UNITED
STATES

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 July 31, 2011                                       
|         |                                                                                   
|[ 
    ] | TRANSITION
    REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT    
|         |                                                                                   
|         | For
    the transition period from _________ to ________                          
|         |                                                                                   
|         | Commission
    file number: 333-153881                                            



|SOURCE
    GOLD CORP.                                                                                                                                                     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(Exact
    name of registrant as specified in its charter)                                                                                                                
|                                                                                                                                                                          
|Nevada                                                                                                                                                                    
|(State
    or other jurisdiction of incorporation or organization)                                                                                                        
|                                                                                                                                                                          
|2
                                                                                                      Toronto Street, Suite 234
        Toronto,
        Ontario, Canada
|(Address
    of principal executive offices)                                                                                                                              
|                                                                                                                                                                          
|Registrant’s
    telephone number: 289-208-6664                                                                                                                           



|Securities
                                                                      registered under Section 12(b) of the Exchange Act:
|------------------------------------------------------------------------------------------------------------------------------------
|Title
    of each class                                                                                                             
|none                                                                                                                                
|Securities
        registered under Section 12(g) of the Exchange Act:                                                              
|Title
    of class                                                                                                                  
|none                                                                                                                                



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



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



Indicate
by checkmark 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 [ ]



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



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



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] 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. Not available



Indicate
the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
50,006,765 as of October 10, 2011.




Table of Contents






|TABLE
                    OF CONTENTS
|-------------------------------------
|                                     
|                                     
|PART
        I                       
|Item 1.                              
|Item 2.                              
|Item 3.                              
|Item 4.                              
|PART
        II                      
|Item 5.                              
|Item 6.                              
|Item 7.                              
|Item 7A.                             
|Item 8.                              
|Item 9.                              
|Item 9A(T).                          
|Item 9B.                             
|PART
        III                     
|Item 10.                             
|Item 11.                             
|Item 12.                             
|Item 13.                             
|Item 14.                             
|PART
        IV                      
|Item 15.                             

2


Table of Contents


PART
I



Item
1. Business



Company
Overview



We are an
exploration stage company that intends to engage in the exploration of mineral properties.  We have acquired four mineral
claims through our wholly owned subsidiaries Northern Bonanza, Inc., an Ontario corporation, (“Northern Bonanza”)
and Source Bonanza, LLC, a Nevada limited liability company, (“Source Bonanza”). None of these properties possesses
known mineral reserves.  Exploration of these mineral claims is required before a final determination as to their viability
can be made.



Northern
Bonanza holds or possesses an option to acquire a partial interest in the following claims in Ontario, Canada:



- Southern Beardmore Claims
- A group of 21 mineral claims in
Beardmore Area and Mary Jane Lake Area, 3 km south of Beardmore, Ontario, Canada.
- KRK West Claims
- Northern Bonanza entered into an
agreement that gave them the option to acquire an undivided 50% interest, in 19 mineral claims known as the KRK West Claims, located
north of Thunder Bay, Ontario, Canada. The foregoing agreement is now the subject of a lawsuit between us and the other party
to the agreement.

Source Bonanza
owns a 100% membership interest in Vulture Gold, LLC, a Nevada limited liability company.  Vulture Gold is the owner
of the mineral rights to 27 unpatented mineral claims located in Maricopa County Arizona.



Our
Business



Northern
Bonanza, Inc.



Southern
Beardmore Claims.

On May 4,
2010, we acquired a group of 21 contiguous mineral claims in the Beardmore Area and Mary Jane Lake Area, near Beardmore, Ontario
for $51,800 (CDN).



Location
and Means of Access to Southern Beardmore Claims.

The property
consists of nineteen contiguous mineral claims.  The area of the property is 269 hectares. The northern boundary of
the property is 3 kilometers south of Beardmore, Ontario on Highway11. Highway 11 transects the property. Old logging roads also
cross the property.



Title
to Southern Beardmore Claims.

We only
hold the mineral rights to the Southern Beardmore Claims.  We do not possess surface rights to the property.  The
claims all expire in May of 2012, subject to proper renewal. There are no royalties, back-in rights payments or other agreements
and encumbrances to which the property is subject. Additionally, there are no environmental liabilities to which the property
is subject or permits that must be acquired to conduct the work proposed.



Previous
Operations on the Southern Beardmore Claims.

There have
been no prior operations on these claims.



Present
Condition of Southern Beardmore Claims.

At the moment
there are no established mineralized zones, mineral resources, mineral reserves and mine workings, tailing ponds, waste deposits
and important natural features and improvements, relative to the outside property boundaries.

3


Table of Contents


Work
Completed on the Southern Beardmore Claims.

No work
has been completed on the claims with the exception of certain airborne survey work, discussed below.



Proposed
and Current State of Exploration and Development on the Southern Beardmore Claims.

There has
been some exploration on the property.  We conducted a fixed-wing airborne survey and had a 43-101 report produced for
the property. These constituted the majority of the $47,735 in direct exploration expenditures that we incurred for the year ended
July 31, 2011.



During the
year ended July 31, 2011, we also made further advances to the operator of $7,040. During the year ended July 31, 2011 the operator
incurred exploration expenditures of $34,008. As a result, the operator held no exploration advances for the year ended July 31,
2011.



In addition
to the original purchase price paid for the property, we incurred $17,436 in staking costs in relation to these claims during
the year ended July 31, 2010.



During the
year ended July 31, 2010, we made exploration advances to the operator amounting to $47,806. As of July 31, 2010 the operator
had incurred exploration expenses aggregating $20,118 resulting in net advances held being $26,968. Our exploration expenditures
during the year ended July 31, 2010 were focused on the recommended airborne survey of the Southern Beardmore property and on
the preparation of a geological report on the property.



No Known
Presence of Reserves on the Southern Beardmore Claims.

The proposed
program is exploratory in nature and there are no known reserves on the property.



Rock
Formations and Mineralization of Existing or Potential Economic Significance on the Southern Beardmore Claims.

Regionally
a swath of metavolcanic-metasedimentary rocks runs from Geraldton to Beardmore. The metavolcanic rocks are host to numerous showings
and former producers of gold and silver. A metasedimentary sequence consists of both clastic and chemical metasediments. These
are rocks from two northeast trenching belts and occur to the northwest and southeast of the central volcanic belt. The northern
belt is about 3.4 km thick; the southern belt is in excess of 5.4 km. The Northern Bonanza claim group lies entirely within the
southern belt. The clastic metasediments are wacked with minor intercalated siltstone and mudstone. The chemical metasediments
comprise ironstone units 1-2 m thick bedded in the metavolcanics. The metavolcanics comprise mafic to intermediate flows in a
belt 2.0 to 2.5 km wide and trend northeasterly between the two metasedimentary units. The metavolcanic flows are dark green to
greenish black in color and typically consist of a massive medium grained basal part, a finer middle portion and a fine-grained
to aphanitic upper part, which may be pillowed, amygdaloidal and/or variolitic. Proterozoic rocks comprise diabase sills of medium
grain size and massive texture and form topographic highs in outcrop. Precious metals occur (i) in quartz and quartz-carbonate
veins almost exclusively in metavolcanics but also in metasediments and (ii) in quartz veins in chert-hematite-magnelite-grunerite
ironstone units interlaycled with the mafic metavolcanics.





Impairment
of the Southern Beardsmore Claims.

Although
we possess a plan of exploration for the Southern Beadsmore Claims, we do not possess the resources to execute on that plan. Additionally,
while it is our goal to raise capital to finance the exploration, there is no assurance of additional funding being available
or on acceptable terms, if at all. Consequently the costs incurred of $68,599 for these mineral properties was deemed to be fully
impaired as of July 31, 2010.



The KRK West Claims



Location
and Means of Access to KRK West Claims.  The property consists of 19 claims covering 15 square miles.  It
is located north of Thunder Bay in the Beardmore area of Northwestern Ontario, Canada.  The nearest townships to the
property are Pifher, Sandra, and Meade.   The property can be accessed Access via Hwy 11 through the Village of
Beardmore to Hwy 801.



Title
to KRK West Claims.



Option
Agreement

On October
26, 2009, we entered into an agreement with Thunder Bay Minerals, Inc. (the “Agreement” and “Thunder Bay”,
respectively) under which we were granted an option to acquire an undivided 50% interest in 19 mineral claims known as the KRK
West Claim, located north of Thunder Bay, Ontario, Canada.  We are currently in a dispute with Thunder Bay regarding
the ownership of the claims.  The dispute is discussed more fully in the following section titled “Separate Purchase
of KRK West Claims” and in Item 3 Legal Proceedings.

4


Table of Contents


Detailed
below are the payments we have made to date and the payments we will be obligated to make in the future if the dispute with Thunder
Bay is not resolved in our favor.



|·       
    Pay $110,000 (CDN) to Thunder Bay with $50,000 (CDN) of that amount due upon execution of the Agreement before commencing
    due diligence of the claims (paid) and the balance of $60,000 (CDN) on or before December 1, 2009 (paid);
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|·        
    Incur $500,000 (CDN) in expenditures on the claims before December 31, 2010 and $500,000 in expenditures on the claims before
    December 31, 2011; and                                                                              
|·        
    Issue 2,000,000 shares of our common stock to the shareholders of Thunder Bay within 30 days of closing the transaction.                                                                                                              



On November
26, 2009 and December 7, 2009, we made payments of $31,785 (CDN) and $28,215 (CDN) respectively.



Under the
agreement, Thunder Bay will act as operator and define the nature of and execute all exploration programs and subsequent phases
of development on the claims.



If we are
able to pay the consideration for the claims (as set forth above), we will be entitled to a 50% interest in the claims, which
are currently subject to a 3% Net Smelter Royalty in favor of James Wheeler, President of Thunder Bay. In the event we acquire
an interest in the claims, we and Thunder Bay have further agreed to enter into a joint venture agreement for further exploration
and development of the claims.



Separate
Purchase of KRK West Claims.

During the
year, we learned that the optionor had allowed the KRK West Claims to lapse, and therefore the option agreement was null and void.  All
19 of the KRK West Claims were re-staked by a third party.  Together with our President, Lauren Notar, we were able
to purchase 13 of the 19 KRK West Claims from the third party who re-staked the claims.  Ms. Notar contributed $20,000
toward the purchase and we contributed $7,578 in cash. The 13 claims were initially transferred to Ms. Notar.  Then,
on June 30, 2010, Ms. Notar transferred the 13 claims to us in exchange for an unsecured non-interest bearing promissory note
for $20,000 which falls due on November 30, 2010.   Our total purchase price for the 13 re-staked claims was therefore
$27,578.  We also incurred exploration expenditures of $555 in relation to these claims.  Subsequent to our
acquisition of the claims, they were transferred to our subsidiary Northern Bonanza.



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



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



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



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

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

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







Impairment
of the KRK West Claims.

Due to the
lapse of the underlying claims we impaired a total of $131,295 of acquisition cost incurred as of July 31, 2010 made up of the
initial $103,718 payment and the additional payment of $27,577.





Previous
Operations on the KRK West Claims.

The KRK
West property encompasses many previous prospects and occurrences that, since 1930, have been the subject of many prospecting,
geophysics, and diamond drilling as well as high grading conducted by operators dating back between 1930-1950 where copper and
gold mineralization was identified.

5


Table of Contents


Present
Condition of KRK West Claims.

At the moment
there are no established mineralized zones, mineral resources, mineral reserves and mine workings, tailing ponds, waste deposits
and important natural features and improvements, relative to the outside property boundaries.



