UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2007

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

Commission file number: 333-127635





|Gryphon Gold Corporation                                             
|---------------------------------------------------------------------
|(Exact name of small business issuer as specified in its
    charter)
|                                                                     
|Nevada                                                               
|(State or other jurisdiction of                                      
|incorporation or organization)                                       
|                                                                     
|1130
    WEST PENDER STREET, SUITE 810                               
|VANCOUVER, BC                                                        
|(Address of principal executive
    offices)                         

Issuer's Telephone Number: (604)
261-2229



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



Yes X          
No



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



Yes             
No X

As of November 1, 2007 there were 57,161,395 shares of common stock outstanding.



Transitional Small Business Disclosure Format (check one)

Yes        No X



---







GRYPHON GOLD CORPORATION
September 30, 2007

INDEX

|                                   | Page No.(s)                                                      
|---------------------------------- | -----------------------------------------------------------------
|                                   |                                                                  
|PART I -
    FINANCIAL INFORMATION |                                                                  
|                                   |                                                                  
|Item 1.                            | Unaudited Interim
    Consolidated Financial Statements as of    
|                                   | September 30, 2007                                               
|                                   |                                                                  
|                                   | Unaudited Consolidated
    Balance Sheet as of September 30, 2007
|                                   | and Audited
    Consolidated Balance Sheet as of March 31, 2007  
|                                   |                                                                  
|                                   | Unaudited Consolidated
    Statements of Operations for the      
|                                   | three and six months
    ended September 30, 2007 and 2006       
|                                   |                                                                  
|                                   | Unaudited Consolidated
    Statements of Stockholders Equity    
|                                   |                                                                  
|                                   | Unaudited Consolidated
    Statements of Cash Flows for the      
|                                   | three and six months
    ended September 30, 2007 and 2006       
|                                   |                                                                  
|                                   | Notes to Unaudited
    Interim Consolidated Financial Statements 
|                                   |                                                                  
|Item 2.                            | Management Discussion
    and Analysis                           
|                                   |                                                                  
|Item 3.                            | Controls and
    Procedures                                      
|                                   |                                                                  
|PART II -
    OTHER INFORMATION    |                                                                  
|                                   |                                                                  
|Item 1.                            | Legal Proceedings                                                
|                                   |                                                                  
|Item 2.                            | Unregistered Sales of
    Equity Securities and Use of Proceeds  
|                                   |                                                                  
|Item 3.                            | Defaults Upon Senior
    Securities                              
|                                   |                                                                  
|Item 4.                            | Submission of Matters
    to a Vote of Security Holders          
|                                   |                                                                  
|Item 5.                            | Other Information                                                
|                                   |                                                                  
|Item 6.                            | Exhibits                                                         
|                                   |                                                                  
|SIGNATURES                         | 27                                                               

1

---



Gryphon Gold Corporation 
(an exploration stage company)

CONSOLIDATED BALANCE SHEETS

|                                                 | As at        | As at       
|------------------------------------------------ | ------------ | ------------
|                                                 | September 30 | March 31,   
|                                                 | 2007         | 2007        
|                                                 | $            | $           
|                                                 |              |             
|ASSETS                                           |              |             
|Current                                          |              |             
|Cash                                             | 3,927,854    | 7,150,154   
|Accounts receivable                              | 57,556       | 65,483      
|Prepaid expenses                                 | 75,057       | 129,065     
|Total current assets                             | 4,060,467    | 7,344,702   
|Mineral property costs [note 5]                  | 12,638,290   | 1,920,371   
|Equipment [note 4]                               | 156,089      | 153,362     
|Other assets [note 9]                            | 258,758      | 134,759     
|                                                 | 17,113,604   | 9,553,194   
|                                                 |              |             
|LIABILITIES AND STOCKHOLDERS EQUITY             |              |             
|Current                                          |              |             
|Accounts payable and accrued liabilities         | 1,223,812    | 786,565     
|Current portion of capital lease [note 11]       | 38,615       | 32,977      
|Total current liabilities                        | 1,262,427    | 819,542     
|                                                 |              |             
|Convertible note [note 12]                       | 4,300,726    |            
|Capital lease [note 11]                          |             | 17,308      
|                                                 |              |             
|Commitments [note 10]                            |              |             
|                                                 |              |             
|Stockholders equity                             |              |             
|Common stock                                     | 57,143       | 47,298      
|Additional paid-in capital                       | 34,201,218   | 26,649,868  
|Deficit accumulated during the exploration stage | (22,707,910) | (17,980,822)
|Total stockholders equity                       | 11,550,451   | 8,716,344   
|                                                 | 17,113,604   | 9,553,194   

See accompanying notes

2

---

Gryphon Gold Corporation 
(an exploration stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. dollars) 
(Unaudited)

|                                                                           |                    |                  |                |               | Period from   
|-------------------------------------------------------------------------- | ------------------ | ---------------- | -------------- | ------------- | --------------
|                                                                           | Three months ended | Six months ended | April 24, 2003
|                                                                           |                    |                  |                |               | (inception) to
|                                                                           | September 30,      | September 30,    | September 30,  | September 30, | September 30, 
|                                                                           | 2007               | 2006             | 2007           | 2006          | 2007          
|                                                                           | $                  | $                | $              | $             | $             
|                                                                           |                    |                  |                |               |               
|Exploration [note 6]                                                       | 1,274,926          | 1,067,703        | 2,753,398      | 2,321,218     | 12,681,505    
|Management salaries and consulting fees                                    | 695,068            | 482,009          | 1,133,431      | 890,602       | 6,376,583     
|General and administrative                                                 | 314,743            | 240,176          | 557,605        | 481,218       | 2,132,133     
|Legal and audit                                                            | 126,560            | 87,393           | 197,857        | 164,759       | 1,158,344     
|Travel and accommodation                                                   | 51,052             | 65,762           | 103,704        | 185,439       | 793,274       
|Depreciation                                                               | 16,390             | 13,937           | 30,237         | 25,482        | 115,667       
|Loss on disposal of equipment                                              | 6,552              |                 | 6,552          |              | 26,274        
|Foreign exchange (gain) loss                                               | 12,102             | (1,798)          | 15,302         | (20,975)      | (2,511)       
|Interest income                                                            | (55,411)           | (84,102)         | (129,550)      | (176,529)     | (631,911)     
|Interest Expense                                                           | 58,553             |                 | 58,553         |              | 58,553        
|Net Loss for the period                                                    | (2,500,535)        | (1,871,080)      | (4,727,088)    | (3,871,214)   | (22,707,910)  
|                                                                           |                    |                  |                |               |               
|Basic and diluted loss per share                                           | $(0.04)            | $(0.05)          | $(0.09)        | $(0.10)       |               
|                                                                           |                    |                  |                |               |               
|Basic and diluted weighted
    average number of common shares outstanding | 52,673,678         | 41,154,718       | 50,093,806     | 40,435,024    |               

See accompanying notes

3

---



Gryphon Gold Corporation 
(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

|                                                                               |              |        |             | Deficit      |            
|------------------------------------------------------------------------------ | ------------ | ------ | ----------- | ------------ | -----------
|                                                                               |              |        |             | Accumulated  |            
|                                                                               |              |        | Additional  | During the   |            
|                                                                               | Common Stock |        | Paid-In     | Exploration  |            
|                                                                               | Shares       | Amount | Capital     | Stage        | Total      
|                                                                               | #            | $      | $           | $            | $          
|Balance, inception April 24, 2003                                              |              |        |             |              |            
|Shares issued:                                                                 |              |        |             |              |            
|For private placements                                                         | 33,197,370   | 33,197 | 16,765,307  |             | 16,798,504 
|Share issue costs                                                              |             |       | (645,048)   |             | (645,048)  
|Initial Public Offering (IPO)                                                  | 6,900,000    | 6,900  | 5,029,597   |             | 5,036,497  
|Share issue costs (IPO)                                                        |             |       | (2,241,940) |             | (2,241,940)
|Compensation component of shares issued                                        |             |       | 226,000     |             | 226,000    
|Fair value of agents warrants issued [note 7[b]]                              |             |       | 156,740     |             | 156,740    
|Fair value of underwriters compensation warrants on IPO [note 7[b]]           |             |       | 135,100     |             | 135,100    
|Exercise of warrants                                                           | 197,500      | 198    | 194,085     |             | 194,283    
|Fair value of options granted to consultants [note76[c]]                       |             |       | 49,558      |             | 49,558     
|                                                                               |              |        |             |              |            
|Net loss from inception                                                        |             |       |            | (9,243,681)  | (9,243,681)
|Balance, March 31, 2006                                                        | 40,294,870   | 40,295 | 19,669,399  | (9,243,681)  | 10,466,013 
|Shares issued:                                                                 |              |        |             |              |            
|For private placements                                                         | 5,129,000    | 5,129  | 3,966,518   |             | 3,971,647  
|Share issue costs                                                              |             |       | (95,505)    |             | (95,505)   
|Fair value of agents warrants issued on
    private placements [note 7[b]]    |             |       | 11,397      |             | 11,397     
|Fair value of options granted                                                  |              |        |             |              |            
|[note 7[c]]                                                                    |             |       | 1,314,961   |             | 1,314,961  
|Fair value of vested stock grants                                              |              |        |             |              |            
|[note 7[d]]                                                                    | 108,000      | 108    | 151,138     |             | 151,246    
|Exercise of warrants                                                           | 1,658,275    | 1,658  | 1,548,894   |             | 1,550,552  
|Exercise of options                                                            | 107,500      | 108    | 83,066      |             | 83,174     
|Net loss for the period                                                        |             |       |            | (8,737,141)  | (8,737,141)
|Balance, March 31, 2007                                                        | 47,297,645   | 47,298 | 26,649,868  | (17,980,822) | 8,716,344  
|Shares issued:                                                                 |              |        |             |              |            
|For private placements                                                         | 5,000,000    | 5,000  | 3,784,197   |             | 3,789,197  
|For Mineral Properties                                                         | 4,500,000    | 4,500  | 3,444,918   |             | 3,449,418  
|Share issue costs                                                              |             |       | (246,414)   |             | (246,414)  
|Fair value of agents warrants issued on
    private placements [note 7[a][b]] |             |       | 44,040      |             | 44,040     
|Fair value of options granted [note 7[c]]                                      |             |       | 137,732     |             | 137,732    
|Fair value of vested stock grants [note7[d]]                                   | 215,000      | 215    | 302,507     |             | 302,722    
|Exercise of warrants                                                           | 130,000      | 130    | 84,370      |             | 84,500     
|Net loss for the period                                                        |             |       |            | (4,727,088)  | (4,727,088)
|Balance, Sept 30, 2007                                                         | 57,142,645   | 57,143 | 34,201,218  | (22,707,910) | 11,550,451 

