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

Form 10-K

|ý                                | Annual report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended February 28, 2010                            
|-------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|r                                | Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________________ to ________________
|Commission file number 000-53520

Santos Resource Corp.

|Nevada 
(State of Incorporation) | 98-0507846
(I.R.S. Employer Identification No.)
|-------------------------------- | -----------------------------------------------

11450 - 201A Street
			Maple Ridge, British Columbia  V2X 0Y4
			Tel: (604) 460-8440(Address and telephone number of
			Registrant's principal executive offices)


|Securities registered pursuant to Section 12(b) of the Act: |  | None                        
|----------------------------------------------------------- |  | ----------------------------
|Securities registered pursuant to Section 12(g) of the Act: |  | Common Stock(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes r
      No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes r
      No ý

Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý
      No r

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

(Not applicable to registrant) Yes r
      No r

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2

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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.

ý

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

|Large accelerated filer r

Non-accelerated filer r

(Do not check if a smaller reporting company) | Accelerated filer rSmaller reporting company ý
|------------------------------------------------------------------------------------------------- | ----------------------------------------------

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ý
   No q

The aggregate market value of the common equity stock held by non-affiliates of the Registrant as of August 31, 2009, the last business day of the Registrant's most recently completed second fiscal quarter, was $2,170,100 (computed based upon the price at which the Company's common stock was last sold).

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

| | Class:
		common stock - $0.001 par value |  | Outstanding at May 28, 2010: 32,076,500
| | ---------------------------------------- |  | ---------------------------------------





|Documents
		incorporated by reference. | None
|-------------------------------------- | ----





























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3

PART I

ITEM 1. BUSINESS

Overview

Santos Resource Corp. (the "Company" or "Santos") was incorporated under the laws of the state of Nevada on May 24, 2006.  We have not commenced business operations and we are considered an exploration stage company.  We are defined as a "shell company" under the Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act because we have nominal operations and nominal assets.  To date, our activities have been limited to organizational matters, obtaining a geological report on the Lourdeau Claims and the preparation and filing of a registration statement on Form S-1.

Lourdeau Claims

Under the Property Option Agreement entered into on June 25, 2007, we acquired an option to acquire a 75% interest in and to 18 mineral claims called the Lourdeau Claims from Starfire Minerals Inc., the registered owner of the Lourdeau Claims.  On May 29, 2008, we amended the property option agreement whereby our option to acquire the Lourdeau Claims is subject to the approval of the TSX Venture Exchange, which approval was obtained in September 2008.  On April 23, 2009, we amended the Property Option Agreement again, which extends the schedule for Santos to incur a portion of the final $22,732 (CAD$25,000) of Expenditures to earn Starfire's interest in the Lordeau Claims to April 30, 2010.  On April 26, 2010, we amended the Property Option Agreement, which extends the schedule for Santos to incur the final $14,004 (CAD$14,740) of Expenditures in order to earn 75% of Starfire's interest in the Lourdeau Claims, from April 30, 2010 to August 31, 2010.  The Lourdeau Claims consist of 18 mineral claims covering approximately 900.75 hectares (9.01 km2), located in the La Grande geological area of Quebec in the James Bay Territory about 620 miles (1,000 km) north of Montreal, Quebec.

Under the Property Option Agreement, Starfire Minerals Inc. has a 3% Net Smelter Return ("NSR") royalty interest in the Lourdeau Claims, if and when Santos exercises its option to acquire a 75% interest in the Lourdeau Claims by making the required cash and share payments.  NSR means the actual proceeds received from the sale of ore, metals or concentrated products from the Lourdeau Property derived from commercial production as recorded by the producer and net of any smelting and refining charges, penalties, costs of transportation of ores, metals or concentrates from the Lourdeau Property to any mint, smelter or other purchaser, cost of insurance of the products, and any export and import taxes levied with respect to production from the Lourdeau Property.

Santos also has the right to purchase up to two-thirds of the NSR royalty (i.e. 2% of the NSR royalty) on the basis of $100,000 for each 0.1% of the NSR royalty (i.e. $100,000 per 0.1% NSR royalty) acquired on the first one-half of the NSR royalty, and $150,000 for each 0.1% of the NSR royalty (i.e. $150,000 per 0.1% NSR royalty) thereafter for the remaining NSR royalty (i.e. the remaining 1% NSR royalty).  To exercise its option to purchase the NSR royalty or any portion thereof, Santos must provide Starfire with at least 30 days advance written notice of its intention to do so, and must close upon each purchase within 60 days of each notice.

Under the Property Option Agreement, Santos is required to make all filings related to the Lourdeau Property and to maintain the Lourdeau Claims in good standing by preparing and filing the assessment reports, paying taxes and keeping the Lourdeau Property free and clear of all liens and encumbrances.  The Lourdeau Claims are in good standing until July 18, 2011 and have been assigned tenure numbers 87500, 87501, 87502, 87503, 87504, 87505, 87506, 87507, 87508, 87509, 87510, 87511, 87512, 87513, 87514, 87515, 87516 and 87517 by the Province of Quebec.

In order to exercise the Option and to earn its 75% interest in the Property, Santos has to pay Starfire $10,582 (CAD$10,000) in cash payment and issue 75,000 shares to Starfire, and incur an aggregate of $47,024 (CAD$50,000) in expenditures before August 31, 2010, within the following time schedule:



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4

(a)        pay $10,582 (CAD$10,000) upon signing of the Property Option
Agreement (paid);

(b)        issue and deliver 75,000 shares within 10 business days of the date
of approval of the Property Option Agreement by the board of directors of Santos
(issued in June 2007);

(c)        incur $24,094 (CAD$25,000) of expenditures on the Lourdeau Property
on or before September 30, 2008 (in September 2008, Santos paid Starfire cash of
$24,094 instead of incurring expenditures on the property);

(d)        incur $8,926 (CAD$10,260) on the Lourdeau Property on or before May
11, 2009 (in May 2009 Santos paid Starfire cash of $8,926 instead of incurring
expenditures on the property); and

(e)        incur additional expenditures of approximately $14,004 (CAD$14,740)
on the Lourdeau Property on or before August 31, 2010.

Any shares delivered, cash payments made, or expenditures incurred toward the option price that is over and above that required to be made during a particular time will be carried forward and applied against the required payment in subsequent periods.

If Santos does not incur the full amount of expenditures within the set time period, Santos may, within 45 days after the end of the period, pay Starfire the outstanding balance to be incurred for that specific year by way of either 100% cash or 50% cash and 50% shares (valued at the weighted average trading price during the 10 trading days preceding the period ended).  After these payments, the option from Starfire remains in good standing and Santos will be deemed to have acquired 75% of the Lourdeau Claims from Starfire.

Plan of Operation

Our business plan is to proceed with the exploration of the Lourdeau Property to determine whether there are commercially exploitable reserves of base and precious metals.  We presently do not have funds to meet our general operating expenses and to meet our obligations under the Property Option Agreement.  We currently do not have any arrangements for financing and we may not be able to obtain financing when required.  We are currently relying on loans that may be available to Santos from management.  We do not have the funds to conduct the recommended exploration program.  Due to extreme weather conditions, exploration activities can only be conducted between June and August of each year.  We are attempting to raise additional money, and have not started the exploration program.  If we are able to raise additional money, we may conduct the exploration program recommended by Mr. Michel Boily in the summer of 2010.  We anticipate the recommended program will cost approximately $102,224 (CAD$107,570).

Mr. Michel Boily, Ph.D., P. Geo. was hired by Santos to provide a Technical Report in July 2007 on the Lourdeau Claims.  Mr. Boily does not have any interest in the Lourdeau Property or the Company.  The report is based on published and private reports, maps and data provided by the Company and in the public domain.

Mr. Boily recommends a systemic surface sampling program of the Lourdeau Vein site and its vicinity, and the northern edge of the Lourdeau Hill, incorporating grab and channel sampling, in order to get a solid geochemical assay database.  Mr. Boily recommends obtaining a helicopter-borne geophysical survey to cover the rest of the Lourdeau Property.  Mr. Boily recommends the geophysical magnetic and radiometric surveys to be done on a 100 m spaced grid.

Depending on the results of this program, the next phase could involve a drilling campaign which would define the targets acquired during the geophysical surveys and sampling campaign.  The focus of the drilling will be the uranium-mineralized sandstones at the Lourdeau Hill, with the gold, copper and silver-mineralized metavolcanic constituting secondary targets.



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We anticipate that additional funding will be in the form of equity financing from the sale of our common stock.  However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund additional phases of the exploration program should we decide to proceed. We believe that debt financing will not be an alternative for funding any further phases in our exploration program. The risky nature of this enterprise and lack of tangible assets places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable mine can be demonstrated. We do not have any arrangements in place for any future equity financing.

Employees

Initially, we intend to use the services of contractors and consultants for exploration work on our properties.  At present, we have no paid employees.  We believe keeping a low number of full-time employees will conserve cash and allow greater flexibility in the future.

ITEM 1A. RISK FACTORS

An investment in the Company is highly speculative in nature and involves an extremely high degree of risk.  There is no assurance that our business will be profitable. You should carefully consider the risks described below and the other information in this annual report before investing in our common stock.  If any of the following risks occur, our business, operating results and financial condition could be seriously harmed.

We are a recently organized business and you cannot evaluate the investment merits of our Company because we have no operating history.

