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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

(Mark One)

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

For the fiscal year ended January 31, 2011

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

For the transition period from [ ] to [ ]

Commission file number 000-52010

TAO MINERALS LTD.(Exact
name of registrant as specified in its charter)

|Nevada                                                               | 20-1682702                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

|Officina 301Edeficio El Crusero, Carrera 48, 12 Sur 
      148 Medellin |           
|------------------------------------------------------------------------ | ----------
|Colombia                                                                 | N/A       
|(Address of principal executive offices)                                 | (Zip Code)

Registrant's telephone number, including area code:
0115-314-2330

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

|Title of Each Class | Name of Each Exchange On Which Registered
|------------------- | -----------------------------------------
|N/A                 | N/A                                      

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

Common Stock, $0.001 par value(Title of
class)

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

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

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

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-K (§229.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).Yes[ ] No[ ]

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

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

|Large accelerated filer [ ] | Accelerated filer [ ]          
|--------------------------- | -------------------------------
|Non-accelerated filer [ ]   | Smaller reporting company [ x ]

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

The aggregate market value of Common Stock held by
non-affiliates of the Registrant on July 31, 2010 was $75,786,702 based on a
$0.255 average bid and asked price of such common equity, as of the last
business day of the registrants most recently completed second fiscal quarter.

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

342,605,877  as of June 22, 2011

DOCUMENTS INCORPORATED BY REFERENCE

None.

2

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TABLE OF CONTENTS

|Item
      1.  | Business                                                                                                                 | 4 
|-------------- | ------------------------------------------------------------------------------------------------------------------------ | --
|Item
      1A. | Risk
      Factors                                                                                                       | 7 
|Item
      1B. | Unresolved
      Staff Comments                                                                                          | 11
|Item
      2.  | Properties                                                                                                               | 11
|Item
      3.  | Legal
      Proceedings                                                                                                  | 12
|Item
      4.  | [Removed
      and Reserved]                                                                                             | 18
|Item
      5.  | Market
      for Registrants Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities | 18
|Item
      6.  | Selected
      Financial Data                                                                                            | 19
|Item
      7.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations                              | 19
|Item
      7A. | Quantitative
      and Qualitative Disclosures About Market Risk                                                         | 26
|Item
      8.  | Financial
      Statements and Supplementary Data                                                                        | 26
|Item
      9.  | Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure                         | 49
|Item
      9A. | Controls
      and Procedures                                                                                            | 49
|Item
      9B. | Other
      Information                                                                                                  | 50
|Item
      10. | Directors,
      Executive Officers and Corporate Governance                                                             | 50
|Item
      11. | Executive
      Compensation                                                                                             | 54
|Item
      12. | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.              | 56
|Item
      13. | Certain
      Relationships and Related Transactions, and Director Independence                                          | 57
|Item
      14. | Principal
      Accounting Fees and Services                                                                             | 58
|Item
      15. | Exhibits,
      Financial Statement Schedules                                                                            | 58

3

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PART I

|Item 1. | Business
|------- | --------

This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States dollars and all references to common
shares refer to the common shares in our capital stock.

As used in this annual report, the terms we", "us", "our" and
"our company" mean Tao Minerals Ltd. and our majority owned subsidiary, Minera
Tao S.A., unless otherwise indicated.

Corporate Overview

The address of our principal executive office is Officina 301
Edeficio El Crusero, Carrera 48, 12 Sur  148 Medellin Colombia. Our telephone
numbers is 877-331-8777.

Corporate History

We were incorporated in the State of Nevada on September 23,
2004.

On July 16, 2008, through our majority owned subsidiary Minera
Tao S.A., we entered into an amended option agreement with Agrominas De
Colombia, LTDA to acquire 80% of a mining interest called El Comillo in
Antioquia, Colombia. The agreement amended the terms of the original option
agreement entered into by Minera Tao on October 2, 2007, and subsequently
extended on April 18, 2008.

Under the terms of the amended option agreement, the purchase
price of the option is $1.42 billion Colombian pesos or approximately US$825,000
dollars. We paid $80,000,000 pesos (approximately US$50,000) upon closing of the
option agreement and are obligated to pay $40,000,000 pesos on the 15th of every
month until $320,000,000 pesos has been paid. Thereafter 20% of production will
be paid until $1.1 billion pesos have been received by Agrominas De Colombia.
After the acquisition price is paid Agrominas De Colombia will continue to
receive 20% of the mining production. Upon receipt of $1.42 billion pesos by
Agrominas De Colombia the option will be exercised and 80% ownership in the
property will be transferred to Minera Tao. To date, we have paid to Agrominas
De Colombia $240,000,000 pesos (or US$150,000).

Effective September 21, 2009, we effected a 200 for 1 share
consolidation of our authorized and issued and outstanding common stock. As a
result, our authorized capital decreased from 552,000,000 shares of common stock
with a par value of $0.001 to 2,760,000 shares of common stock with a par value
of $0.001 and our issued and outstanding shares decreased from 547,370,946
shares of common stock to 2,736,854 shares of common stock.

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The consolidation became effective with the Over-the-Counter
Bulletin Board at the opening for trading on September 23, 2009 under the new
stock symbol TAON. Our CUSIP number is 87600P303.

Effective July 1, 2010, we entered into a consulting services
agreement with Kerry Associates, Inc., wherein Kerry Associates has the agreed
to provide certain consulting services to our company for a period of 30 days.
Under the terms of the agreement we paid Kerry Associates, Inc. $25,000 and
issued to Kerry Associates, Inc. 2,000,000 restricted shares of our stock

We are a start-up, exploration stage company and have not yet
generated or realized any revenues from our business operations. We must raise
cash in order to implement our plan and stay in business.

We are in the mineral resource business. This business
generally consists of three stages: exploration, development and production.
Mineral resource companies that are in the exploration stage have not yet found
mineral resources in commercially exploitable quantities, and are engaged in
exploring land in an effort to discover them. Mineral resource companies that
have located a mineral resource in commercially exploitable quantities and are
preparing to extract that resource are in the development stage, while those
engaged in the extraction of a known mineral resource are in the production
stage. Our company is in the exploration stage.

The address of our principal executive office is Officina 301
Edeficio El Crusero, Carrera 48, 12 Sur  148 Medellin Colombia. Our telephone
numbers is 877-331-8777.

Our common stock is quoted on the OTC Bulletin Board under the
symbol "TAON".