See accompanying notes

4

---

Gryphon Gold Corporation 
(an exploration stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. dollars) 
(Unaudited)

|                                                                       |                    |                  | Period from   
|---------------------------------------------------------------------- | ------------------ | ---------------- | --------------
|                                                                       | Three months ended | Six months ended | April 24, 2003
|                                                                       |                    |                  | (inception) to
|                                                                       | September 30,      | September 30,    | September 30, 
|                                                                       | 2007               | 2006             | 2007          
|                                                                       | $                  | $                | $             
|OPERATING ACTIVITIES                                                   |                    |                  |               
|Net loss for the period                                                | (2,500,535)        | (1,871,080)      | (4,727,088)   
|Items not involving cash:                                              |                    |                  |               
|Depreciation                                                           | 16,390             | 13,937           | 30,237        
|Fair value of options, warrants and other non-cash compensation        | 271,462            | 225,691          | 484,494       
|Non-cash interest expense                                              | 28,367             |                 | 28,367        
|Loss on disposal of equipment                                          | 6,552              |                 | 6,552         
|Changes in non-cash working capital items:                             |                    |                  |               
|Amounts receivable                                                     | 29,696             | 45,527           | 7,927         
|Accounts payable and accrued liabilities                               | 416,128            | (55,280)         | 437,247       
|Prepaid expenses                                                       | 162,356            | 17,655           | 54,008        
|Cash used in operating activities                                      | (1,569,584)        | (1,623,550)      | (3,678,256)   
|                                                                       |                    |                  |               
|INVESTING ACTIVITIES                                                   |                    |                  |               
|Reclamation deposit                                                    | (45,000)           | (52,100)         | (54,700)      
|Purchase of equipment                                                  | (16,391)           | (3,015)          | (40,221)      
|Nevada Eagle acquisition and related non-compete agreement[note
    3] | (2,964,527)        |                 | (3,068,340)   
|Mineral property expenditures[note
    5]                              | (3,710)            | (665)            | (3,710)       
|Mineral property lease payments received                               | 5,000              |                 | 5,000         
|Proceeds from sale of equipment                                        | 2,314              |                 | 2,314         
|Cash used by investing activities                                      | (3,022,314)        | (55,780)         | (3,159,657)   
|                                                                       |                    |                  |               
|FINANCING ACTIVITIES                                                   |                    |                  |               
|Capital lease principal payments                                       | (5,917)            | (4,466)          | (11,670)      
|Cash received for shares                                               | 3,789,197          | 399,302          | 3,873,697     
|                                                                       |                    |                  |               
|Share issue costs                                                      | (246,414)          |                 | (246,414)     
|                                                                       |                    |                  |               
|Subscription receivables collected                                     |                   |                 |              
|                                                                       |                    |                  |               
|Cash provided by financing activities                                  | 3,536,866          | 394,836          | 3,615,613     
|                                                                       |                    |                  |               
|Increase (decrease) in cash during the period                          | (1,050,032)        | (1,284,494)      | (3,222,300)   
|                                                                       |                    |                  |               
|Cash, beginning of period                                              | 4,982,886          | 7,525,057        | 7,150,154     
|Cash, end of period                                                    | 3,927,854          | 6,240,563        | 3,927,854     

See accompanying notes

5

---

1. NATURE OF OPERATIONS AND CONTINUANCE OF OPERATIONS

Gryphon Gold Corporation was incorporated in the State of
Nevada in 2003 and wholly owns its subsidiaries, Borealis Mining Company,
Gryphon Nevada Eagle Holding Company and Nevada Eagle Resources LLC
(collectively, "the Company"). The Company is an exploration stage company in
the process of exploring its mineral properties, and has not yet determined
whether these properties contain reserves that are economically recoverable.
The recoverability of amounts shown for mineral property
interests in the Companys consolidated balance sheets are dependent upon the
existence of economically recoverable reserves, the ability of the Company to
arrange appropriate financing to complete the development of its properties, the
receipt of necessary permitting and upon achieving future profitable production
or receiving proceeds from the disposition of the properties. The timing of such
events occurring, if at all, is not yet determinable.
2. BASIS OF PRESENTATION

These interim unaudited consolidated financial statements
have been prepared by the Company in accordance with U.S. generally accepted
accounting principles ("GAAP") for interim financial statements, applied on a
consistent basis. These interim financial statements follow the same significant
accounting policies and methods of application as those disclosed in Note 2 to
the Company's audited consolidated financial statements as at and for the year
ended March 31, 2007 (the "Annual Financial Statements''), expect for the new
revenue recognition and intangible asset policies described below related to the
Nevada Eagle acquisition (see note 3). Accordingly, they do not include all
disclosures required for annual financial statements. These interim unaudited
consolidated financial statements and notes thereon should be read in
conjunction with the Annual Financial Statements.
The preparation of these interim unaudited consolidated
financial statements and the accompanying notes requires management to make
estimates and assumptions that affect the amounts reported. In the opinion of
management, these interim unaudited consolidated financial statements reflect
all adjustments (which include only normal, recurring adjustments) necessary to
state fairly the results for the periods presented. Actual results could vary
from these estimates and the operating results for the interim periods presented
are not necessarily indicative of the results expected for the full year.
In June 2006, the FASB issued FASB interpretation No. 48 
Accounting for Uncertainty in Income Taxes ("FIN 48"). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprises
financial statements in accordance with FASB Statement No. 109, Accounting for
Income Taxes. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. This Interpretation also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. This interpretation is
effective for fiscal years beginning after December 15, 2006. Effective April 1,
2007, the Company adopted FIN 48, which did not have a material impact on the
Companys interim unaudited consolidated financial statements.
Revenue recognition Mineral lease rentals or option payments are treated as reductions of the
cost of the property as the payor is accumulating an interest in the mineral
property; payments in excess of capitalized costs are recognized in income. Some
agreements provide for payments in the form of stock and other equity
instruments as well as cash payments. Stock and other equity instruments are
recognized based on their fair market value at the time of receipt. Fluctuations
incurred during the holding period are accounted for as gains or losses from
held for trading securities. The leases provide for the receipt of royalty
payments upon production of the property. Royalty payments will be recognized in
the period in which production occurs. There are no properties in the production
stage at this time.
Intangible Assets Identifiable intangible assets include a non-competition agreement. The
initial measurement of the non-competition agreements is based on the fair value
of the consideration paid. The agreement is being amortized on a straight-line
basis, over managements estimated useful like of five years.6

---



3. ACQUISTION OF NEVADA EAGLE RESOUCES LLC

On August 21, 2007 Gryphon Gold Corporation closed the
acquisition of Nevada Eagle Resources LLC, a privately held Nevada limited
liability company ("Nevada Eagle"), pursuant to a membership interest purchase
agreement (the "Purchase Agreement"), dated July 4, 2007, by and between the
Company, Gerald W. Baughman and Fabiola Baughman, as sellers ("Sellers"), and
Nevada Eagle. Under the Purchase Agreement, the company acquired all of the
outstanding limited liability company interests of Nevada Eagle from the Sellers
(the "Acquisition") for the following consideration, paid on August 21, 2007
(the "Closing Date"):

(a)

$2,500,000 in
cash;

(b)

4,500,000 shares
of common stock of the Company (the "Common Shares") valued at $3,449,418; and

(c)

a 5% convertible
note in the principal amount of $5,000,000 (the "Convertible Note") with an
issue date of August 21, 2007 and a fair value of $3,390,640.

The Convertible Note, due March 30, 2010, bears interest at
an annual rate of 5% and is convertible at the option of the holder into common
shares of the Registrant at an initial conversion price of $1.00 per share
during first the twelve-month period following the Closing Date, $1.25 per share
during the second twelve-month period following the Closing Date, $1.50 per
share thereafter, and $1.75 per share if converted on March 30, 2010. The
interest payments are due on a beginning on January 1, 2008, and payable
thereafter on each January 1, and June 1.

In addition to the purchase consideration, the Sellers will
be entitled to all revenues of Nevada Eagle (payable in cash, stock, or other
consideration) calculated to be received and received on the Assets and
Properties from January 1, 2007 through midnight on December 31, 2007; however,
pursuant to a letter agreement between the Company and the Sellers, dated August
21, 2007, the Sellers revenue right does not include revenues generated or
arising from any new agreements entered into by the Company regarding the
acquired properties (as described below) executed after August 21, 2007.

Gryphon granted the Sellers registration rights under which
Gryphon agreed to file, within the later of (i) 90 days of the Closing Date or
(ii) any date in which Gryphon is required to file a registration statement for
a third-party in connection with a financing or acquisition, but no later than
120 days of the Closing Date, a resale registration statement under the
Securities Act of 1933, as amended ("Securities Act"), to register the Common
Shares issuable at Closing and the common shares of the Company issuable upon
exercise of the Convertible Note.

Upon completion of the Acquisition, Nevada Eagle became a
wholly-owned subsidiary of Gryphon Nevada Eagle Holding Company, a Nevada
corporation, which is a wholly-owned subsidiary of the Company. Nevada Eagle has
interests in 54 prospective gold properties covering over 70 square miles of
gold trends in Nevada. Twenty-four of these properties are in the Walker Lane
belt and add to Gryphons inventory of volcanogenic hosted gold resources. Seven
of the properties are in the Cortez Trend, seven in the Austin-Lovelock Trend,
two in the Carlin Trend and the balance are unique situations throughout Nevada
with a few in contiguous states. These properties offer Gryphon both production
opportunities or royalty income upon production. Twenty-six of the properties
are farmed-out through lease and option agreements that generate a positive
cash flow net of carryings costs. The remaining wholly-owned properties are
retained for Gryphon Golds own exploration effort or additional future farm
outs.

Under the terms of the Purchase Agreement, the closing of the Acquisition was
subject to several closing conditions, including execution of several ancillary
agreements as follows:



A Lock-up Agreement, dated August 21,
2007, under which the Sellers agree that for a period of three months following
the Closing Date not to sell Common Shares issued or issuable under the Purchase
Agreement and Convertible Note and, thereafter, to limit the sale of such Common
Shares to 20% of the aggregate Common Shares issued under the Purchase Agreement
and Convertible Note each quarter (with unsold Common Shares aggregating each
quarter thereafter);

(b)

An Employment Agreement between
the Registrant and Mr. Baughman for a term of one year, renewable by the
parties, to serve as Gryphons Vice President of Corporate Development; and



---





A Non-Competition Agreement under which
the Sellers have agreed not to compete with the Company for the latter of (i)
twelve (12) months following the Closing Date (the "Restricted Period"), or (ii)
twelve (12) months following the termination of the Companys employment of
Gerald Baughman. The scope of the non-competition obligation relates to the
business of acquiring and/or holding base metal and precious metal mineral
assets located in the state of Nevada within the Area of Interest and to
properties that have been examined by the Company or Mr. Baughman during the
course of his employment by the Company, in any manner or capacity. "Area of
Interest" is defined as any property owned by the Company, Nevada Eagle, or any
affiliate of the Company or Nevada Eagle on the latter of (i) Closing Date or
(ii) the termination date of Gerald Baughmans employment by the Company, if
any, together with any adjacent areas within one kilometer of the exterior
boundary of such properties.

| | Considerationpaid for acquisition of
    Nevada Eagle |             | 
| | ----------------------------------------------------- | ----------- | 
| | Cash at closing                                       | $2,500,000  | 
| | Cash due diligence costs                              |             | 
| | and other expenses                                    | 568,340     | 
| |                                                       | 3,068,340   | 
| |                                                       |             | 
| | Common shares                                         | 3,449,418   | 
| | Convertible note and value                            |             | 
| | of conversion feature                                 | 4,272,359   | 
| |                                                       | $10,790,117 | 
| | Allocation of Purchase Price                          |             | 
| | Mineral properties                                    | 10,719,209  | 
| | Non-competition agreement                             | 70,908      | 
| |                                                       | $10,790,117 | 

4. EQUIPMENT

|                           | September 30, 2007
|-------------------------- | ------------------
|                           |                   
|                           | Cost              
|                           | $                 
|                           |                   
|Office and lab equipment   | 180,832           
|Trucks under capital lease | 71,319            
|Total                      | 252,151           

|                           |               
|-------------------------- | --------------
|                           | March 31, 2007
|                           |               
|                           | Cost          
|                           | $             
|                           |               
|Office and lab equipment   | 151,857       
|Trucks under capital lease | 71,319        
|Total                      | 223,176       

5. MINERAL PROPERTY

The Company initially entered into a property option
agreement dated July 21, 2003 to acquire up to a 70% interest in the Borealis
property in Nevada, USA from Golden Phoenix Minerals, Inc. for cash
consideration of $125,000 and the obligation to make qualifying expenditures
over several years. On January 28, 2005, the Company purchased outright the
rights to a full 100% interest in the property for $1,400,000. A cash payment of
$400,000 was made on closing. The Company paid the full outstanding
consideration of $1,000,000, in four quarterly payments of $250,000 during the
year ended March 31, 2006.