Our Company is only recently organized with no operating history, which makes it difficult to evaluate the investment merits of our Company.  Our Company was organized on May 24, 2006 and is a start-up company.  We have no operating history and we do not have any business prior to our organization.  As of February 28, 2010, we incurred $69,689 to acquire an option to acquire and explore the Lourdeau Property, and $147,428 in professional fees to organize the Company and file a registration statement on Form S-1.  We have incurred a total of $217,790 in expenses, with a cash balance of $307 as of February 28, 2010.

We may not be able to continue as a going concern if we do not obtain additional financing.

Because of our lack of sufficient funds and short operating history incurring only expenses, and no revenues, our independent accountants' audit report states that there is substantial doubt about our ability to continue as a going concern. Our independent auditor in their audit report have stated that we are in the exploration stage, have no permanently established source of revenue, and are dependent on our ability to raise capital from shareholders or other sources to sustain operations, raising substantial doubt about our ability to continue as a going concern.  Therefore, our ability to continue as a going concern is highly dependent upon obtaining additional financing for our planned operations.  As of the date hereof, all our cash has been raised from the issuance of securities.

If we do not obtain additional financing, our business will fail because we cannot fund our business objectives.

In order for us to perform any exploration program, we will need to obtain additional financing. As of February 28, 2010, we had cash in the amount of $307 and current liabilities of $37,062.  We currently do not have any operations and we have no income. Our business plan calls for incurring approximately $102,224 on an exploration program incorporating grab and channel sampling followed by a helicopter-borne geophysical survey, which would define the targets acquired during the geophysical surveys and sampling campaign.  We do not have sufficient funds to meet our general operating expenses and to meet our obligations under the Property Option Agreement.  We currently do not have any arrangements for financing and we may not be able to obtain financing when required.  We are currently relying on



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loans that may be available to Santos from management.  We do not have funds to conduct the exploration program.  If we raised the funds and conducted the exploration programs, and if our exploration programs are successful in discovering ore of commercial tonnage and grade, we will require additional funds in order to place the Lourdeau Claims into commercial production. Obtaining additional financing would be subject to a number of factors, including the market price for uranium, gold, silver, copper, base and precious metals and the cost of exploring for these minerals. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.

Weather interruptions in the province of Quebec may affect and delay our proposed exploration operations and as a result, there may be delays in generating revenues.

We may not have access to the Lourdeau Property during the winter season due to snow in the area and road closures.  Extreme weather can also occur in other seasons and limit access to the Lourdeau Property.  The summers are very short (from early June to late August).  As a result, any attempts to visit, test, or explore the property may be limited to these few months of the year when weather permits such activities.  These limitations can result in significant delays in exploration efforts, as well as mining and production in the event that commercial amounts of minerals are found.  Such delays can result in our inability to meet deadlines for exploration expenditures required to be made in order to retain title to our claims under provincial mineral property laws.

Because our sole executive officer does not have formal training specific to the mining industry, there is a higher risk our business will fail.

Mr. Richard Pierce, our sole executive officer, does not have any formal training as a geologist, or in the technical aspects of management of a company specializing in mining and exploration for base and precious metals.  Mr. Pierce has no business experience with exploration companies, his decisions and choices may not take into account standard exploration or mining approaches commonly used in the industry.  As a result of this inexperience, there is a higher risk of our being unable to complete our business plan for the exploration of our mineral claims.  In addition, we will have to rely on the technical services of others with expertise in geological exploration in order for us to carry our planned exploration program.  If we are unable to contract for the services of such individuals, it will make it difficult and maybe impossible to pursue our business plan.  There is thus a higher risk of business failure.

Because our sole executive officer has only agreed to provide his services on a part-time basis, he may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail.

Our sole executive officer is employed on a full time basis by other companies.  Because we are in the early stages of our business, Mr. Pierce, our executive officer, devotes approximately 10 hours per week to our affairs.  If the demands of our business require the full business time of Mr. Pierce, he is prepared to adjust his timetable to devote up to 15 hours a week.  However, Mr. Pierce may not be able to devote sufficient time to the management of our business, as and when needed. It is possible that the demands of Mr. Pierce's other business interests will increase with the result that he would no longer be able to devote sufficient time to the management of our business.  Competing demands on Mr. Pierce's time may lead to a divergence between his interests and the interests of other shareholders.

We are highly dependent on our senior management.  The loss of our sole executive officer could hinder our ability to pursue our stated plan of operation and obtain debt or equity financing, if and when required.

We believe that our continued success depends to a significant extent upon the efforts and abilities of our senior management and in particular Richard Pierce, our sole executive officer.  Mr. Pierce has been in management for over 20 years.  We believe that the loss of Mr. Pierce's business and management experience could hinder our ability to pursue our stated plan of operations and obtain debt or equity financing, if and when required.



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Because the owner of the Lourdeau Property is Starfire, where our sole executive officer is also a director, there may be conflicts of interest when our Company transacts any business with Starfire.

There may be conflict of interest situations whenever our Company conducts any business with Starfire, the registered owner of the Lourdeau Property.  Richard Pierce, our sole executive officer, is also a director of Starfire.  Shareholders of Santos will be dependent upon our management exercising, in a manner fair to all of our shareholders, his fiduciary duties as an officer or as a member of our board of directors.  There is no way to prevent or control any business transactions between Santos and Starfire relating to the Lourdeau Property that could have a negative or unfavorable consequence for Santos.  There is a significant risk that Santos may not receive fair treatment in any transaction connected to the Lourdeau Property and as a result the shareholders of Santos will be adversely affected.

We have no known mineral resources and if we cannot find any mineral resources we may have to cease operations.

We have no measured mineral bodies.  If we do not find a mineral body or bodies containing valuable minerals or metals or if we cannot conduct further exploration of any minerals, either because we do not have money to do it or because it is not economically feasible to do it, we may have to cease operations and you will loose your investment.

Our sole asset is a Property Option Agreement and if we fail to make the required payments on a timely basis, we will lose the right to acquire a 75% interest in and to the Lourdeau Property.

Under the Property Option Agreement we have a right and option to acquire a 75% interest in and to the Lourdeau Claims by paying a total of CAD$10,000 in cash; issuing 75,000 shares to Starfire Minerals Inc., the registered owner of the Lourdeau Claims; and incurring at least a total of $47,024 of expenditures on the property before August 31, 2010.  As of the date hereof, we have paid Starfire $10,582 (CAD$10,000); issued to Starfire 75,000 shares; and instead of incurring expenditures we paid Starfire $33,020 in cash.  We are required to incur additional expenditures of approximately $14,004 (CAD$14,740) before August 31, 2010.  Under the agreement we have a choice to either incur the full amount of expenditures within the set time period, or within 45 days after the end of the period, pay Starfire the outstanding balance to be incurred for that specific year by way of either 100% cash or 50% cash and 50% shares (valued at the weighted average trading price during the 10 trading days preceding the period ended).  The failure of our Company to make any cash payments and incurring the expenditures within the contractual time limit will allow Starfire to terminate the Property Option Agreement.  If the Property Option Agreement is terminated, we will lose all rights to the Lourdeau Property, including any payments previously made to Starfire.  The Property Option Agreement is our sole asset and if we lose the contractual rights to acquire the Lourdeau Property, we will have no assets and you may lose all your investment.

Title to the Lourdeau Claims is registered in the name of Starfire Minerals Inc. and Starfire may transfer title to third parties without our knowledge.

The Property Option Agreement only gives us a right to acquire a 75% interest in and to the Lourdeau Claims by fulfilling our obligations under the contract.  We cannot prevent Starfire from transferring the Lourdeau Property to third parties.  A third party has no way of knowing that we have rights to the Lourdeau Property since ownership is registered in the name of Starfire with the government of Quebec.  If the Lourdeau Property is transferred to third parties we may have to litigate in order to determine our ownership rights.  There is no way of knowing if Starfire will or has transferred the property to third parties.  Our only protection is our contractual rights under the Property Option Agreement.



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Since we are subject to compliance with government regulation, which may change, the anticipated costs of our exploration program may increase.

There are several governmental regulations that materially restrict mineral exploration or exploitation. We will be subject to the mining laws of Quebec as we carry out our exploration programs.  Because we are a foreign company working on mining claims in Quebec, we will need to register with the government of Quebec before we work on the Lourdeau Claims.  We may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these regulations. While our planned exploration program budgets for regulatory compliance, there is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program.

Because we have nominal assets, we are considered a "shell company" and will be subject to more stringent reporting requirements.

Rule 12b-2 of the Exchange Act defines a shell company as a registrant that has no or nominal operations, and either (a) no or nominal assets; (b) assets consisting solely of cash and cash equivalents; or (c) assets consisting of any amount of cash and cash equivalents and nominal other assets.  Our balance sheet states that we have cash as our only asset therefore, we are defined as a shell company.  SEC rules prohibit shell companies from using a Form S-8 to register securities pursuant to employee compensation plans.  However, the rules do not prevent us from registering securities pursuant to registration statements.  SEC rules regarding Form 8-K requires shell companies to provide more detailed disclosure upon completion of a transaction that causes it to cease being a shell company.  If and when we cease to be a shell company, we must file a current report on Form 8-K containing the information required pursuant to Regulation S-K and in a registration statement on Form 10, within four business days following completion of the transaction together with financial information of the private operating company.  In order to assist the SEC in the identification of shell companies, we are also required to check a box on Form 10-Q and Form 10-K indicating that we are a shell company.  To the extent that we are required to comply with additional disclosure because we are a shell company, we may be delayed in executing any mergers or acquiring other assets that would cause us to cease being a shell company.