Mineral resource exploration can consist of several stages. The
earliest stage usually consists of the identification of a potential prospect
through either the discovery of a mineralized showing on that property or as the
result of a property being in proximity to another property on which exploitable
resources have been identified, whether or not they are or have in the past been
extracted.

After the identification of a property as a potential prospect,
the next stage would usually be the acquisition of a right to explore the area
for mineral resources. This can consist of the outright acquisition of the land
or the acquisition of specific, but limited, rights to the land (e.g., a
license, lease or concession). After acquisition, exploration would probably
begin with a surface examination by a prospector or professional geologist with
the aim of identifying areas of potential mineralization, followed by detailed
geological sampling and mapping of this showing with possible geophysical and
geochemical grid surveys to establish whether a known trend of mineralization
continues through un-exposed portions of the property (i.e., underground),
possibly trenching in these covered areas to allow sampling of the underlying
rock. Exploration also commonly includes systematic regularly spaced drilling in
order to determine the extent and grade of the mineralized system at depth and
over a given area, as well as gaining underground access by ramping or shafting
in order to obtain bulk samples that would allow one to determine the ability to
recover various commodities from the rock. Exploration might culminate in a
feasibility study to ascertain if the mining of the minerals would be economic.
A feasibility study is a study that reaches a conclusion with respect to the
economics of bringing a mineral resource to the production stage.

Our mineral resource properties consist of exploration claims
located in Columbia (Risaldo La Golondrina D14-082 mineral property located in
Narino, Colombia) ( El Colmillo mineral property located in Antioquia,
Colombia). There is no assurance that a commercially viable mineral deposit
exists on any of our properties, and further exploration is required before we
can evaluate whether any exist and, if so, whether it would be economically and
legally feasible to develop or exploit those resources. Even if we complete our
current exploration program and we are successful in identifying a mineral
deposit, we would be required to spend substantial funds on further drilling and
engineering studies before we could know whether that mineral deposit will
constitute a reserve (a reserve is a commercially viable mineral deposit).
Please refer to the section entitled Risk Factors, of this annual report on
Form 10-K, for additional information about the risks of mineral
exploration.

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Our Current Business

We are an exploration stage company that has not yet generated
or realized any revenues from our business operations. We have concentrated our
recent exploration efforts on the La Golondrina Property in Columbia. In July,
2008 we acquired a mineral right in the El Colmillo property in Colombia. In
October, 2009, our company decided to employ our efforts in exploration of the
El Colmillo property for the next 12 months and will hold exploration of the
Golondrina property until a determination of viability at El Colmillo can be
determined. In December 2008, company personnel at the El Colmillo property were
met by Colombian rebels who demanded a war tax to permit the development
activities to continue. Our company immediately ceased any efforts at the mine
and reported the situation to the Colombian government and to the issuer of the
option. Our company invoked the force majeure section of the contract and we are
waiting to see what developments will take place.

Research and Development

We do not currently have a formal research and development
effort. We did not spend any funds on research and development during the last
two fiscal years.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment over the
twelve months ending January 31, 2012.

Competition

We are a mineral resource exploration company. We compete with
other mineral resource exploration companies for financing and for the
acquisition of new mineral properties. Many of the mineral resource exploration
companies with whom we compete have greater financial and technical resources
than those available to us. Accordingly, these competitors may be able to spend
greater amounts on acquisitions of mineral properties of merit, on exploration
of their mineral properties and on development of their mineral properties. In
addition, they may be able to afford more geological expertise in the targeting
and exploration of mineral properties. This competition could result in
competitors having mineral properties of greater quality and interest to
prospective investors who may finance additional exploration. This competition
could adversely impact on our ability to finance further exploration and to
achieve the financing necessary for us to develop our mineral properties.

Compliance with Government Regulation

We are committed to complying with and are, to our knowledge,
in compliance with, all governmental and environmental regulations applicable to
our company and our properties. Permits from a variety of regulatory authorities
are required for many aspects of mine operation and reclamation. We cannot
predict the extent to which these requirements will affect our company or our
properties if we identify the existence of minerals in commercially exploitable
quantities. In addition, future legislation and regulation could cause
additional expense, capital expenditure, restrictions and delays in the
exploration of our properties.

Subsidiaries

We have a majority owned subsidiary Minera Tao S.A.

Employees

As of June 22, 2010, we had no employees other than our
directors and officers.

On September 1, 2008, we entered into an executive employment
agreement with James Sikora, our president and chief executive officer. The
agreement shall be for a period of thirty-six (36) months.

6

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We also engage contractors from time to time to supply work on
specific corporate business and exploration programs.

Consultants are retained on the basis of ability and
experience. Except as set forth above, there is no preliminary agreement or
understanding existing or under contemplation by us (or any person acting on our
behalf) concerning any aspect of our operations pursuant to which any person
would be hired, compensated or paid a finders fee.

Intellectual Property

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

REPORTS TO SECURITY HOLDERS

We are required to file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange
Commission and our filings are available to the public over the internet at the
Securities and Exchange Commissions website at http://www.sec.gov. The public
may read and copy any materials filed by us with the Securities and Exchange
Commission at the Securities and Exchange Commissions Public Reference Room at
100 F Street N.E. Washington D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the Securities and
Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site
that contains reports, proxy and formation statements, and other information
regarding issuers that file electronically with the SEC, at
http://www.sec.gov.

|Item 1A. | Risk Factors
|-------- | ------------

Risks Associated With Our Business

All of our properties are in the exploration stage. There is
no assurance that we can establish the existence of any mineral resource on any
of our properties in commercially exploitable quantities. Until we can do so, we
cannot earn any revenues from operations and if we do not do so we will lose all
of the funds that we expend on exploration. If we do not discover any mineral
resource in a commercially exploitable quantity, our business could fail.

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

A mineral reserve is defined by the Securities and Exchange
Commission in its Industry Guide 7 (which can be viewed over the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as
that part of a mineral deposit which could be economically and legally extracted
or produced at the time of the reserve determination. The probability of an
individual prospect ever having a "reserve" that meets the requirements of the
Securities and Exchange Commission's Industry Guide 7 is extremely remote; in
all probability our mineral resource property does not contain any 'reserve' and
any funds that we spend on exploration will probably be lost.

