrant on May 10, 2010


—



—



31,250



—



—



31,250Net loss for year ended May 31, 2010


—


$
—


$
—


$
—


$
(1,396,663
)

$
(1,396,663
)Balance, May 31, 2010


134,325,000


$
134,325


$
1,980,975


$
—


$
(1,509,608
)

$
605,692Common shares submitted for cancellation on

November 30, 2010


(5,000,000
)


(5,000
)


5,000



—



—



—Additional Paid-In Capital relating to 2,225,000 options vestedon May 31, 2011


—



—



219,738



—



—



219,738Foreign currency translation adjustment


—


$
—


$
—


$
5,856


$
—


$
5,856Net loss for year ended May 31, 2011


—


$
—


$
—


$
—


$
(774,720
)

$
(774,720
)Balance, May 31, 2011


129,325,000


$
129,325


$
2,205,713


$
5,856


$
(2,284,328
)

$
56,566

















The accompanying notes to financial statements are an integral part of these consolidated financial statements


39
 Table of Contents





GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)




Consolidated Statements of Cash Flows





Year ended

May 31, 2011


Year ended

May 31, 2010


July 15, 2005

(inception)

through

May 31, 2011Cash flows from operating activities:Net loss for the period

$
(774,720
)

$
(1,396,663
)

$
(2,284,328
)Reconciling adjustments:Adjustments to reconcile net lossto net cash used in operating activities:Gain on Cancelation of debt


(471,934
)


—



(471,934
)Expense related to vesting of stock options


219,738



—



219,738Net change in operating assets and liabilitiesPrepaid expenses


188,607



(185,524
)


(3,119
)Accounts payable and accrued expenses


(86,392
)


87,327



935Mineral property impairments


—



1,005,668



1,021,653Net cash (used) by operating activities


(924,701
)


(489,192
)


(1,517,055
)Cash flows from investing activities:Purchase of Mineral Properties


—



(471,934
)


(487,919
)Net cash (used) by investing activities


—



(471,934
)


(487,919
)Cash flows from financing activities:Common stock issued for cash


—



2,000,000



2,053,500Proceeds from loans by stockholders


—



—



86,285Re-payments for loans by stockholders


—



(86,285
)


(86,285
)Net cash provided by financing activities


—



1,913,715



2,053,500Effect of foreign currency translation


5,856



—



5,856Net increase (decrease) in cash


(918,845
)


952,589



54,382Cash, beginning of period


973,227



20,638



—Cash, end of period

$
54,382


$
973,227


$
54,382














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


consolidated financial statements




40
 Table of Contents








GUINNESS EXPLORATION,INC. AND SUBSIDIARY


(An Exploration Stage Company)




Consolidated Supplemental Disclosure of Cash Flow Information





Year ended

May 31, 2011


Year ended

May 31, 2010


July 15, 2005

(inception)

through

May 31, 2011Cash paid for interest

$
—


$
8,037


$
8,037








Consolidated Supplemental Disclosure of Non-cash Investing and Financing Activities





Year ended

May 31, 2011


Year ended

May 31, 2010


July 15, 2005

(inception)

through

May 31, 2011Common stock issued for property purchase payment

$
—


$
61,800


$
61,800Note payable issued for property purchase payment

$
—



471,934



471,934



































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


consolidated financial statements


41
 Table of Contents





GUINNESSEXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements






Note 1 – Operations





Organization and Description of Business





Guinness Exploration, Inc. (“Guinness”, “We”, the “Registrant”, or the “Company”) was incorporated in the State of Nevada on July 15, 2005 and incorporated its subsidiary, Nantawa Resources Inc., in Yukon, Canada on November 6, 2009. Guinness Exploration Inc. trades on the OTC-BB under the symbol GNXP. Since inception the Company has not been involved in any bankruptcy, receivership or similar proceedings. Since inception the Company has not been involved in any reclassification, consolidation, or merger arrangements. The financial statements included herein have been prepared by Guinness Exploration, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States and our fiscal year end is May 31st.





Exploration Stage Activities





The Company has been in the exploration stage since its formation and has not yet realized any revenues from its planned operations. The Company was formed for the purposes of acquiring exploration and development stage mineral properties. The Company began exploration operations during fiscal 2010 in Yukon, Canada.








Note 2 – Basis of Presentation and Summary of Significant Accounting Policies





Basis of Presentation





The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.





This summary of significant accounting policies is presented to assist in understanding Guinness Exploration Inc.’s financial statements. The financial statements reflect the following significant accounting policies:





Exploration Stage Company





As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.

















42
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








Exploration Costs and Mineral Property Right Acquisitions





The Company is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities – Mining (AS 930) at each fiscal quarter end. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. Capitalized costs will be amortized using the units-of-production method over the estimated life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.