The SEC adopted a new Rule 144 effective February 15, 2008, which makes resale of restricted securities by shareholders of a shell company more difficult.  The new Rule 144 cannot be relied upon for the resale of securities of a shell company, and may be relied upon to sell securities of a former shell company only if all of the following conditions are met:  the issuer has ceased to be a shell company; the issuer is subject to the reporting requirements of the Exchange Act; the issuer has filed all Exchange Act reports required for the past 12 months; and at least one year has elapsed from the time that the issuer filed current Form 10 information on Form 8-K changing its status to a non-shell company.

Because our directors and sole executive officer, as a group, control approximately 44.3% of our outstanding common stock, investors may find that corporate decisions influenced by our directors and executive officer are inconsistent with the best interests of other stockholders.

Our directors and sole executive officer, as a group, control approximately 44.3% of our issued and outstanding shares of common stock.  The interests of our directors and executive officer may not be, at all times, the same as that of other shareholders.  Since our directors and executive officer are not simply passive investors but also our Board of Directors and executive officer, their interests as an executive may, at times, be adverse to those of passive investors.  Where those conflicts exist, our shareholders will be dependent upon our directors and executive officer exercising, in a manner fair to all of our shareholders, their fiduciary duties as an officer or as a member of our board of directors. Also, our directors and executive officer will have the ability to significantly influence the outcome of most corporate actions requiring shareholder approval, including the merger of Santos with or into another company, the sale of all or substantially all of our assets and amendments to our articles of incorporation.  This concentration of ownership with our directors and executive officer may also have the effect of delaying, deferring or preventing a change in control of Santos, which may be disadvantageous to minority shareholders.



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If the selling shareholders sell a large number of shares all at once or in blocks, the market price of our shares would most likely decline.

Our Form S-1 Registration Statement filed on November 26, 2008, registered for resale 13,836,500 shares of our common stock held by our selling shareholders, which represents 43.1% of the common shares outstanding.  The offer or sale of a large number of shares at any price may cause the market price to fall.

Rules of the Securities and Exchange Commission concerning low priced securities may limit the ability of shareholders to sell their shares

Santos's common stock is subject to Rule 15g-9 of the Securities and Exchange Commission which regulates broker/dealer practices in connection with transactions in "penny stocks".  Penny stocks generally are equity securities with a 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 that security are provided by the exchange or system.  The penny stock rules require a broker/dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Commission that provides information about penny stocks and the nature and level or risks in the penny stock market.  The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and if the broker/dealer is the sole market-maker, the broker/dealer must disclose this fact and the broker/dealer's presumed control over the market.  This information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer.  The bid and offer quotations, and the broker/dealer and its salesperson compensation information, must be given to the customer in writing before or with the customer's confirmation.  The broker/dealer must make a special suitability determination for purchasers of the securities and receive the purchaser's written agreement to the transaction prior to sale.  Monthly statements must be sent by the broker/dealer to the customer disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.  These disclosure requirements may reduce the level of trading activity in the market for Santos's common stock and may limit the ability of investors in this offering to sell Santos's common stock in the secondary market.

There is no active trading market for our securities.

There has been, and continues to be, a limited public market for our common stock.  An active trading market for our shares has not, and may never develop or be sustained and purchasers of our shares may not be able to resell their securities at prices equal to or greater than the price paid for these shares.

Rules of the Securities and Exchange Commission concerning late report filings

Our common stock is quoted on the OTC Bulletin Board.  FINRA Rule 6530 provides that OTC Bulletin Board issuers who are late in filing their annual or quarterly reports three times within a 24-month period will be ineligible for quotation on the OTC Bulletin Board.  In order to regain eligibility under this rule, Santos would need to timely file all of its annual and quarterly reports due in a one year period.  We have not been late in filing our quarterly and annual reports.

ITEM 1B UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our only property is an option to acquire a 75% interest in and to 18 mineral claims covering approximately 900.75 hectares (9.01 km2) called the Lourdeau Claims.  The Lourdeau Claims are located in the La Grande geological area of Quebec in the James Bay Territory about 620 miles (1,000 km) north of Montreal, Quebec.



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We do not own or lease any property other than our interest in the Lourdeau Claims.

Currently, we are not paying any monthly rent for our office space located at 11450 - 201A Street, Maple Ridge, British Columbia.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. REMOVED AND RESERVED



PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is quoted on the OTC Bulletin Board under the name "Santos Resource Corp." and the symbol "SANZ".  Set forth below are the range of high and low bid quotations for the periods indicated as reported by the OTC Bulletin Board. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. The Company's common stock began trading on June 15, 2009.  The following table reports high and low closing prices, on a quarterly basis, for the Company's common stock:

|Quarter Ending | High             | Low             
|-------------- | ---------------- | ----------------
|May 31, 2008   | not
		applicable | not
		applicable
|Aug. 31, 2008  | not
		applicable | not
		applicable
|Nov. 30, 2008  | not
		applicable | not
		applicable
|Feb. 28, 2009  | not
		applicable | not
		applicable
|May 31, 2009   | not
		applicable | not
		applicable
|Aug. 31, 2009  | $0.20            | $0.20           
|Nov. 30, 2009  | $0.20            | $0.20           
|Feb. 28, 2010  | no
		trades      | no
		trades     

Holders

As of May 28, 2010, there were approximately 41 owners of record of the Company's common stock.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.

Securities authorized for issuance under equity compensation plans

None.

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Recent Sales of Unregistered Securities

The following sets forth certain information regarding sales of, and other transactions with respect to, our securities, which sales and other transactions were not registered pursuant to the Securities Act of 1933, during the last three years.  Unless otherwise indicated, no underwriters were involved in such transactions.

On June 19, 2007, we issued an aggregate of 31,040,000 shares of common stock at a price of $0.0005 per share to nine founding shareholders, which include our directors and sole officer. We received $15,520 from this offering.  These shares were issued pursuant to Regulation S of the Securities Act of 1933.  The purchasers represented to us that they were non-US persons, as defined in Regulation S, and that their intentions to acquire the securities was for investment only and not with a view toward distribution.  We did not engage in a distribution of this offering in the United States and no general solicitation was made to the public and no advertising was conducted for the offering.

On June 25, 2007, we issued 75,000 shares of common stock to Starfire Minerals Inc., a British Columbia company, as partial consideration for Starfire granting us an option to acquire 75% of the Lourdeau Claims.  These shares are issued at a deemed price of $0.15 per share.  These shares were issued pursuant to Regulation S of the Securities Act of 1933.  Starfire represented to us that it was a non-US person, as defined in Regulation S, and that its intentions to acquire the securities was for investment only and not with a view toward distribution.  We did not engage in a distribution of this offering in the United States and no general solicitation was made to the public and no advertising was conducted for the offering.

On February 1, 2008, we issued 961,500 shares of common stock to 40 purchasers at $0.15 per share pursuant to Regulation S of the Securities Act.  The purchasers represented to us that they were non-US persons, as defined in Regulation S, and that their intentions to acquire the securities was for investment only and not with a view toward distribution.  We did not engage in a distribution of this offering in the United States and no general solicitation was made to the public and no advertising was conducted for the offering.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The financial data presented below should be read in conjunction with the more detailed financial statements and related notes, which are included elsewhere in this report.  Information discussed herein, as well as elsewhere in this Annual Report on Form 10-K, includes forward-looking statements or opinions regarding future events or the future financial performance of the Company, and are subject to a number of risks and other factors which could cause the actual results to differ materially from those contained in forward-looking statements.  Among such factors are general business and economic conditions, and risk factors as listed in this Form 10-K or listed from time to time in documents filed by the Company with the Securities and Exchange Commission.

Financial Condition

As at February 28, 2010, Santos had a cash balance of $307.  Management does not anticipate generating any revenue for the foreseeable future.  When additional funds become required, the additional funding will come from equity financing from the sale of Santos' common stock.  If Santos is successful in completing an equity financing, existing shareholders will experience dilution of their interest in Santos.  Santos does not have any financing arranged and Santos cannot provide investors with any assurance that Santos will be able to raise sufficient funding from the sale of its common stock.  In the absence of such financing, Santos' business will fail.



---

12

Based on the nature of Santos' business, management anticipates incurring operating losses in the foreseeable future.  Management bases this expectation, in part, on the fact that very few mineral claims in the exploration stage ultimately develop into producing, profitable mines.  Santos' future financial results are also uncertain due to a number of factors, some of which are outside its control.  These factors include, but are not limited to:

- Santos' ability to raise additional funding;
- the market price for minerals; and
- the results of Santos' proposed exploration programs on its exploration mineral properties.

Due to Santos' lack of operating history and present inability to generate revenues, Santos' auditors have stated their opinion that there currently exists a substantial doubt about Santos' ability to continue as a going concern.  This means that there is substantial doubt whether Santos can continue as an on going business for the next 12 months unless we obtain additional capital to pay our bills.  We presently do not have the funds to conduct the recommended exploration program.  Further, even if Santos completes its recommended exploration program, we will require additional funds in order to place the Lourdeau Claims into commercial production.

Liquidity

Santos' internal sources of liquidity will be loans that may be available to Santos from management.  Although Santos has no written arrangements with any of directors and officers, Santos expects that the directors and officers will provide Santos with internal sources of liquidity, if it is required.

Also, Santos' external sources of liquidity will be private placements for equity conducted outside the United States.  Since inception on May 24, 2006 to February 28, 2010, Santos did not complete any definitive arrangements for any external sources of liquidity, except for a private placement in February 2008 where the Company issued 961,500 shares of common stock at $0.15 per share for proceeds of $144,226.