---



Effective August 21, 2007, the Company
purchased all the rights and interests of Nevada Eagle, as described in footnote
3. $10,719,209 of the purchase price was allocated to the value of the
exploration properties acquired.

|                                           | Total      |  | 
|------------------------------------------ | ---------- |  | 
|                                           | $          |  | 
|                                           |            |  | 
|Mineral property costs, March 31, 2005     | 1,775,326  |  | 
|Expenditures during the year               | 122,881    |  | 
|Mineral property costs, March 31, 2006     | 1,898,207  |  | 
|Expenditures during the year               | 22,164     |  | 
|Mineral property costs, March 31, 2007     | 1,920,371  |  | 
|Nevada Eagle acquisition                   | 10,719,209 |  | 
|Lease payments received                    | (5,000)    |  | 
|Expenditures during the period             | 3,710      |  | 
|Mineral property costs, September 30, 2007 | 12,638,290 |  | 

6. EXPLORATION

|                                  |                    |                  |                |               | Period from   
|--------------------------------- | ------------------ | ---------------- | -------------- | ------------- | --------------
|                                  | Three months ended | Six months ended | April 24, 2003
|                                  |                    |                  |                |               | (inception) to
|                                  | September 30,      | September 30,    | September 30,  | September 30, | September 30, 
|                                  | 2007               | 2006             | 2007           | 2006          | 2007          
|                                  | $                  | $                | $              | $             | $             
|                                  |                    |                  |                |               |               
|Borealis property Exploration :   |                    |                  |                |               |               
|Property maintenance              | 218,626            | 224,231          | 351,579        | 431,360       | 2,320,550     
|Project management                | 84,629             | 145,660          | 119,873        | 275,244       | 1,264,074     
|Drilling                          | 733,390            | 540,855          | 1,728,537      | 1,108,357     | 6,322,475     
|Engineering                       | 5,000              | 37,006           | 5,000          | 151,870       | 748,340       
|Geological                        | 202,349            | 119,526          | 502,641        | 336,028       | 1,726,580     
|Metallurgy                        | 10,932             | 425              | 25,768         | 18,359        | 279,486       
|Subtotal Borealis property        | 1,254,926          | 1,067,703        | 2,733,398      | 2,321,218     | 12,661,505    
|Other Exploration and Development | 20,000             |                 | 20,000         |              | 20,000        
|Total exploration                 | 1,274,926          | 1,067,703        | 2,753,398      | 2,321,218     | 12,681,505    

7. CAPITAL STOCK

[a]

Authorized capital
stock consists of 150,000,000 common shares with a par value of $0.001 per share
and 15,000,000 preferred shares with a par value of $0.001 per share.

On August 21, 2007,
the Company issued 4,500,000 common shares as partial consideration for the
acquisition of Nevada Eagle (see note 3, Acquisition of Nevada Eagle Resources
LLC).

During the quarter
ended September 30, 2007, 98,750 (162,500 for the six months ended September 30,
2007) common shares were issued to employees and directors of the Company upon
vesting of outstanding Restricted Stock Units.

On August 3, 2007, the
Company completed a private placement of 5,000,000 units at Cdn$0.80 for gross
proceeds of C$4,000,000. Each unit consisted of one common share and one series
G warrant. Each series G warrant entitles the holder to purchase a common share
at a price of Cdn$1.00 per share during the first 12 months after closing and
Cdn$1.25 per share during the second 12 months after closing and until expiry.
Cash compensation of C$152,040 and 265,050 compensation warrants (series H) were
issued to agents and are exercisable at a price of Cdn$0.83 per share and expire
9 months after closing. The Company has a right to force warrant holders to
exercise warrants, if the common share price of the Company remains equal to or
greater than, Cdn$1.85 per common share, for a period of twenty consecutive
days.



---



During the quarter ended June 30,
2007, the company issued 30,000 common shares to a consultant acting as
financial advisor to the company in certain transactions. The issuance is based
on the consulting agreement, which requires 7,500 common shares to be issuable
monthly for the term of the consulting agreement. The Company charged to expense
$25,111 in the quarter attributable to the fair value of the common shares.

On September 30, 2007, the Company
issued an additional 22,500 common shares to the same consultant acting as
financial advisor to the company. The issuance is based on the consulting
agreement, which requires 7,500 common shares to be issuable monthly for the
term of the consulting agreement. The Company charged to expense $20,355 in the
quarter attributable to the fair value of the common shares

As at November 1, 2007, the company has 57,161,395
common shares issued and outstanding, which includes common shares, issued to
consultants (see note 13, Subsequent Events).

7. CAPITAL STOCK (contd)

[b]

Warrants:

The following table contains information with respect
to all warrants:

|                                                         | Number of Warrants | Fair Value of Warrants
|-------------------------------------------------------- | ------------------ | ----------------------
|                                                         | #                  | $                     
|                                                         |                    |                       
|Warrants outstanding, March 31, 2004                     |                   |                      
|Issued for:                                              |                    |                       
|Private placements                                       | 3,407,981          |                      
|Agents compensation                                     | 141,008            | 45,100                
|Exercised                                                |                   |                      
|Warrants outstanding, March 31, 2005                     | 3,548,989          | 45,100                
|Issued for:                                              |                    |                       
|Private placements                                       | 3,015,204          |                      
|Agents compensation on private placement                | 130,000            | 35,100                
|Initial Public Offering (IPO)  Series A                 | 6,900,000          |                      
|Underwriters compensation on IPO                        | 690,000            | 135,100               
|Private placements  Series B                            | 2,737,500          |                      
|Agents compensation on private placement 
    Series C | 280,500            | 76,540                
|Exercised                                                | (197,500)          |                      
|Warrants outstanding, March 31, 2006                     | 17,104,693         | 291,840               
|Issued for:                                              |                    |                       
|Private placements  Series D                            | 64,500             |                      
|Private placements  Series E                            | 5,000,000          |                      
|Agents compensation on private placement 
    Series F | 85,050             | 11,397                
|Exercised                                                | (1,658,275)        |                      
|Expired                                                  | (15,175,410)       |                      
|Warrants outstanding, March 31, 2007                     | 5,420,558          | 303,237               
|Issued for:                                              |                    |                       
|Private placements  Series G                            | 5,000,000          |                      
|Agents compensation on private placement 
    Series H | 265,050            | 44,040                
|Exercised                                                | (130,000)          |                      
|Expired                                                  | (64,500)           |                      
|Warrants outstanding, September 30, 2007                 | 10,491,108         | 347,277               

10

---

The following table summarizes information about warrants outstanding and
exercisable as at September 30, 2007:

|Warrants
    Outstanding and Exercisable
|----------------------------------------
|                                        
|                                        
|Warrants                                
|#                                       
|                                        
|141,008                                 
|85,050                                  
|5,000,000                               
|5,000,000                               
|265,050                                 
|10,491,108                              

*

The fair value of agents and underwriters warrants issued
during 2007 and 2006 has been estimated using the Black-Scholes Option Pricing
Model based on the following assumptions: a risk-free interest rate of 3.38% to
5.21% as of the date of transaction; expected life of 1 to 3 years depending on
their terms; an expected volatility of 53% to 70% (based on the average
volatility of companies in the industry at date of issuance for period
equivalent to the expected life); and no expectation for the payment of
dividends.

11

---

7. CAPITAL STOCK (contd.)

[c]
Stock options:
On September 6, 2007, a director was
awarded 100,000 stock options. The options vest over one year and are
exercisable for 5 years at a price of Cdn$0.77 per share.
On September 13, 2007, an employee
was granted 20,000 stock options that vest over 2.5 years and are exercisable
for 5 years at a price of Cdn$0.81 per share.
On September 21, 2007, four employees
were granted 835,000 stock options that vest over two years and are exercisable
for 5 years at a price of Cdn$0.90 per share.
On July 27, 2007, a consultant was
awarded 75,000 stock options that vest over 2 years and are exercisable for 5
years at a price of Cdn$0.91 per share.
On May 11, 2007, two employees were
granted a total of 60,000 stock options. The options vest over the next 18
months and are exercisable for 5 years at a price of Cdn$0.95 per share. 40,000
of these options have been subsequently forfeited.
The Company recognizes stock-based
compensation expense over the requisite service period of the individual grants,
which generally equals the vesting period. SFAS 123(R) requires forfeitures to
be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. The Companys total
employees are relatively few in number and turnover is considered remote,
therefore the Company currently estimates forfeitures to be 5.5%. Estimate of
forfeitures is reviewed on a quarterly basis. Stock-based compensation is
expensed on a straight-line basis over the requisite service period.
The Company recorded total stock-based compensation expense
related to stock options and restricted stock units as follows:

|                                            | Three months | Three months | Six months | Six months
|------------------------------------------- | ------------ | ------------ | ---------- | ----------
|                                            | ended        | ended        | ended      | ended     
|                                            | September    | September    | September  | September 
|                                            | 30, 2007     | 30, 2006     | 30, 2007   | 30, 2006  
|                                            | $            | $            | $          | $         
|                                            |              |              |            |           
|Management salaries, exploration expense, & |              |              |            |           
|consulting fees                             | 271,462      | 225,691      | 484,494    | 250,064   

12

---

7. CAPITAL STOCK (contd.)Stock option activity

The following table summarizes the Companys stock
option activity for the six months ended September 30, 2007:

|                                     | Number    | Weighted        
|------------------------------------ | --------- | ----------------
|                                     | of Stock  | Average exercise
|                                     | Options   | price*          
|Outstanding, beginning of year       | 5,282,500 | $1.02           
|Granted                              | 1,090,000 | $0.89           
|Exercised                            |          |                
|Forfeited                            | (630,000) | $1.00           
|Total outstanding at period end      | 5,742,500 | $1.00           
|Vested and exercisable at period end | 4,330,000 | $1.03           

* Based on the September 30, 2007 exchange rate of
Cdn$1 equals US$1.0052

The following table summarizes information about
stock options outstanding as at September 30, 2007:

|Stock Options Outstanding and Exercisable
|-----------------------------------------
|                                         
|Stock Options                            
|Outstanding                              
|                                         
|1,912,500                                
|115,000                                  
|90,000                                   
|50,000                                   
|190,000                                  
|1,490,000                                
|30,000                                   
|80,000                                   
|50,000                                   
|240,000                                  
|20,000                                   
|425,000                                  
|20,000                                   
|75,000                                   
|100,000                                  
|20,000                                   
|835,000                                  
|5,742,500                                

*

13

---

7. CAPITAL STOCK (contd.)
Valuation assumptions

Compensation expense recorded in the financial
statements has been estimated using the Black-Scholes option pricing model. The
assumptions used in the pricing model include:

|                        | 2008        | 2007         
|----------------------- | ----------- | -------------
|                        |             |              
|Dividend yield          | 0%          | 0%           
|Expected volatility     | 55%         | 55%          
|Risk free interest rate | 4.09%-4.62% | 4.54% - 5.21%
|Expected lives          | 3 years     | 3 years      

The risk-free interest rate is
determined based on the rate at the time of grant for US government zero-coupon
bonds for a 3 year term, which is a term equal to the estimated life of the
option. Dividend yield is based on the stock options exercise price and
expected annual dividend rate at the time of grant. Volatility is derived by
measuring the average share price fluctuation of three publicly listed companies
that operate in the same industry. The period of historical volatility is the
same period as the expected life of the option being 3 years.