Work
Completed on the Claims and Proposed and Current State of Exploration and Development on the Claims.

We have
undertaken an initial trenching, sampling, and geological mapping program on the KRK West Claims. The samples are being assayed
by Accurassay Laboratories in Thunder Bay, Ontario, Canada.



Based upon
the initial exploration program of trenching, channel sampling, geological mapping and a TEM survey covering our claim group on
over 15 square miles of the KRK West Property, we have identified three main areas of interest.



The first
area of interest is the Little Brother Claim Group, where a number of samples were taken from an area along a northern grandiorite
with intermediate volcanics, which yielded visible gold occurrences.



The second
area of interest is close to the eastern portion of the property east of Peddle Lake. This area is the most active on the property
where a number of drill collars belonging to a previous operator were drilled during the 1970's. The ground observations in the
trenches and historical assessment have indicated a large disrupted zone carrying the potential for significant gold and silver
values.



The third
area of interest is the most westerly area of the property near Musca Lake, along a continuous shear zone. The Musca Lake zone
consists of a quartz flooded shear which pinches and swells along its strike length.



Although
we have not established an overall exploration budget for the KRK West claims at this time, we intend to continue with an exploration
program centered on the major fault lines and areas of interest which traverse the KRK West mineral claims. Accurassay Laboratories
is currently processing more than 250 trench samples from our three main areas of interest on the KRK West Property.



No Known
Presence of Reserves on the KRK West Claims.

The proposed
program is exploratory in nature and there are no established reserves on the property.



Rock
Formations and Mineralization of Existing or Potential Economic Significance on the KRK West Claims.

The property
is located within the Northern Felsic Metavolcanic Belt. Intermediate crystal-lithic tuff is the dominant rock type and underlies
most of the property. These tuffs consist of intermixed units of crystal tuffs containing feldspar crystals and lithic tuffs containing
fragments of felsic to intermediate composition. Felsic crystal tuffs are easily identified by the presence of quartz-eyes within
a light gray crystal tuff. The rock weathers to a very distinctive porcellaneous buff-white color. The felsic crystal tuff forms
two prominent east-west trending horizons within the intermediate crystal-lithic tuff in the southern half of the western portion
of the property and can be traced to the western boundary. The felsic horizons vary in width from 25 to 120 meters, and can be
traced for a length of 2.8 kilometers.



Gold occurs
on the property associated with white quartz veins and pyritic horizons within felsic crystal tuffs and quartz-feldspar porphyry.
Earlier exploration identified quartz veins and mineralized shear zones within felsic and mafic intrusions. Base and precious
metals are found all over the property. The KRK West property encompasses many previous well known prospects and occurrences that
since 1930 have been the subject of many prospecting, geophysics, and diamond drilling as well as high grading conducted by operators
dating back between 1930-1950 where copper and gold mineralization was identified.



Source
Bonanza, LLC.



Vulture
Peak Property and Gold Point Claim Group.

On August
7, 2010, we entered into an agreement with Vulture Gold LLC (“Vulture”), to purchase 100% of Vulture’s outstanding
membership interests in consideration for 4 million shares of our common stock. Vulture is the owner of the mineral rights to
unpatented mineral claims located in Maricopa County Arizona known collectively as the Vulture Claims.

6


Table of Contents


Location
and Means of Access to Vulture Claims.

The property
is located approximately 15 km to 17 km southwest of Wickenburg in Maricopa County, Arizona. It consists of 27 claims located
in Section(s) 23, 24, 25, 26, 35 and 36, T.6N., R.GW., and in Section(s) 3D, T.6N., R.5W., Maricopa County, Arizona. Each claim
is approximately 20.7 acres with a total property area of 476.1 acres, configured in three separate blocks.



The property
can be accessed from Wickenburg through Vulture Mine Road south from State Highway 60. Wickenburg is located 85 km (53 miles)
NW of Phoenix; 98 km (61 miles) S of Prescott; and 206 km (128 miles) SE of Kingman. Wickenburg is connected with Phoenix through
State Highway 60 south; and to Prescott and Kingman through State Highways 89 and 93 respectively. Wickenburg is one of the railway
stations for Prescott-Phoenix branch of Santa Fe Railway. From Vulture Mine Road various gravel roads traverse through different
areas of the property providing access to almost all the mineral claims.



Title
to Vulture Claims.

The Vulture
Claims are owned by Vulture Gold, LLC, which is owned 100% by Source Bonanza. The following claim maintenance fees are applicable
for the property:





|- | Bureau
    of Land Management Claim Maintenance Feeequals $125 per claim per year ($3,625 each year, due on or before September
    1)
|- | --------------------------------------------------------------------------------------------------------------------------------------
|- | Maricopa
    County Recorder "Notice of Intent to Hold" Fee = $104 per year (due on or before November 1).                            







A "Mineral
Exploration Permit" application will be required to get a permit for the proposed exploration work to be carried out on the
property. A minimum bond required is $3,000 but the actual bond amount is based upon the type of exploration and the degree of
disturbance. The department responsible for issuing this is the Minerals Section of the Arizona State Land Department.  Additionally,
the Arizona State Land Commissioner, at his discretion, may also change the amount of the damage and restoration bond when warranted
by any changes in the Plan of Operation.



Previous
Operations on the Vulture Claims.

The Vulture
Claims were part of the historical Red Cloud Mine, Vulture Mine, Vulture Mine Extension, and Mohawk Mines. The first prospecting
party to explore the mountains of north-central Arizona was guided by Pauline Veaver, a pioneer trapper and Indian Scout of the
period. Henry Wickenburg, one of the party members, while prospecting south of Wickenburg located the Vulture lode in 1863. He
established a camp on the Hassayampa River six miles east of the location, and for the next three years worked the richer parts
of the outcrop ore. No records are available for his production.



In November
1, 1866, the Vulture Claims and adjoining area was acquired from Wickenburg by the Vulture Company of New York. This company established
a camp at the mine, and built a forty stamp amalgamation and concentration mill at Wickenburg. This pioneer company operated steadily
from 1867 to July 1872. Chinese miners were employed. Concentrates were stored, and the production was in gold bullion saved on
the plates. The property was closed due to excessive transportation costs and to the apparent pinching of the ore at water level.



In 1870
a new corporation was formed to operate the Vulture and Vulture Extension of Taylor and Smith. This company was known as the Arizona
Central Mining Company. Vulture Extension property was reportedly located to the north of the Vulture Mine and is believed to
be located on claim 27 and 28, an area staked by Gold Point LLC.  An 80 stamp mill was built at the mine, and water
was pumped from Hassayampa at Seymour, through a seven mile pipe line. Power was supplied by woodburning boilers. Work was continued
by this company for nine years on a large scale. A great deal of very low grade ore was treated. No exact figures are available
on the production but scattered estimates of the Art one Daily Star and U.S. Mint reports indicate a probable gross of 3,000,000
ounces. The mine was worked down about 300 feet to a fault which cut off the ore body.



In 1908
the property was acquired by the Vulture Mines Company. This company at first used 20 stamps of the Arizona Central Company mill.
In 1910 a new 20 stamp mill was erected driven by gasoline engine, which treated from 100 to 120 tons a day of ore. This company
operated the mine up to 1917. The gross output of this company which worked on the faulted segment of ore was $1,839,375, 30 percent
of which was concentrates and 70 percent bullion.

7


Table of Contents


In 1927
D.R. Finlayson acquired the property and organized the Vulture Mining and Milling Company. A 5-stamp amalgamation mill was built
at the mine using water pumped from the mine, power being supplied by Diesel engine. Old pillars were treated.



In 1929,
a diamond drill campaign was started, after a careful geological study, to prospect for the second faulted segment of the ore.
Vein matter carrying free gold was encountered. Financial help was enlisted from the United Verde Extension Mining Company of
Jerome. In 1930 and 1931 an 800 foot shaft was sunk to prospect the ground cut by the drill. A large vein was encountered. After
six months lateral work and a little drilling, work was abandoned.



Present
Condition of Vulture Claims.



There are
several areas of past producing mines and old workings located on the property. Detailed below are some of the old workings on
the property.





-         
Red Cloud Mine

o   
This shaft is located at 0329733 E, 3745506 N at an elevation of 2,222 ft (692 m). The shaft area is fenced. Mine dump material
is lying in the immediate surrounding area. Groundwater was observed in the shaft by throwing a piece of rock in the shaft and
is estimated to be at a depth of 60 to 80 m below ground surface. Three old trenches were observed; two on the west and one on
the east side along strike of this shaft.

-         
Red Cloud Mill and Shaft

o   
An old shaft, foundations of a stamp mill and an approximately 30 m long trench was observed at this location. A small dump of
old milling material was also observed.

-         
Vulture Mine Extension

o   
This area is marked by the presence of a shaft, an abandoned mill site with remnants of hoist, head frame, ball mills, generator,
etc. This area is located on Vulture claim at 0330263 E, 3744219 N with an elevation of 2162 ft (659 m). The shaft is fenced and
was observed to be plugged with rock material at 6 to 7 m depth.

-         
Mohawk

o   
Gold Point claims 27-29 located immediately to the west of Vulture Mine private property were historically called Mohawk group
of claims reportedly located 2 miles (3 km) to the west of historical Vulture and Black Hawk mines. Historical work done in this
area included a shaft down to about 48 feet which passed through 24 feet of ledge matter.







Work
Completed on the Vulture Claims.

During the
year ended July 31, 2011, we incurred exploration expenditures of $2,221 on the property.



Proposed
State of Exploration and Development on the Vulture Claims and Impairment of Vulture Claims.We have not carried out any exploration
work on the property. However, on March 13, 2008 Gold Point LLC, the party that staked the current Vulture Claims, contracted
Fred B. Brost, P.E. to carry out rock sampling on Red Cloud, Red Rock, and Vulture claims. A total of six samples were collected
during this work at various locations. The samples were analyzed at Jacobs Assay Office in Tucson. Following receipt of the assay
results, we retained a geologist to conduct a study and produce a report on the exploration potential of the property.  He
recommended the following two stage exploration program:



8


Table of Contents


Phase
1- Data Compilation, Geological Mapping, Trenching and Sampling





|- | This
    work should be completed in two stages. The first stage should include compilation of all the historical geological data available
    for property and putting it into a data base to generate several layers of maps in GIS format for further interpretation.
    This work will also include geo-referencing historical geological maps, sampling and trenching data, and collecting available
    historical production records from shafts and mines.                                                                                
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | In
    the second stage, the geological fieldwork program should be carried out. This program should include, geological mapping
    1:5,000 scale, conducting systematic rock sampling on each claim, and trenching at selected locations. All the accessible
    old shafts should be studied and sampled in detail to understand the local mineralization trend and to get an insight into
    the type of ore historically mined. The intent of this work should be to define ground geophysical surveying targets for Phase
    2 work Program.