There are no assurances that Santos will be able to achieve further sales of its common stock or any other form of additional financing.  If Santos is unable to achieve the financing necessary to continue its plan of operations, then Santos will not be able to continue its exploration programs and its business will fail.

Capital Resources

As of February 28, 2010, Santos had total assets of $307 and total liabilities of $37,062 for a net working capital deficit of $36,755, compared with a net working capital of $18,283 as of February 28, 2009. The assets are comprised of cash of $307.  The liabilities consisted mainly of accounting, audit and legal fees payable and shareholder loan.

There are no assurances that Santos will be able to achieve further sales of its common stock or any other form of additional financing.  If Santos is unable to achieve the financing necessary to continue its plan of operations, then Santos will not be able to continue its exploration programs and its business will fail.

Management does not believe that Santos' current cash will be sufficient to meet our general operating expenses for the next 12 months and to meet our obligations under the Property Option Agreement.  We do not have the funds to conduct the recommended exploration program which is estimated to cost approximately $102,224 (CAD$107,570).  We need to raise additional money to conduct our exploration program.  If we are able to raise additional money, we plan to conduct our exploration program in the summer of 2010.



---

13

Results of Operations

We did not earn any revenues for the fiscal year ended February 28, 2010 and from inception on May 24, 2006 to February 28, 2009.  We do not anticipate earning revenues until such time as we have entered into commercial production of our mineral properties. 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 our properties, or if such resources are discovered, that we will enter into commercial production of our mineral properties.

We incurred total expenses in the amount of $54,305 during the fiscal year ended February 28, 2010 and total expenses in the amount of $92,777 during the fiscal year ended February 28, 2009.  These operating expenses comprised mainly of accounting and legal expenses of $38,893  and mineral property costs of $9,526 for the fiscal year ended February 28, 2010; compared to accounting and legal expenses of $65,587 and mineral property costs of $28,583 during the fiscal year ended February 28, 2009.  The decrease in expenditure during the fiscal year ended February 28, 2010 as our continuous disclosure obligations incur less accounting and legal fees, compared to filing of a registration statement on Form S-1 during the prior year.

Off-Balance Sheet Arrangements

Santos has no off-balance sheet arrangements.

Cautionary Statement Regarding Forward-Looking Statements

This annual report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "our company believes," "management believes" and similar language. These forward-looking statements are based on our current expectations and are subject to certain risks, uncertainties and assumptions, including those set forth in the following discussion, including under the heading "Risk Factors". Our actual results may differ materially from results anticipated in these forward-looking statements. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. In addition, our historical financial performance is not necessarily indicative of the results that may be expected in the future and we believe that such comparisons cannot be relied upon as indicators of future performance. Other important factors that could cause actual results to differ materially include the following: business conditions, the price of precious metals, ability to attract and retain personnel; the price of the Company's stock; and the risk factors set forth from time to time in the Company's SEC reports, including but not limited to its annual report on Form 10-K; its quarterly reports on Form 10-Q; and any current reports on Form 8-K.  In addition, the Company disclaims any obligation to update or correct any forward-looking statements in all the Company's annual reports and SEC filings to reflect events or circumstances after the date hereof.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.











---

14

ITEM 8. FINANCIAL STATEMENTS

















Santos Resource Corp.

Financial Statements

February 28, 2010

(Presented In US Dollars)



















---

15



|CHARTERED
ACCOUNTANTS | 1100 - 1177 West Hastings Street
Vancouver, BC V6E 4T5
Tel: (604) 687-4511
Fax: (604) 687-5805
Toll Free: 1-800-351-0426
www.MacKay.ca | 
|--------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | 

Report of Independent Registered Public Accounting Firm

To the Stockholders of 
Santos Resource Corp.(an Exploration Stage Company)

We have audited the balance sheets of Santos Resource Corp. (an Exploration Stage Company) as at February 28, 2010 and 2009 and the statements of operations, stockholders' equity(deficit), and cash flows for the years ended February 28, 2010 and 2009 and the period from incorporation on May 24, 2006 to February 28, 2010.  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 an audit to obtain reasonable assurance whether the financial statements are free of material misstatements.  The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the 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, these financial statements present fairly, in all material respects, the financial position of the Company as at February 28, 2010 and 2009 and the results of its operations and its cash flows for the years ended February 28, 2010 and 2009 and the period from incorporation on May 24, 2006 to February 28, 2010 in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to financial statements, the Company is in the exploration stage, and has no permanently established source of revenue and is dependent on its ability to raise capital from shareholders or other sources to sustain operations.  These factors, along with other matters as set forth in Note 1, raise substantial doubt that the Company will be able to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.





|Vancouver, Canada
May 14, 2010 | "MacKay LLP"
Chartered Accountants
|------------------------------ | ----------------------------------





---

16

Santos Resource Corp.


(an Exploration stage Company)
	Balance Sheets
	(Expressed in US Dollars)  At February 28,
			
			2010
			
			2009AssetsCurrent AssetsCash
			$
			307
			$
			38,661Amounts
			receivable
			
			733
			
			-Total Assets
			$
			1,040
			$
			38,661Liabilities and Stockholders'
			Equity (Deficiency)Current LiabilitiesAccounts payable and accrued liabilities
			$
			27,562
			$
			12,508Shareholder loan - Note 3(b)
			
			9,500
			
			7,870Total Current Liabilities
			
			37,062
			
			20,378Stockholders' Equity
			(Deficiency)Common
			Stock - 75,000,000 shares authorized, 
			$0.001 par value - 32,076,500 (2009 - 32,076,500) shares issued
			
			32,077
			
			32,077Additional paid in capital
			
			149,871
			
			149,871Deficit
			accumulated during the exploration stage
			
			(217,970)
			
			(163,665)Total Stockholders' Equity
			(Deficiency)
			
			(36,022)
			
			18,283Total Liabilities and
			Stockholders' Equity (Deficiency)
			$
			1,040
			$
			38,661  Nature of operations and
	Continuance of Business - Note 1 Subsequent event - Note 7 On Behalf of the Board: /s/ Richard Pierce  Director /s/ Andrew Lee Smith  Director    The
	accompanying notes are an integral part of these financial statements 17Santos Resource Corp. (an Exploration stage company)
	Statements of Operations
	(Expressed in US Dollars)
	
	Year Ended
			
			Year Ended
			
			Cumulative toFebruary 28,
			
			February 28,
			
			February 28,2010
			
			2009
			
			2010ExpensesGeneral and administrative
			$
			223
			$
			175
			$
			744Foreign exchange loss (gain)
			
			1,397
			
			(1,568)
			
			109Mineral property costs
			
			9,526
			
			28,583
			
			69,689Professional Fees
			
			43,159
			
			65,587
			
			147,428Total Expenses
			
			54,305
			
			92,777
			
			217,970Net
			loss and comprehensive loss
			$
			(54,305)
			$
			(92,777)
			$
			(217,970)Net
			loss per share - basic and diluted
			$
			(0.00)
			$
			(0.00)Weighted average number of sharesoutstanding - basic and diluted
			
			32,076,500
			
			32,076,500
	
	
	
	
	
	
	
	
	
	The accompanying notes are an integral part of these financial statements


---

18

Santos Resource Corp.

(an Exploration stage company)
	Statements of Stockholders' Equity (Deficiency)
	At February 28, 2010
	(Expressed in US Dollars) DeficitAccumulatedAdditional
			During the
			TotalCommon
			Stock
			Paid-in
			Exploration
			Stockholders'Number
			Par Value
			Capital
			Stage
			EquityBalance, May 24, 2006 (date of
			inception), andFebruary 28, 2007
			
			-
			$             -
			$             -
			$             -
			$             -Capital Stock issued for
			subscriptionsreceivable at $0.0005 per share and servicesat
			$0.005 per share
			19-Jun-07
			31,040,000
			31,040
			(15,520)
			-
			15,520Mineral Property Option - Starfire Minerals at $0.15
			per share
			25-Jun-07
			75,000
			75
			11,175
			-
			11,250Private Placement at $0.15 per
			share
			1-Feb-08
			961,500
			962
			143,264
			-
			144,226Private Placement Fees
			1-Feb-08
			-
			-
			(4,568)
			-
			(4,568)Net loss for the year
			
			-
			-
			15,520
			(70,888)
			(55,368)Balance, February 29, 2008
			
			32,076,500
			32,077
			149,871
			(70,888)
			111,060Net loss for the year
			
			-
			-
			-
			(92,777)
			(92,777)Balance, February 28, 2009
			
			32,076,500
			32,077
			149,871
			(163,665)
			18,283Net loss for the year
			
			-
			-
			-
			(54,305)
			(54,305)Balance, February 28, 2010
			
			32,076,500
			$     32,077
			$   149,871
			$  (217,970)
			$    (36,022)         The
	accompanying notes are an integral part of these financial statements


---

19

Santos Resource Corp.