Even if we do eventually discover a mineral reserve on one or
more of our properties, there can be no assurance that we will be able to
develop our properties into producing mines and extract those resources. Both
mineral exploration and development involve a high degree of risk and few
properties which are explored are ultimately developed into producing mines.

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

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We have a limited operating history and as a result there is
no assurance we can operate on a profitable basis.

We have a limited operating history and must be considered in
the exploration stage. Our company's operations will be subject to all the risks
inherent in the establishment of an exploration stage enterprise and the
uncertainties arising from the absence of a significant operating history.
Potential investors should be aware of the difficulties normally encountered by
mineral exploration companies and the high rate of failure of such enterprises.
The likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the
exploration of the mineral properties that we plan to undertake. These potential
problems include, but are not limited to, unanticipated problems relating to
exploration, and additional costs and expenses that may exceed current
estimates. The expenditures to be made by us in the exploration of the mineral
claims may not result in the discovery of mineral deposits. Problems such as
unusual or unexpected formations of rock or land and other conditions are
involved in mineral exploration and often result in unsuccessful exploration
efforts. If the results of our exploration do not reveal viable commercial
mineralization, we may decide to abandon our claims and acquire new claims for
new exploration or cease operations. The acquisition of additional claims will
be dependent upon us possessing capital resources at the time in order to
purchase such claims. If no funding is available, we may be forced to abandon
our operations. No assurance can be given that we may be able to operate on a
profitable basis.

If we do not obtain additional financing, our business will
fail and our investors could lose their investment.

We had cash in the amount of $18,295 and a working capital
deficit of $1,522,276 as at our year ended January 31, 2011. We currently do not
generate revenues from our operations. Our business plan calls for substantial
investment and cost in connection with the acquisition and exploration of our
mineral properties currently under lease and option. Any direct acquisition of
the claim under lease or option is subject to our ability to obtain the
financing necessary for us to fund and carry out exploration programs on the
properties. The requirements are substantial. We do not currently have any
arrangements for additional financing and we can provide no assurance to
investors that we will be able to find such financing if required. Obtaining
additional financing would be subject to a number of factors, including market
prices for minerals, investor acceptance of our properties, and investor
sentiment. These factors may make the timing, amount, terms or conditions of
additional financing unavailable to us. The most likely source of future funds
presently available to us is through the sale of equity capital and loans. Any
sale of share capital will result in dilution to existing shareholders.

Because there is no assurance that we will generate
revenues, we face a high risk of business failure.

We have not earned any revenues as of the date of this annual
report and have never been profitable. We do not have an interest in any revenue
generating properties. We were incorporated in September 2004 and to date have
been involved primarily in organizational activities and limited exploration
activities. Prior to our being able to generate revenues, we will incur
substantial operating and exploration expenditures without realizing any
revenues. We therefore expect to incur significant losses into the foreseeable
future. We have limited operating history upon which an evaluation of our future
success or failure can be made. Our net loss from inception to our year ended
January 31, 2011 was $14,432,305. We have incurred losses for the year ended
January 31, 2011 of $5,923,713. We recognize that if we are unable to generate
significant revenues from our activities, we will not be able to earn profits or
continue operations. Based upon current plans, we also expect to incur
significant operating losses in the future. We cannot guarantee that we will be
successful in raising capital to fund these operating losses or generate
revenues in the future. We can provide investors with no assurance that we will
generate any operating revenues or ever achieve profitable operations. If we are
unsuccessful in addressing these risks, our business will most likely fail and
our investors could lose their investment.

Because of the speculative nature of the exploration of
natural resource properties, there is substantial risk that this business will
fail.

There is no assurance that any of the claims we explore or
acquire will contain commercially exploitable reserves of minerals. Exploration
for natural resources is a speculative venture involving substantial risk.
Hazards such as unusual or unexpected geological formations and other conditions
often result in unsuccessful exploration efforts.

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We may also become subject to significant liability for
pollution, cave-ins or hazards, which we cannot insure or which we may elect not
to insure.

Our foremost project is located in Colombia where mineral
exploration activities may be affected in varying degrees by political and
government regulations which could have a negative impact on our ability to
continue our operations.

Certain projects in which we have interests are located in
Colombia. Mineral exploration activities in Colombia may be affected in varying
degrees by political instabilities and government regulations relating to the
mining industry. Any changes in regulations or shifts in political conditions
are beyond our control and may adversely affect our business. Operations may be
affected in varying degrees by government regulations with respect to
restrictions on production, price controls, export controls, income taxes,
expropriations of property, environmental legislation and mine safety. The
status of Colombia as a developing country may make it more difficult for us to
obtain any required financing for our projects. The effect of all these factors
cannot be accurately predicted. Notwithstanding the progress achieved in
restructuring Colombia political institutions and revitalizing its economy, the
present administration, or any successor government, may not be able to sustain
the progress achieved. While the Colombian economy has experienced growth in
recent years, such growth may not continue in the future at similar rates or at
all. If the economy of Colombia fails to continue its growth or suffers a
recession, we may not be able to continue our operations in that country. We do
not carry political risk insurance.

If we cannot compete successfully for financing and for
qualified managerial and technical employees, our exploration program may
suffer.

Our competition in the mining industry includes large
established mining companies with substantial capabilities and with greater
financial and technical resources than we have. As a result of this competition,
we may be unable to acquire additional financing on terms we consider
acceptable. We also compete with other mining companies in the recruitment and
retention of qualified managerial and technical employees. If we are unable to
successfully compete for financing or for qualified employees, our exploration
program may be slowed down or suspended.

If we are unable to hire and retain key personnel, we may
not be able to implement our business plan.

Our success is also largely dependent on our ability to hire
highly qualified personnel. This is particularly true in highly technical
businesses such as mineral exploration. These individuals are in high demand and
we may not be able to attract the personnel we need. In addition, we may not be
able to afford the high salaries and fees demanded by qualified personnel, or
may lose such employees after they are hired. Failure to hire key personnel when
needed, or on acceptable terms, would have a significant negative effect on our
business.

Inability of our officers and directors to devote sufficient
time to the operation of the business may limit our company's success.

Presently some of our officers and directors allocate only a
portion of their time to the operation of our business. If the business requires
more time for operations than anticipated or the business develops faster than
anticipated, the officers and directors may not be able to devote sufficient
time to the operation of the business to ensure that it continues as a going
concern. Even if this lack of sufficient time of our management is not fatal to
our existence, it may result in limited growth and success of the business.