Consolidation of Financial Statements





These financial statements include the accounts of the Company and its subsidiary Nantawa Resources Inc., on a consolidated basis. All inter-company accounts have been eliminated.





Use of Estimates





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





Basic and Diluted Net Loss per Share





Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding, to include common stock equivalents.





At May 31, 2011, common stock equivalents outstanding included 2,500,000 common share purchase warrants. These warrants were issued as part of unit offerings of 1,875,000 units and 625,000 units (each with identical terms) which were completed on February 10, 2010 and May 10, 2010 respectively, which comprised a total of 2,500,000 Units priced at US$0.80 per Unit. Each Unit consists of one share of common stock of Guinness (each, a "Share"); and one common share purchase warrant (each a “Warrant”) subject to adjustment for stock splits, or stock dividends. Each whole Warrant is non-transferable and entitles the holder to purchase one common share of Guinness (each, a “Warrant Share”), as presently constituted, for a period of twenty four months beginning February 10, 2010 or May 10, 2010 at a price per Warrant Share of US$2.00. These Units are being issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and Guinness did not engage in any general solicitation or advertising regarding this Unit offering.





Diluted and basic loss per share are the same, as any inclusion of common stock equivalents would be anti-dilutive.










43
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








Estimated Fair Value of Financial Instruments





The  carrying  value  of  accounts  payable,  and  other  financial  instruments reflected  in  the  financial  statements  approximates  fair  value  due  to the short-term maturity of the instruments. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.





Income Taxes





The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted rates in effect in the years during which the differences are expected to reverse and upon the possible realization of net operating loss carry-forwards. Additionally, the Company has not recognized any amount for a tax position taken or expected to be taken on its tax return, or for any interest or penalties.





Valuation of Long-Lived Assets





The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of un-depreciated balances through measurement of undiscounted operation cash flows on a basis consistent with accounting principles generally accepted in the United States of America.





Start-up Costs





The Company expenses the cost of start-up activities, including organizational costs, as those costs are incurred.





Foreign Currency





The books of the Company are maintained in United States dollars and this is the Company’s functional and reporting currency. Adjustments to translate the Company’s Canadian dollar cash account to the United States dollar are recorded in other comprehensive income. Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Consolidated Statements of Operations:





(i)
Monetary items are recorded at the rate of exchange prevailing as at the balance sheet date;


(ii)
Non-Monetary items including equity are recorded at the historical rate of exchange; and


(iii)
Revenues and expenses are recorded at the period average in which the transaction occurred.











44
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








Cash and Cash Equivalents





The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.





Risks and Uncertainties





The Company is subject to substantial business risks and uncertainties inherent in starting a new business. There is no assurance that the Company will be able to generate sufficient revenues or obtain sufficient funds necessary for launching a new business venture.





Recent Accounting Pronouncements





We do not expect the adoption of any recent accounting pronouncements to have a material effect on our financial statements.




Other





The Company consists of one reportable business segment.





We did not have any off-balance sheet arrangements as of May 31, 2011.








Note 3 – Going Concern





Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. However, the Company had a net loss for the twelve month period ended May 31, 2011, of $(774,720). Additionally it has accumulated operating losses since its inception and has limited business operations, which raises substantial doubt about the Company’s ability to continue as a going concern. The continuation of the Company is dependent upon the continuing financial support of investors and stockholders of the Company. As of May 31, 2011, we projected the Company would need additional cash resources to operate during the upcoming 12 months. The Company intends to attempt to acquire additional operating capital through private equity offerings to the public and existing investors to fund its business plan. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.













45
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








Note 4 – Acquisition of Mineral Properties





Nantawa Agreement, as amended





(NOTE: During the year ended May 31, 2011, the Nantawa Agreement has been superseded by The Nantawa Modification Agreement and the corresponding Ansell Agreement (see Note 5). Data regarding the Nantawa Agreement are provided here for reference.)