|                                                           |   |              |   |              |   |              
|---------------------------------------------------------- | - | ------------ | - | ------------ | - | -------------
|                                                           |   | Year Ended   |   | Year Ended   |   | Cumulative to
|                                                           |   | February 28, |   | February 28, |   | February 28, 
|                                                           |   | 2010         |   | 2009         |   | 2010         
|                                                           |   |              |   |              |   |              
|Cash flows used in Operating
		Activities                  |   |              |   |              |   |              
|Net loss
		for the period                                  | $ | (54,305)     | $ | (92,777)     | $ | (217,970)    
|Adjustments
		to net loss for non-cash  
		  activities    |   |              |   |              |   |              
|Shares
		issued for property acquisition                   |   | -            |   | -            |   | 11,250       
|Unrealized
		foreign exchange loss (gain)                  |   | 1,397        |   | (1,568)      |   | 109          
|Services
		provided by founders in
		  exchange for shares |   | -            |   | -            |   | 15,520       
|Change in
		amounts receivable                             |   | (733)        |   | -            |   | (733)        
|Change in
		accounts payable and accrued 
		  liabilities  |   | 15,054       |   | 703          |   | 26,868       
|                                                           |   |              |   |              |   |              
|Net cash used in operating
		activities                    |   | (38,587)     |   | (93,642)     |   | (164,956)    
|                                                           |   |              |   |              |   |              
|Cash flows from financing
		activities                     |   |              |   |              |   |              
|Common
		Stock issued                                      |   | -            |   | -            |   | 159,746      
|Private
		Placement Fees                                   |   | -            |   | -            |   | (4,568)      
|Advances
		from shareholders                               |   | -            |   | -            |   | 9,852        
|Net cash flows from financing
		activities                 |   | -            |   | -            |   | 165,030      
|                                                           |   |              |   |              |   |              
|Foreign exchange effect on cash                            |   | 233          |   | -            |   | 233          
|                                                           |   |              |   |              |   |              
|Cash increase (decrease) during the
		period               |   | (38,354)     |   | (93,642)     |   | 307          
|                                                           |   |              |   |              |   |              
|Cash beginning of the period                               |   | 38,661       |   | 132,303      |   | -            
|                                                           |   |              |   |              |   |              
|Cash end of the period                                     | $ | 307          | $ | 38,661       | $ | 307          
|                                                           |   |              |   |              |   |              
|Interest Paid in the period                                | $ | -            | $ | -            | $ | -            
|Income Taxes Paid in the period                            | $ | -            | $ | -            | $ | -            









The accompanying notes are an integral part of these financial statements

---

20

Santos Resource Corp.

1.        Nature of Operations and Continuance of Business

Santos Resource Corp. (the "Company") was incorporated in
the state of Nevada on May 24, 2006. The Company is an Exploration Stage
Company. The Company's principal business is the acquisition and exploration of
mineral properties. The Company has not presently determined whether its
properties contain mineral reserves that are economically recoverable.

The accompanying financial statements have been prepared on a
going concern basis, which implies the Company will continue to realize its
assets and discharge its liabilities in the normal course of business. The
Company has not generated revenues since inception and has never paid dividends
and is unlikely to pay dividends or generate earnings in the immediate or
foreseeable future. The continuation of the Company as a going concern is
dependent upon the continued financial support from its shareholders, the
ability of the Company to obtain necessary equity financing to continue
operations, confirmation of the Company's interests in the underlying
properties, and the attainment of profitable operations. As at February 28,
2010, the Company has not generated any revenues and has an accumulated loss of
$217,970 since inception. These factors raise substantial doubt regarding the
Company's ability to continue as a going concern. These financial statements do
not include any adjustments to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.

2.         Summary of Significant
Accounting Policies

a)         Use of Estimates

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

b)         Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in
accordance with FASB accounting standards for "Earnings per Share", which
requires presentation of both basic and diluted earnings per share (EPS) on the
face of the income statement. Basic EPS is computed by dividing net income
(loss) available to common shareholders (numerator) by the weighted average
number of shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock price for the
period would be used in determining the number of shares assumed to be purchased
from the exercise of stock options or warrants. Diluted EPS excludes all
dilutive potential shares if their effect is anti dilutive. There were no
dilutive instruments outstanding at February 28, 2010 and 2009.

c)         Comprehensive Loss

FASB accounting standard for





---

21Santos Resource Corp.(an exploration stage company)
Notes to the Financial Statements
For the year ended February 28, 2010
(Expressed in U.S. dollars)

2.         Summary of Significant Accounting Policies
(continued)

d)         Cash and Cash Equivalents

The Company considers all highly liquid instruments with
maturity of three months or less at the time of acquisition to be cash
equivalents.

e)         Mineral Property Costs

The Company is in the exploration stage and has not yet
realized any revenue from its planned operations. It is primarily engaged in the
acquisition, exploration, and development of mining properties. Mineral property
acquisition and 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, the costs incurred to develop such
property are capitalized. Such costs will be depreciated using the
units-of-production method over the estimated life of the probable reserve.

f)         Long-lived Assets

In accordance with FASB accounting standard"Accounting for the Impairment or Disposal of Long-Lived Assets", the
carrying value of long-lived assets is reviewed on a regular basis for the
existence of facts or circumstances that may suggest impairment. The Company
recognizes impairment when the sum of the expected undiscounted future cash
flows is less than the carrying amount of the asset. Impairment losses, if any,
are measured as the excess of the carrying amount of the asset over its
estimated fair value.

g)         Financial Instruments

Financial instruments include cash, accounts payable and
accrued liabilities and shareholder loan. The Company's mineral property is in
Quebec, Canada and its administrative operation is in Canada, which results in
exposure to market risks from changes in foreign currency rates. The financial
risk is the risk to the Company's operations that arise from fluctuations in
foreign exchange rates and the degree of volatility of these rates.

h)         Income Taxes

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

The Company accounts for uncertain income tax positions in
accordance with FASB's accounting standard for Accounting for Uncertainty in
Income Taxes, which requires that that the Company recognize in the financial
statements, the impact of a tax position, if that position is more likely than
not of being sustained on examination by taxation authorities, based on the
technical merits of the position.



---

22Santos Resource Corp.(an exploration stage company)
Notes to the Financial Statements
For the year ended February 28, 2010
(Expressed in U.S. dollars)

2.         Summary of Significant Accounting Policies
(continued)

i)         Foreign Currency Translation

The Company's functional and reporting currency is the
United States dollar. Monetary assets and liabilities denominated in foreign
currencies are translated in accordance with FASB's accounting standard for "Foreign
Currency Translation", using the exchange rate prevailing at the balance
sheet date. Non-monetary assets are translated at historical exchange rates, and
revenue and expense items at the average rate of exchange prevailing during the
period. Gains and losses arising on settlement of foreign currency denominated
transactions or balances are included in the determination of income. Foreign
currency transactions are primarily undertaken in Canadian dollars. The Company
has not, to the date of these financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.

j)         Segmented Reporting

The Company reports segmented information in accordance
with FASB's accounting standard for Disclosure about Segments of an Enterprise
and Related Information.

k)         Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 157, "Fair Value Measurements" (ASC topic 820).
It establishes a framework for measuring the fair value of assets and
liabilities. This framework is intended to provide increased consistency in how
fair value determinations are made under various existing accounting standards
that permit, or in some cases require, estimates of fair market value. It also
expands financial statement disclosure requirements about a company's use of
fair value measurements, including the effect of such measures on earnings. For
nonfinancial assets and nonfinancial liabilities, the standard is effective for
financial statements issued for fiscal years beginning after November 15, 2008.
The Company adopted this new guidance effective March 1, 2009. The adoption of
this standard did not impact the financial position, results of operations or
cash flows.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements Liabilities -an Amendment of ARB
No. 51" (ASC Topic 810). This statement amends ARB 51 to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. This statement is effective for fiscal
years and interim periods within those fiscal years, beginning on or after
December 15, 2008 and earlier adoption is prohibited. The Company adopted this
new guidance effective March 1, 2009. The adoption of this statement did not
have an effect on the Company's financial statements.

In March 2008, the FASB issued SFAS No. 161, "Disclosures
about Derivative Instruments and Hedging Activities - an amendment to FASB
Statement No. 133" (ASC Topic 815). It is intended to improve financial
standards for derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
an entity's financial position, financial performance, and cash flows. Entities
are required to provide enhanced disclosures about: (a) how and why an entity
uses derivative instruments; (b) how derivative instruments and related hedged
items are accounted for under Statement 133 and its related interpretations; and
(c) how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows.  It is effective
for financial statements issued for fiscal years beginning after November 15,
2008, with early adoption encouraged. The Company adopted this new guidance
effective March 1, 2009. The adoption of this statement did not have a material
effect on the Company's financial statements.



---

23Santos Resource Corp.(an exploration stage company)
Notes to the Financial Statements
For the year ended February 28, 2010
(Expressed in U.S. dollars)

2.         Summary of Significant Accounting Policies
(continued)

k)         Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141R,
"Business Combinations" (ASC Topic 805). This statement replaces SFAS 141 and
defines the acquirer in a business combination as the entity that obtains
control of one or more businesses in a business combination and establishes the
acquisition date as the date that the acquirer achieves control. It requires an
acquirer to recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date. It also requires the acquirer to recognize
contingent consideration at the acquisition date, measured at its fair value at
that date. This statement is effective for fiscal years and interim periods
within those fiscal years, beginning on or after December 15, 2008 and earlier
adoption is prohibited. The Company adopted this new guidance effective March 1,
2009. The adoption of this statement did not have a material effect on the
Company's financial statements.

Effective June 1, 2009, the Company adopted Statement of
Financial Accounting Standards No. 165, "Subsequent Events" (ASC Topic 855). It
establishes general standards of accounting for and disclosure of subsequent
events. The adoption of the standard has not had any impact on the Company's
financial position, results of operations, or cash flows.