The Black-Scholes option-pricing
model used by the Company to calculate option values was developed to estimate
the fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Companys stock option awards.
Options pricing models require the input of highly subjective assumptions,
including future stock price volatility and expected time until exercise, which
greatly affect the calculated values. Changes in these assumptions can
materially affect the fair value estimate and therefore it is managements view
that the existing models do not necessarily provide a single reliable measure of
the fair value of the Companys equity instruments.

[d]

Restricted stock units:

On May 11, 2007, the Board of Directors approved the
grant of 10,000 restricted stock units (RSU) to an employee of the Company
which were subsequently forfeited on July 31, 2007.

On September 5, 2007 the Company
entered into a Transition Agreement with an employee and director (see note
10(c)). Among other things, the agreement provided a grant of 112,500 RSUs that
vest over two years; 18,750 RSUs that were to vest in January 2008 were
forfeited; a grant of 50,000 RSUs was forfeited and replaced with a new RSU
agreement that provides 2,778 units for each full month of service (subject to a
maximum of 50,000 RSUs) completed as a member of the Board of Directors
beginning January 1, 2007 and vest upon resignation from the Board of Directors.

The following table summarizes information about
restricted stock units outstanding as at September 30, 2007:

|                                  | RSUs   | RSUs   | Weighted Average Fair
|--------------------------------- | ------- | ------- | ---------------------
|                                  | Granted | Vested  | Value at Grant Date  
|Outstanding at April 1, 2006      |        |        |                     
|Issued April 18, 2006             | 8,000   | 8,000   | Cdn$1.63             
|Issued December 12, 2006          | 15,000  | 15,000  | Cdn$0.84             
|Issued January 10, 2007           | 616,250 | 247,500 | Cdn$0.82             
|Issued September 6, 2007          | 112,500 |        | Cdn$0.77             
|Outstanding at September 30, 2007 | 751,750 | 270,500 | $1.02*               

* Based on the September 30, 2007 exchange rate of
Cdn$1 equals US$1.0052

14

---

8. RELATED PARTY TRANSACTIONS

All transactions with related parties have occurred in the
normal course of operations and are measured at their exchange amount as
determined by management. All material transactions and balances with related
parties not disclosed elsewhere are described below:
During the three months ended September 30, 2007, the Company
paid consulting fees to a non-independent director in the amount of $30,025
[September 30, 2006 - $90,882] for services rendered on the exploration of the
Borealis property.
9. OTHER ASSETS

|                            | September 30, | March 31,
|--------------------------- | ------------- | ---------
|                            | 2007          | 2007     
|                            | $             | $        
|Reclamation bond & deposits | 189,459       | 134,759  
|Non-compete agreement       | 70,908        |         
|Accumulated Amortization    | (1,609)       |         
|                            | 258,758       | 134,759  

During the six months ended September 30, 2007, the Company
increased the amount of their performance bond from $113,759 to $168,459 by
purchasing a further performance bond totaling $54,700 from an insurance
company. The total bond purchase is in support of the potential future
obligations the Company may incur under a Plan of Operation for exploration
within the brown-field area of the Borealis property filed with the U.S. Forest
Service. The Company also holds a deposit with the Bureau of Land Management ("BLM")
for $21,000 (March 31, 2007 - $21,000), which supports its potential future
obligations for reclamation during the Companys exploration activities within
the BLM area. At September 30, 2007, the Company has recorded an estimated
reclamation liability of $5,600 (June 30, 2006  $7,000) representing future
obligations related to its drilling activities completed to September 30, 2007.

As part of the acquisition of Nevada Eagle (footnote 3), the primary interest
holder entered into a non-compete agreement. The non-compete agreement is being
amortized over 5 years.

10. COMMITMENTS & CONTINGENCIES

[a]

A portion of the
Borealis Property is subject to a mining lease. The Company is required to make
monthly lease payments of $9,094, adjusted annually based on the Consumer Price
Index, for the duration of the lease term. In addition, production of precious
metals from the Borealis Property will be subject to the payment of a royalty
under the terms of the mining lease. The mining lease expires in 2009, but may
be renewed by the Company annually thereafter, so long as mining related
activity continues on the Borealis Property. The Company has the option to
terminate the mining lease at any time prior to expiry in 2009.

[b]

The Company rents office space in
Vancouver, BC for a 3 year term. The following are rental lease commitments in
relation to the office lease:

| |      | $     
| | ---- | ------
| |      |       
| | 2008 | 20,238
| | 2009 | 16,940

[c]

In September 2007,
the Company entered into a Transition Agreement with an individual under which,
the individual will cease to be an employee and will continue as a director of
the Company. The agreement requires the Company to pay $12,500 per month, for 18
months beginning October 2007, and the individual was granted 112,500 Restricted
Stock Units the will vest at 37,500 each on April 1, 2009, July 1, 2009 and
October 1, 2009. The agreement provides for certain incidental expenses for 18
months beginning October 2007. The Company recorded a charge to expense of
$322,464 during the quarter ended September 30, 2007 to accrue the cost of the
agreement.

[d]

Nevada Eagle holds approximately
28 exploration properties that are not leased out. Annual claim fees to hold
these properties are approximately $50,000.



---



11. CAPITAL LEASE

The Company leases two trucks that are both accounted for as
capital leases, with the present value of the required lease payments recorded
as a liability and an asset at inception and thereafter lease payments reduce
the liability and result in interest expense and the asset is depreciated. The
actual combined lease payments are $2,371 per month with a residual payment of
$12,000 due October 2007 and $13,854 due May 2008.

The present value of required payments during each fiscal year:

| |      | $     
| | ---- | ------
| |      |       
| | 2008 | 21,307
| | 2009 | 17,308

12. CONVERTIBLE PROMISSORY NOTE

|Convertible promissory note, with
    a face value of $5,000,000 due March 30, 2010 unsecured, bearing interest at
    5%. Interest is payable each January 1st and June 1st.
    Discount accretion for the period from August 21, 2007 (date of issue) to
    September 30, 2007, totalled $28,377. | September 30, |      | March 31,
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ---- | ---------
|2007                                                                                                                                                                                                                                                                                                  |               | 2007
|$                                                                                                                                                                                                                                                                                                     |               | $   
|4,300,726                                                                                                                                                                                                                                                                                             |               | 0   

Gryphon Gold issued a Convertible Promissory Note to the
former owner of Nevada Eagle with a face amount of $5,000,000, due March 30,
2010, bearing interest at 5% per annum, payable on January 1 and June 1 of each
year. The note is convertible at the holders option into shares for the first
12 months after closing at a conversion price of $1 per common share; for the
next 12 months at $1.25 per common share; for the period 24 months from closing
to March 29, 2010 at $1.50 per common share and on March 30, 2010 at $1.75 per
common share. The conversion rate is subject to certain anti-dilution
adjustments and is also subject to adjustment on payment of cash dividends by
Gryphon Gold. Upon an event of default, which includes amongst other things a
change in control of Gryphon Gold, the holder may demand repayment of the
principal amount of the debenture or exercise the conversion feature for a fixed
number of shares. After an event of default, the interest rate on the
convertible debenture increases to 9%. The change in control in an event of
default is considered an embedded derivative however its issue date fair value
is not considered to be significant, nor is it considered to be significant at
September 30, 2007. The conversion feature does not require bifurcation in the
financial statements because it is not a beneficial conversion feature and a
cash payment is not required if common shares issued at time of conversion are
never successfully registered. The Convertible Promissory Note, including the
conversion feature and change in control event of default embedded derivative,
has been recorded at its estimated issue date fair value of $4,272,359 in the
unaudited consolidated balance sheet. Interest and discount accretion of $30,176
and $28,367, respectively for the period of August 21, 2007 to September 30,
2007, has been recorded as interest expense in the unaudited consolidated income
statements. The former owner of Nevada Eagle is also an employee of the Company
(see note 3).

13. SUBSEQUENT EVENTS

On October 11, 2007, the Company granted 47,000 options to a consulting
Company at a price of Cdn$0.88 per common share that vest on November 10, 2007.

On October 10, 2007, 6,250 RSUs vested for each of three directors and
common shares were issued.



---



Item 2. Managements Discussion and Analysis.

Overview

Gryphon Gold Corporation was
incorporated in Nevada on April 24, 2003 and has offices in Hawthorne, Nevada
and Vancouver, British Columbia. Our objective is to add to our potential
exposure to gold mineralization in Nevada though exploration, joint ventures and
acquisitions. Currently, our most valuable asset is a 100% interest in the
Borealis Property, located in Mineral County, Nevada. We have not determined if
the mineralized material from the Borealis Property can be economically
exploited. Through the acquisition of Nevada Eagle Resources LLC, we obtained
approximately 54 additional exploration properties. None of these properties
have known reserves.

In July 2003, we initially acquired
from Golden Phoenix Minerals, Inc. ("Golden Phoenix") an option to earn a 70%
joint venture interest in the Borealis Property by incurring qualified
development expenditures. On January 28, 2005, we acquired the remaining
interest held by Golden Phoenix in the Borealis Property for $1,400,000. Our
subsidiary, Borealis Mining, paid to Golden Phoenix $400,000 upon closing of the
purchase on January 28, 2005, with four additional quarterly payments of
$250,000 due to Golden Phoenix. On January 24, 2006, with a final payment of
$250,000, Borealis Mining completed all of its financial requirements with
respect to our acquisition of the interest held by Golden Phoenix.

As sole shareholder of Borealis
Mining, we control all of the lease rights to a portion of the Borealis
Property, subject to advance royalty, production royalty, and other payment
obligations imposed by the lease. Our acquisition of the interest of Golden
Phoenix in the Borealis Property terminated the July 2003 Option and Joint
Venture Agreement.

In addition to our leasehold interest
to a portion of the Borealis Property, through Borealis Mining we also own
numerous unpatented mining claims that make up the balance of the Borealis
Property, and we also own all of the documentation and samples from years of
exploration and development programs carried out by the previous operators of
the Borealis Property (totaling thousands of pages of data including, but not
limited to, geophysical surveys, mineralogical studies and metallurgical testing
reports).

A portion of the Borealis Property is
subject to the mining lease. We are required to make monthly lease payments of
$9,094, adjusted annually based on change in the Consumer Price Index. In
addition, the production of precious metals from the Borealis Property will be
subject to the payment of a royalty under the terms of the mining lease. The
terms of the mining lease and royalty are described below under the heading
"Borealis Property". We have also entered into lease arrangements for offices in
Vancouver, British Columbia and Hawthorne, Nevada and recently we terminated our
office lease in Lakewood, Colorado on Dec 31, 2006.

On June 26, 2006, we announced that
the USDA Forest Service and the Nevada Bureau of Mining Regulation and
Reclamation have both approved the Plan of Operations and Reclamation Plan,
allowing Gryphon Gold to proceed with the development of a heap leach mine at
the Borealis Gold Project. These approvals, combined with the previously
approved operating permits from the State of Nevada, represented the key
regulatory approvals required to place the Borealis gold mineralization into
production.