On November 19, 2009, and as amended on February 4, 2010, the Company signed the Nantawa Agreement for purchase of a 65% ownership interest in two exploration properties in Yukon, Canada. The agreement also includes an option (the “Option”) for Guinness to increase its ownership in the properties by 35%. A copy of which agreement, and the February 4, 2010 Amendment (collectively the “Agreement”), was filed as an Exhibit to a Form 8-K filed April 9, 2010. The terms of the Nantawa Agreement specify Guinness’ wholly owned Yukon subsidiary Nantawa Resources Inc. will receive a 65% interest in the Nantawa properties in return for payment to Eagle Trail Properties Inc. (‘ETPI’) of $1,005,668 (comprised of: $943,868 cash, plus 60,000,000 restricted common shares of Guinness valued at US$0.00103 per share for a total share value of $61,800). These payments are to be made over a 12 month period in two equal installments of $471,934; plus immediate issuance to ETPI of the 60 million restricted common shares. Subsequently, Guinness was required to make a deposit of $951 to maintain the Option and then incur exploration expenditures of $1,895,735 million over a two year period to earn an additional 35% interest. ETPI will retain a 3% Net Smelter Royalty. To confirm the cash payments owed by us to ETPI, we provided ETPI with a Promissory Note (the “Note”), stating our indebtedness to ETPI in the amount of $943,868. This Promissory Note was filed as an Exhibit with a Current Report on Form 8-K on April 9, 2010. To account for this event, $1,005,668 was entered as a mineral property asset, with a corresponding note payable entry. As of May 31, 2010, the Company had insufficient geological evidence, and therefore performed an impairment analysis. Based on that analysis, the Company has recorded an impairment loss on the mineral property asset. On December 29, 2009, to fulfill payment terms of the Nantawa Agreement, the Company issued 60,000,000 restricted shares of its common stock valued at $0.00103 per share to ETPI and made payment of $951 to ETPI. On February 12, 2010, the Company paid ETPI $471,934.





Nantawa Modification Agreement


On October 12, 2010, the Company signed the Nantawa Modification Agreement with ETPI in which Guinness received full vesting of a 49% interest in 175 full or fractional mineral claims/leases located in the Mount Nansen area of the Whitehorse Mining District of the Yukon Territory, Canada (the “Mineral Claims”). The other 51% interest in the Mineral Claims was retained by ETPI. The Mineral Claims had been part of the Nantawa Agreement signed between the Company and ETPI on November 19, 2009 and amended February 4, 2010, under which the Company acquired the right to purchase the Mineral Claims and an additional set of 47 mineral claims/leases (the “Tawa Claims”) from ETPI for total consideration of US$1,005,668 (comprised of: US$943,868 cash, plus 60,000,000 restricted common shares of Guinness valued at US$0.00103 per share for a total share value of $61,800). A remaining cash payment of $471,934 under the Nantawa Agreement was due by February 28, 2011 and the Company projected it would not have the resources to fulfill the second payment by February 28, 2011 and the Board determined it was in the best interests of the














46
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








Company to negotiate revised purchase terms from ETPI for the Mineral Claims. To provide consideration to ETPI, the Company agreed to waive its rights under the Nantawa Agreement to the Tawa Claims, which had lapsed while in trust with ETPI. The Nantawa Modification Agreement had the net effect of resolving the Tawa Claims matter between Guinness and ETPI and has provided the Company an immediate vesting of a 49% interest in the Mineral Claims without the requirement to make further payments to ETPI.





Due to the elimination by ETPI on October 12, 2010 of the requirement for a payment by Guinness of $471,934 by November 30, 2010, these financial statements for the year ended May 31, 2011 include an entry to eliminate this liability. A corresponding cancelation of debt income of $471,934 has also been recorded. Per the terms of the Nantawa Modification Agreement, ETPI has also submitted to the Company, and the Company has cancelled, 5,000,000 of the 60,000,000 restricted common shares previously issued to ETPI as a property payment. This cancellation was recorded through a reduction in Paid in Capital of $5,000.








Note 5 – Ansell Agreement





On March 4, 2011, the Company executed an option agreement (the “Ansell Agreement”) with Ansell Capital Corp. (“Ansell”), ETPI and two individuals (the “Additional Parties”) which will provide funding for the Charlotte Project (formerly named the “Nantawa Project”) in the Mount Nansen area of the Whitehorse Mining Division, of the Yukon Territory, Canada.




Subject to the terms of the Ansell Agreement (incorporated herein by reference), Guinness, ETPI and the Additional Parties (collectively the “CSG Group”), agreed to grant Ansell an option to acquire up to an 85% undivided interest in the 128 mineral claims which form the Charlotte Project based on Ansell providing financing and expertise for development of the project. Under the Ansell Agreement, ETPI will hold the Charlotte Project claims (the “Properties”) in trust for all parties during the term of the Ansell Agreement. Upon Ansell earning an interest in the Properties, the parties have agreed to form a joint venture to further explore and develop the Properties, all upon and subject to the terms and conditions set out in the Ansell Agreement. Ansell is now the Operator of the project and will bear all project expenditures going forward.








Note 6 – Note Payable





To confirm the cash payments owed by us to ETPI under the Nantawa Agreement, we provided ETPI with a Promissory Note, stating our indebtedness to ETPI in the amount of $943,868. To fulfill our first payment, on February 12, 2010 the Company paid to ETPI $471,934, which was prior to the first installment payment deadline of May 31, 2010. The second installment of  $471,934 on the Note was waived by ETPI under that Nantawa Modification Agreement and no further property payments are owing to ETPI.