Because of the inherent dangers involved in mineral
exploration, there is a risk that we may incur liability or damages as we
conduct our business.

The exploration of valuable minerals involves numerous hazards.
As a result, we may become subject to liability for such hazards, including
pollution, cave-ins and other hazards against which we cannot insure or against
which we may elect not to insure. The payment of such liabilities may have a
material adverse effect on our financial position.

9

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Our independent certified public accounting firm, in their
Notes to the audited financial statements for the year ended January 31, 2011
states that there is a substantial doubt that we will be able to continue as a
going concern.

Our independent certified public accounting firm state in their
Notes to the audited financial statements for the year ended January 31, 2011,
that we have experienced significant losses since inception. Failure to arrange
adequate financing on acceptable terms and to achieve profitability would have
an adverse effect on our financial position, results of operations, cash flows
and prospects, there is a substantial doubt that we will be able to continue as
a going concern.

We are subject to various government regulations and
environmental concerns.

We are subject to various government and environmental
regulations. Permits from a variety of regulatory authorities are required for
many aspects of exploration, mining operations and reclamation. We cannot
predict the extent to which future legislation and regulation could cause
additional expense, capital expenditures, restrictions, and delays in the
development of our U.S. or Colombian properties, including those with respect to
unpatented mining claims.

Our activities are not only subject to extensive federal, state
and local regulations controlling the exploration and mining of mineral
properties, but also the possible effects of such activities upon the
environment. Future legislation and regulations could cause additional expense,
capital expenditures, restrictions and delays in the development of our
properties, the extent of which cannot be predicted. Also, as discussed above,
permits from a variety of regulatory authorities are required for many aspects
of mine operation and reclamation. In the context of environmental permitting,
including the approval of reclamation plans, we must comply with known
standards, existing laws and regulations that may entail greater or lesser costs
and delays, depending on the nature of the activity to be permitted and how
stringently the regulations are implemented by the permitting authority. We are
not presently aware of any specific material environmental constraint affecting
our properties that would preclude the economic development or operation of any
specific property.

If we become more active on our properties, it is reasonable to
expect that compliance with environmental regulations will increase our costs.
Such compliance may include feasibility studies on the surface impact of the our
proposed operations; costs associated with minimizing surface impact, water
treatment and protection, reclamation activities, including rehabilitation of
various sites, on-going efforts at alleviating the mining impact on wildlife,
and permits or bonds as may be required to ensure our compliance with applicable
regulations. It is possible that the costs and delays associated with such
compliance could become so prohibitive that we may decide to not proceed with
exploration, development, or mining operations on any of our mineral properties.

Risks Associated with Our Common Stock

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

Our common stock is quoted on the OTC Bulletin Board service of
the Financial Industry Regulatory Authority. Trading in stock quoted on the OTC
Bulletin Board is often thin and characterized by wide fluctuations in trading
prices, due to many factors that may have little to do with our operations or
business prospects. This volatility could depress the market price of our common
stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin
Board is not a stock exchange, and trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on a
quotation system like NASDAQ or a stock exchange like Amex. Accordingly,
shareholders may have difficulty reselling any of their shares.

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

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an

10

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

In addition to the penny stock rules promulgated by the
Securities and Exchange Commission, the Financial Industry Regulatory Authority
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the Financial Industry Regulatory Authority believes that there
is a high probability that speculative low-priced securities will not be
suitable for at least some customers. The Financial Industry Regulatory
Authority  requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.

Other Risks

Because some of our officers and directors are located in
non-U.S. jurisdictions, you may have no effective recourse against the non U.S.
officers and directors for misconduct and may not be able to enforce judgment
and civil liabilities against our officers, directors, experts and agents.

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

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most
significant risks to our business, but we cannot predict whether, or to what
extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to our common stock.

|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

As a smaller reporting company, we are not required to
provide the information required by this Item.

11

---

|Item 2. | Properties
|------- | ----------

Executive Offices

Our principal offices are located at Officina 301 Edeficio El
Crusero, Carrera 48, 12 Sur  148 Medellin Colombia. Our telephone number at our
principal office is 011-574-311-0720. Our office is donated rent free by our
President. We believe that our office space and facilities are sufficient to
meet our present needs and do not anticipate any difficulty securing alternative
or additional space, as needed, on terms acceptable to us.

Mineral Properties

There is no assurance that a commercially viable mineral
deposit exists on any of our properties, including the La Golondrina or El
Colmillo Property, or that we will be able to identify any mineral resource on
any of these properties that can be developed profitably. Even if we do discover
commercially exploitable levels of mineral resources on any of our properties
there can be no assurance that we will be able to enter into commercial
production of our mineral properties.

Golondria Gold-Silver Project

Acquisition, Location and Access

On February 1, 2006 we executed a letter agreement with
Primecap Resources and Nueva California S.A., concerning the acquisition of an
interest in the Risaraldo La Golondrina D14-082 property located in Narino,
Colombia.

On March 5, 2006, we entered into an Assignment Agreement dated
effective February 28, 2006 (the Definitive Agreement), with Primecap
Resources Inc., of Las Vegas, Nevada, (Primecap), concerning the acquisition of
Primecaps option (the Option), to acquire a 100% interest in the Risaldo La
Golondrina D14-082 mineral property located in Narino, Colombia (the
Property). Primecap had been granted the Option by Nueva California S.A., of
Medellin, Colombia, pursuant to the terms and conditions of a Heads of Agreement
dated August 23, 2004 (the HOA).

The Definitive Agreement provides for the assignment of the
Option for the following consideration:

| | 1. | Payment of US$150,000, payable on or before March 15,
      2006 and upon execution of the Definitive Agreement; and                                                                                                                                                                                                                   
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                        
| | 2. | The issuance of 2,500,000 common shares in the capital
      stock of the company, subject to applicable trading restrictions, to Nueva
      California which will be issued either contemporaneous with the payment of
      US$150,000 or within 14 days of the execution of a Definitive Agreement,
      whichever is the earlier.
| |    |                                                                                                                                                                                                                                                                                                                                        
| | 3. | The issuance of 600,000 shares of common stock as
      follows:                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                        
| |    | 300,000 as of August 23, 2006 and 300,000 shares as of
      August 23, 2007.                                                                                                                                                                                                                                                          

In addition, we will assume Primecaps financial obligations
under the HOA.