In June 2009 the FASB established the Accounting Standards
Codification ("Codification" or "ASC") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in accordance with generally accepted
accounting principles in the United States ("GAAP"). Rules and interpretive
releases of the Securities and Exchange Commission ("SEC") issued under
authority of federal securities laws are also sources of GAAP for SEC
registrants. Existing GAAP was not intended to be changed as a result of the
Codification, and accordingly the change did not impact our financial
statements.

Statement of Financial Accounting Standards ("SFAS") No. 166
(ASC Topic 810), "Accounting for Transfers of Financial Assets-an Amendment of
FASB Statement No. 140", SFAS No. 167 (ASC Topic 810), "Amendments to FASB
Interpretation No. 46(R)", and SFAS No. 168 (ASC Topic 105), "The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles-a replacement of FASB Statement No. 162" were recently
issued. SFAS No. 166, 167, and 168 have no current applicability to the Company
or their effect on the financial statements would not have been significant.

Accounting Standards Update ("ASU") ASU No. 2009-05 (ASC
Topic 820), which amends Fair Value Measurements and Disclosures - Overall, ASU
No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No.
2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software
Elements, and various other ASU's No. 2009-2 through ASU No. 2009-15 which
contain technical corrections to existing guidance or affect guidance to
specialized industries or entities were recently issued. These updates have no
current applicability to the Company or their effect on the financial statements
would not have been significant.









---

24Santos Resource Corp.(an exploration stage company)
Notes to the Financial Statements
For the year ended February 28, 2010
(Expressed in U.S. dollars)

3.         Related Party Transactions

a)         On June 25, 2007, the Company issued 75,000 shares of common stock at
$0.15 per share to Starfire Minerals Inc. ("Starfire") as part of its contract
to Option to Purchase Property in Quebec.  Richard Pierce, President of Santos
Resource Corp. is a director on the board of each company.

b)         A shareholder loaned the company US$9,500 (CAD$10,000) in April 2007.
The loan is non interest bearing and unsecured and is payable upon request from
the shareholder; accordingly fair value can not be reliably determined.

4.         Mineral Properties

On June 25, 2007 the Company signed an option agreement
(amended May 29, 2008, April 23, 2009, and April 26, 2010) to acquire a 75%
interest in 18 mineral property claims in Northern Quebec known as the Lordeau
Property, with Starfire. Santos was granted an option to acquire 75% of the
right, title and undivided interest in the property (subject to the NSR Royalty
reserved to Starfire). Terms and conditions are as follows:

a)         $10,582 (Cdn$10,000) cash
payment by Santos on execution of this agreement (paid);

b)         75,000
common shares of Santos to be allotted and issued and certificates therefore
delivered to Starfire (issued June 25, 2007);

c)         Incur exploration
expenditures:

(i)         $24,094 (Cdn$25,000)
before September 30, 2008 (incurred);

(ii)         $8,926
(Cdn$10,260) before May 11, 2009 (incurred);

(iii)        $14,004 (Cdn$14,740)
before August 31, 2010.



In the event that the Company fails to incur the full amount
of Expenditures in a given period, the Company may, within 45 days of the end of
such period pay Starfire an amount equal to the outstanding balance to be
incurred by way of 50% cash and 50% shares (valued at the weighted average
trading price for during the 10 trading days preceding the period end date).

In addition, any shares delivered, cash payments made, or
Expenditures incurred toward the option price that is over and above that
required to be made during a particular time shall be carried forward and
applied against the required payment in subsequent periods.

Santos will pay Starfire a 3% net smelter return royalty ("NSR
Royalty"). Santos may purchase in the aggregate up to two-thirds (i.e., 2% NSR
Royalty) of the NSR Royalty on the basis of one hundred thousand dollars for
each one-tenth percent of the NSR Royalty (i.e., $100,000 per 0.1% NSR Royalty)
acquired on the first one-half of the NSR Royalty (i.e., the first 1% NSR
Royalty), and one hundred fifty ($150,000) dollars for each one-tenth percent of
the NSR Royalty (i.e., $150,000 per 0.1% NSR Royalty) thereafter for the
remaining NSR Royalty (i.e., the remaining 1% NSR Royalty). To exercise its
option to purchase the NSR Royalty or any portion thereof, Santos must provide
the Owner with at least 30 days advance written notice of its intention to do
so, and must close upon each purchase within 60 days of each notice.



---

25Santos Resource Corp.(an exploration stage company)
Notes to the Financial Statements
For the year ended February 28, 2010
(Expressed in U.S. dollars)

5.         Financial Instruments

The Company's financial instruments consist of cash,
accounts payable and accrued liabilities, and shareholder loan, unless otherwise
noted, it is management's opinion that the Company is not exposed to significant
interest, currency, or credit risks arising from these financial instruments.
The fair values of these financial instruments approximate their carrying value,
unless otherwise noted.

Currency risk is the risk to the Company's earnings that
arises from fluctuations of foreign exchange rates and the degree of volatility
of these rates. The Company does not use derivative instruments to reduce its
exposure to foreign currency risk.

At February 28, 2010 the Company had the following financial
assets and liabilities in Canadian dollars:

| |                                          |     | USD equivalent |     | CDN Dollars
| | ---------------------------------------- | --- | -------------- | --- | -----------
| | Cash on deposit
Due to Shareholder       | $
$ | 307
9,500      | $
$ | 323
10,000 
| | Accounts payable and accrued liabilities | $   | 27,562         | $   | 29,012     

At February 28, 2010 US dollar
amounts were converted at a rate of $1.0526 Canadian dollars to $1.00 US dollar.

6.         Income Taxes

A reconciliation of the provision for income taxes at the
United States federal statutory rate compared to the Company's income tax
expense as reported is as follows:

|                             |   |                   |   |                  
|---------------------------- | - | ----------------- | - | -----------------
|                             |   | February 28, 2010 |   | February 28, 2009
|                             |   |                   |   |                  
|Net Loss before income taxes | $ | (54,305)          | $ | (92,777)         
|Statutory Tax Rate           |   | 35%               |   | 35%              
|Income tax recovery          |   | (19,010)          |   | (32,472)         
|Valuation Allowance          |   | 19,010            |   | 32,472           
|                             |   |                   |   |                  
|Provision for income taxes   | $ | -                 | $ | -                

The significant components of
deferred income tax assets at February 28, 2010 and 2009 are as follows:

February 28, 2010
			
			February 28, 2009Net operating loss carry forward
			
			$          76,290
			$
			57,280Valuation allowance
			
			(76,290)
			
			(57,280)Net
			deferred income tax asset
			
			$                   -
			$
			-




---

26

Santos Resource Corp.

6.         Income Taxes (continued)

The amount taken into income as deferred income 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 a full valuation allowance against all available income tax
loss carry forwards. The Company has recognized a valuation allowance for the
deferred income tax asset since the Company cannot be assured that it is more
likely than not that such benefit will be utilized in future years. The
valuation allowance is reviewed annually. When circumstances change and which
cause a change in management's judgment about the realizability of deferred
income tax assets, the impact of the change on the valuation allowance is
generally reflected in current income.

Management has considered the likelihood and significance of
possible penalties associated with its current and intended filing positions and
has determined, based on their assessment, that such penalties, if any, would
not be expected to be material.

No provision for income taxes has been provided in these
financial statements due to the net loss for the years ended February 28, 2010
and 2009. At February 28, 2010, the Company has net operating loss carryforwards,
which expire commencing in 2028, totaling approximately $218,000.

7.         Subsequent Event

On April 26, 2010, the Company signed an amendment to the
agreement with Starfire to extend the exploration expenditure term for $14,004
(Cdn$14,740) to August 31, 2010 (see Note 4).



















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27

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of the
Company's management, including the Company's principal executive officer and
principal financial officer, the Company has evaluated the effectiveness of the
design and operation of its disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15(e) and Rule 15d-15(e) as of the end of the fiscal year
covered by this annual report. Based on that evaluation, the principal executive
officer and principal financial officer have identified that the lack of
segregation of accounting duties as a result of limited personnel resources is a
material weakness of its financial procedures. Other than for this exception,
the principal executive officer and principal financial officer believe the
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in the reports we file or submit under the
Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms
and that our disclosure and controls are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. There were no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of their evaluation and there were no corrective actions
with regard to significant deficiencies and material weaknesses.

Internal Control over Financial Reporting

Our management is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management has
employed a framework consistent with Exchange Act Rule 13a-15(c), to evaluate
our internal control over financial reporting described below. Our internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
and fair presentation of financial statements for external purposes in
accordance with generally accepted accounting principals.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the design and
operation of our internal control over financial reporting as of February 28,
2010 based on the criteria set forth in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This evaluation included review of the documentation of controls, evaluation of
the design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation.

In performing the assessment, management noted that our board
of directors is performing the duties of the audit committee, there is only one
independent director, and none of the members is considered a financial expert.
Our management believes that the lack of a financial expert on our board of
directors means that no member of our board of directors has the financial
expertise to review our financial statements for potential errors and provide
the necessary oversight over our management's activities in the event of a
management override of our internal control policies. Our management believes
that this





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28

lack of a financial expert on our board of directors raises a
reasonable possibility that a material misstatement of our annual or interim
financial statements may not be timely prevented or detected and that it should
therefore be considered a material weakness in our internal control over
financial reporting. Because of this material weakness, our management believes
that as of February 28, 2010, our company's internal controls over financial
reporting were not effective. We do not currently have any plans to replace any
existing member of our board of directors, nor do we have any current plans to
add any additional directors.