47
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








Note 7 – Impairments on Mineral Properties





On July 17, 2008, the Company determined it should abandon the mineral property assetwhich consisted of 100% ownership of a uranium mineral property staked as Saskatchewan Claim number S-108991. A related impairment loss of $15,985 is reflected in the attached statement of operations for the year ended May 31, 2010.





As detailed in Note 4, on November 19, 2009, and as amended on February 4, 2010, the Company signed the Nantawa Agreement for purchase of a 65% ownership interest in two exploration properties in Yukon, Canada. To conform with generally accepted accounting principles, pertaining to the classification of the mineral properties as assets, an impairment charge of $1,005,668 was entered against this asset based on the Company’s impairment analysis as of May 31, 2010.








Note 8 – Income Taxes





The Company is subject to federal income taxes in the US and Canada. The Company has had no net income and therefore has not paid nor has any income taxes owing in the US or Canada.





Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company's deferred tax assets consist entirely of the benefit from net operating loss carry-forwards. The Company's deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carry-forwards.  Net operating loss carry-forwards may be further limited by a change in company ownership and other provisions of the tax laws.





Due to the change of control of the Company during the year ended May 31, 2011, under Section 382 of the Internal Revenue Code, there may be limitations on the amount of Net Operating Loss carryforwards the Company will be able to use in the future. Some of the loss carryforwards may be unusable.





Income taxes at the statutory rate are reconciled to the Company’s actual income taxes as follows:





Income tax benefit at statutory rate resulting from net operating Loss carryforward


(35
%)Deferred income tax valuation allowance


35
%Actual tax rate


0
%














48
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








The Company's deferred tax assets, valuation allowance, and change in valuation allowance are as follows (“NOL” denotes Net Operating Loss):




Year Ending

Estimated

NOL

Carry-forward


NOL

Expires


Estimated

Tax

Benefit

from NOL


Valuation

Allowance


Net Tax

Benefit2006

$
(848
)


2026


$
297


$
(297
)

$
—2007


(51,071
)


2027



17,875



(17,875
)

$
—2008


(37,913
)


2028



13,270



(13,270
)

$
—2009


(23,113
)


2029



8,090



(8,090
)

$
—2010


(1,396,663
)


2029



488,832



(488,832
)

$
—2011


(774,720
)


2030



271,152



(271,152
)

$
—$
(2,284,328
)





$
799,516


$
(799,516
)

$
—





The total valuation allowance for the year ended May 31, 2011 was $(799,516) which increased by $(271,152) for the year ended May 31, 2011.








Note 9 – Common Stock





On February 7, 2006, the Company issued 39,000,000 shares of its common stock to its President for cash. This transaction was valued at a board approved value of $0.001 per share for total proceeds of $3,000.





During the fiscal year ending May 31, 2006, the Company issued 32,825,000 shares of its common stock in a private offering at $0.02 per share for total proceeds of $50,500.





On May 26, 2008, the Company declared a 12 for 1 stock dividend. The Record date and Payment date for this stock dividend were June 4, 2008 and June 6, 2008 respectively. The Company instructed its Transfer Agent to round up to one for any fractional interest which resulted in the calculation of the dividend. This dividend had the effect of increasing the issued and outstanding share capital of the Company from 5,525,000 shares to 71,825,000 shares. All references in these financial statements to stock issued and stock outstanding have been retroactively adjusted as if the stock dividend had taken place on July 15, 2005 (inception).





On November 30, 2009, the Company submitted to a vote of the Company's security holders a proposal to increase the authorized common shares limit of the Company from 75,000,000 to 500,000,000 and add authorization for issuance of up to 100,000,000 preferred shares, par value $0.001, for which the Board of Directors may fix and determine the designations, rights, preferences or other variation to each class or series within each class of preferred shares. Shareholder approval for this change was received November 26, 2009 and a Definitive 14C was filed with the Securities Exchange Commission on December 9, 2009.














49
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








On December 29, 2009 to fulfill a Nantawa Agreement payment term, the Company issued 60,000,000 restricted shares of its common stock valued at US$0.00103 per share to Eagle Trail Properties, Inc. representing aggregate proceeds of US$61,800. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended and the Company did not engage in any general solicitation or advertising regarding these shares.





On February 10, 2010 the Company completed a Unit offering which raised aggregate proceeds of US$1,500,000 and was comprised a unit (‘Unit’) sale by Guinness of 1,875,000 Units priced at US$0.80 per Unit for one share of common stock in the capital of Guinness (each, a "Share"); and one common share purchase warrant (each a “Warrant”) subject to adjustment.  The US$0.80 per Unit value was allocated US$0.77 to the common stock (closing price of the Company’s stock on the date the agreement was executed, January 26, 2010) and US$0.03 to the share purchase warrant. Each whole Warrant is non-transferable and entitles the holder to purchase one common share of Guinness (each, a “Warrant Share”), as presently constituted, for a period of twenty four months beginning February 10, 2010 at a price per Warrant Share of US$2.00. These Units are being issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and Guinness did not engage in any general solicitation or advertising regarding this Unit offering.