On March 15, 2006, we entered into an amending agreement (the
Amending Agreement) which agreement amended certain terms of the Definitive
Agreement. The Amending Agreement provides for an extension to the payment terms
such that the $150,000 payment time of March 15, 2006 was extended to April 15,
2006. The payment was made on April 10, 2006. On April 21, 2006 we issued
2,500,000 common shares to Nueva California SA pursuant to the terms of the
Definitive Agreement.

12

---

On May 9, 2008 we entered into a second amending agreement
which agreement amended certain terms of the Definitive Agreement. The second
agreement modifies payments of $280,000 which would have to been made from
August 23, 2005 through August 23, 2009 to two payments of $100,000 each on or
before July 1, 2006 and on or before August 1, 2008. The first payment of
$100,000 has been made. As of May 9, 2008 the company has not issued the 600,000
shares of common stock and has not received any notice of default from non
issuance.

Items 1 through 6 of the HOA agreement are deleted. The total
amounts payable to Primecap remains as amended in the first amendment. The
second $100,000 payment is now due on or before August 1, 2008. As of January
31, 2009 the Company has not issued the 300,000 shares of common stock due
August 23, 2006 and the 300,000 shares of common stock due August 23, 2007. The
Company has accrued $51,000 as a liability for the issuance of 300,000 shares of
common stock on August 23, 2006 at $.17 the closing price of the stock as of
such date and $41,100 for the issuance liability of 300,000 shares of common
stock at August 23, 2007 at $$.137 the closing price of the stock at such date.
The Company has no further obligations under the HOA agreement other than those
stated here.

The property is located within a mixture of small-scale mining
and small-scale agricultural lands. Limited accommodations and supplies are
available in Sotomayor, while Pasto acts as the main supply centre. The property
is accessible from Sotomayor by a one-lane gravel road for the first four
kilometres and then by a 1 kilometre ATV trail. Access to Sotomayor is from
Pasto by a secondary gravel road, with travel time estimated to be 4 hrs.
Transportation to Sotomayor is available in Pasto. The gravel roads are suitable
for movement of heavy equipment.

ESTIMATED BUDGET, PHASE 1 PROGRAM

Chronological Schedule

WeeksItem
    Labour
    1
    2
    3
    4
    5
    6
    7
    8
    9
    101
    Historical data
    X2
    Environmental Review
    
    X
    
    X
    
    X3
    Regional Geological
      Mapping
    
    
    X4
    Stream Sediment
      Geochemistry
    
    
    
    X5
    Detailed Geological
      Mapping
    
    
    
    
    X
    X
    X6
    Underground Sampling
    
    
    
    
    
    X
    X7
    Soil Geochemistry
    
    
    
    X8
    Trench Sampling
    
    
    
    
    
    
    
    X9
    Rock Sampling
      (Prospecting)
    
    
    X10
    Sample
      Preparation/Analysis
    
    
    
    X
    
    
    X
    X
    X11
    Report
    
    
    
    
    
    
    
    
    
    X


Expense Schedule

ITEM
    
    #
    Cost/wk
    # Wks
    $US/day
    Total $US
    Comments1
    Senior Geologist
    1
    $1400
    6
    $200
    $84002
    Junior Geologist
    2
    $875
    6
    $125
    $105003
    Labourers
    6
    $140
    6
    $7
    $50404
    Stream sample Analysis
    50
    
    
    $20/sample
    $1000
    ICP+AuFA


13

---

5
    Soil sample analysis
    50
    
    
    $20/sample
    $1000
    ICP+AuFA6
    Underground sample
      analysis
    200
    
    
    $20/sample
    $4000
    ICP+AuFA7
    Trenching/backhoe
    1
    $1500
    1
    $45/hr
    $1500
    RetroCAT1008
    Food
    9
    $180
    6
    $20
    $97209
    Transportation
    1
    $400
    6
    
    $2400
    Campero 4X410
    Accommodation
    9
    $35
    6
    $5
    $189011
    Office Management-local
    1
    $1000
    3
    
    $100012
    Administration-Medellin
    1
    $1000
    12
    $4000/mo
    $6000TOTAL
    $52,450


The proposed program is exploratory in nature as there are no
proven reserves currently.



14

---

POINT
    NORTH
    EASTP.A.
    62.810
    949.7001
    662.003
    949.629.42
    662.003
    949.629.43
    661.003
    948.429.44
    662.003
    948.429.4


The above represents the longitude and latitude of the property
representing 120 hectares. We have obtained a 30 year concession from under
concession number 6927 from the department of Agrominas De Colombia LTDA. Our
property is located in the municipality of Los Andes Sotomayor. We currently are
in the process of exploration and do not have any production facilities.

History

Historically gold has been mined in the country since
pre-Columbian times. Exploration of the Sierra Nevada de Santa Marta area, along
the north coast of the country, was conducted by Alonso de Ojeda, one of the
companions of Columbus. His work revealed the large amounts of precious metals
held by the local Indians and led to the rapid Spanish colonization of the west
coast and interior of South America. Much of Colombia was thus conquered and a
number of towns established by 1539. Pasto was founded in 1537. From that time
the population has spread out along the major river valleys, searching for land
to cultivate and precious metals to mine, eventually reaching the valleys of
tributaries of the Rio Pacual, where the town of Sotomayor was established.
There are no government records of historical mining activity in the area of the
Golondrina property

The Golondrina property was acquired by Colombian mining
company Barro Blanco S.A Barro Blanco S.A. also acquired the Nueva Esparta
property which lies approximately 4 kilometres to the east. Several other
properties exist in the area of these two properties. Latingold optioned several
properties from Barro Blanco S.A. and carried out exploration on those
properties. This work included surface and underground mapping and sampling, as
well as a Lithium-Bismuth surface geochemical survey. In 1998 Latingold
abandoned its option.

Property Geology

The Golondrina Gold-Silver property is underlain by Dagua Group
fine-grained layered quartzites (siliceous clastic sediments) of Cretaceous age.
These contain minor basalt flows and diabase dikes of the same age. Intruded
into these sediments is a small (2 km X 0.5 km) biotite-hornblende tonalite body
of Tertiary age. It is associated with the larger Vergel STock, which is found 7
kilometers to the northwest. The intrusion has a 100 meter wide hornfelsed
contact aureole against the sediments.