The estimated
cost of this program is $132,500, which would be expended as follows:



PHASE
1 BUDGET – GEOLOGICAL MAPPING, TRENCHING AND SAMPLING



|Item                                     |  |  | No.
                                                                                                                                 of
                                                                                                                                 Units |  |  |   | Rate   |  |  |   | Total   | 
|---------------------------------------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | - | ------ |  |  | - | ------- | 
|Bonds and Permitting                     |  |  | 1                                                                                                                                                                                                                                                                              |  |  | $ | 5,000  |  |  | $ | 5,000   | 
|Data Compilation                         |  |  | 10                                                                                                                                                                                                                                                                             |  |  | $ | 500    |  |  | $ | 5,000   | 
|Maps production                          |  |  | 1                                                                                                                                                                                                                                                                              |  |  | $ | 1,000  |  |  | $ | 1,000   | 
|Geological mapping (2 geologists)        |  |  | 21                                                                                                                                                                                                                                                                             |  |  | $ | 1,100  |  |  | $ | 23,100  | 
|Prospecting (Prospectors 2)              |  |  | 21                                                                                                                                                                                                                                                                             |  |  | $ | 900    |  |  | $ | 18,900  | 
|Assaying rock samples                    |  |  | 500                                                                                                                                                                                                                                                                            |  |  | $ | 40     |  |  | $ | 20,000  | 
|Soil Samples                             |  |  | 300                                                                                                                                                                                                                                                                            |  |  | $ | 40     |  |  | $ | 12,000  | 
|Excavator                                |  |  | 10                                                                                                                                                                                                                                                                             |  |  | $ | 1,500  |  |  | $ | 15,000  | 
|Accommodation and Meals                  |  |  | 50
                                                                                                            Man days                                                                                                                                                        |  |  | $ | 200    |  |  | $ | 10,000  | 
|Vehicles: 1                              |  |  | 25                                                                                                                                                                                                                                                                             |  |  | $ | 100    |  |  | $ | 2,500   | 
|Supplies, Blasting Equipment and Rentals |  |  | Lump
                                                                                                            Sum                                                                                                                                                           |  |  | $ | 10,000 |  |  | $ | 10,000  | 
|Reports                                  |  |  | Lump
                                                                                                            Sum                                                                                                                                                           |  |  | $ | 10,000 |  |  | $ | 10,000  | 
|TOTAL (CANADIAN DOLLARS)                 |  |  |                                                                                                                                                                                                                                                                                |  |  |   |        |  |  | $ | 132,500 | 



9


Table of Contents


Phase
2 - Ground Geophysical Surveying, Diamond Drilling



Based on
the results of Phase 1 program, the following ground geophysical surveys should be carried out at suitable locations: 3D Induced
Polarization (IP), Magnetometer Survey and Electromagnetic (EM) - VLF Survey





|- | The IP technique will
    help in measuring the amount of disseminated metallic sulphides in the underlying porphyritic rocks and quartz veins.  This
    technique energizes the ground surface with an alternating square wave pulsar via a pair of current electrodes and the IP
    effect is measured as a time diminishing voltage at the receiver electrodes.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | The very-low frequency (VLF) EM method
    will help to detect any subsurface conducting zone by utilizing radio signals in the 15 to 30 kilohertz (kH) range that are
    used for military communications.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | Magnetometer survey measures the earth's
    magnetic field which can be influenced due to presence of magnetic or relatively non-magnetic rocks in the survey area. This
    survey will be helpful in identifying gold bearing zones associated with pyrrhotite or magnetite depleted porphyry type copper-gold
    mineralization. In some property areas with potential for porphyry copper-gold type ore bodies the mineralizing fluids might
    have destroyed the magnetite associated with the original intrusive or volcanic rocks. Magnetic surveys would outline positive
    magnetic anomalies over the unaltered rock formations. The exploration target would be the relatively magnetic lows within
    these formations where magnetite has altered to a non-magnetic mineral, such as pyrite.
|- | The geophysical survey is initially
    recommended to be carried out at 50 m x 50 m grid on selected areas within the following claim blocks: Red Cloud, Vulture
    Extension Mohawk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | The type of geophysical survey on
    each claim would depend on the style of mineralization. This work will help to define the trends and continuity of the anomalous
    surface mineralization and locate targets for drilling. A 10 to 15 drill hole program for up to 2,000 m diamond drilling is
    proposed which will be contingent upon the findings of Phase 1 program and geophysical surveys.                                                                                                                                                                                                                                                                                                                                                                                                      













Estimated
cost of Phase 2 work program is $522,600, which would be expended as follows:



PHASE
2 BUDGET – GROUND GEOPHYSICAL SURVEYING, DIAMOND DRILLING



|Item                                    |  | No. of
    Units |                                                                                                                      | Rate |  | Total
|--------------------------------------- |  | ---------------- | -------------------------------------------------------------------------------------------------------------------- | ---- |  | -----
|Bond and permitting                     |  |                  | 1                                                                                                                    |      |  | $    
|Geologist                               |  |                  | 10                                                                                                                   |      |  | $    
|Geophysical Survey Induced Polarization |  |                  | 42                                                                                                                   |      |  | $    
|Magnetometer, EM-VLF Survey Crew        |  |                  | 28                                                                                                                   |      |  | $    
|Diamond Core Drilling (m), if warranted |  |                  | 2,000                                                                                                                |      |  | $    
|Accommodation and Meals                 |  |                  | 200                                                                                                                  |      |  | $    
|Vehicles: 2 – 4x4 truck                 |  |                  | 20                                                                                                                   |      |  | $    
|Supplies and Rentals                    |  |                  | Lump
                                                                                                            Sum |      |  | $    
|Data Interpretation                     |  |                  | Lump
                                                                                                            Sum |      |  | $    
|Reports                                 |  |                  | Lump
                                                                                                            Sum |      |  | $    
|TOTAL (CANADIAN DOLLARS)                |  |                  |                                                                                                                      |      |  |      



10


Table of Contents


No Known
Presence of Reserves on the Vulture Claims.  The proposed program is exploratory in nature and there are no known
reserves on the property.



Rock
Formations and Mineralization of Existing or Potential Economic Significance on the Vulture Claims. Mineralization on the
claims and adjoining areas can be classified into three types: i) mineralized veins, ii) porphyritic masses of rock, iii) mixed
deposits in which veins and porphyry are both present.



Mineralized
Veins.  Fractures filled with quartz and other veining material was observed at places on the claims but no strong
or regular veins were located. Most of the veins are at the contact of volcanics and metasediments. Gold, silver and other metals
may concentrate in quartz veins and in silicified and altered rocks. Some irregular quartz veins were observed in schistose rocks
where vein filling occur mainly along the cleavage of schist.



Porphyritic
Masses of Rock. At many places quartz monzonite volcanic dykes were observed containing pyrite in disseminated crystalline
grains with in porphyritic masses of rocks. The distribution of this sulphide looks like independent of fractures or fracture
filling. Moderate to severe alteration of dykes and wall rocks has converted feldspar and mafic minerals to a fine grained sericite,
hematite, and clay minerals. Altered dyke rocks commonly consist of quartz "eyes" in a fine-grained matrix of alteration
minerals. Conceptual restoration of the rocks of the Vulture mine area to their pre-rotations orientation reveals that the mineralization
and alteration originally occurred along a north-northeast-trending subvertical dyke that projected upward from the structural
top of a Cretaceous granitoid pluton. The association of gold with dyke and gradation of the dyke into the granitic rocks of the
pluton indicate that gold mineralization was intimately related to Cretaceous magmatism and dyke emplacement. Later erosion and
subsequent burial by lower Miocene volcanic rocks was followed by structural dismemberment and tilting and eventual uncovering
by late Cenozoic erosion.



Mixed
Mineralization. Combined veining and porphyritic style of mineralization was observed to be a common feature especially on
Gold Point Vulture claim and Gold Point claims 27-29 located in the southwestern part of the property. Granitoid rocks are intersected
by porphyritic volcanic rocks in these areas. Hematitic alteration is common and covers large areas at the contact of granite
and volcanic dykes.



Impairment
of the Vulture Claims.

Although
we possess a plan of exploration for the Vulture Claims, we do not possess the resources to execute on that plan. Additionally,
while it is our goal to raise capital to finance the exploration, there is no assurance of additional funding being available
or on acceptable terms, if at all. As a result, we have fully impaired the value of the Vulture Claims.



Competition



The mineral
exploration industry, in general, is intensely competitive and even if commercial quantities of reserves are discovered, a ready
market may not exist for the sale of the reserves.



Most companies
operating in this industry are more established and have greater resources to engage in the production of mineral claims.  We
were incorporated on June 4, 2008 and our operations are not well-established.  Our resources at the present time are
limited.  We may exhaust all of our resources and be unable to complete full exploration of our various claims.  There
is also significant competition to retain qualified personnel to assist in conducting mineral exploration activities.   If
a commercially viable deposit is found to exist and we are unable to retain additional qualified personnel, we may be unable to
enter into production and achieve profitable operations.  These factors set forth above could inhibit our ability to
compete with other companies in the industry and enter into production of the mineral claim if a commercial viable deposit is
found to exist.



Numerous
factors beyond our control may affect the marketability of any substances discovered.  These factors include market
fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including
regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental
protection.  The exact effect of these factors cannot be accurately predicted, but the combination of these factors
may result in not receiving an adequate return on invested capital.



11


Table of Contents


Compliance
with Government Regulation





Canada.



The main
agency that governs the exploration of minerals in the Province of Ontario is the Ontario Ministry of Northern Development, Mines
and Forestry.



The Ontario
Ministry of Northern Development, Mines and Forestry manages the development of Ontario’s mineral resources, and implements
policies and programs respecting their development while protecting the environment. In addition, the Ministry regulates and inspects
the exploration and mineral production industries in Ontario to protect workers, the public and the environment.



The material
legislation applicable to us is the Ontario Mining Act. In order to prospect on Crown lands in Ontario or stake out, record, or
apply to record the staking of a mining claim, a person must be a holder of a prospector's license issued under the Ontario Mining
Act. In order to obtain a license an application is made to the nearest Mining Lands office or other offices offering Mining Lands
services of the Ministry of Northern Development, Mines and Forestry.  Although a license is required for prospecting,
unlicensed parties can perform pre-exploration activities including: geophysical/geochemical surveys, airborne geophysical surveys,
limited stripping and trenching, limited bulk sampling and various forms of drilling can be conducted without a license.



Prospecting
or preliminary exploration may require the following permits and approvals:





|- | Provincial permits associated with
    use of Crown land for road building, water crossings, tree cutting, burning of materials or approach to a Provincial highway.
    In addition, some of the permits required for activity on Crown land may require a limited Environmental Assessment;
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Federal approvals for crossing a watercourse
    designated as navigable; work near or within waters that are -fish habitat; exploration on First Nation Reserve land; or purchase
    and possession of explosives; and                                                                     
|- | Municipal approvals for potential
    changes in land use, and sometimes for burning of materials.                                                                                                                                                                                           





If we progress
past the exploration stage then the next three main stages in the development of a mining project are advanced exploration, development,
operations, and closures. At such point in time as we move closer towards realizing each stage we will provide the major regulatory
and permitting requirements to be taken into consideration.



In order
to hold a claim in good standing or to apply for a lease, exploration work (referred to as assessment work) must be performed
and reported to the Crown for approval within specified time limits.  Qualifying assessment activities fall into two
categories, those performed within 12 months prior to the recording of mining claims and those performed after the recording of
mining claims.  Activities in the former category are regional surveys such as airborne geophysics and regional or reconnaissance
ground exploration and prospecting by a holder of a valid prospector’s license.  Activities in the latter category
include prospecting and physical work such as manual, mechanical overburden stripping and bedrock trenching, and shaft sinking,
driving adits and open cuttings.



We have
a total of 19 claims scheduled to expire in April 2012, including the 13 KRK West claims which we have re-purchased and the additional
6 claims which remain in dispute.  We estimate that a total of $104,400 in assessment work must be conducted before
that date in order to maintain the claims in good standing.  In addition, we have a total of 19 claims scheduled to
expire in May of 2012.  We estimate that a total of $107,600 in assessment work must be conducted before that date in
order to maintain the claims in good standing.





United
States.