On May 10, 2010 the Company completed a Unit offering which raised aggregate proceeds of US$500,000 and was comprised a unit (‘Unit’) sale by Guinness of 625,000 Units priced at US$0.80 per Unit for one share of common stock in the capital of Guinness (each, a "Share"); and one common share purchase warrant (each a “Warrant”) subject to adjustment. The US$0.80 per Unit value was allocated US$0.75 to the common stock (closing price of the Company’s stock on the date the agreement was executed, April 22, 2010) and US$0.05 to the share purchase warrant. Each whole Warrant is non-transferable and entitles the holder to purchase one common share of Guinness (each, a “Warrant Share”), as presently constituted, for a period of twenty four months beginning May 10, 2010 at a price per Warrant Share of US$2.00. These Units are being issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and Guinness did not engage in any general solicitation or advertising regarding this Unit offering.





Per the terms of the Nantawa Modification Agreement executed on October 12, 2010, on November 30, 2010, ETPI submitted to the Company, and the Company has cancelled, 5,000,000 of the 60,000,000 restricted common shares previously issued to ETPI as a property payment.








Note 10 – Stock Options





On July 12, 2010, the board approved and adopted the Company’s 2010 Equity Incentive Plan (the “Plan”), pursuant to which up to an aggregate of 10,000,000 options with a maximum exercise term of 10 years for 10,000,000 shares of the Corporation’s common stock are reserved for issuance to employees and non-employees, directors of, and consultants to the Company in connection with their retention and/or continued employment by the Company. The Company uses the Fair Value Method to calculate compensation expenses related to its option grants.











50
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








On September 19, 2010, the Board approved option grants to Directors, Officers and staff totalling 4,450,000 Options for purchase of 4,450,000 common shares of the Company. These Options have terms of between 5 to 10 years; exercise prices ranging between $0.33 to $0.363 per share; and all vest in two equal parts on May 31, 2011 and May 31, 2012; or fully in the event of a takeover offer or sale of a significant body of assets of the Company. Total compensation expense for these options grants has been calculated as $439,476 based on a valuation using a Black-Scholes option pricing model.





On May 31, 2011, 2,225,000 options vested under the Plan. This was recorded in these financial statements as an addition of $50,265 to Exploration Expenses and $169,473 to Professional Fees for the year ended May 31, 2011, for a total 2011 options grant compensation expense of $219,738.





The fair value of the options granted were calculated on the date of grant using a Black Scholes option pricing model with the following assumptions: (i) a risk-free interest rate of 0.16% (based on the US 90-day T-Bill rate on grant date); (ii) a dividend yield of zero (which is the projected dividend payment of the Company for the foreseeable future): (iii) a volatility factor of 26% (based on the 12 month standard deviation of Guinness' daily stock closing price); specific exercise prices, which ranged between $0.33 to $0.363 (such prices having been fixed based on the closing stock price on grant date); and an expected life of the options of ten years (which is equal to the term of the options and is the current assumed employment or contracted services tenure of all grantees). The fair value method requires the cost of options to be expensed over the period in which they vest, which in the case of these first option grants is in two equal parts, being one-half on May 31, 2011 and one-half on May 31, 2012. The fair value compensation cost arrived from these calculations has been credited to Additional Paid-In Capital on the Balance Sheet. In the event that the Board determines that any current grantees should be eliminated from the options plan due to events such as resignation or termination, future compensation cost adjustments will be made to reflect decreases in compensation costs related to any such events.





Mr. Alastair Brown, who is President and CEO of the Company and who classifies as a ‘10% shareholder’ for regulatory purposes, has received a grant of 2,000,000 options to purchase 2,000,000 common shares of Guinness at a price of $0.363 per share, with vesting of 1,000,000 options on May 31, 2011 and 1,000,000 options on May 31, 2012.





At may 31, 2011, a total of 4,450,000 options to purchase 4,450,000 shares had been issued. These options were comprised of: 1,500,000 ‘Incentive Stock Options’ issued to employees; 950,000 ‘Non-Qualified Stock Options’ issued to non-employee contractors; and 2,000,000 to Alastair Brown, who is not eligible for ‘Incentive Option status’ because he is a 10% shareholder of the Company.