Mineralization on the Golondrina Project is confined to milky
white quartz veins which contain disseminated sulphides. These sulphides include
pyrite, chalcopyrite (copper) and galena (lead). Vein widths range between 5 and
50 centimeters.

We have not found any other mineral properties either for
staking or purchasing but will seek other mineral properties during the next
year so to diversify our holdings. Any staking and/or purchasing of mineral
properties may involve the issuance of substantial blocks of our shares. We have
no intentions of purchasing for cash or other considerations any mineral
properties from our officers and/or directors.

15

---

El Colmillo Gold Project

Acquisition, Location and Access

On July 16, 2008, through our majority owned subsidiary Minera
Tao S.A. (MT), we entered into an amended option agreement with Agrominas De
Colombia, LTDA (AC) to acquire 80% of a mining interest called El Comillo in
Antioquia Colombia. The agreement amended the terms of the original option
agreement entered into by MT on October 2, 2007, and subsequently extended on
April 18, 2008.

Under the terms of the amended option agreement, the purchase
price of the option is $1.42 billion Colombian pesos or approximately US$825,000
dollars at an exchange rate of $1,600 pesos for one dollar. We paid $80,000,000
pesos (approximately US$50,000) upon closing of the option agreement and are
obligated to pay $40,000,000 pesos on the 15th of every month until $320,000,000
pesos has been paid. Thereafter 20% of production will be paid until $1.1
billion pesos have been received by AC. After the acquisition price is paid AC
will continue to receive 20% of the mining production. Upon receipt of $1.42
billion pesos by AC the option will be exercised and 80% ownership in the
property will be transferred to MT.

The El Colmillo vein-hosted gold deposit is located in a river
basin which contains La Tinta Gorge, and more specifically in the sub river
basin of the gorge La Blanquita, a tributary of the Nechí River.The concession
covers an area of 296 hectares.

ESTIMATED BUDGET, PHASE 1 PROGRAM

In anticipation of our acquisition of our interest in the El
Comillo mining property pursuant to our agreement with Agrominas De Colombia,
LTDA, we are beginning the execution of our plan to upgrade the El Colmillo Gold
Mine by implementing Phase I of the mine upgrade program.

Phase I of the program focuses on the existing mining works.
The mine is currently idle and Phase I activities are designed to accomplish its
reactivation to the extent of its existing full installed capacity. Actions to
accomplish this will include developing the tunnels to increase the throughput
volume of ore and, in concert with that, work to increase knowledge of the
mines characterization in terms of its specific mineralogy to determine the
best approach to the set-up of the upgraded gold recovery circuit.

Total monthly expenses for Phase I are estimated at $68,000 and
will include, in addition to other unnamed items, specific expenditures for
personnel, $16,000; fuel, $14,000; administration, $5,000; dynamite, $4,000 and
an unspecified amount for repairs and adjustments to existing equipment. Capital
costs to be incurred in Phase I are an estimated $12,000 for a jaw crusher and
an estimated $14,000 for a 4 x 4 truck to transport fuel to the mine.

Finally, as part of the reactivation, Tao will be paying the
annual tax for the exploration of the mine known as the  cannon superficiario.

The proposed program is exploratory in nature as there are no
proven reserves currently.

In December 2008 Company personnel at the El Colmillo property
were met by Colombian rebels who demanded a war tax to permit the development
activities to continue. The Company immediately ceased any efforts at the mine
and reported the situation to the Colombian government and to the issuer of the
option. The Company invoked the force majoure section of the contract and is
waiting to see what developments will take place.

16

---



POINTP.A.
    7 o3500.59
    N2
    7 o3500.00
    N3
    75 o2000.00
    W4
    75 o1959.77
    W


Property Geology

Bedrock consists of metamorphic rocks of sericite and graphitic
aluminous schists. Alteration includes sericitization and chloritization, as
well as silicification in the form of quartz. The dominant regional structures
are the North Otú and North Bagre faults, with general directions N°1-14°W.
Locally two faults which trend north-south and dip 60oE have been observed.
These two faults are concordant with the existing mineralization. It is suggest
that they are part of the North Bagre fault system.

At least three veins are recognized in the El Colmillo
mineralized zone. These include El Colmillo vein, La Muela vein and a third
un-named subparallel vein. The first two show their moderate continuity by the
presence of old

17

---

mine workings. Some of these are collapsed. In the un-named
vein the continuity is recognized by old workings for about 5 m.

The vein El Colmillo has a strike direction that varies from
N/75oE to N30o-N40oE with a thickness of between 0.20 m and 3.2 m. It is
recognized along its course by small tunnels for a distance of about 300 m.
Those faults associated with the mineralized veins are regional in extent,
suggesting that there is a considerable potential for the mineralization to
extend along those faults for an additional 1.2 km within the concession area
and an additional 1 km outside of the concession.

The mineralization in El Colmillo is vein-hosted. The veins are
composed of milky white quartz, with interleaves and interfingerings of
schistose host rock. There are only minor amounts of sulfides in the examined
levels. Galena is found locally.

|Item 3. | Legal Proceedings
|------- | -----------------

We know of no material, existing or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial stockholder,
is an adverse party or has a material interest adverse to our interest.

|Item 4. | [Removed and Reserved]
|------- | ----------------------

PART II

|Item 5. | Market for Registrants Common Equity,
      Related Stockholder Matters and Issuer Purchases of Equity
      Securities
|------- | ------------------------------------------------------------------------------------------------------------------------

Our Common stock is quoted on the OTC Bulletin Board under the
Symbol "TAOL". We received approval on November 22, 2005 for trading under the
symbol TAOM. On March 24, 2006 our symbol was changed to TAOL in connection
with our forward stock split and on September 23, 2009 our symbol was changed to
TAON in connection with a share consolidation.

The following table reflects the high and low bid information
for our common stock obtained from Stockwatch and reflects inter-dealer prices,
without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions.

The high and low bid prices of our common stock for the periods
indicated below are as follows:

OTC Bulletin BoardQuarter Ended
    High
    LowJanuary 31, 2011
    $0.035
    $0.0065October 31, 2010
    $0.049
    $0.0072July 31, 2010
    $0.72
    $0.022April 30, 2010
    $0.31
    $0.08January 31, 2010
    $0.12
    $0.06October 31, 2009
    $0.32
    $0.009July 31, 2009
    $0.0015
    $0.006April 30, 2009
    $0.0023
    $0.008January 31, 2009
    $0.0039
    $0.001


18

---

As of June 22, 2011, there were approximately 36 holders of
record of our common stock. As of such date, 342,605,877  common shares were
issued and outstanding.