The exploration,
drilling, and mining industries in the United States operate in a legal environment that requires permits to conduct virtually
all operations.  A Mineral Exploration Permit application will be required to get a permit for the proposed exploration work
to be carried out on the Vulture Claims. The department responsible for issuing this is the Minerals Section of the Arizona State
Land Department (the “ALSD”).



An exploration
permit is valid for one (1) year, renewable up to five(5) years.  An Exploration Plan of Operation must be submitted
annually and approved by the ASLD prior to startup of exploration activities. A minimum bond required is $3,000 but the actual
bond amount is based upon the type of exploration and the degree of disturbance. The State Land Commissioner, an Arizona official,
at his discretion, may also change the amount of the damage and restoration bond when warranted by any changes in the Plan of
Operation.



12


Table of Contents


Once a permit
is issued then there are minimum expenditure requirements.  If no work was completed on-site, the applicant can pay
the equal amount to the department. An exploration permit does not permit its holder to conduct mining operations.  If
discovery of a valuable mineral deposit is made, then the permitee must apply for a mineral lease before actual mining activities
can begin.



Employees



We have
no employees as of the date of this report other than our president and CEO, Ms. Notar. We conduct our business largely through
agreements with consultants and other independent third party vendors. We do not anticipate hiring additional employees over the
next twelve months.



Research
and Development Expenditures



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



Environmental
Laws



With the
exception of the regulations discussed above, we have not incurred and do not anticipate incurring any expenses associated with
environmental laws during the currently planned exploratory phases of our operations.



Subsidiaries



We do not
have any subsidiaries other than Northern Bonanza, Inc., an Ontario corporation, and Source Bonanza, LLC, a Nevada limited liability
company and IRC Exploration, Ltd., an Alberta Corporation.  Source Bonanza wholly owns Vulture Gold LLC.



Patents
and Trademarks



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



Item
2. Properties



We do not
lease or own any real property other than our mineral claims. Our executive and head office is located at 2 Toronto Street,
Suite 234, Toronto, Ontario, Canada M5C 2B5. We believe our current premises are adequate for our current operations and we do
not anticipate that we will require any additional premises in the foreseeable future.  When and if we require additional
space, we intend to move at that time.

13


Table of Contents


Southern
Beardmore Claims



The Southern
Beardmore property consists of a group of 21 contiguous mineral claims in the Beardmore Area and Mary Jane Lake Area, near Beardmore,
Ontario. The area of the property is 269 hectares. The northern boundary of the property is 3 kilometers south of Beardmore, Ontario
on Highway11.





14


Table of Contents


KRK
West Claims



The KRK
West property consists of 19 claims covering 15 square miles. It is located north of Thunder Bay in the Beardmore area of Northwestern
Ontario, Canada.





15


Table of Contents


Vulture
Peak Claims



The Vulture
Peak property is located approximately 15 km to 17 km southwest of Wickenburg in Maricopa County, Arizona. It consists of 23 claims
located in Section(s) 23, 24, 25, 26, 35 and 36, T.6N., R.GW., and in Section(s) 3D, T.6N., R.5W., Maricopa County, Arizona. Each
claim is approximately 20.7 acres with a total property area of 476.1 acres, configured in three separate blocks.





16


Table of Contents


Item
3. Legal Proceedings



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



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



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



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





|- | An order transferring an application
    regarding mining claims to Ontario Superior Court to be consolidated with this action;
|- | -------------------------------------------------------------------------------------------------------------------------------
|- | A declaration regarding our ownership
    and Thunder Bay and Wheeler’s ownership with respect to certain mining claims; and   
|- | $1,200,000 in damages from Thunder
    Bay and Wheeler.                                                                        



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



Other
than the foregoing, we are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which
any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material
interest adverse to us.



Item
4. (Removed and Reserved)

17


Table of Contents


PART
II



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



Market
Information



Our
common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is sponsored by FINRA. The OTCBB is a
network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information
on current "bids" and "asks", as well as volume information. Our shares are quoted on the OTCBB under the
symbol “SRGL.OB”.



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



|Fiscal
    Year Ending July 31, 2010
|------------------------------------
|Quarter
    Ended                   
|July
    31, 2010                   
|April
    30, 2010                  
|February
    28, 2010               
|October
    31, 2009                



|Fiscal
    Year Ending July 31, 2011
|------------------------------------
|Quarter
    Ended                   
|July
    31, 2011                   
|April
    30, 2011                  
|February
    28, 2011               
|October
    31, 2010                

Penny
Stock



The
SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are
generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature
and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of
the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation
of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market,
including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a
toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or
in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type
size and format, as the SEC shall require by rule or regulation.



The
broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations
for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares
to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for
such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.



18


Table of Contents


In
addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those 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 acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.



These
disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may
have difficulty selling our securities.



Holders
of Our Common Stock



As
of October 10, 2011, we had 50,006,675 shares of our common stock issued and outstanding, held by fifty-three (53) shareholders
of record.



Dividends



There
are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes,
however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:



|1. | We would not
    be able to pay our debts as they become due in the usual course of business, or;                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Our total assets
    would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders
    who have preferential rights superior to those receiving the distribution.



We
have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.



Recent
Sales of Unregistered Securities





On
June 17, 2011, the Company issued 100,000 common shares at $0.40 to Talon International Group for total proceeds of $40,000 in
a private placement pursuant to Regulation S of the United States Security Act of 1933.





Securities
Authorized for Issuance under Equity Compensation Plans



None.



Item
6. Selected Financial Data



A
smaller reporting company is not required to provide the information required by this Item.



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



Forward-Looking
Statements



Certain
statements, other than purely historical information, including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the
words “believes,” “projects,” “expects,” “anticipates,” “estimates,”
“intends,” “strategy,” “plan,” “may,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions. We intend such
forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which
may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations
and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory
changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties
should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events or otherwise. Further information concerning our business, including additional factors that could materially affect
our financial results, is included herein and in our other filings with the SEC.

19


Table of Contents


Results
of Operations for the years ended July 31, 2011 and 2010 and period from Inception (June 4, 2008 to July 31, 2011)



We generated
no revenue for the years ended July 31, 2011 and 2010 and for the period from June 4, 2008 (Date of Inception) until July 31,
2011. We do not anticipate earning revenues until such time that we enter into commercial production of our claims.  We
are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable
levels of mineral resources on any of our claims, or if such resources are discovered, that we will enter into commercial production.



Our operating
expenses for the years ended July 31, 2011 and 2010 and for the period from June 4, 2008 (Date of Inception) to July 31, 2011,
were $6,304,842, $7,495,347 and $13,912,082, respectively.  The primary operating expenses for the year ended July 31,
2011, consisted of management fees of $4,054,571, mineral property option impairment costs of $2,000,000,



The primary
operating expenses for the year ended July 31, 2010, consisted of management fees of $7,021,998, mineral property option impairment
of $199,894, legal fees of $108,400, mineral property exploration costs of $52,200, accounting and audit fees of $47,426, office
expenses of $40,198 and tax penalties and interest of $25,231. The overwhelming amount of the operating expense attributable to
management fees was an expense in the amount of $6,967,429 accrued as a result of options to purchase common stock granted from
our former president to our current president.  The total expense for the options was $10,960,000 but because of the
vesting period for the options the remaining expense of $3,992,571 was attributable to the fiscal year ended July 31, 2011.



The primary
operating expenses for the period from June 4, 2008 (Date of Inception) until July 31, 2011, consisted of management fees of $11,089,569,
mineral property option impairment costs of $2,203,611, mineral property exploration costs of $152,629, legal fees of $203,701,
accounting and audit fees of $134,633, office expenses of $76,812 and tax penalties and interest of $47,847.



We recorded
a net loss of $6,304,842, $7,495,347 and $13,912,082 for the years ended July 31, 2011 and 2010 and for the period from June 4,
2008 (Date of Inception) until July 31, 2011, respectively.



Liquidity
and Capital Resources



As of July
31, 2011, we had total current assets of $47,586, consisting of $47,106 in cash and $480 of prepaid expenses.  We had
$129,748 in current liabilities as of July 31, 2011. Thus, we had a working capital deficit of $82,162 as of July 31, 2011.



Net cash
used in operating activities was $250,388, $265,329 and $621,078 for the years ended July 31, 2011 and 2010 and for the period
from June 4, 2008 (Date of Inception) to July 31, 2011, respectively. Our main source of cash has been from the sale of our common
stock which has generated $877,375 in cash flow to date since the date of our inception.



We
will require significant additional cash to complete the proposed exploration programs on our various mining properties. Our business
plan calls for ongoing expenses in connection with exploring and developing our mineral properties, including, but not limited
to, an initial exploration budget of $60,000 for the Southern Beardmore claims and $132,500 CDN for Phase I of the exploration
plan on the Vulture claims.  Accordingly, we must seek additional financing to fund our planned operations. Such additional
funds may be raised through the issuance of equity, debt, convertible debt or similar securities that may have rights or preferences
senior to those of our common stock. If financing adequate to fund our planned exploration activities cannot be secured, we will
be required to limit our operations and the execution of our business plan will be significantly delayed.  There can
be no assurance that such additional financing, when and if necessary, will be available to us on acceptable terms, or at all.



20


Table of Contents


Based
upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next
twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be
insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering
to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are
not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that
such additional financing will be available to us on acceptable terms or at all.



Off
Balance Sheet Arrangements



As
of July 31, 2011, there were no off balance sheet arrangements.



Going
Concern



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



We have
yet to achieve profitable operations, have accumulated losses of $13,912,082 since our inception, have a working capital deficiency
of $82,162, no source of recurring revenues, and expect to incur further losses in the development of our business, all of which
casts substantial doubt about the our ability to continue as a going concern. Our ability to continue as a going concern is dependent
upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other
sources to meet our obligations and repay our liabilities arising from normal business operations when they come due.



Management
has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing
and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if
at all. The 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 we cannot continue in existence.



Critical
Accounting Policies



In
December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management
Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the
portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
At this time, we believe that the following is the only of our accounting policies that fits this definition.





Stock-based
compensation



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



Stock
based compensation for non-employees is accounted for using the Stock Based Compensation Topic of the FASB ASC 505. We use the
fair value method for equity instruments granted to non-employees and will use the Black Scholes model for measuring the fair
value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at
which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

Recently
Issued Accounting Pronouncements



We
have reviewed issued accounting pronouncements and plan to adopt those that are applicable to us. We do not expect the adoption
of any other pronouncements to have an impact on its results of operations or financial position.



Item
7A. Quantitative and Qualitative Disclosures About Market Risk



A
smaller reporting company is not required to provide the information required by this Item.

21


Table of Contents


Item
8. Financial Statements and Supplementary Data



Index
to Financial Statements Required by Article 8 of Regulation S-X:



|Audited
    Financial Statements:
|---------------------------------
|                                 
|F-1                              
|F-2                              
|F-3                              
|F-4                              
|F-6                              
|F-7                              

22


Table of Contents










REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







To
the Board of Directors and Stockholders

Source
Gold Corp.



We
have audited the accompanying balance sheets of Source Gold Corp. (An Exploration Stage Company) as of July 31, 2011 and 2010
and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended July 31, 2011
and 2010 and from inception (June 4, 2008) to July 31, 2011. These financial statements are the responsibility of the Company’s
management. 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 audits 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 audits 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 purpose 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 financial position of Source
Gold Corp. (An Exploration Stage Company) as of July 31, 2011 and 2010 and the results of its operations and cash flows for the
years ended July 31, 2011 and 2010 and from inception (June 4, 2008) to July 31, 2011 in conformity with accounting principles
generally accepted in the United States of America.