On November 30, 2006, our board of
directors concluded that we would not proceed with construction and production
financing of the Borealis heap leach mine. The feed for the proposed mine was
remnants from the previously mined open pits, and heap and dump material
associated with the historical mining operations. The decision not to proceed
was made due to the impact of certain technical corrections to the previously
announced Feasibility Study and related NI 43-101 Technical Report, dated August
15, 2006. The technical corrections reduced the anticipated quantity of
recoverable gold and silver over the project life, and resulted in a marginal
projected return on investment. In light of the decision not to proceed with
development of a mine, in December 2006, we closed our Denver office and
terminated operations and engineering staff, including our Chief Operating
Officer Mr. Allen Gordon and our Vice President of Borealis Project Development
Mr. Matt Bender. Mr. Steven Craig, our Vice President of Exploration, was
relocated to Nevada. As of December 1, 2006, our Chief Financial Officer, Mr.
Michael Longinotti, commenced working on a part-time basis. Under this
agreement, his time spent in the office was reduced by 50% along with his
salary, and as of July 1, 2007 Mr. Longinotti resumed full-time employment.

On January 11, 2007, we announced the
results of the revised CIM compliant resource estimate in accordance with NI
43-101 which had been compiled by Mr. Alan C. Noble, P.E. of Ore Reserves
Engineering. The results of the report
were independently reviewed by AMEC to insure the methodology and assumptions
used in the calculations were consistent with industry standards. The resource
estimate includes the results of exploration drilling through February 28, 2006.
The measured, indicated and inferred gold resource reported in January 2007 was:



---



|Date              | Measured* | Indicated* | Inferred*
|----------------- | --------- | ---------- | ---------
|                  | Tons      | Grade      | Ozs of   
|                  | (000s)   | opt        | Gold     
|January, 11, 2007 | 16,360    | 0.031      | 503,700  

The updated report confirmed a total
gold resource (measured, indicated and inferred) of 1,822,700 ounces contained
in the Borealis property.

*Cautionary Note to investors
concerning estimates of Measured, Indicated and Inferred Mineral Resources:
We report mineralized material under two separate standards to meet the
requirements for reporting in both the U.S. and Canada. U.S. reporting
requirements for disclosure of mineral properties are governed by the United
States Securities and Exchange Commission (SEC) Industry Guide 7. Canadian
reporting requirements for disclosure of mineral properties are governed by
National Instrument 43-101, commonly referred to as NI 43-101. Canadian and
United States standards are substantially different, and none of our property
has any probable or proven reserves under either Canadian or United States
standards. The table above uses the terms "measured," "indicated" and "inferred"
in reference to "resources." We advise investors that while these terms are
recognized and required by Canadian regulations, the SEC does not recognize
them. "Inferred mineral resources" have a great amount of uncertainty as to
their existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an inferred mineral
resource will ever be upgraded to a higher category. In accordance with Canadian
rules, estimates of inferred mineral resources cannot form the basis of
feasibility or other economic studies. Investors are cautioned not to assume
that any part or all of the inferred mineral resource exists or is economically
or legally mineable. In the United States, an issuer is not generally permitted
to disclose mineralization unless such mineralization satisfies the definitional
requirements of proven or probable mineral reserve in accordance with SEC
Industry Guide 7, which defines mineral reserve as a part of a mineral deposit,
which could be economically and legally extracted or produced at the time the
reserve determination is made. Accordingly, information contained in this Form
10-QSB containing descriptions of our mineral deposits in accordance with NI
43-101 may not be comparable to similar information made public by other U.S.
companies under the United States federal securities laws and the rules and
regulations thereunder. Investors are cautioned not to assume that any part or
all of the mineral deposits in these categories will ever be converted into
mineral reserves.

In October 2007, we completed a
Controlled Source Audio-Frequency Magnetotelluric survey on the gold deposits in
the Graben. We plan to expand this survey on other parts of the Borealis
property.

We expect to report a CIM compliant
resource estimate in accordance with NI 43-101 during the quarter ended March
31, 2008. The completion of the report is partially dependent on timing of the
end of the current drilling program and related turn around time for assay
results.

In December 2006, we completed the
geophysical survey, which commenced in September 2006. The positive geophysical
results obtained from induced polarization (IP) surveys identified multiple
chargeability and resisitivity anomalies coincident with aeromagnetic lows which
extended several kilometers (km) to the north and northwest of the Graben
sulphide deposit. The IP surveys identified two new mineralized exploration
targets located under the pediments 3.0 km (Central Pediments) and 5.3 km
(Western Pediment) northwest of the Graben sulphide deposit.

On January 17, 2007, we announced a
72-hole, $4.5 million drilling and exploration program focused on the expansion
of the Graben deposit and Borealis exploration drilling. The program consists of
a series of Graben deposit expansion drilling and extension drilling north of
the successful G3  G13 fence of holes. The drilling of the Graben deposit will
alternate with follow up exploration drilling in the Central and Western
Pediments where 10 holes have intersected two distinct hydrothermal systems
hidden beneath the pediments.



---



Dur

1)

On June 10, 2006,
we completed private placements to an officer and employee of 129,000 units for
gross proceeds of Cdn$174,150. The units were sold at a price of Cdn$1.35 each
and consist of one common share and one-half of one purchase warrant exercisable
at Cdn$1.82 per share. The warrants expired on June 10, 2007.

2)

On February 9,
2007 we completed a private placement of 5.0 million units at a price of
Cdn$0.90 per unit for gross proceeds of Cdn$4.5 million. Each unit consisted of
one common share and one full purchase warrant. The two year warrants are
exercisable at a price of Cdn$1.10 if exercised within twelve months of the
closing and at a price of Cdn$1.35 if exercised after the First Anniversary but
prior to expiry. We paid qualified registered dealers a 7% cash commission in
the amount of Cdn$77,175 and issued compensation options to acquire 85,050
common shares (at a price of Cdn$0.90 per share for a period of 12 months from
closing) in respect of the 1.225 million units placed by them. The shares,
warrants and underlying shares were not qualified by prospectus, have not been
registered under U.S. securities laws, and are subject to resale restrictions.
The Company granted registration rights to the investors in this private
placement and accordingly filed with the SEC on June 7, 2007 (amended July 23,
2007), a registration statement under the Securities Act. The Company will use
commercially reasonable efforts to cause the registration statement to be
declared effective. The proceeds of this offering will be applied to fund the
continuation of our exploration and development program on the Borealis
Property.

For the fiscal year ended March 31,
2007, our exploration work focused on extension and definition drilling and the
broadening of district exploration and we expended $4.8 million (fiscal year
ended March 31, 2006 $3.6 million) on exploration of the Borealis property.

On July 4, 2007, we entered into a membership
interest purchase agreement (the "Purchase Agreement") with Gerald W. Baughman
and Fabiola Baughman, as sellers ("Sellers"), and Nevada Eagle Resources LLC, a
Nevada limited liability company ("Nevada Eagle"), under which Gryphon agreed to
purchase all of the outstanding limited liability company interests of Nevada
Eagle (the "Acquisition"). The transaction closed August 21, 2007. Under the
terms of the Purchase Agreement, Gryphon acquired Nevada Eagle from the Sellers
for the following consideration:

(a)

$2,500,000 in cash;

(b)

four million five hundred thousand
(4,500,000) shares of common stock of Gryphon ("Common Shares"); and

(c)

a 5% convertible promissory note
in the principal amount of $5,000,000 (the "Convertible Note").

The Convertible Note, due March 30, 2010, bears
interest at the annual rate of 5% and is convertible at the option of the holder
into Common Shares at an initial conversion price of $1.00 per common share
during first the twelve month period following the Closing Date, $1.25 per
common share during the second twelve month period following the Closing Date,
$1.50 per common share thereafter and $1.75 per common share if converted on
March 10, 2007. The interest payments are due on each January 1 and June 1,
beginning on January 1, 2008. In addition to the purchase consideration, the
Sellers will be entitled to all revenues of Nevada Eagle (payable in cash,
stock, or other consideration) calculated to be received and received on the
assets and properties from January 1, 2007 through midnight on December 31,
2007.

In addition, we granted the Sellers registration
rights under which we agreed to file (within the later of (i) 90 days of the
Closing Date or (ii) any date in which we are required to file a registration
statement for a third-party in connection with a financing or acquisition, but
no later than 120 days of the Closing Date) a resale registration statement to
register the Common Shares issuable at Closing and issuable upon exercise of the
Convertible Note under the Securities Act of 1933, as amended.



---

At closing, the following agreements
were also executed:
(a)
the sellers executed a Lock-up Agreement under which the Sellers agreed that for
a period of three months following the Closing Date not to sell Common Shares
issued or issuable under the Purchase Agreement and Convertible Note and,
thereafter, to limit the sale of such Common Shares to 20% of the aggregate
Common Shares issued under the Purchase Agreement and Convertible Note each
quarter (with unsold Common Shares aggregating each quarter thereafter);
(b)
Mr. Baughman entered into an Employment Agreement for a term of one year,
renewable by the parties, to serve as our Vice President of Corporate
Development; and
(g)
the sellers entered into a Non-Competition Agreement.
Under the terms of the
Non-Competition Agreement, the Sellers agreed not to compete with Gryphon for
the latter of (i) twelve (12) months following the Closing Date (the "Restricted
Period"), or (ii) twelve (12) months following the termination of our employment
of Gerald Baughman. The scope of the non-competition obligation relates to the
business of acquiring and/or holding base metal and precious metal mineral
assets located in the state of Nevada within the Area of Interest and to
properties that have been examined by Gryphon or Gerald Baughman during the
course of his employment by us, in any manner or capacity. "Area of Interest" is
defined as any property owned by the Company, Nevada Eagle, our Affiliates or
Nevada Eagle on the latter of (i) Closing Date or (ii) the termination date of
Gerald Baughman's employment by us, if any, together with any adjacent areas
within one kilometer of the exterior boundary of such properties.
On August 3, 2007, we completed a
private placement of 5,000,000 units at Cdn$0.80 for gross proceeds of
approximately Cdn$4,000,000. Each unit consisted of one common share and one
series G warrant. Each series G warrant entitles the holder to purchase a common
share at a price of Cdn$1.00 per share during the first 12 months after closing
and Cdn$1.25 per share during the second 12 months after closing and until
expiry. We paid qualified registered dealers a 7% cash commission in the amount
of Cdn$152,040 and issued compensation options to acquire 265,050 common shares
(at a price of Cdn$0.83 per share for a period of 9 months from closing) in
respect of the 2,715,000 million units placed by them. We have a right to force
warrant holders to exercise warrants, if the price of our common stock remains
equal to or greater than, Cdn$1.85 per common share, for a period of twenty
consecutive days. The shares, warrants and underlying shares were not qualified
by prospectus, have not been registered under U.S. securities laws, and are
subject to resale restrictions. We granted registration rights to the investors
in this private placement and will use commercially reasonable efforts to
prepare and file with the SEC, within 120 days of closing, a registration
statement under the Securities Act and to cause such statement to be declared
effective. The proceeds of this offering will be applied to fund the
continuation of our exploration and development program on the Borealis
Property.
Fiscal 2008 Plan

During fiscal 2008, we plan to
continue extension drilling, focused on the expansion of the Graben deposit and
exploration drilling for new gold deposits within the two newly identified
potentially gold-bearing hydrothermal systems in the pediments.
The following activities are planned
for the duration of fiscal 2008:Continue the Graben deposit drilling
  extension and expansion program, a series of in-fill drilling and step-out
  holes along the northern extension of the Graben trend.