This 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 company's
registered public accounting firm pursuant to temporary rules of the SEC that
permit our company to provide only management's report in this Annual Report on
Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in control over financial reporting
during the quarter ended February 28, 2010 that have materially affected or are
reasonably likely to affect our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers And Directors

The following table sets forth the directors and
executive officers of our Company, their ages, term served and all officers and
positions with our Company. Pursuant to our bylaws, our directors are elected at
our annual meeting of stockholders and each director holds office until his
successor is elected and qualified. Officers are elected by our Board of
Directors and hold office until an officer's successor has been duly appointed
and qualified unless an officer sooner dies, resigns or is removed by the Board.

There are no arrangements or understandings regarding the
length of time a director of our company is to serve in such a capacity.

|Name             | Age | Position                                         
|---------------- | --- | -------------------------------------------------
|Richard Pierce   | 49  | Director and President, Secretary and
		Treasurer
|Andrew Lee Smith | 54  | Director                                         

Business Experience

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

Richard
Piercehas been a Director, President and Secretary-Treasurer of the Company
since September 13, 2006. Mr. Pierce is also presently the President and CEO of
GFR Pharma Ltd. (since 1998), GFR Health Ltd. (since 1998) and Biologic
Nutritional Resources Inc. (since 2006). GFR Pharma is a contract manufacturer
of Nutraceutical products, GFR Health distributes Nutraceutical products for the
human market, and Biologic distributes nutraceuticals for the pet (animal)
market. Mr. Pierce was



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29

also President and CEO of GFR Pharmaceuticals Inc. (from
2000 to 2006), a Nevada company whose shares are quoted on the NASD OTC Bulletin
Board. Mr. Pierce is also presently a director of Starfire Minerals Inc., a
British Columbia company whose shares are listed on the TSX Venture Exchange,
and the Berlin, Frankfurt and Struttgart Stock Exchanges in Germany. Starfire is
also an exploration company with mineral properties and projects in Ontario and
British Columbia. Mr. Pierce is one of five directors of Starfire, and in the
event of a conflict, Mr. Pierce will abstain from voting on a directors
resolution in both Santos and Starfire.

During our early stages of business development, our
President intends to devote approximately 10 hours per week of his time to our
business. If, however, the demands of our business require more business time,
such as raising additional capital or addressing unforeseen issues with regard
to our plan of operations, he is prepared to adjust his timetable to devote up
to 15 hours a week on our business in furtherance of our plan of operations.
However, Mr. Pierce may not be able to devote sufficient time to the management
of our business, as and when needed.

Andrew Lee Smith, B.Sc., P.Geo., has been a Director
of the Company since May 24, 2006. Mr. Smith was the President of the Company
from May 24, 2006 to September 13, 2006. Mr. Smith has over 20 years of
experience in exploring, developing and operating North American base and
precious metal mining projects. He is presently the President of Iron Mask
Exploration Ltd., a Vancouver-based corporate and geological management firm
that provides consulting services to the mining industry. Mr. Smith is also
presently Chief Executive Officer and a director of Canaco Resources Inc., and
was Chief Executive Officer and President of True North Gems until February,
2010, both companies are listed on the TSX Venture Exchange. Mr. Smith remains a
director of True North Gems. Mr. Smith is also a director of Daytona Energy
Corp., a company listed on the TSX Venture Exchange; and a director of Scorpio
Gold Corporation and Candente Gold Corp., companies listed on the Toronto Stock
Exchange.

Mr. Smith holds a Hons. BSc in Earth Sciences from the
University of Waterloo and is a professional geologist. He has been a registered
member of the Association of Professional Engineers and Geoscientists of British
Columbia since January 2001. Prior to this date, he was a Fellow of the
Geological Association of Canada and the Society of Economic Geologists.

We intend to rely on Mr. Smith to provide the expertise in
geological exploration in order for us to carry our planned exploration program.
If we do retain the services of Mr. Smith, we will compensate Mr. Smith at the
public going rate. However, Mr. Smith may not be able to devote sufficient time
to our exploration program, as and when needed. We may need to rely on the
technical services of others with expertise in geological exploration in order
for us to carry our planned exploration program. We have not contracted with any
geologist to assist with the exploration programs. At the right time, we will
hire from the available pool of contract geologists depending on the time of the
year and availability of experience. Presently, there are no other agreements or
understandings to hire such geologists or engineers.

No Audit Committee

The functions of the audit committee are currently
carried out by our Board of Directors. We do not have an audit committee or
financial expert on our Board carrying out the duties of the audit committee.
Our Board has determined that we do not need such an expert because we are a
start-up exploration company and have no revenue. The cost of hiring a financial
expert to act as a director of Santos and to be a member of the audit committee
or otherwise perform audit committee functions outweighs the benefits of having
a financial expert on the audit committee. We do not have a compensation
committee, nominating committee, an executive committee of our board of
directors, stock plan committee or any other committees.

No Nominating Committee

We do not have a standing nominating committee, our Board
of Directors is responsible for identifying new candidates for nomination to the
Board. We have not adopted a policy that permits shareholders to



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30

recommend
candidates for election as directors or a process for shareholders to send
communications to the Board of Directors.

Code of Ethics

We have adopted a code of ethics that applies to our
Chief Executive Officer, Chief Financial Officer, Principal Executive Officer,
Principal Financial Officer, Principal Accounting Officer, Controller and
persons performing similar functions within the Company. A copy of the code of
ethics is filed with the SEC as an exhibit to the Company's Form S-1 filed on
July 14, 2008. If we make any substantive amendments to the Code of Ethics or
grant any waiver, including any implicit waiver, from a provision of the Code of
Ethics to our directors, officers and employees, we will disclose the nature of
such amendment or waiver in a report on Form 8-K.

Family Relationships

There are no family relationships between any two or more
of our directors or executive officers. There is no arrangement or understanding
between any of our directors or executive officers and any other person pursuant
to which any director or officer was or is to be selected as a director or
officer, and there is no arrangement, plan or understanding as to whether
non-management shareholders will exercise their voting rights to continue to
elect the current board of directors. There are also no arrangements, agreements
or understandings to our knowledge between non-management shareholders that may
directly or indirectly participate in or influence the management of our
affairs.

Involvement in Certain Legal Proceedings

None of our directors or executive officers has been
involved in any of the following events during the past five years:

- 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;
- any
	conviction in a criminal proceeding or being subject to a pending criminal
	proceeding (excluding traffic violations and other minor offences);
- being
	subject to any order, judgment, or decree, not subsequently reversed,
	suspended or vacated, of any court of competent jurisdiction, permanently or
	temporarily enjoining, barring, suspending or otherwise limiting his
	involvement in any type of business, securities or banking activities; or
- being found
	by a court of competent jurisdiction (in a civil action), the Commission or
	the Commodity Futures Trading Commission to have violated a federal or state
	securities or commodities law, and the judgment has not been reversed,
	suspended, or vacated.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934
requires our directors, executive officers and persons who own more than 10% of
our common stock to file reports regarding ownership of, and transactions in,
our securities with the Securities and Exchange Commission and to provide us
with copies of those filings. Based solely on our review of the copies of such
reports received by us, or written representations from certain reporting
persons, we believe that during fiscal year covered by this annual report, all
filing requirements applicable to our officers, directors and greater than 10%
beneficial owners were complied with.



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31

ITEM 11. EXECUTIVE COMPENSATION

Presently, we do not pay our directors or officers any
salary or consulting fees. Our directors and executive officer do not currently
receive and have never received any compensation for serving as a director or
executive officer of the Company. In addition, at present, there are no ongoing
plans or arrangements for compensation of any of our officers. There are no
plans or agreements for compensation of our officers and directors even if
certain milestones are achieved in the business plan. However, we expect to
adopt a plan of reasonable compensation to our officers and employees when and
if we become operational and profitable.

The following table sets forth all compensation awarded to,
earned by, or paid for services rendered to us in all capacities during the
fiscal years ended February 28, 2010, February 28, 2009 and February 29, 2008,
by our executive officers and our directors.

Summary Compensation Table

|Name and
			Principal Position                      | Year            | Salary
			($) | Bonus
			($) | Stock &
			Option Awards ($) | Total
			($)
|--------------------------------------------------- | --------------- | ------------- | ------------ | ---------------------------- | ------------
|Richard Pierce
		President, Secretary and Treasurer | Feb. 28,
		2010 | None          | None         | None                         | None        
|Feb. 28,
		2009                                     | None            | None          | None         | None                        
|Feb. 29,
		2008                                     | None            | None          | None         | None                        

Director Compensation Table

|Name             | Year            | Fees
			Earned or Paid in Cash
			($) | Stock
			Awards or Options 
			(#) | All
			other Compensation All other Compensation 
			($)
|---------------- | --------------- | ------------------------------------- | ---------------------------------- | --------------------------------------------------------
|Richard Pierce   | Feb. 28,
		2010 | None                                  | None                               | None                                                    
|Andrew Lee Smith | Feb. 28,
		2010 | None                                  | None                               | None                                                    

No Option Plans

We do not presently have a stock option plan but intend
to develop an incentive based stock option plan for our officers and directors
in the future and may reserve up to 20% of our outstanding shares of common
stock for that purpose.

No Compensation Committee

We do not have a compensation committee. The functions of
the compensation committee are currently carried out by our Board of Directors.