The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability
to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.





/s/
De Joya Griffith & Company, LLC

Henderson,
Nevada

November
11, 2011





F-1


Table of Contents




SOURCE GOLD
CORP.

(An
Exploration Stage Company)

CONSOLIDATED
BALANCE SHEETS

(Audited)





|                                                                                                                                                 |  | July 31 |             | July 31    
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------- | ----------- | -----------
|ASSETS                                                                                                                                           |  | 2011    |             | 2010       
|                                                                                                                                                 |  |         |             | (Re-stated)
|Current                                                                                                                                          |  |         |             |            
|Cash                                                                                                                                             |  | $       | 47,106      |            
|Prepaid
    expenses - Note 7(c)                                                                                                                 |  |         | 480         |            
|Total
    current assets                                                                                                                         |  |         | 47,586      |            
|Total
    assets                                                                                                                                 |  | $       | 47,586      |            
|                                                                                                                                                 |  |         |             |            
|LIABILITIES
    AND STOCKHOLDERS’ DEFICIT                                                                                                        |  |         |             |            
|Current                                                                                                                                          |  |         |             |            
|Accounts
    payable and accrued liabilities                                                                                                     |  | $       | 129,748     |            
|Due
    to related party - Note 5                                                                                                                |  |         | —           |            
|Total
    current liabilities                                                                                                                    |  |         | 129,748     |            
|Total
    liabilities                                                                                                                            |  |         | 129,748     |            
|                                                                                                                                                
|STOCKHOLDERS’
    DEFICIT                                                                                                                        |  |         |             |            
|Preferred stock,
    $0.001 par value 20,000,000 shares authorized, none outstanding                                                             |  |         | —           |            
|Common stock,
    $0.001 par value - Note 6 180,000,000 shares authorized 49,846,765 (July 31, 2010 -  45,159,265) shares issued and outstanding |  |         | 49,846      |            
|Additional paid
    in capital                                                                                                                   |  |         | 13,787,529  |            
|Accumulated other
    comprehensive loss                                                                                                         |  |         | (7,455      | )          
|Deficit
    accumulated during the exploration stage                                                                                             |  |         | (13,912,082 | )          
|Total
    stockholders’ deficit                                                                                                                  |  |         | (82,162     | )          
|Total
    liabilities and stockholders’ deficit                                                                                                  |  | $       | 47,586      |            







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





F-2


Table of Contents




SOURCE
GOLD CORP.

(An
Exploration Stage Company)

CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Audited)







|                                                  |  |          |            | From Inception       
|------------------------------------------------- |  | -------- | ---------- | ---------------------
|                                                  |  | July 31, |            | (June 4, 2008)
    to
|                                                  |  | 2011     |            | 2010                 
|                                                  |  |          |            | (Re-stated)          
|Expenses                                          |  |          |            |                      
|Accounting
    and audit fees                     |  | $        | 54,022     |                      
|Foreign exchange
    loss                         |  |          | —          |                      
|Legal fees                                        |  |          | 64,058     |                      
|Management fees
    – Note 5                      |  |          | 4,054,571  |                      
|Mineral property option
    impairment            |  |          | 2,000,000  |                      
|Mineral property
    exploration costs            |  |          | 83,743     |                      
|Office expenses                                   |  |          | 25,832     |                      
|Tax
    penalties and interest                    |  |          | 22,616     |                      
|Net loss                                          |  |          | (6,304,842 | )                    
|Other comprehensive
    loss                      |  |          |            |                      
|Unrealized
    foreign exchange                   |  |          | (4,653     | )                    
|Comprehensive
    loss                            |  | $        | (6,309,496 | )                    
|Basic
    loss per share                          |  | $        | (0.13      | )                    
|Weighted average
    number of shares outstanding |  |          | 48,563,666 |                      







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





F-3


Table of Contents




SOURCE
GOLD CORP.

(An
Exploration Stage Company)

CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

For
the period from Inception (June 4, 2008) to July 31, 2011
(Audited)







|                                                      |  |                   |            |             |  |               |        |                |  | Deficit     |           |  
|----------------------------------------------------- |  | ----------------- | ---------- | ----------- |  | ------------- | ------ | -------------- |  | ----------- | --------- | -
|                                                      |  |                   |            |             |  |               |        | Accumulated    |  | Accumulated |           |  
|                                                      |  |                   |            | Additional  |  | Other         |        | During
    the |  |            
|                                                      |  | Common
    Shares |            | Paid
    In |  | Comprehensive |        | Exploration    |  |            
|                                                      |  |                   | Number     |             |  |               | Par    |                |  |             | Capital   |  
|Balance at Inception
    (June 4, 2008)               |  |                   | —          |             |  | $             | —      |                |  | $           | —         |  
|Common
    stock issued for cash:                     |  |                   | 24,000,000 |             |  |               | 24,000 |                |  |             | 24,000    |  
|                                                      |  |                   | 20,400,000 |             |  |               | 20,400 |                |  |             | 51,000    |  
|Less: commission                                      |  |                   | —          |             |  |               | —      |                |  |             | (7,025    | )
|Net
    loss                                          |  |                   | —          |             |  |               | —      |                |  |             | —         |  
|                                                      |  |                   |            |             |  |               |        |                |  |             |           |  
|Balance July 31, 2008                                 |  |                   | 44,400,000 |             |  |               | 44,400 |                |  |             | 67,975    |  
|Net
    loss                                          |  |                   | —          |             |  |               | —      |                |  |             | —         |  
|                                                      |  |                   |            |             |  |               |        |                |  |             |           |  
|Balance July 31, 2009                                 |  |                   | 44,400,000 |             |  |               | 44,400 |                |  |             | 67,975    |  
|Common stock issued
    for cash:                     |  |                   | 400,000    |             |  |               | 400    |                |  |             | 99,600    |  
|                                                      |  |                   | 220,000    |             |  |               | 220    |                |  |             | 219,780   |  
|                                                      |  |                   | 33,333     |             |  |               | 33     |                |  |             | 49,967    |  
|                                                      |  |                   | 105,932    |             |  |               | 106    |                |  |             | 124,894   |  
|Unrealized
    loss on foreign exchange               |  |                   | —          |             |  |               | —      |                |  |             | —         |  
|Capital
    contribution by former president – Note 5 |  |                   | —          |             |  |               | —      |                |  |             | 6,967,429 |  
|Net
    loss                                          |  |                   | —          |             |  |               | —      |                |  |             | —         |  
|                                                      |  |                   |            |             |  |               |        |                |  |             |           |  
|Balance
    July 31, 2010                             |  |                   | 45,159,265 |             |  | $             | 45,159 |                |  | $           | 7,529,645 |  









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



F-4


Table of Contents


SOURCE
GOLD CORP.

(An
Exploration Stage Company)

CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) – (Cont’d)

For
the period from Inception (June 4, 2008) to July 31, 2011
(Audited)







|                                                      |  |                   |            |            |  |               |        |             |  | Deficit     |            |      
|----------------------------------------------------- |  | ----------------- | ---------- | ---------- |  | ------------- | ------ | ----------- |  | ----------- | ---------- | -----
|                                                      |  |                   |            |            |  |               |        | Accumulated |  | Accumulated |            |      
|                                                      |  |                   |            | Additional |  | Other         |        | During the  |  |            
|                                                      |  | Common
    Shares |            | Paid In    |  | Comprehensive |        | Exploration |  |            
|                                                      |  | Number            |            | Par        |  | Capital       |        | Loss        |  | Stage       |            | Total
|                                                      |  |                   |            |            |  |               |        |             |  |             |            |      
|Balance
    July 31, 2010                             |  |                   | 45,159,265 |            |  | $             | 45,159 |             |  | $           | 7,529,645  |      
|                                                      |  |                   |            |            |  |               |        |             |  |             |            |      
|Common stock issued
    for mineral property          |  |                   | 4,000,000  |            |  |               | 4,000  |             |  |             | 1,996,000  |      
|Common stock issued
    for cash:                     |  |                   | 100,000    |            |  |               | 100    |             |  |             | 49,900     |      
|                                                      |  |                   | 31,250     |            |  |               | 31     |             |  |             | 19,969     |      
|                                                      |  |                   | 281,250    |            |  |               | 281    |             |  |             | 89,719     |      
|                                                      |  |                   | 275,000    |            |  |               | 275    |             |  |             | 109,725    |      
|Unrealized loss on
    foreign exchange               |  |                   | —          |            |  |               | —      |             |  |             | —          |      
|Capital contribution
    by former president – Note 5 |  |                   | —          |            |  |               | —      |             |  |             | 3,992,571  |      
|Net
    loss                                          |  |                   | —          |            |  |               | —      |             |  |             | —          |      
|                                                      |  |                   |            |            |  |               |        |             |  |             |            |      
|Balance,
    July 31, 2011                            |  |                   | 49,846,765 |            |  | $             | 49,846 |             |  | $           | 13,787,529 |      





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





F-5


Table of Contents






SOURCE GOLD
CORP.

(An
Exploration Stage Company)

CONSOLIDATED
STATEMENTS OF CASH FLOWS

(Audited)





|                                                                               |  |                     |            |         |  | From Inception (June
    4, 2008)
|------------------------------------------------------------------------------ |  | ------------------- | ---------- | ------- |  | ---------------------------------
|                                                                               |  |                     |            | to     
|                                                                               |  | Years Ended July 31 |            | July 31
|                                                                               |  | 2011                |            | 2010    |  | 2011                             
|                                                                               |  |                     |            |         |  |                                  
|Cash flows used
    in operating activities                                    |  |                     |            |         |  |                                  
|Net
    loss                                                                   |  | $                   | (6,304,842 | )       |  | $                                
|Adjustments to reconcile net loss to
    net cash used by operating activities |  |                     |            |         |  |                                  
|Mineral
    property option costs                                              |  |                     | —          |         |  |                                  
|Impairment
    loss on mineral property option                                 |  |                     | 2,000,000  |         |  |                                  
|Management
    fees from stock options                                         |  |                     | 3,992,571  |         |  |                                  
|Changes
    in operating assets and liabilities                                |  |                     |            |         |  |                                  
|Prepaid
    expenses                                                           |  |                     | 26,488     |         |  |                                  
|Accounts
    payable and accrued liabilities                                   |  |                     | 35,395     |         |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Net
    cash used in operating activities                                      |  |                     | (250,388   | )       |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Cash flows from
    investing activities                                       |  |                     |            |         |  |                                  
|Mineral
    property option acquisition                                        |  |                     | —          |         |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Net
    cash provided by financing activities                                  |  |                     | —          |         |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Cash flows from
    financing activities                                       |  |                     |            |         |  |                                  
|Proceeds
    from sale of common stock, net cash commission                    |  |                     | 270,000    |         |  |                                  
|Promissory
    note paid                                                       |  |                     | —          |         |  |                                  
|Due
    to related party                                                       |  |                     | (20,000    | )       |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Net
    cash used in financing activities                                      |  |                     | 250,000    |         |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Effect
    of foreign exchange on cash                                         |  |                     | (4,653     | )       |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Increase (decrease)
    in cash during the year                                |  |                     | (5,041     | )       |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Cash,
    beginning of the year                                                |  |                     | 52,147     |         |  |                                  
|                                                                               |  |                     |            |         |  |                                  
|Cash,
    end of the year                                                      |  | $                   | 47,106     |         |  | $                                
|                                                                               |  |                     |            |         |  |                                  
|Supplementary disclosure
    for non-cash investing and financing activities   |  |                     |            |         |  |                                  
|Shares
    issued for mineral property                                         |  | $                   | 2,000,000  |         |  | $                                









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



F-6


Table of Contents






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



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



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



During
the year ended July 31, 2009, the Company acquired via its subsidiary company IRC Exploration Ltd. (“IRC”), a mineral
claim located in British Columbia, Canada. During the year ended July 31, 2010, the mineral property option agreement for the
claim in British Columbia was abandoned.