51
 Table of Contents








GUINNESS EXPLORATION, INC. AND SUBSIDIARY


(An Exploration Stage Company)





Notes to Consolidated Financial Statements








A summary of changes in issued and outstanding stock options for the year ended May 31, 2011 is as follows:





Options

Outstanding


Weighted Average Exercise PriceBalance at May 31, 2010


Nil



-Granted


4,450,000


$
0.343Exercised


Nil



-Cancelled/expired


Nil



-Balance at May 31, 2011


4,450,000


$
0.343





The following table summarizes information about the options issued and outstanding at May 31, 2011:





Options Outstanding


Options ExercisableExercise Prices


Options Outstanding


Weighted Average Exercise Price


Aggregate

Intrinsic

Value


Weighted Average Remaining Contractual Life (years)


Options Outstanding(1)


Weighted Average Exercise Price


Aggregate

Intrinsic

Value


Weighted Average Remaining Contractual Life (years)$
0.330



1,500,000


$
0.330


$
Nil



9.4



750,000


$
0.330


$
Nil



9.4$
0.363



2,950,000


$
0.363


$
Nil



9.4



1,475,000


$
0.363


$
Nil



9.4Totals



4,450,000


$
0.343


$
Nil



9.4



2,225,000


$
0.343


$
Nil



9.4

































52
 Table of Contents








ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





We have had no disagreements with accountants on accounting and financial disclosure.






ITEM 9A.     CONTROLSAND PROCEDURES





Evaluation of Disclosure Controls and Procedures





The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e). The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company's desired disclosure control objectives. In designing periods specified in the SEC's rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company's certifying officer has concluded that the Company's disclosure controls and procedures are not effective in reaching that level of assurance.





At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.





Management's Report on Internal Control over Financial Reporting





Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Section 13a-15(f) of the Securities Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed by, or under the supervision of, the Company's CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in conformity with U.S. generally accepted accounting principles and include those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that 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 (iii) 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.





As of May 31, 2011, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of




53
 Table of Contents








the Treadway Commission (COSO). Based on the criteria established by COSO management concluded that the Company's internal control over financial reporting was not effective as of May 31, 2011, as a result of the identification of the material weaknesses described below.





A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.





Specifically, management identified the following control weaknesses:





(1)  The Company has not properly segregated duties as one or two individuals initiate, authorize, and complete all transactions. The Company has not implemented measures that would prevent the individuals from overriding the internal control system. The Company does not believe that this control weakness has resulted in deficient financial reporting because the Chief Financial Officer is aware of his responsibilities under the SEC's reporting requirements and personally certifies the financial reports;





(2)  The Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software.





Accordingly, while the Company has identified certain material weaknesses in its system of internal control over financial reporting, it believes that it has taken reasonable steps to ascertain that the financial information contained in this report is in accordance with generally accepted accounting principles. Management has determined that current resources would be appropriately applied elsewhere and when resources permit, they will alleviate material weaknesses through various steps.





Remediation Plan


We have identified that additional staff will be required to properly segment the accounting duties of the Company. However, we do not currently have resources to fulfill this part of our plan and will be addressing this matter once sufficient resources are available.





Changes in Internal Control over Financial Reporting


During the fourth quarter of the Company’s fiscal year ended May 31, 2011, no material changes were made to the Company’s internal control over financial reporting





Limitations on the Effectiveness of Controls


The Company has confidence in its revised regime of internal controls and procedures. Nevertheless, the Company’s management (including the Chief Executive Officer and Chief Financial Officer) believes that a control system, no matter how well designed and operated can provide only reasonable assurance and cannot provide absolute assurance that the objectives of the internal control system are met, and no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitation in all internal control systems, no evaluation of controls can provide absolute assurance that all control issuers and instances of fraud, if any, within the Company have been detected.








ITEM 9B.     OTHER INFORMATION





None.









54
 Table of Contents








PART III








ITEM 10.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT




Directors and Executive Officers





The following table sets forth certain information regarding the executive officer and director of Guinness Exploration Inc. as of May 31, 2011.





All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:





Name
Positions Held

with the Company
Age
Date First Elected

or AppointedAlastair Brown
Director, Chair, President and Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer
43
October 19, 2009Nigel Mattison
Director, Secretary & Treasurer
61
January 13, 2010





Business Experience


The following is a brief account of the education and business experience during at least the past five years of each of our directors and executive officers, indicating their principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.





Alastair Brown- President & CEO, CFO, PAO, Board Chair, and Director


From 1986 to 1990, Mr. Brown attended the University of Auckland, New Zealand where he received his Bachelor of Commerce degree in 1990. From 1990 to 2005, Mr. Brown has had a successful business career in a variety of large property developments in New Zealand and Australia.