- Continue exploration drilling at both the
  Central Pediment and Western Pediment, which are northwest of the Graben
  sulphide deposit. Drilling will be guided by the results of the geological and
  geophysical exploration model.

- Commence detailed review of properties
  acquired through Nevada Eagle Resources acquisition and compile exploration
  and development schedule.

- Complete joint venture and lease
  agreements for the un-leased properties held by Nevada Eagle Resources.

- Complete 43-101 report.



---

Managements Discussion and Analysis

This discussion and analysis should
be read in conjunction with the accompanying Unaudited Interim Financial
Statements and related notes. The discussion and analysis of the financial
condition and results of operations are based upon the unaudited interim
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America ("U.S. GAAP"). The
preparation of financial statements in conformity with U.S. GAAP requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of any contingent liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period.
On an on-going basis, we review our estimates and assumptions. The estimates
were based on historical experience and other assumptions that we believe to be
reasonable under the circumstances. Actual results are likely to differ from
those estimates under different assumptions or conditions, but we do not believe
such differences will materially affect our financial position or results of
operations. Critical accounting policies, the policies we believe are most
important to the presentation of the financial statements and require the most
difficult, subjective and complex judgments, are outlined below in "Critical
Accounting Policies," and have not changed significantly.
We use words like "expects,"
"believes," "intends," "anticipates," "plans," "targets," "projects" or
"estimates" in this quarterly report. When used, these words and other, similar
words and phrases or statements that an event, action or result "will," "may,"
"could," or "should" occur, be taken or be achieved identify "forward-looking"
statements. Such forward-looking statements reflect our current views with
respect to future events and are subject to certain risks, uncertainties and
assumptions, including, the risks and uncertainties outlined in Exhibit 99.1
titled "Risk Factors and Uncertainties", which Exhibit is hereby incorporated by
reference. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, believed, estimated or expected. Our
management has included projections and estimates in this quarterly report,
which are based primarily on managements experience in the industry,
assessments of our results of operations, discussions and negotiations with
third parties and a review of information filed by our competitors with the
Securities and Exchange Commission or otherwise publicly available. We caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. We disclaim any obligation subsequently to
revise any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
We qualify all the forward-looking statements
contained in this quarterly report by the foregoing cautionary statements.
Critical Accounting Policies and Estimates
The preparation of our unaudited
interim financial statements is in accordance with accounting principles
generally accepted in the United States. The following are critical accounting
policies and estimates which we believe are important to understanding our
financial results.
Use of estimates
The preparation of financial
statements requires us to make estimates and assumptions which affect the
reported amounts of assets and liabilities at the date of the financial
statements and the revenues and expenses for the period reported. By their
nature, these estimates are subject to measurement uncertainty and the effect on
the financial statements of changes in such estimates in future periods could be
significant. Actual results will likely differ from these estimates.
Revenue recognition

Mineral lease rentals or option
payments are treated as reductions of the cost of the property as the payor is
accumulating an interest in the mineral property; payments in excess of
capitalized costs are recognized in income. Some agreements provide for payments
in the form of stock and other equity instruments as well as cash payments.
Stock and other equity instruments are recognized based on their fair market
value at the time of receipt. Fluctuations incurred during the holding period
are accounted for as gains or losses from held for trading securities. Privately
held stock, or stock that is not currently trading is valued at zero. The leases
provide for the receipt of royalty payments upon production of the property.
Royalty payments will be recognized in the period in which production occurs.
There are no properties in the production stage at this time.21

---

Exploration of mineral property interests

We expense exploration costs as they
are incurred. When we determine that a mining deposit can be economically and
legally extracted or produced based on established proven and probable reserves,
development costs incurred after such determination will be capitalized. The
establishment of proven and probable reserves is based on results of final
feasibility studies which indicate whether a property is economically feasible.
Upon commencement of commercial production, we will transfer capitalized costs
to the appropriate asset category and amortize them over their estimated useful
lives and/or ounces produced, as appropriate. We capitalize the cost of
acquiring mineral property interests (including original claim establishment)
until we have determined the viability of the property. We expense capitalized
acquisition costs if we determine that the property has no future economic value
and ongoing claim maintenance costs. We will also write down capitalized amounts
if estimated future cash flows, including potential sales proceeds, related to
the mineral property are estimated to be less than the carrying value of the
property.
Stock-based compensation
In December 2004, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standard 123R, Share-Based
Payment, ("SFAS 123 (R)") a revision to SFAS 123. SFAS 123(R) requires all
share-based payments to be recognized in the financial statements based on their
values using either a modified-prospective or modified-retrospective transition
method.
Prior to March 31, 2006, the Companys stock-based
employee compensation plans were accounted for under the recognition and
measurement provisions of Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations, as permitted by FASB Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). The Company did not recognize employee
stock-based compensation costs in its statement of operations for the periods
prior to March 31, 2006, as all options granted had an exercise price equal to
the market value of the underlying common stock on the date of the grant.
Effective April 1, 2006, the Company
adopted the fair value recognition provisions of SFAS No. 123(R), using the
modified-prospective-transition method. The Companys total employees are
relatively few in number and turnover is considered remote, therefore the
Company currently estimates forfeitures to be 5.5%. Estimation of forfeitures
will be reviewed on a quarterly basis.
Asset retirement obligations
The Company records the fair value of
an asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets
that results from the acquisition, construction, development or normal use of
the assets with a corresponding increase in the carrying amount of the related
long-lived asset. This amount is then depreciated over the estimated useful life
of the asset. Over time, the liability is increased to reflect an interest
element considered in its initial measurement at fair value. The amount of the
liability will be subject to re-measurement at each reporting period. Currently,
the Company has a reclamation liability of $5,600 which is disclosed further in
Note 8 of the financial statements.
Tax valuation allowance
We have recorded a valuation
allowance that fully reserves for our deferred tax assets because at this time
we cannot establish that we will be able to utilize the tax loss carryforwards
in the future. If in the future we determine that we will be able to use all or
a portion of our deferred tax assets in the future, based on our projections of
future taxable income, we will reduce the valuation allowance, thereby
increasing income in that period.22

---

Foreign currency translation
The United States dollar is our
functional currency. Transactions involving foreign currencies for items
included in operations are translated into U.S. dollars using average exchange
rates; monetary assets and liabilities are translated at the exchange rate
prevailing at the balance sheet date and all other balance sheet items are
translated at the historical rates applicable to the transactions that comprise
those amounts. Translation gains and losses are included in our determination of
net income.
Recent Accounting Pronouncements
The United States Securities and
Exchange Commission recently announced that it would provide for a phased-in
implementation process for FASB Statement No. 123(R), Share-Based Payment ("SFAS
123(R)"). Registrants must adopt SFAS 123(R)'s fair value method of accounting
for share-based payments to employees no later than the beginning of the first
annual period beginning after December 15, 2005. We adopted SFAS 123(R)
effective April 1, 2006.
The Financial Accounting Standards
Board ratified the consensus of the Emerging Issues Task Force that stripping
costs incurred during the production phase of a mine are variable production
costs that should be included in the costs of the inventory produced during the
period that the stripping costs are incurred. This consensus is effective for
the first reporting period in fiscal years beginning after December 15, 2005,
with early adoption permitted. To date the Company has not incurred any
stripping costs.
In June 2006, the FASB issued FASB
interpretation No. 48  Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in tax return. This Interpretation
also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. This interpretation is
effective for fiscal years beginning after December 15, 2006. The adoption of
FIN 48 will not have a material impact on the Companys consolidated financial
statements.
In September 2006, the FASB issued
SFAS 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value,
establishes a framework for measuring fair value in GAAP, and expands
disclosures about fair value measurements. This Statement applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those pronouncements that fair value is a
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, the application of this Statement will
change current practice, effective April 1, 2008. The adoption of SFAS 157 will
not have a material impact on the Companys consolidated financial statements.
Results of Operations

We are in an exploration stage and currently have no
producing mineral properties and thus we had no revenues during all reporting
periods.
Three months ended September 30, 2007 compared to three months ended
September 30, 2006

For the three months ended September
30, 2007 we had a net loss of $2,500,535 or $0.04 per share compared to a net
loss of $1,871,080 or $0.05 per share in the same period in the prior year, as
spending on our exploration activities on the Borealis property increased by
$207,223 and we incurred additional one-time costs related to a transition
agreement for an employee and director.
Exploration expenses during the three
months ended September 30, 2007 were $1,274,926 or 50% of our total expenses
compared to $1,067,703 or 55% of total expenses in the prior year. During the
second quarter ended September 30, 2007 we completed drilling 10 holes, totaling
12,080 feet (3,682 meters) compared to completing 7 holes totaling 10,395 feet
(3,168 meters) in prior years comparable period. The increase in spending was
related to continuation of the exploration drilling program and progressing on
building a geologic model of the Graben deposit on our Borealis property. A
Controlled Source Audio-Frequency Magnetotelluricgeophysical study was also completed late in the second quarter of 2007.23

---



Management salaries and consulting
fees in the quarter ended September 30, 2007 were $695,068 compared to $482,009
incurred in the quarter ended September 30, 2006 due to the one-time cost of a
transition agreement for an employee and director. The cost of the transition
agreement was $322,464, including non-cash costs of $81,235. The majority of the
cash costs will be paid out over an 18 month period. Excluding the cost of the
transition agreement, management salaries and consulting fees would have totaled
$372,604 for the quarter ended September 30, 2007, a decrease of 23% from the
prior years comparable quarter. This decrease is related to the closure of the
Denver engineering office during late 2006. Total non-cash compensation costs
included in the quarter ended September 30, 2007 were $271,462 versus $225,691
in the prior years comparable quarter.

General and administrative costs for
the quarter ended September 30, 2007 was $314,743 compared to $240,176 for the
quarter ended September 30, 2006. Investor relations costs increased by $40,000
and filing fees increased by $79,000, during the comparable periods. Legal and
audit fees for the period increased to $126,560 from $87,393 for the three
months ended September 30, 2006, and is mainly due to costs associated with
being a public company that reports in both Canada and the United States, and
registering stock issued under private placements. Travel and accommodation
expense during the quarter ended September 30, 2007 was $51,052, compared to
$65,762 expended on travel in the prior year's comparable quarter. The decrease
is due to cost savings from closing the Denver office in the prior year and
fewer property site visits. Interest income earned on cash deposits was $55,411
for the quarter ended September 30, 2007, compared to $84,102 in the prior year
quarter due to lower average cash balances then the prior quarter. Interest
expense was $58,553 during the quarter ended September 30, 2007 due to the issue
of a convertible promissory note as partial payment for the purchase of the
membership interest of Nevada Eagle Resources LLC in August 2007.

Six months ended September 30, 2007 compared to Six months
ended September 30, 2006

For the six month period ended
September 30, 2007 we incurred a net loss of $4,727,088 or $0.09 per share
compared to a net loss of $3,871,214 or $0.10 per share incurred during the same
period in the prior year, as spending increased on our exploration activities,
along the one-time cost of the transition agreement and higher corporate
administration costs.

Exploration expenses during the six
month period ended September 30, 2007 were $2,753,398 or 57% of our total
expenses compared to $2,321,218 or 57% of total expenses in the prior year.
During the current year we have drilled a total of 26 holes at the Borealis
property, representing 30,970 feet (9.440 meters) compared to 26 holes
representing 23,395 feet (7,130 meters). Although the number of holes completed
is the same for the two years, there was an increase of 32% for total number of
feet drilled.