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



On
August 7, 2010, the Company acquired a 100% interest in Vulture Gold LLC, (“Vulture”) a Nevada Limited Liability Company.
(Note 4)



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



F-7


Table of Contents




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



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



The
Company has yet to achieve profitable operations, has accumulated losses of $13,912,082 since inception, has working capital deficiency
of $82,162, has no source of recurring revenues, and expects to incur further losses in the development of its business, all of
which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to
continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary
financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations
when they come due.



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



Note
2	Summary of Significant Accounting Policies



The
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America and are stated in US dollars. Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been
made using careful judgment. Actual results may vary from these estimates.



Principles
of Consolidation



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



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





F-8


Table of Contents




Note
2	Summary of Significant Accounting Policies – (Cont’d)



Cash
and cash equivalents



For
the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are
considered to be cash equivalents. The carrying value of these investments approximates fair value.



Exploration
Stage Company



The
Company has not commenced any significant operations and, in accordance with ASC Topic 915, the Company is considered an exploration
stage company. All losses accumulated since inception have been considered as part of the Company’s exploration stage activities.



Mineral
Properties



The
Company is primarily engaged in the acquisition, exploration, and development of mineral properties.



Mineral
property acquisition costs are capitalized in accordance with FASB ASC 930-805, “Extractive Activities-Mining,” when
management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified
and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition
and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria
for capitalization are not met. In the event that mineral property acquisition costs are paid with Company shares, those shares
are recorded at the estimated fair value at the time the shares are due in accordance with the terms of the property agreements.



Mineral
property exploration costs are expensed as incurred.



When
it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves
and pre-feasibility, the costs incurred to develop such property are capitalized.



Estimated
future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production
basis.



Costs,
which include production equipment removal and environmental remediation, are estimated each period by management based on current
regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or
the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated
provision amounts as incurred.



To
date the Company has not established any proven or probable reserves on its mineral properties.



F-9


Table of Contents




Note
2	Summary of Significant Accounting Policies – (Cont’d)



Foreign
Currency Translation



The
Company’s functional currency is the Canadian dollar as substantially all of the Company’s operations are in Canada.
IRC’s and NBI’s functional currency is the Canadian dollar. The functional currency of SB and Vulture is the US dollar
as its activities are in the USA. The Company uses the United States dollar as its reporting currency for consistency with registrants
of the Securities and Exchange Commission (“SEC”).



Assets
and liabilities denominated in a foreign currency are translated into US dollar reporting currency at the exchange rate in effect
at the balance sheet date and capital accounts are translated at historical rates. Income statement accounts are translated at
the average rates of exchange prevailing during the period. Transactions undertaken in currencies other than the functional currency
of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included
in other comprehensive loss.



Basic
and Diluted Loss per Share



Basic
loss per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share
are computed similar to basic income per share except that the denominator is increased to include the number of common stock
equivalents. Common stock equivalents represent the dilutive effect of the assumed exercise of any outstanding stock equivalents,
using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever
is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position
at the calculation date.



There
are no common stock equivalents outstanding and, thus, diluted and basic loss per share is the same.



Income
Taxes



The
Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing
assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations
in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset
will not be realized.



Comprehensive
Loss



The
Company is required to report comprehensive loss, which includes net loss as well as changes in equity from non-owner sources.



F-10


Table of Contents




Note
2	Summary of Significant Accounting Policies – (Cont’d)



Fair
value of financial instruments



Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as
of July 31, 2011 and 2010. The respective carrying value of certain on-balance-sheet financial instruments approximated their
fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values
for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable
on demand.



Stock-based
compensation



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



Stock
based compensation for non-employees is accounted for using the Stock Based Compensation Topic of the FASB ASC 505. We use the
fair value method for equity instruments granted to non-employees and will use the Black Scholes model for measuring the fair
value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at
which the performance of the services is completed (measurement date) and is recognized over the vesting periods.



Use
of estimates



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



Newly
Issued Accounting Pronouncements



On
August 1, 2010, we adopted guidance issued by the FASB ASU 2010-15 on the consolidation of variable interest entities. The new
guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control
over such entities, and additional disclosures for variable interests. Adoption of the new guidance did not have a material impact
on our financial statements.



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

F-11


Table of Contents


Note
3	Restatement



The
Company has determined that certain transactions were not correctly accounted for in the year ended December 31, 2010 and accordingly
the results of the year ended July 31, 2010 have been restated for the following items:



a)	The
overstatement of accruals for legal expenses.



The
Company originally overstated legal expenses in its year ended July 31, 2010 financial statements by $11,931. The effect of the
restatement was to decrease accounts payable and accrued liabilities and the loss for the year ended July 31, 2010 by $11,931.
Accordingly the loss at July 31, 2010 was reduced by $11,931 and the accumulated deficit at July 31, 2010 was reduced by $11,931.



b)	Recognition
of tax penalties for late filing of information returns



The
Company has increased accounts payable and accrued liabilities at July 31, 2010 by $25,231 for its estimated exposure to late
filing penalties for its failure to timely file certain tax information returns. This has resulted in the net loss for the year
ended July 31, 2010 and the accumulated deficit at July 31, 2010 increasing by $25,231, resulting in an increase of $25,231 in
the accumulated deficit at July 31, 2010.



c)	Treatment
of foreign exchange adjustments arising upon consolidation



The
Company has revised its treatment of foreign exchange gains and losses arising upon consolidation of Source Gold Corp with its
subsidiary companies located in Canada. The Company has determined that exchange differences arising upon consolidation should
be classified as part of Accumulated Other Comprehensive Loss which comprises Equity. As a result of this restatement the reported
loss for the year ended July 31, 2010 and the accumulated deficit at July 31, 2010 has been decreased by $2,802. Accumulated Other
Comprehensive Loss has also decreased by $2,802 at July 31, 2010 resulting in there being no effect upon total stockholders’
deficit as a result of this restatement.



d)	Valuation
of Option Granted to The Company President.



As
a result of the review of the Company’s valuation methods relating to share based payments the Company discovered that the
valuation for the option entered into between the current president and the former President had been improperly valued.On
November 9, 2009, the former president of the Company granted an option to the current president of the Company to acquire up
to 20,000,000 common shares of the Company, held by the former president, at a price of $0.0025 per share effective December 20,
2010 until May 1, 2011. The Option was originally determined to have a fair value of $4,960,000 and this was fully expensed in
the year ended July 31, 2010. Upon review the Option has been determined to have a fair value of $10,960,000, which is to be expensed
over the term the option is earned. The Company has accordingly increased the non-cash management fee charge by $2,017,429 resulting
in the loss for the year and accumulated deficit increasing by $2,017,429. Additional paid in capital has also been increased
by $2,017,429 at July 31, 2010, resulting in there being no effect on stockholders’ deficit as a result of this restatement.

F-12


Table of Contents


Note
3	Restatement (Cont’d)



The
effect of the restatements on the results of operations and financial position as of and for the year ended July 31, 2010 is as
follows:





|                                              |  | As Previously |                                                                                                                                                    |              |  |   |            | As Restated  
|--------------------------------------------- |  | ------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ |  | - | ---------- | -------------
|                                              |  | Reported At   |                                                                                                                                                    |              |  |   |            | At           
|                                              |  | July 31, 2010 |                                                                                                                                                    | Restatements |  |   |            | July 31, 2010
|Effect
    of Balance Sheet:                  |  |               |                                                                                                                                                    |              |  |   |            |              
|Deficit                                       |  | $             | (5,579,313                                                                                                                                         | )            |  | $ | 11,931     |              
|                                              |  |               |                                                                                                                                                    |              |  |   | (25,231    | )            
|                                              |  |               |                                                                                                                                                    |              |  |   | 2,802      |              
|                                              |  |               |                                                                                                                                                    |              |  |   | (2,017,259 | )            
|                                              |  | $             | (5,579,313                                                                                                                                         | )            |  | $ | (2,027,927 | )            
|                                              |  |               |                                                                                                                                                    |              |  |   |            |              
|Additional paid
    in capital                |  | $             | (5,512,216                                                                                                                                         | )            |  | $ | 2,017,429  |              
|Accumulated other
    comprehensive income    |  | $             | —                                                                                                                                                  |              |  | $ | (2802      | )            
|                                              |  |               |                                                                                                                                                    |              |  |   |            |              
|Effect
    on statement of operations:        |  |               |                                                                                                                                                    |              |  |   |            |              
|Expenses                                      |  |               |                                                                                                                                                    |              |  |   |            |              
|Accounting
    and audit fees                 |  | $             | 47,426                                                                                                                                             |              |  |   | —          |              
|Foreign
    exchange loss                     |  |               | 2,802                                                                                                                                              |              |  |   | (2,802     | )            
|Legal fees                                    |  |               | 120,330                                                                                                                                            |              |  |   | (11,930    | )            
|Management
    fees                           |  |               | 5,004,569                                                                                                                                          |              |  |   | 2,017,429  |              
|Mineral
    property option impairment        |  |               | 199,894                                                                                                                                            |              |  |   | —          |              
|Mineral
    property explorations costs       |  |               | 52,200                                                                                                                                             |              |  |   | —          |              
|Office expenses                               |  |               | 40,199                                                                                                                                             |              |  |   | (1         | )            
|Tax
    penalties and interest                |  |               | —                                                                                                                                                  |              |  |   | 25,231     |              
|Net
    loss                                  |  | $             | (5,467,420)                                                                                                                                        |              |  |   | 2,027,927  |              
|Other comprehensive
    loss                  |  |               |                                                                                                                                                    |              |  |   |            |              
|Unrealized
    loss on foreign exchange       |  |               | —                                                                                                                                                  |              |  |   | (2,802     | )            
|Comprehensive
    loss                        |  |               | —                                                                                                                                                  |              |  |   |            |              
|Basic
    loss per share                      |  | $             | (0.12                                                                                                                                              | )            |  |   |            |              
|                                              |  |               |                                                                                                                                                    |              |  |   |            |              
|Effect
    on statement of cash flows:        |  |               |                                                                                                                                                    |              |  |   |            |              
|Net cash used
    in operating activities     |  | $             | (421,024                                                                                                                                           | )            |  |   | 155,695    |              
|Net cash used
    in investing activities     |  |               | (26,968                                                                                                                                            | )            |  |   | (172,926   | )            
|Net cash provided
    by financing activities |  |               | 492,125                                                                                                                                            |              |  |   | 20,033     |              
|Effect
    of foreign exchange on cash        |  |               | —                                                                                                                                                  |              |  |   | (2,802     | )            
|Increase in cash
    during the year          |  |               | 44,133                                                                                                                                             |              |  |   |            |              
|Cash,
    beginning of the year               |  |               | 8,
                                                                                                                                            014 |              |  |   |            |              
|Cash,
    end of the  year                    |  | $             | 52,147                                                                                                                                             |              |  |   |            |              









F-13


Table of Contents


Note
4	Financial Instruments



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



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



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



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



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



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



The
carrying value of the Company’s financial assets and liabilities which consist of cash, and accounts payable and accrued
liabilities, in management’s opinion approximate their fair value due to the short maturity of such instruments. These financial
assets and liabilities are valued using level 3 inputs, except for cash which is at level 1. Unless otherwise noted, it is management’s
opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.