Nigel Mattison - Director


Nigel Mattison has a strong background in the governance of national and community based organizations. His breadth of skills includes company directorship, management, accounting and auditing, international sales and marketing, strategic planning, public relations and fund raising. Mr. Mattison’s employment background includes senior positions with: Conrad Properties (2005 to 2010); Kuranda Resort and Spa (2003 to 2005); Russley Hotel, Christchurch (1994 – 2000); Pan Pacific Hotels and Resorts, a subsidiary of the Tokyu Corporation, Japan (1998 to 1992); ITT Sheraton (1982 to 1988); Groote Eylandt Mining Company Australia (which is jointly owned by BHP Billiton and Anglo American Corporation) (1975); Lion Nathan Brewing (1970 to 1975); and property development projects, and communications and marketing consulting engagements (1975 to 2003).








55
 Table of Contents








Family Relationships





Because we only have a sole officer and director, there are no family relationships between any director or executive officer.





Significant Employees





Mr. Brown and Mr. Mattison are the employees of the Company. Other duties required to operated the Company are fulfilled by contracted service providers.





Involvement in Certain Legal Proceedings





Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:




1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;


2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);


3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business,  securities or banking activities; or


4.
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.





Audit Committee Financial Expert





The duties of an audit committee were assigned to the full board via a resolution executed May 15, 2006. Due to the fact that the Company is in its exploration stage, it has not yet been able to recruit and compensate an expert for the Audit Committee.





Compliance With Section 16(a) of the Securities Exchange Act of 1934





Section 16(a) of the Securities and Exchange Act of 1934 requires our executive officers, directors and persons who own more than 10% of our equity securities registered pursuant to Section 12 of the Exchange Act of 1934 (the “Act”) to file with the SEC initial statements of beneficial ownership on Form 3, reports of changes in ownership on Form 4 and annual reports concerning their ownership on Form 5. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Mr. Brown has filed a Form 3 and a Schedule 13D to report his holdings in the Company.





Code of Ethics





We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. This code is incorporated by reference herein as Exhibit 14.1. Upon request, the Company will furnish a copy of this Code of Ethics by mail to any person without charge. Such requests should be made in writing and mailed to: Guinness Exploration Inc., Suite 12E, Eclipse, 156 Vincent West Auckland, New Zealand 1010 attn: Code of Ethics Request.








56
 Table of Contents





ITEM 11.      EXECUTIVECOMPENSATION





Executive Compensation





The particulars of compensation paid by our company to the following persons:




(a)
our principal executive officer;


(b)
each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended May 31, 2011 and May 31, 2010; and





(c)
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as an executive officer at the end of the year ended May 31, 2011, who we will collectively refer to as our named executive officers are set out in the following summary compensation table:





The following table sets forth the salaries and director fees we paid to our current executive officers in our most recent fiscal year ended May 31, 2011 and since inception:





Name and Principal Positions
Fiscal

Year
Salary

($)
Bonus

($)
Other Annual Compensation

($)
Restricted Stock Awards/SARs

($)(1)
Securities Underlying Options/SARs

(#)
LTIP

Payouts

($)(2)
All Other

Compensation

($)(3)Alastair Brown

President and CEO, CFO,

PAO, Chair, and Director(4)
2011

2010
Nil

Nil
Nil

Nil
Nil

Nil
Nil

Nil
2,000,000

Nil
Nil

Nil
$44,000

$45,000Nigel Mattison

Secretary & Treasurer, and

Director(5)( 6)
2011

2010
Nil

Nil
Nil

Nil
Nil

Nil
Nil

Nil
1,000,000

Nil
Nil

Nil
$11,000

$  5,000







Notes:(1)
SAR’s are “Stock Appreciation Rights”. We have to date not issued any SARs.(2)
LTIP’s are “Long-Term Incentive Plans”. We have to date not created and LTIPs.(3)
There are no compensatory plans or arrangements with respect to our executive officers resulting from their resignation, retirement or other termination of employment or from a change of control.(4)
Effective October 19, 2009, Mr. Alastair Brown was appointed as a Director, President, Chief Executive Officer, Chief Financial Officer and as the Principal Accounting Officer of our company. Effective December 1, 2009, Mr. Brown was appointed as our Secretary and Treasurer. During the year ended May 31, 2011, Mr. Brown was paid $44,000 in consulting fees and was issued 2,000,000 to purchase 2,000,000 common shares at an exercise price of $0.363 per share. 1,000,000 of these options vested on May 31, 2011 and the remaining 1,000,000 will vest on May 31, 2012.(5)
Effective October 12, 2010, Mr. John Hiner resigned his positions as Chief Geologist, Vice President, Secretary and Treasurer and has remained with the Company as our primary geological consultant. On October 12, 2010, Mr. Nigel Mattison was appointed as Secretary and Treasurer.(6)
Effective January 13, 2010, Mr. Nigel Mattison was appointed as a Director of our company. During the year ended May 31, 2011, Mr. Mattison was paid $11,000 in director fees and was issued 1,000,000 to purchase 1,000,000 common shares at an exercise price of $0.33 per share. 500,000 of these options vested on May 31, 2011 and the remaining 500,000 will vest on May 31, 2012.