Our common shares are issued in registered form. Transfer
Online, Inc., 512 SE Salmon Street, Portland, OR, USA (Telephone: 503.227.2950)
is the registrar and transfer agent for our common shares.

Dividend Policy

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

Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities

Other than as disclosed below, we did not sell any equity
securities which were not registered under the Securities Act during the year
ended January 31, 2011 that were not otherwise disclosed on our quarterly
reports on Form 10-Q or our current reports on Form 8-K filed during the year
ended January 31, 2011.

Equity Compensation Plan Information

Except as disclosed below, we do not have a stock option plan
in favor of any director, officer, consultant or employee of our company.

Purchase of Equity Securities by the Issuer and Affiliated
Purchasers

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

|Item 6. | Selected Financial Data
|------- | -----------------------

As a smaller reporting company, we are not required to
provide the information required by this Item.

|Item 7. | Managements Discussion and Analysis of
      Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------------

The following discussion should be read in conjunction with our
audited financial statements and the related notes for the years ended January
31, 2011 and January 31, 2010 that appear elsewhere in this annual report. The
following discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward looking statements. Factors that could cause or
contribute to such differences include, but are not limited to those discussed
below and elsewhere in this annual report, particularly in the section entitled
"Risk Factors" beginning on page 7 of this annual report.

Our audited financial statements are stated in United States
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.

Plan of Operations

Management plans to focus on Phase I of the mine upgrade
program on the El Colmillo property until a determination of viability at El
Colmillo can be determined. We intend to hold exploration of the Golondrina
property until such time as the viability at El Colmillo can be determined.

Phase I of the program focuses on the existing mining works.
The mine is currently idle and Phase I activities are designed to accomplish its
reactivation to the extent of its existing full installed capacity. Actions to
accomplish this

19

---

will include developing the tunnels to increase the throughput
volume of ore and, in concert with that, work to increase knowledge of the
mines characterization in terms of its specific mineralogy to determine the
best approach to the set-up of the upgraded gold recovery circuit.

Total monthly expenses for Phase I are estimated at $68,000 and
will include, in addition to other unnamed items, specific expenditures for
personnel, $16,000; fuel, $14,000; administration, $5,000; dynamite, $4,000 and
an unspecified amount for repairs and adjustments to existing equipment. Capital
costs to be incurred in Phase I are an estimated $12,000 for a jaw crusher and
an estimated $14,000 for a 4 x 4 truck to transport fuel to the mine.

Finally, as part of the reactivation, we will be paying the
annual tax for the exploration of the mine known as the cannon superficiario.

In December 2008, company personnel at the El Colmillo property
were met by Colombian rebels who demanded a war tax to permit the development
activities to continue. Our company immediately ceased any efforts at the mine
and reported the situation to the Colombian government and to the issuer of the
option. Our company invoked the force majoure section of the contract and is
waiting to see what developments will take place.

In May 2010, we retained the Colombian legal firm of Gutierrez
Marquez Asesores S.A. to represent our company in all aspects of applicable
Colombian law pertaining to our operations in Colombia.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment over the
next twelve months.

Personnel Plan

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

Off-Balance Sheet Arrangements

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

Our principal capital resources have been through the
subscription and issuance of common stock, although we have also used
stockholder loans and advances from related parties.

Results of Operations for the Years Ended January 31, 2011
and 2010

The following summary of our results of operations should be
read in conjunction with our audited financial statements for the years ended
January 31, 2011 and 2010.

Our operating results for the years ended January 31, 2011 and
2010 are summarized as follows:

| |                          |   | Year Ended |  
| | ------------------------ | - | ---------- | -
| |                          |   | January 31 |  
| |                          |   | 2011       |  
| |                          |   |            |  
| | Revenue                  | $ | Nil        |  
| | Total Operating Expenses | $ | 3,453,091  |  
| | Other Income (Expenses)  | $ | (2,470,622 | )

20

---

| |          |   | Year Ended |  
| | -------- | - | ---------- | -
| |          |   | January 31 |  
| |          |   | 2011       |  
| | Net Loss | $ | (5,923,713 | )

Revenues

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

Operating Expenses

Our operating expenses for the year ended January 31, 2011 and
January 31, 2010 are outlined in the table below:

| |                            |   | Year Ended | 
| | -------------------------- | - | ---------- | 
| |                            |   | January 31 | 
| |                            |   | 2011       | 
| | Exploration expenses       | $ | 25,524     | 
| | Professional fees          | $ | 51,450     | 
| | Consulting fees            | $ | 395,156    | 
| | Legal fees                 | $ | 32,707     | 
| | General and administrative | $ | 2,928,604  | 
| | Impairment charge          | $ | 19,650     | 

The increase in operating expenses for the year ended January
31, 2011, compared to the same period in fiscal 2010, was mainly due to an
increase in stock based compensation.

Liquidity and Financial Condition

As of January 31, 2011, our total current assets were $26,990
and our total current liabilities were $1,579,266 and we had a working capital
deficit of $1,552,276. Our financial statements report a net loss of $5,923,713
for the year ended January 31, 2011, and a net loss of $14,432,305 for the
period from September 23, 2004 (date of inception) to January 31, 2011.

We have suffered recurring losses from operations. The
continuation of our company is dependent upon our company attaining and
maintaining profitable operations and raising additional capital as needed. In
this regard we have raised additional capital through equity offerings and loan
transactions.

| | Cash Flows                                    |   | As at       |  
| | --------------------------------------------- | - | ----------- | -
| |                                               |   | January 31, |  
| |                                               |   | 2011        |  
| |                                               |   |             |  
| | Net Cash Used by Operating Activities         | $ | (500,012    | )
| | Net Cash Used by Investing Activities         | $ | Nil         |  
| | Net Cash Provided by Financing Activities     | $ | 520,300     |  
| | Increase (Decrease) In Cash During The Period | $ | 10,430      |  

We had cash in the amount of $18,295 as of January 31, 2011 as
compared to $7,865 as of January 31, 2010. We had a working capital deficit of
$1,552,276 as of January 31, 2011 compared to working capital deficit of
$1,454,580 as of January 31, 2010.