Note
5	Related Party Transactions



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



On
June 16, 2008, the Company received and accepted a subscription to purchase 24,000,000 common shares at $0.002 per share for aggregate
proceeds of $48,000 from Company’s former president. The subscription agreement permitted the Company to accept US$48,000
or CDN$48,000 in full settlement of the share subscription. The share subscription was settled in Canadian dollars. On June 16,
2008 the shares were issued.

F-14


Table of Contents


Note
5	Related Party Transactions (Cont’d)



On
July 1, 2008, the Company entered into a Corporate Management Services Agreement with the Company’s president at the time
for management services. Pursuant to the agreement the former President receives $1,000 per month plus expenses for services rendered.
The agreement was terminated effective November 1, 2009, and the former President resigned on November 6, 2009.





On
June 30, 2010, the Company purchased from the Company president 13 mineral property claims in the Thunder Bay mining division
of Ontario, Canada. As consideration for the purchase the Company issued an unsecured, non-interest bearing promissory note for
$20,000 due on November 30, 2010. During the period ended July 31, 2011 this promissory note was settled by payment of $20,000
cash to the president.



During
the year ended July 31, 2010, the former president of the Company granted an option to the current president of the Company to
acquire up to 20,000,000 common shares of the Company as detailed in Note 6, Capital Contribution.



During
the year ended July 31, 2011, the Company incurred management fees of $62,000 (2010 - $51,569) charged by the Company’s
president and $Nil (2010 - $3,000) charged by the Company’s former president. In addition, as a result of the stock options
granted, the Company incurred additional management fees of $3,992,571 and $6,970,429 for the years ended July 31, 2011 and 2010
respectively.



On
November 1, 2009, the Company entered into a Corporate Management Services Agreement with the President of the Company for management
services. Pursuant to the agreement the President would receive a signing bonus of $7,500 (paid November 1, 2009) and $5,000 per
month beginning December 1, 2009 for services rendered plus reimbursement of the Company’s expenses. The agreement may be
terminated by either party upon 30 days written notice. As of June 21, 2011, the Company amended the agreement by issuing a resolution
to reflect a payment of $6,000 per month for services rendered.



Note
6	Stockholders’ Deficit



On
June 16, 2008, the Company issued 24,000,000 common shares to the Company’s former president at $0.002 per share for total
proceeds of $48,000.



On
July 31, 2008, the Company issued 20,400,000 common shares at $0.0035 per share for total proceeds of $71,400 pursuant to a private
placement. The Company paid commissions of $7,025 for net proceeds of $64,375.



On
October 26, 2009, the Company issued 200,000 common shares at $0.25 per share for total proceeds of $50,000 pursuant to a private
placement.



On
October 30, 2009, the Company issued 200,000 common shares at $0.25 per share for total proceeds of $50,000 pursuant to a private
placement.



On
November 26, 2009, the Company issued 100,000 common shares at $1.00 per share for total proceeds of $100,000 pursuant to a private
placement.

F-15


Table of Contents


Note
6	Stockholders’ Defict – (Cont’d)



On
March 5, 2010, the Company issued 120,000 common shares at $1.00 per share for total proceeds of $120,000 pursuant to a private
placement.



On
April 30, 2010, the Company issued 33,333 common shares at $1.50 per share for total proceeds of $50,000 pursuant to a private
placement.



On
June 16, 2010, the Company issued 105,932 common shares at $1.18 per share for total proceeds of $125,000 pursuant to a private
placement.



On
August 7, 2010, the Company issued 4,000,000 common shares with an aggregate fair value of $2,000,000 pursuant to the acquisition
of Vulture Gold LLC.



On
September 29, 2010, the Company issued 100,000 common shares at $0.50 per share for total proceeds of $50,000 pursuant to a private
placement.



On
October 22, 2010, the Company issued 31,250 common shares at $0.64 per share for total proceeds of $20,000 pursuant to a private
placement.



On
December 14, 2010, the Company issued 156,250 common shares at $0.32 per share for total proceeds of $50,000 pursuant to a private
placement.



On
February 25, 2011, the Company issued 50,000 common shares at $0.40 for total proceeds of $20,000 pursuant to a private placement.



On
March 29, 2011, the Company issued 125,000 common shares at $0.40 for total proceeds of $50,000 pursuant to a private placement.



On
April 28, 2011, the Company issued 125,000 common shares at $0.32 for total proceeds of $40,000 pursuant to a private placement.



On
June 17, 2011, the Company issued 100,000 common shares at $0.40 for total proceeds of $40,000 pursuant to a private placement.





Capital
Contribution



During
the year ended July 31, 2010, the former president of the Company granted an option to the current president of the Company to
acquire up to 20,000,000 common shares of the Company, held by the former president, at a price of $0.0025 per share effective
December 20, 2010 until May 1, 2011. The Company has recorded compensation under management fees and a capital contribution of
$10,960,000 using the Black-Scholes valuation model based on the following inputs; exercise price $0.0025; dividend rate Nil;
current stock price of $0.55; term 1.5 years; and volatility 137.75%.

F-16


Table of Contents




Note
7	Mineral Properties



a)	On
August 11, 2008, the Company’s wholly owned subsidiary, IRC Exploration Ltd. (“IRC”), entered into a property
option agreement whereby IRC was granted an option to earn up to an 85% interest in one mineral claim (the “Queen”
claim) consisting of 457.7 hectares located in the Omineca Mining Division of British Columbia. The option agreement is denominated
in Canadian dollars.



Consideration
for the option is cash payments totalling $52,167 (CDN$54,000) and aggregate exploration expenditures of $232,957 (CDN$241,000)
as follows:



i)	Cash
payments:



·        
$1,875 (CDN$2,000) upon execution of the Option agreement (paid);

·        
$1,842 (CDN$2,000) on or before July 31, 2009 (paid);

·        
$48,450 (CDN$50,000) on or before July 31, 2010.



ii)	Exploration
expenditures of $14,157 (CDN$15,000) on or before July 31, 2009 (expenses incurred), $29,467 (CDN$31,000) in aggregate on or before
July 31, 2010; $232,957 (CDN$241,000) in aggregate on or before July 31, 2011.



Upon
earning its 85% interest in the option, the Company shall enter into a joint venture agreement to develop and operate the property.



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



In
aggregate the Company incurred $16,685 (CDN$17,808) of exploration expenditures on the property prior to abandoning the claims
on July 31, 2010.



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



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



i)        
Cash payments:



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

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



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

F-17


Table of Contents




Note
7	Mineral Properties – (Cont’d)



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



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



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



Pursuant
to the agreement, if commercial production has been achieved and the Company sells or otherwise disposes of metals and minerals
that have been produced and removed from the KRK West properties, the Company will pay Thunder Bay a 3% Net Smelter Return royalty.
In the event the Company sells or causes the sale of products other than to a smelter or refinery or otherwise causes the removal
of products from the Property, the Company will pay a 2% Net Smelter Return Royalty. Alternatively, the Company can buy back the
royalty right for $1,000,000 for each breccia pipe that reaches commercial production.



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



During
the year ended July 31, 2010, the Company learned that the optionor had allowed the underlying claims to lapse, and therefore
the option agreement was null and void. The Company, and a director of the Company (The Company subsequently purchased these claims
from the director), purchased the claims from persons who re-staked the claims for an aggregate amount of $27,577. Subsequent
to acquisition, the claims were transferred to the Company’s wholly owned subsidiary, Northern Bonanza Inc. Due to the lapse
of the underlying claims the Company impaired a total of $131,295 of acquisition cost incurred as of July 31, 2010 made up of
the initial $103,718 payment and the additional payment of $27,577.



The
original optionor represents that control of the claims remains with the optionor and that the Company has no right to further
explore the property. The Company disagrees with this assertion and accordingly, ownership to the claims is in dispute. On January
6, 2011 the Ministry of Northern Development, Mines and Forestry, Canada, was to adjudicate upon the ownership of the claims.
The hearing did not occur as the other party filed for a change of venue. A determination regarding the change of venue has not
yet been made and a date for rendering the decision has not yet been established. Mediation regarding the matter has been deferred
until late 2011 and presently no firm date has been established. As a result of the cancellation, we decided the best course of
action was to file suit. Accordingly, we filed an action against Thunder Bay and Wheeler in Ontario Superior Court of Justice.

F-18


Table of Contents


Note
7	Mineral Properties – (Cont’d)



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



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



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



As
at July 31, 2011 the operator held exploration advances amounting to $nil (2010 - $26,968). Due to lack of funding, the Company
has no immediate plans to explore these mines to determine resources available and consequently the costs incurred of $68,599
for these mineral properties was deemed to be fully impaired as of July 31, 2010.



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



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



During
the year ended July 31, 2011, the Company incurred exploration expenditures of $2,221 on the property.



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



F-19


Table of Contents




Note
8	Income Taxes



The
following table presents income before taxes and income tax expense as well as the taxes charged to stockholders equity:



|                                                                                                                                                                                                    |  | Year Ended |            | Year Ended
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ---------- | ----------
|                                                                                                                                                                                                    |  | July 31,   |            | July 31,  
|                                                                                                                                                                                                    |  | 2011       |            | 2010      
|Loss
    before income taxes                                                                                                                                                                        |  | $          | (6,304,842 | )         
|A reconciliation of the
    expected consolidated income expense, computed by applying a 35% U.S. Federal corporate income tax rate to income before taxes
    to income tax expense is as follows:
|Expected
    approximate tax recovery on net loss, before income tax                                                                                                                                |  | $          | (2,206,695 | )         
|Share-based compensation                                                                                                                                                                            |  |            | 1,397,400  |           
|Mineral property
    acquisition and exploration                                                                                                                                                    |  |            | 728,470    |           
|Changes
    in valuation allowance                                                                                                                                                                  |  |            | 80,823     |           
|Deferred
    income tax recovery                                                                                                                                                                    |  | $          | —          |           





At
July 31, 2011, and 2010 the Company incurred net operating losses carry forward for U.S. Federal tax purposes of approximately
$231,000 and $307,000, respectively which may be applied against future taxable income, if any, at various times through 2031.
Certain significant changes in ownership of the Company may restrict future utilization of these tax loss carry-forwards.



The
amount taken into income as deferred tax assets must reflect that portion of the income tax loss carry-forwards that is more-likely-than-not
to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax
loss carry-forwards, regardless of their time of expiry.



Uncertain
Tax Positions



The
Company files income tax returns in the U.S. federal jurisdiction, various state and foreign jurisdictions. The Company’s
tax returns are subject to tax examinations by U.S. federal and state tax authorities, or examinations by foreign tax authorities
until respective statute of limitation. It is subject to tax examinations by tax authorities for all taxation years commencing
on or after 2008.



Provision
has not been made for U.S. or additional foreign taxes on undistributed earnings of foreign subsidiaries. Such earnings have been
and will continue to be reinvested but could become subject to additional tax if they were remitted as dividends, or were loaned
to the Company affiliate. It is not practicable to determine the amount of additional tax, if any, that might be payable on the
undistributed foreign earnings.

F-20


Table of Contents


Note
9	Commitments



a)	The
Company has an ongoing agreement with a director of the company to provide management services for $6,000 per month. Either party
many terminate the agreement with one month’s written notice.



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



Note
10	Subsequent events



On
September 7, 2011 the Company issued 160,000 shares under subscription agreement for a per share value of $0.25, for total consideration
of $40,000.



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



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

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

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







F-21


Table of Contents


Item
9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure



None.