Management salaries and consulting
fees in the six months ended September 30, 2007 were $1,133,431 compared to
$890,602 for the same period in the prior year. The increase is due to the
recognition of $322,464 in one-time costs for the transition agreement covering
a single employee and director including non-cash costs of $81,235. The majority
of the cash costs will be paid out over an 18 month period. Excluding the cost
of the transition agreement, management salaries and consulting fees would have
totaled $810,967 for the six months ended September 30, 2007, a decrease of 9%
from the prior years comparable period. This decrease is to the closure of the
Denver engineering office during late 2006. Total non-cash compensation costs
included in the six months ended September 30, 2007 were $484,494 versus
$250,064 in the prior years comparable period.

Legal and audit fees for the six
month period increased to $197,857 from $164,759 incurred in the prior years
comparable period. The higher costs reported in the six months ended September
30, 2007 were associated with increases that occurred during the quarter ended
September 30, 2007 and are identified above. Travel and accommodation during the
six months ended September 30, 2007 was $103,704, compared to $185,439 reported
in prior year six month period ended September 30, 2006. The decrease was due to
a reduction is site visits and the closure of the Denver engineering office in
late 2006. General and administrative expenses were $557,605, versus $481,218 in
the prior years comparable period. The increase is due to higher spending on
investor relations and filing fees. Interest income earned on cash deposits was
$129,550 for the six months ended September 30, 2007, compared to $176,529 for
the six months ended September 30, 2006, due to lower average cash balances
during the six month period. Interest expense totaled $58,553 and arose from the
issuance of a convertible promissory note related to the purchase of Nevada
Eagle Resources LLC on August 21, 2007. $28,367 of the interest expense is
non-cash.



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Liquidity and Capital Resources

Our principal source of liquidity is cash that is
raised by way of sale of common stock from treasury and other equity securities.

At September 30, 2007, we had working
capital of $2,798,040. Current assets consisted of $3,927,854 in cash, $57,556
in accounts receivable and $75,057 in prepaid expenses. We had $1,262,427 in
current liabilities at September 30, 2007, consisting of $1,223,812 in accounts
payable and accrued liabilities and $38,615 related to the current portion of
capital leases. The increase in accounts payable and accrued liabilities
compared to the balance at March 31, 2007 is related to increased exploration
costs and the recognition of the transition agreement that will be paid over 18
months.

During the quarter ended September
30, 2007, we used cash in operating activities of $1,569,584, which included our
net loss during the quarter of $2,500,535, offset by depreciation of $16,390,
non-cash compensation of $271,462 and changes in non-cash working capital of
$29,696 decrease for accounts receivable, $416,128 increase for accounts payable
and $162,356 decrease for pre-paid expenses. We used cash in investing
activities of $3,022,314, including $3,048,176 for the purchase of Nevada Eagle
LLC, $45,000 for reclamation deposits, $16,391 for equipment purchases and a
decrease of $103,813 in deferred acquisition costs. Financing activities
provided cash of $3,536,866, which included $3,879,197 from the issuance of
shares in connection with a private placement, offset by capital lease principal
payments of $5,917. Cash decreased during the period by $1,050,032 to $3,927,854
as at September 30, 2007.

Under the terms of the acquisition
agreement for Nevada Eagle Resources LLC a cash payment of $2,500,000 was made
on August 21, 2007. Refer to the section Contractual Obligations under this
document for a full description of the acquisition and commitment.

On August 3, 2007, we completed a
private placement of 5,000,000 units at Cdn$0.80 for net proceeds of
approximately Cdn$3.82 million. Each unit consisted of one common share and one
series G warrant. Each series G warrant entitles the holder to purchase a common
share at a price of Cdn$1.00 per share in year one and Cdn$1.25 per share in
year two until expiry. Compensation warrants (series H) of 265,050 were issued
to agents and are exercisable until May 2, 2008 at a price of Cdn$0.83 per
share. We have a right to force warrant holders to exercise warrants, if the
price of our common stock remains equal to or greater than, Cdn$1.85 per common
share, for a period of twenty consecutive days. With the receipt of these funds
we believe we have sufficient working capital to fund our drilling program,
costs related to lease and claim maintenance fees and general and administrative
expenses for the next 12 months.

Updated share capital
as of September 30, 2007:

|Basic Common Stock Issued and Outstanding              | 57,142,645 | 
|------------------------------------------------------ | ---------- | 
|Warrants, Options and other Convertible
    Securities | 16,696,108 | 
|Fully Diluted Common Stock                             | 73,838,753 | 

Summary of any product research and development that the company will perform
for the term of the plan.

We do not anticipate performing any product research and development under
our plan of operation.

Expected purchase or sale of plant and significant equipment.



---



We do not anticipate any significant equipment purchases or
sales.

Significant changes in number of employees.

We currently have eight employees. We do not expect a
significant change in this number.

Off-Balance Sheet Arrangements

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

Contractual Obligations

We make advance royalty payments of $9,094 per month to
certain leaseholders while exploration is proceeding on the Borealis Property.
In addition, to maintain its existing claims, we make payments totaling
approximately $130,000 annually. These payments are contingent upon us
maintaining an interest in the property. We also make annual claim payments on
certain of the properties acquired under the Nevada Eagle Resources acquisition.
These costs totaled approximately $50,000 in 2007.

As of September 30, 2007, we had the
following non-cancelable contractual obligations:

|                               | Payments Due by Period(3)
|------------------------------ | -------------------------
|                               |                          
|                               |                          
|                               | Total                    
|                               |                          
|Operating Lease Obligation (1) | $37,268                  
|Capital Lease obligations (2)  | 38,615                   
|Debenture                      |                          
|Total                          | $75,883                  

(1)

Obligation for the rental of
office space in Vancouver BC with an initial 3 year term, terminating August
2008 and payments of approximately $3,388 per month, based on the September 30,
2007 exchange rate of Cdn$0.9948 equals US$1.

(2)

The capitalized leases are for the
purchase of two trucks.

(3)

The table does not include
employment contracts with certain executive management which are described in
our 10K-SB filed June 22, 2007 under the section heading "Executive
Compensation".

Under the terms of the Purchase Agreement we closed
with Gerald W. Baughman and Fabiola Baughman, as sellers, and Nevada Eagle, we
acquired Nevada Eagle from the Baughmans for the following consideration, paid
on August 21, 2007:

(a)

$2,500,000 in cash;

(b)

four million five hundred thousand
(4,500,000) shares of our common stock; and

(c)

a 5% convertible note in the
principal amount of $5,000,000.



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The Convertible Note, due March 30,
2010, bears interest at the annual rate of 5% and is convertible at the option
of the holder into common shares at an initial conversion price of $1.00 per
common share during first the twelve month period following the Closing Date,
$1.25 per common share during the second twelve month period following the
Closing Date, $1.50 per common share thereafter and $1.75 per common share if
converted on March 10, 2007. The interest payments are due each January 1 and
June 1, beginning on January 1, 2008. In addition to the purchase consideration,
the Sellers will be entitled to all revenues of Nevada Eagle (payable in cash,
stock, or other consideration) calculated to be received and received on the
assets and properties from January 1, 2007 through midnight on December 31,
2007.

In addition, granted the Sellers
registration rights under which we agreed to file (within the later of (i) 90
days of the Closing Date or (ii) any date in which we are required to file a
registration statement for a third-party in connection with a financing or
acquisition, but no later than 120 days of the Closing Date) a resale
registration statement to register the common shares issuable at Closing and
issuable upon exercise of the Convertible Note under the Securities Act of 1933,
as amended. We also entered into an Employment Agreement with Mr. Baughman for a
term of one year, renewable by the parties, to serve as our Vice President of
Corporate Development.

Certain information contained in this
"Management Discussion and Analysis" constitutes forward-looking information and
actual results could differ from estimates, expectations or beliefs contained in
such statements.

Item 3. Controls and Procedures

We maintain disclosure controls and
procedures designed to ensure that information required to be disclosed in
reports filed under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the specified time periods.
As of the end of the period covered by this report, our principal executive
officer and principal financial officer evaluated the effectiveness of our
disclosure controls and procedures. Based on the evaluation, which disclosed no
significant deficiencies or material weaknesses, our principal executive officer
and principal financial officer concluded that our disclosure controls and
procedures are effective and that our disclosure controls and procedures were
adequately designed and 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 applicable rules and forms. In addition, our principal executive officer and
principal financial officer have determined that the disclosure controls and
procedures are effective to ensure that information required to be disclosed in
the reports that are filed under the Exchange Act are accumulated and
communicated to management, including our principal executive officer and
principal financial officer, to allow timely decisions regarding required
disclosure.

There were no changes in our internal
control over financial reporting (as defined in Rule 13(a)-15(f) or 15(d)-15(f))
that occurred during the companys most recent fiscal quarter and the period
covered by this quarterly report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

PART IIOTHER INFORMATION

Item 1.

Legal Proceedings.

Except as provided below, neither we
nor any of our property, including the Borealis Property, are currently subject
to any material legal proceedings or other regulatory proceedings and to our
knowledge no such proceedings are contemplated. On September 16, 2005, our
subsidiary, Borealis Mining Company, was named as a co-defendant in an ongoing
civil action pending in the United States District Court for the District of
Nevada, entitled United States v. Walker River Irrigation District(Court
Doc. No. In Equity C-125, Subfile C-125-B). The action seeks to determine the
existence and extent of water rights held by the federal government in the
Walker River drainage area for use on federally reserved lands such as Indian
reservations, National Forests, military reservations, and the like. The suit
does not dispute nor seek to invalidate any existing water rights (including
ours); rather, it seeks to determine the extent and priority of the federal
governments water rights. On May 27, 2003, the Court stayed all proceedings to
allow the United States, the State of Nevada, the State of California, the
Walker River Paiute Tribe, the Walker River Irrigation District, Mono County,
California, Lyon County, Nevada, Mineral County, Nevada and the Walker Lake
Working Group to attempt to mediate a settlement. Borealis Mining Company was
named as one of several hundred co-defendants in this action because it owns
water rights within a portion of the Walker River drainage area in Nevada, which
were granted under a permit on September 16, 2005. We, like most private water
right owners, do not intend to participate in the merits of the lawsuit. We do
not believe that this civil action, which will determine the extent and priority
of federally reserved water rights in the area, will have any effect on our
planned business operations as we currently have permits to access water from
two sites for our Borealis Property, one of which is not subject to this action
and either of which, individually, would provide a sufficient water supply under
our approved plan of operation.



---



Item 1A.

Risks Factors.

See Exhibit 99.1.

Item 2.

Unregistered Sales of Equity
Securities and Use of Proceeds.

During the quarter ended September 30, 2007, we have
offered and sold the following securities in unregistered transactions pursuant
to exemptions under the Securities Act of 1933, as amended.

Securities Issued in Acquisition of Nevada Eagle

On August 21, 2007, we closed the acquisition of
Nevada Eagle pursuant to a membership interest purchase agreement dated July 4,
2007, by and between Gryphon Gold, as buyer, Gerald W. Baughman and Fabiola
Baughman, as sellers ("Sellers"), and Nevada Eagle. Under the Purchase
Agreement, we acquired all of the outstanding limited liability company
interests of Nevada Eagle from the Sellers. We issued the following unregistered
securities as part of the purchase price:

(a)

4,500,000 shares of common stock
of the Company (the "Common Shares") valued at $3,449,418; and

(b)

a 5% convertible note in the
principal amount of $5,000,000 (the "Convertible Note") with an issue date of
August 21, 2007 and a fair value of $3,390,640.