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32

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

Securities authorized for issuance under equity compensation
plans

Equity Compensation Plan Information

|Plan category                                                           | Number of securities to be
			issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise
			price of outstanding options, warrants and rights | Number of securities
			remaining available for future issuance under equity compensation
			plans (excluding securities reflected in column (a))
|----------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                        | (a)                                                                                            | (b)                                                                            | (c)                                                                                                                                              
|Equity compensation plans previously approved by security
		holders     | Nil                                                                                            | Not Applicable                                                                 | Nil                                                                                                                                              
|Equity compensation plans not previously approved by
		security holders | Nil                                                                                            | Not Applicable                                                                 | Nil                                                                                                                                              

Security Ownership of Certain Beneficial Owners and
Management

The following table sets forth certain information as of
May 28, 2010, with respect to the beneficial ownership of our company's common
stock with respect to each named director and executive officer of our Company,
each person known to our Company to be the beneficial owner of more than five
percent (5%) of said securities, and all directors and executive officers of our
Company as a group. Unless otherwise indicated, the address for each listed
person is c/o Santos Resource Corp., 11450 - 201A Street, Maple Ridge, British
Columbia V2X 0Y4.

|Name and Address                                               | Title
			of Class | Amount
			and Nature of Beneficial Ownership | Percentage 
			of Class(1)
|-------------------------------------------------------------- | ----------------- | -------------------------------------------- | --------------------------
|Richard Pierce
		President, Secretary & Treasurer and Director | Common            | 7,022,000                                    | 21.9%                     
|Andrew Lee Smith 
		Director                                   | Common            | 7,182,000                                    | 22.4%                     
|Shih-Yi Chuang
		Taiwan                                        | Common            | 7,022,000                                    | 21.9%                     
|David W. Smalley
		Vancouver, BC                               | Common            | 3,104,000                                    | 9.7%                      
|All officers & directors as a group (2
		persons)              | Common            | 14,204,000                                   | 44.3%                     

> (1) The percentage of class is based on 32,076,500 shares of common stock
> 	outstanding as of the date hereof.

The persons named above have
full voting and investment power with respect to the shares indicated. Under the
rules of the Securities and Exchange Commission, a person (or group of persons)
is deemed



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33

to be a "beneficial owner" of a security if he or she, directly or
indirectly, has or shares the power to vote or to direct the voting of such
security, or the power to dispose of or to direct the disposition of such
security. Accordingly, more than one person may be deemed to be a beneficial
owner of the same security. A person is also deemed to be a beneficial owner of
any security, which that person has the right to acquire within 60 days, such as
options or warrants to purchase our common stock.

Changes in Control

We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change of control of our
company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE

Except as discussed below, since the beginning of Santos'
last fiscal year, no director, executive officer, security holder, or any
immediate family of such director, executive officer, or security holder owing
more than 5% of our shares of common stock has had any direct or indirect
material interest in any transaction or currently proposed transaction, which
Santos was or is to be a participant, that exceeded the lesser of (1) $120,000,
or (2) 1% of the average of Santos's total assets at year end for the last two
completed fiscal years.

Our director and sole executive officer, Richard Pierce is
also a director of Starfire Minerals Inc. On June 25, 2007, we entered into a
Property Option Agreement with Starfire that allows us to acquire a 75% interest
in and to the Lourdeau Claims. On May 29, 2008, we amended the property option
agreement with Starfire whereby our option to acquire the Lourdeau Claims is
subject to the approval of the TSX Venture Exchange, which approval was obtained
in September 2008. On April 23, 2009, we amended the Property Option Agreement
again, which extends the schedule for Santos to incur a portion of the final
$22,930 (CAD$25,000) of Expenditures to earn Starfire's interest in the Lordeau
property to April 30, 2010. On April 20, 2010, we amended the Property Option
Agreement, which extends the schedule for Santos to incur the final $14,004
(CAD$14,740) of Expenditures in order to earn 75% of Starfire's interest in the
Lourdeau Property in Quebec, from April 30, 2010 to August 31, 2010. Pursuant to
the Property Option Agreement, as amended, we paid Starfire $10,582 (CAD$10,000)
in 2007, $24,094 (CAD$25,000) in 2008, and $8,926 (CAD$10,260) in May 2009; and
we issued 75,000 shares of common stock to Starfire in 2007. Under the Property
Option Agreement we are obligated to incur additional expenditures of
approximately $14,004 (CAD$14,740) on the Lourdeau Property on or before August
31, 2010 or pay Starfire either 100% in cash or 50% in cash and 50% in shares
(valued at the weighted average trading price during the 10 trading days
preceding the period ended). The 75,000 shares have a deemed value of $11,250.

We have no formal written employment agreement or other
contracts with our officers, and there is no assurance that the services to be
provided by them, and facilities to be provided by Mr. Pierce, will be available
for any specific length of time in the future. Mr. Pierce anticipates initially
devoting up to approximately 10 hours a week of his business time to the affairs
of our Company. If and when the business operations of our company increase and
a more extensive time commitment is needed, Mr. Pierce is prepared to devote up
to 15 hours a week in the event that becomes necessary. The amounts of
compensation and other terms of any full time employment arrangements with our
Company would be determined if and when such arrangements become necessary.

We incurred legal fees of $22,899 during the fiscal year
ended February 28, 2010 to Fraser and Company LLP, a law firm of David Smalley
is a partner. Mr. Smalley owns over 5% of our common stock.

The Company's transactions with its officers, directors and
affiliates have been and such future transactions will be, on terms no less
favorable to the Company than could have been realized by the Company in arm's
length transactions with non-affiliated persons and will be approved by a
majority of the independent disinterested directors.



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34

Directors Independence

One of our two directors are independent, pursuant to the
definition of an "independent director" set forth in Nasdaq Marketplace Rule
4200(a)(15). Andrew Lee Smith is independent, and Richard Pierce is not
independent as he is our sole executive officer. In summary, an "independent
director" means a person other than an executive officer or employee of the
issuer or any other individual having a relationship which, in the opinion of
the issuer's board of directors, would interfere with the exercise of
independent judgement in carrying out the responsibilities of a director, and
includes any director who accepted any compensation from the issuer in excess of
$200,000 during any period of 12 consecutive months with the three past fiscal
years. Also, the ownership of the issuer's stock will not preclude a director
from being independent.

The Company is currently traded on the OTC Bulletin Board,
which does not require that a majority of the Board be independent.

We do not have a compensation committee, nominating committee
or audit committee; the functions of these committees are performed by our Board
of Directors.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The fees billed to the Company for the fiscal years
ending February 28, 2010 and February 28, 2009 by MacKay LLP were as follows:

|                   | Year endedFeb. 28, 2010 | Year endedFeb. 28, 2009
|------------------ | ----------------------- | -----------------------
|Audit Fees         | $8,500                  | $12,000                
|Audit-Related Fees | $6,000                  | $4,500                 
|Tax Fees           | $Nil                    | $Nil                   
|All Other Fees     | $Nil                    | $Nil                   

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Financial Statements and Schedules

The financial statements are set forth under Item 8 of
this Annual Report on Form 10-K. Financial statement schedules have been omitted
since they are either not required, not applicable, or the information is
otherwise included.

Exhibit Listing

|            |                            |                   | Incorporated by reference
|----------- | -------------------------- | ----------------- | -------------------------
|Exhibit No. | Description of Exhibit     | Filed
			herewith | Form                     
|3.1         | Articles of Incorporation  |                   | S-1                      
|3.1         | Bylaws                     |                   | S-1                      
|4.1         | Specimen Stock Certificate |                   | S-1                      







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35



|            |                                                                                                                                                                                                              |                   | Incorporated by reference
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------- | -------------------------
|Exhibit No. | Description of Exhibit                                                                                                                                                                                       | Filed
			herewith | Form                     
|10.1        | Mineral Property Option Agreement dated
		June 25, 2007 between Starfire Minerals Inc. and Santos Resource Corp.,
		whereby Santos has an option to acquire a 75% interest in and to the
		Lourdeau Property |                   | S-1                      
|10.2        | Mineral Property Option Amending
		Agreement dated May 29, 2008 between Starfire Minerals Inc. and Santos
		Resource Corp.                                                                                   |                   | S-1                      
|10.3        | Mineral Property Option Agreement
		Amendment No. 2 dated April 23, 2009 between Starfire Minerals Inc. and
		Santos Resource Corp.                                                                          |                   | 10-K                     
|10.4        | Mineral Property Option Amending
		Agreement (third amendment) dated April 26, 2010 between Starfire
		Minerals Inc. and Santos Resource Corp.                                                               |                   | 8-K                      
|14          | Code of Ethics                                                                                                                                                                                               |                   | S-1                      
|31.1        | Certifications of Principal Executive
		Officer and Principal Financial Officer Pursuant to Section 302 of the
		Sarbanes-Oxley Act of 2002                                                                  | X                 |                          
|32.1        | Certifications of Principal Executive
		Officer and Principal Financial Officer Pursuant to Section 906 of the
		Sarbanes-Oxley Act of 2002                                                                  | X                 |                          





















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36



SIGNATURES

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

|                   | SANTOS RESOURCE CORP.                                                                                                                                                
|------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date: May 28, 2010 | By:    	/s/ Richard Pierce
Richard Pierce         
President, Secretary and Treasury         
(Principal Executive Officer and          
Principal Financial Officer)



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



|Date               | Signature                            | Title                                                                                                     
|------------------ | ------------------------------------ | ----------------------------------------------------------------------------------------------------------
|Date: May 28, 2010 | /s/ Richard PierceRichard Pierce     | President, Secretary, Treasurer and Director
(Principal Executive Officer and Principal Financial Officer)
|Date: May 28, 2010 | /s/ Andrew Lee SmithAndrew Lee Smith | Director