Item
9A(T). Controls and Procedures



As
required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this annual report, being July 31, 2011. This evaluation
was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer.



Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures
include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed
under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer
and Chief Financial Officer, to allow timely decisions regarding required disclosure.



Based
upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure
controls and procedures were ineffective as of the end of the period covered by this annual report.



Management’s
Report on Internal Control over Financial Reporting



Our
management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial
reporting as of July 31, 2011 based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of July 31,
2011, our internal control over financial reporting was not effective. Our management identified the following material weaknesses
in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate
segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.



We
plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered
by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate
such weaknesses, we hope to implement the following changes during our fiscal year ending July 31, 2012: (i) appoint additional
qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written
policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent
upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing
such funds, remediation efforts may be adversely affected in a material manner.



This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection
Act.



Item
9B. Other Information



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

23


Table of Contents


On June
21, 2011, the Board of Directors passed a Resolution increasing the President’s monthly salary to $6,000 per month. Our
President took the increased salary beginning in June of 2011.



PART
III



Item
10. Directors, Executive Officers and Corporate Governance



The following
information sets forth the names of our current director and executive officer, her age as of July 31, 2011 and her present positions.



|Name         | Age | Position(s)
    and Office(s) Held                                           
|------------ | --- | -----------------------------------------------------------------------------
|Lauren Notar | 51  | President, Chief Executive Officer,
    Chief Financial Officer, and Director



Set forth
below is a brief description of the background and business experience of each of our current executive officers and directors.



Lauren
Notar.    Ms. Notar is our CEO, CFO, President, and sole director.  She has served in these
capacities since November 2009. During 2009, Ms. Notar also operated her own independent sales and marketing company. From 2008
to 2009, she was with Dolphin Enterprises in the sales department.  From 2007-2008, she worked with investor relations
at Ryland Oil and Gas.  From 2005 to 2007 she was an investment advisor at Global Securities Corporation.  From
2002 to 2005, she was an investment advisor with Canaccord Capital Corporation.



Term
of Office



Our
Directors are appointed for a one year term to hold office until the next annual general meeting of our shareholders or until
removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until
removed by the board.



Involvement
in Certain Legal Proceedings



To
the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director,
executive officer, or employee: (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 or her involvement in any type
of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the
SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.



Committees
of the Board



Our
company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does
our company have a written nominating, compensation or audit committee charter. Our directors believe that it is not necessary
to have such committees, at this time, because the functions of such committees can be adequately performed by the board of directors.



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Table of Contents


Our
company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations
for directors. The board of directors believes that, given the stage of our development, a specific nominating policy would be
premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently
have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process
or procedure for evaluating such nominees. The board of directors will assess all candidates, whether submitted by management
or shareholders, and make recommendations for election or appointment.



A
shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our President
and CEO, Ms. Notar, at the address appearing on the first page of this annual report.



Code
of Ethics



As
of July 31, 2011, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions.



Item
11. Executive Compensation



Compensation
Discussion and Analysis



Compensation
of our sole officer and director, Lauren Notar, is governed by a Corporate Management Services Agreement dated November 1, 2009.  Under
this agreement, Ms. Notar provides us with accounting, administrative, management, and corporate record-keeping services.  Ms.
Notar received a $7,500 signing bonus per the agreement, and is paid a monthly stipend of $5,000 together with reimbursement of
any company expenses incurred. On June 21, 2011, the Board of Directors passed a Resolution increasing the President’s monthly
salary to $6,000 per month. Our President took the increased salary beginning in June of 2011. The agreement may be terminated
by either party upon 30 days written notice.



The goal
of our current compensation arrangement is to provide our sole officer with such compensation for her time and efforts as is feasible
and appropriate for a small, exploration stage mineral resource company.  In addition, Ms. Notar holds an option to
acquire substantial ownership of our common stock and we believe she is therefore additionally motivated by a strong entrepreneurial
interest in developing our operations and potential revenue base to the best of her ability.   As our business
and operations expand and mature, we may expand our compensation package designed to attract, retain and motivate talented executives.



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Table of Contents


Summary
Compensation Table



The table
below summarizes all compensation awarded to, earned by, or paid both to our officers and to our directors for all services rendered
in all capacities to us for our fiscal years ended July 31, 2011 and 2010.



|SUMMARY
    COMPENSATION TABLE                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------
|Name
                                                                                     and
        principal
        position
|                                                                                                                                
|Lauren
                                                         Notar, CEO, CFO, President, Secretary-Treasure                  
|Harry Bygdnes,
    Former CEO, CFO, President, Secretary-Treasurer                                                              









Narrative
Disclosure to the Summary Compensation Table



Pursuant
to the agreement discussed above, our current sole officer and director, Lauren Notar, received a total of $62,000 during the
year ended July 31, 2011.

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Table of Contents


Stock
Option Grants



We have
not granted any stock options to the executive officers or directors since our inception.



Outstanding
Equity Awards at Fiscal Year-End



The table
below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive
officer as of July 31, 2011.



|OUTSTANDING
    EQUITY AWARDS AT FISCAL YEAR-END          
|----------------------------------------------------------
|OPTION
    AWARDS                                         
|Name                                                      
|Lauren
    Notar, CEO, CFO, President Secretary, Treasurer







Director
Compensation



The
table below summarizes all compensation of our directors as of July 31, 2011.



|DIRECTOR
    COMPENSATION                                 
|----------------------------------------------------------
|Name                                                      
|Lauren Notar, CEO,
    CFO, President Secretary, Treasurer

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Table of Contents


Narrative
Disclosure to the Director Compensation Table



We do not
compensate our directors for their service at this time.



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



The
following table sets forth, as of October 10, 2011 the beneficial ownership of our common stock by each executive officer and
director, by each person known by us to beneficially own more than 5% of the our common stock and by the executive officers and
directors as a group:



|Title
    of class                                              | Name
    and address of beneficial owner (1)                                                                                                   | Amount
                                                of
        beneficial
        ownership | Percent
        of
        class(2)
|--------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | -----------------------------------
|Executive
        Officers & Directors:                        
|Common                                                          | Lauren
                                    Notar
        2 Toronto
        Street, Suite 234
        Toronto,
        Ontario, Canada M5C 2B5  | 20,000,000(3)                                                                                  | 39.99%                             
|                                                               
|Total
    of All Directors and Executive Officers (one person): | 20,000,000
    Shares                                                                                                                          | 39.99%                                                                                        
|Other
        More Than 5% Beneficial Owners:                  
|Common                                                          | Harry
                                    Bygdnes
        2 Toronto
        Street, Suite 234
        Toronto,
        Ontario, Canada M5C 2B5 | 24,000,000(4)                                                                                  | 47.99%                             







|(1) | As used in this table, "beneficial
    ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment
    power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition,
    for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that
    such person has the right to acquire within 60 days after such date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The percent of class is based on 50,006,765
    shares of common stock issued and outstanding as of October 11, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(3) | Lauren
        Notar, is party to a Purchase Option Agreement dated November 6, 2009 (the “Agreement”).   Under
        the Agreement, Ms. Notar acquired the option to purchase up to 20,000,000 shares of our common stock from our former President
        and CEO, Harry Bygdnes, for a price of $0.0025 per share.  Under the Agreement, Ms. Notar’s options to
        purchase common stock from Mr. Bygdnes first became exercisable on December 20, 2010 and remained exercisable through
        May 1, 2011.
        
        Effective
        as of April 30, 2011, Ms. Notar and Mr. Bygdnes executed an extension of the Agreement entitled Extension of Purchase
        Option Agreement (the “Extension”). As a result of the Extension, Ms. Notar has retained the option to purchase
        the foregoing shares through May 1, 2012. Aside from the agreed exercise price for any options which will be exercised,
        there was no separate consideration paid under the Agreement or Extension.
|(4) | As all of Lauren Notar’s shares,
    if purchased pursuant to the existing option agreement, will be purchased from Harry Bygdnes, the greatest combined number
    of shares beneficially owned by Ms. Notar and Mr. Bygdnes is the current total of Mr. Bygdnes shares which is 24,000,000 shares
    or 47.99%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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



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



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



On June
16, 2008, we received and accepted a subscription to purchase 24,000,000 common shares at $0.002 per share for aggregate proceeds
of $48,000 from our former president. The subscription agreement permitted us to accept US$48,000 or CDN$48,000 in full settlement
of the share subscription. The share subscription was settled in Canadian dollars. On June 16, 2008 the shares were issued.



On July
1, 2008, we entered into a Corporate Management Services Agreement with our president at the time for management services. Pursuant
to the agreement the former President received $1,000 per month plus expenses for services rendered. The agreement was terminated
effective November 1, 2009, and the former President resigned on November 6, 2009.



On November
1, 2009, we entered into a Corporate Management Services Agreement with our President for management services. Pursuant to the
agreement the President would receive a signing bonus of $7,500 (paid November 1, 2009) and $5,000 per month from December 1,
2009 for services rendered plus reimbursement of company’s expenses. The agreement may be terminated by either party upon
30 days written notice. On June 21, 2011, the Board of Directors passed a resolution increasing the President’s salary to
$6,000 per month.



During
the year ended July 31, 2011, we incurred management fees of $62,000 charged by our president.

On
June 30, 2010, we purchased from our president 13 mineral property claims in the Thunder Bay mining division of Ontario, Canada.
As consideration for the purchase we issued an unsecured, non-interest bearing promissory note for $20,000 due on November 30,
2010. During the period ended January 31, 2011 this promissory note was settled by payment of $20,000 cash to the president.

As of the
date of this annual report, our common stock is traded on the OTC Bulletin Board (the “Bulletin Board”).  The
Bulletin Board does not impose on us standards relating to director independence or the makeup of committees with independent
directors, or provide definitions of independence.



Item
14. Principal Accounting Fees and Services



Below is
the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial
statements for the years ended:



|Financial
                                                             Statements for the Year Ended July 31 | Audit
    Services | Audit
    Related Fees | Tax
    Fees | Other
    Fees
|------------------------------------------------------------------------------------------------------------ | ------------------ | ---------------------- | ------------ | --------------
|2011                                                                                                         | $20,250            | $0                     | $0           | $0            
|2010                                                                                                         | $15,000            | $0                     | $0           | $0            



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PART
IV



Item
15. Exhibits, Financial Statements Schedules



|(a) | Financial
    Statements and Schedules
|--- | --------------------------------------



The
following financial statements and schedules listed below are included in this Form 10-K.



Financial
Statements (See Item 8)



|(b) | Exhibits
|--- | --------



|Exhibit
    Number | Description                                                                                                                                                                          
|------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1                | Articles of Incorporation
    (1)                                                                                                                                                    
|3.2                | Bylaws (1)                                                                                                                                                                           
|3.3                | Extension
    of Option Agreement                                                                                                                                                    
|3.4                | Resolution
    Increasing Management Compensation Agreement                                                                                                                          
|31.1               | Certification
    of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002  
|31.2               | Certification
    of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002  
|32.1               | Certification
    of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002



|(1). | Incorporated
    by reference to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 7, 2008
|---- | --------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



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





| | SOURCE
    GOLD CORP.                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                          
| | By: /s/ Lauren
    Notar                                                                                                                                                 
| | Lauren
                                                          Notar
        President,
        Chief Executive Officer, and Director
        November
        15, 2011



In accordance
with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:



| | By:
    /s/ Lauren Notar                                                                                                                                                 
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Lauren
                                                          Notar
        President,
        Chief Executive Officer, and Director
        November
        15, 2011





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