The Convertible Note, due March 30, 2010, bears
interest at an annual rate of 5% and is convertible at the option of the holder
into common shares of the Registrant at an initial conversion price of $1.00 per
share during first the twelve-month period following the Closing Date, $1.25 per
share during the second twelve-month period following the Closing Date, $1.50
per share thereafter, and $1.75 per share if converted on March 30, 2010. The
interest payments are due on a semi-annual basis beginning on January 1, 2008.
Each of the Sellers is an accredited investor. We issued the Common Shares and
the Convertible Note in a private transaction exempt from the registration
requirements under Section 4(2) of the Securities Act of 1933, as amended. We
granted the Sellers registration rights under which we agreed to file, within
the later of (i) 90 days of the Closing Date or (ii) any date in which we are
required to file a registration statement for a third-party in connection with a
financing or acquisition, but no later than 120 days of the Closing Date, a
resale registration statement under the Securities Act to register the Common
Shares issuable at Closing and the common shares of the Company issuable upon
exercise of the Convertible Note

Securities Issued in Private Placement

On August 3, 2007, we completed a private placement
of 5,000,000 units at Cdn$0.80 for gross proceeds of approximately
Cdn$4,000,000. Each unit consisted of one common share and one series G warrant.
Each series G warrant entitles the holder to purchase a common share at a price
of Cdn$1.00 per share during the first 12 months after closing and Cdn$1.25 per
share during the second 12 months after closing and until expiry. We paid
qualified registered dealers a 7% cash commission in the amount of Cdn$152,040
and issued compensation options to acquire 265,050 common shares (at a price of
Cdn$0.83 per share for a period of 9 months from closing) in respect of the
2,715,000 million units placed by them. We have a right to force warrant holders
to exercise warrants, if the price of our common stock remains equal to or
greater than, Cdn$1.85 per common share, for a period of twenty consecutive
days. The shares, warrants and underlying shares were not qualified by
prospectus in Canada. The shares, warrants and underlying shares of the private
placement were not registered under the Securities Act or the laws of any state,
and are subject to resale restrictions and may not be offered or sold in the
United States absent registration or an applicable exemption from the
registration requirements. The shares, warrants and underlying securities were
placed in the United States pursuant to exemptions from registration
requirements of the Securities Act provided by Section 4(2) and/or 506 of
Regulation D of the Securities Act and outside the United States in off-shore
transactions pursuant to Rule 903 of Regulation S of the Securities Act, such
exemptions being available based on information obtained from the investors to
the private placement. We granted registration rights to the investors in this
private placement and will use commercially reasonable efforts to prepare and
file with the SEC, within 120 days of closing, a registration statement under
the Securities Act and to cause such statement to be declared effective.



---



Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Submission of Matters to a Vote of
Security Holders.

Results of Annual General Meeting of Shareholders

On September 06, 2007, Gryphon Gold Corporation held its
annual general meeting of shareholders at the Vancouver Club, 915 West Hastings
Street, Vancouver, BC, at 1:30PM. Shareholders representing 22,391,617 shares or
47.12% of the shares authorized to vote (47,521,395) were present in person or
by proxy, representing a quorum for the purposes of the annual meeting. The
shareholders approved the following:

|Proposal #1  Election of Directors                                                                                                                                              | Voted For  | Withheld 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------- | ---------
|The election of the Nominees to the Companys Board to serve
    until the Companys 2007 Annual Meeting of Shareholders or until successors
    are duly elected and qualified:
|                                                                                                                                                                                 |           
|                                                                                                                                                                                 |           
|Albert J. Matter                                                                                                                                                                 | 19,929,681 | 1,810,686
|Richard W. Hughes                                                                                                                                                                | 19,586,581 | 2,153,786
|Rohan Hazelton                                                                                                                                                                   | 21,705,386 | 34,981   
|Donald W. Gentry                                                                                                                                                                 | 21,705,386 | 34,981   
|Anthony (Tony) D.J. Ker                                                                                                                                                          | 19,929,681 | 1,810,686

|Proposal #2                                                                                                           | For        | Against   | Abstain
|--------------------------------------------------------------------------------------------------------------------- | ---------- | --------- | -------
|To ratify an increase in the number of option shares
    available under the Companys 2006 Omnibus Incentive Plan    | 17,438,100 | 2,401,805 | 52,000 
|                                                                                                                      |            |          
|Proposal #3                                                                                                           | For        | Against   | Abstain
|To ratify the Companys 2007 audited financial statements                                                             | 21,724,902 | 0         | 15,465 
|Proposal #4                                                                                                           | For        | Against   | Abstain
|To ratify the appointment of the Companys Independent
    Registered Public Accounting Firm for the 2008 fiscal year | 21,740,367 | 0         | 0      
|                                                                                                                      |            |          

Proxies were solicited under the proxy statement filed with the Securities
and Exchange Commission on August 10, 2007. Each nominee for director was
elected, and each proposal was approved by the Shareholders.

Item 5.

Other Information.

None.



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Item 6.

Exhibits

|Exhibit  |  |                                                                                                                                                                                                                                                                        
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number   |  | Description                                                                                                                                                                                                                                                            
|         |  |                                                                                                                                                                                                                                                                        
|3.1(1)   |  | Articles of Incorporation of Gryphon Gold
    Corporation, filed April 24, 2003                                                                                                                                                                                        
|3.2(1)   |  | Certificate of Amendment to Articles of
    Incorporation of Gryphon Gold Corporation, filed August 9, 2005                                                                                                                                                            
|3.3(1)   |  | Bylaws of Gryphon Gold Corporation                                                                                                                                                                                                                                     
|3.4(1)   |  | Articles of Incorporation of Borealis Mining
    Company, filed June 5, 2003                                                                                                                                                                                           
|3.5(1)   |  | Bylaws of Borealis Mining Company                                                                                                                                                                                                                                      
|4.1(4)   |  | Specimen Common Stock certificate                                                                                                                                                                                                                                      
|4.2(3)   |  | Form of Warrant Indenture                                                                                                                                                                                                                                              
|4.3(4)   |  | Form of Underwriters Compensation Options                                                                                                                                                                                                                             
|10.1(1)  |  | Investor Rights Agreement by and among
    Gryphon Gold Corporation and the Stockholders Party Hereto, dated as of May
    1, 2003, as amended                                                                                                                         
|10.2(1)  |  | Assignment of Borealis Mining Lease, dated
    January 10, 2005, between Golden Phoenix Mineral Company and Borealis Mining
    Company                                                                                                                                
|10.3(1)  |  | Agreement and Consent to Assignment of
    Borealis Mining Lease, entered into as of January 26, 2005, between Richard
    J. Cavell, Hardrock Mining Company, John W. Whitney, Golden Phoenix
    Minerals, Inc., Borealis Mining Company and Gryphon Gold Corporation
|10.4(1)  |  | Escrow Agreement, dated January 10, 2005,
    between Borealis Mining Company, Gryphon Gold Company and Lawyers Title
    Agency of Arizona (Regarding Purchase Agreement dated January 10, 2005)                                                                      
|10.5(1)  |  | Purchase Agreement dated January 10, 2005, as
    amended, Seller: Golden Phoenix Minerals, Inc., Buyer: Borealis Mining
    Company and Guarantor: Gryphon Gold Corporation                                                                                           
|10.6(1)  |  | Agreement between Golden Phoenix Minerals,
    Inc. and Borealis Mining Company (Borealis Property, Mineral County,
    Nevada), dated July 21, 2003                                                                                                                   
|10.7(1)  |  | Agency Agreement/ Investment Advisory
    Retainer, between Gryphon Gold Corporation and Desjardins Securities Inc.,
    signed March 9, 2005                                                                                                                          
|10.8(1)  |  | Service Agreement between Gryphon Gold
    Corporation and The Kottmeier Resolution Group Ltd., dated May 17, 2005.
    Replaced by Contact Financial dated December 22, 2005.                                                                                         
|10.9(1)  |  | Office Building Lease dated June 22, 2005,
    related to Lakewood, Colorado office                                                                                                                                                                                    
|10.10(1) |  | Executive Compensation Agreement, dated
    October 1, 2003, between Gryphon Gold Corporation and Allen Gordon dba
    Evergreen Mineral Ventures LLC                                                                                                                  
|10.11(1) |  | Assignment Assumption Agreement between
    Gryphon Gold Corporation and Allen Gordon                                                                                                                                                                                  
|10.12(1) |  | Executive Compensation Agreement, dated
    October 1, 2003, between Gryphon Gold Corporation and Albert Matter                                                                                                                                                        

30

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|Exhibit  |  |                                                                                                                                           
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|Number   |  | Description                                                                                                                               
|         |  |                                                                                                                                           
|10.13(1) |  | Executive Compensation Agreement, dated
    February 1, 2004, between Gryphon Gold Corporation and Tony Ker                               
|10.14(1) |  | Executive Compensation Agreement, dated
    November 1, 2004, between Gryphon Gold Corporation and Thomas Sitar                           
|10.15(1) |  | Executive Compensation Agreement, dated June
    1, 2005 between Gryphon Gold Corporation and Donald Ranta                                
|10.16(1) |  | Gryphon Gold Corporation 2004 Stock Incentive
    Plan                                                                                    
|10.17(4) |  | Form of Escrow Agreement                                                                                                                  
|10.18(2) |  | Form of Lock Up Agreement  Shareholders                                                                                                  
|10.19(2) |  | Form of Lock Up Agreement for Executive
    Officers and Directors                                                                        
|10.20(2) |  | Warrant Agreement dated August 10, 2005,
    between Gryphon Gold Corporation and Computershare Trust Company, Inc.
    (Golden, Colorado)
|10.21(5) |  | Membership Purchase Agreement dated July 4,
    2007 related to Nevada Eagle Resources LLC                                                
|10.22    |  | Transition Agreement                                                                                                                      
|14.1(2)  |  | Code of Business Conduct and Ethics                                                                                                       
|31.1     |  | Certification Required Pursuant to Section
    302 of the Sarbanes-Oxley Act of 2002                                                      
|31.2     |  | Certification Required Pursuant to Section
    302 of the Sarbanes-Oxley Act of 2002                                                      
|32.1     |  | Certification Required Pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002                                                      
|32.2     |  | Certification Required Pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002                                                      
|99.1(6)  |  | Risk Factors and Uncertainties                                                                                                            
|         |  |                                                                                                                                           
|(1)      |  | Previously filed on Form SB-2 on August 17,
    2005.                                                                                     
|(2)      |  | Previously filed on Form SB-2 on October 6,
    2005.                                                                                     
|(3)      |  | Previously filed on Form SB-2 on October 27,
    2005.                                                                                    
|(4)      |  | Previously filed on Form SB-2 on November 9,
    2005.                                                                                    
|(5)      |  | Previously filed on Form 8-K on July 6, 2007.                                                                                             
|(6)      |  | Previously filed on Form 10QSB on August 15,
    2007.                                                                                    

31

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SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

GRYPHON GOLD CORPORATIONBy:
      /s/ Anthony D.J. KerAnthony D.J. KerChief Executive Officer(On behalf of the registrant and asprincipal executive officer)Date: November 14, 2007By:
      /s/ Michael K. LonginottiMichael K. LonginottiChief Financial Officer(On behalf of the registrant and asprincipal financial and accounting officer)Date: November 14, 2007


32

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