57
 Table of Contents








ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





The following table sets forth, as of May 31, 2011, certain information as to shares of our common stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, and (iii) all of our executive officers and directors as a group:




Name
Amount and Nature of Beneficial

Shares Owned(1)
Percent of Outstanding Ownership(2)Alastair Brown

Director, Chair, President & CEO, CFO,

and PAO
39,000,000 restricted common shares
30.2%Nigel Mattison

Director
Nil
NilAll Officers, Directors and

Control Persons as a Group
39,000,000 restricted common shares
30.2%Eagle Trail Properties Inc.
45,000,000 restricted common shares
34.8%Mark Donaldson
15,000,000 restricted common shares
11.6%




Notes:


(1)
Based on 129,325,000 shares of common stock issued and outstanding as of September 7, 2011. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.




(2)
Within sixty days, Mr. Alastair Brown has the right to acquire an additional 1,000,000 restricted common shares of the Company and Mr. Nigel Mattison has the right to acquire an additional 500,000 restricted common shares. If they were to each exercise their vested options in full, this would increase the percent ownership of management to 31.0%.


























58
 Table of Contents








ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





Other than the property transaction with Eagle Trail Properties Inc. referenced in Item 2, and the option grants referenced in Note 10 of our financial statements, during the two years ended May 31, 2011, there have been no material transactions or series of similar transactions to which the Company was or will be a party, in which the amount involved exceeds $60,000 and in which any promoter, founder, director or executive officer, or any security holder who is known to us to own of record, or beneficially, more than five percent of the our common stock, or any member of the immediate family of any of the foregoing persons, had a material interest, and none is presently proposed.






ITEM 14.      PRINCIPAL ACCOUNTANT FEES AND SERVICES




The following table presents the fees for professional audit services rendered by Madsen & Associates CPA’s Inc. for the audit of the Corporation’s annual financial statements for the years ended May 31, 2011 and May 31, 2010 and fees billed for other services rendered by Madsen & Associates CPA’s Inc. during those periods. All services reflected in the following fee table for 2010 and 2009 were pre-approved, respectively, in accordance with the policy of the Board of Directors.




May 31, 2011


May 31, 2010Audit fees (1)- Madsen & Associates

$
17,000


$
19,025Audit-related fees - Madsen & Associates


-



-Tax fees - Madsen & Associates


-



-All other fees - Madsen & Associates


-



-TOTAL FEES

$
17,000


$
19,025




Notes:(1)
Audit fees consist of audit and review services, consents and review of documents filed with the SEC.





In its capacity as the Audit Committee, the Board of Directors pre-approves all audit (including audit-related) and permitted non-audit services to be performed by the independent auditors. The Board of Directors annually approves the scope and fee estimates for the year-end audit to be performed by the Corporation’s independent auditors for the fiscal year. With respect to other permitted services, the Board of Directors pre-approves specific engagements, projects and categories of services on a fiscal year basis, subject to individual project and annual maximums. To date, the Company has not engaged its auditors to perform any non-audit related services.


















59
 Table of Contents








PART IV




ITEM 15.      EXHIBITS





EXHIBIT INDEX




Number
Exhibit Description3.1(1)
Articles of Incorporation3.2(1)
Certificate of Amendment of Articles of Incorporation3.3(1)
Bylaws10.1(2)
Nantawa Modification Agreement10.2(3)
Ansell Agreement14.1(1)
Code of Ethics24.1(1)
Power of Attorney31.1
Certificate of President & Chief Executive Officer (principal executive officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certificate of Chief Financial Officer (principal financial officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 200232.1
Certificate of President & Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  (1)
Filed as an exhibit to our registration statement on Form SB-2 filed December 27, 2006 and incorporated herein by this reference(2)
Filed as an exhibit to a Current Report on Form 8-K filed on October 13, 2010 and incorporated herein by reference.(3)
Filed as an exhibit to a Current Report on Form 8-K filed on March 8, 2011 and incorporated herein by reference.



































60
 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 to be signed on its behalf by the undersigned, there unto duly authorized.




GUINNESS EXPLORATION, INC./s/ Alastair BrownAlastair BrownPresident and Chief Executive Officer,Chief Financial Officer, Principal AccountingOfficer ,Director and Chair of BoardDated: September 7, 2011








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





/s/ Alastair Brown


Alastair Brown


President and Chief Executive Officer,


Chief Financial Officer, Principal Accounting Officer ,


Director and Chair of Board





/s/ Nigel Mattison


Nigel Mattison


Secretary and Treasurer,


Director





Dated: September 7, 2011

































61