21

---

Cash Requirements

We intend to conduct exploration activities on our properties
during the next twelve months. We estimate our operating expenses and working
capital requirements for the twelve month period to be as follows:

Estimated Expenses For the Twelve Month
      Period ending January 31, 2012Operating Expenses
    $
    100,000Exploration
    $
    500,000Total
    $
    600,000


At present, our cash requirements for the next 12 months
outweigh the funds available to maintain or develop our properties. Of the
$600,000 that we require for the next 12 months, we had $18,295 in cash as of
January 31, 2011, and a working capital deficit of $1,552,276. In order to
improve our liquidity, we plan pursue additional equity financing from private
investors or possibly a registered public offering. we do not currently have any
definitive arrangements in place for the completion of any further private
placement financings and there is no assurance that we will be successful in
completing any further private placement financings. If we are unable to achieve
the necessary additional financing, then we plan to reduce the amounts that we
spend on our business activities and administrative expenses in order to be
within the amount of capital resources that are available to us.

Research and Development

We do not intend to allocate any funds to research and
development over the twelve months ending January 31, 2012.

Future Financings

We will require additional funds to implement our growth
strategy in our new business. These funds may be raised through equity
financing, debt financing, or other sources, which may result in further
dilution in the equity ownership of our shares.

There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis should it be required, or generate significant
material revenues from operations, we will not be able to meet our other
obligations as they become due and we will be forced to scale down or perhaps
even cease our operations.

Contractual Obligations

As a smaller reporting company, we are not required to
provide tabular disclosure obligations.

Going Concern

We have suffered recurring losses from operations and are
dependent on our ability to raise capital from stockholders or other sources to
meet our obligations and repay our liabilities arising from normal business
operations when they become due. In their report on our audited financial
statements for the year ended January 31, 2011, our independent auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosure describing the circumstances that lead to this disclosure by our
independent auditors.

22

---

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

The discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with the accounting principles generally
accepted in the United States of America. Preparing financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, and expenses. These estimates and
assumptions are affected by managements application of accounting policies. We
believe that understanding the basis and nature of the estimates and assumptions
involved with the following aspects of our financial statements is critical to
an understanding of our financial statements.

Accounting Estimates

The preparation of financial statements in conformity with US
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Our company regularly evaluates estimates and assumptions
related to valuation of long-lived assets, stock based compensation and deferred
income tax asset valuation allowances. Our company bases our estimates and
assumptions on current facts, historical experience and various other factors
that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities and the accrual of costs and expenses that are not readily apparent
from other sources. The actual results experienced by our company may differ
materially and adversely from our companys estimates. To the extent there are
material differences between the estimates and the actual results, future
results of operations will be affected.

Cash Equivalents

For purposes of the statement of cash flows cash equivalents
usually consist of highly liquid investments which are readily convertible into
cash with maturity of three months or less when purchased.

Concentrations

Our company has no significant off-balance-sheet concentrations
of credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. Our company maintains the majority of our cash
balances with one financial institution, in the form of demand deposits. Our
companys assets and operations are concentrated in the country of Colombia,
South America.

Mineral Interests

Mineral interests associated with other than owned properties
are classified as tangible assets. The mineral rights will be amortized using
the units-of-production method when production at each project commences.

Long-Lived Assets

In accordance with ASC 360, Property Plant and Equipment, our
company tests long-lived assets or asset groups for recoverability when events
or changes in circumstances indicate that their carrying amount may not be
recoverable. Circumstances which could trigger a review include, but are not
limited to: significant decreases in the market price of the asset; significant
adverse changes in the business climate or legal factors; accumulation of costs
significantly in excess of the amount originally expected for the acquisition or
construction of the asset; current period cash flow or operating losses combined
with a history of losses or a forecast of continuing losses associated with the
use of the asset; and current expectation that the asset will more likely than
not be sold or disposed significantly before the end

23

---

of its estimated useful life. Recoverability is assessed based
on the carrying amount of the asset and its fair value which is generally
determined based on the sum of the undiscounted cash flows expected to result
from the use and the eventual disposal of the asset, as well as specific
appraisal in certain instances. An impairment loss is recognized when the
carrying amount is not recoverable and exceeds fair value.

Foreign Currency Translation

Our companys functional and reporting currency is the United
States dollar. Management has adopted ASC 740 Foreign Currency Translation
Matters. Monetary assets and liabilities denominated in foreign currencies are
translated using the exchange rate prevailing at the balance sheet date.
Non-monetary assets and liabilities denominated in foreign currencies are
translated at rates of exchange in effect at the date of the transaction.
Average monthly rates are used to translate revenues and expenses. Gains and
losses arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of income. Our
company has not, to the date of these financial statements, entered into
derivative instruments to offset the impact of foreign currency
fluctuations.

The financial statements of the subsidiary are translated to
United States dollars in accordance with ASC 740 using period-end rates of
exchange for assets and liabilities, and average rates of exchange for the year
for revenues and expenses. Translation gains (losses) are recorded in
accumulated other comprehensive income (loss) as a component of stockholders
deficit. Foreign currency transaction gains and losses are included in current
operations.

Environmental Costs

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

Loss per Share

Our company computes net earnings (loss) per share in
accordance with ASC 260, Earnings Per Share, which requires presentation of both
basic and diluted earnings per share (EPS) on the face of the income
statement. Basic EPS is computed by dividing net earnings (loss) available to
common shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS, the average stock price for the period is used
in determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti-dilutive. Our company has $375,800 of convertible
debentures which can be converted to common stock. These shares have not been
included in any weighted average computations since the effect would be
anti-dilutive.

Income Taxes

Our company accounts for income taxes under the ASC 740, Income
Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under ASC
740, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.

Fair Value of Financial Instruments

Our financial instruments consist principally of cash, accounts
payable, derivative liabilities, amounts due to related parties, stock issuance
liabilities and convertible notes. Pursuant to ASC 820, Fair Value Measurements
and Disclosures, and ASC 825, Financial Instruments the fair value of our cash
equivalents is determined based on

24

---

Level 1 inputs, which consist of quoted prices in active
markets for identical assets, the fair value of derivative liabilities, stock
issuance liabilities and convertible notes are determined based on Level 3
inputs, which consist of unobservable inputs to the valuation methodology that
are significant to the measurement of the fair value of the assets or
liabilities. We believe that the recorded values of all of our other financial
instruments approximate their current fair values because of their nature and
respective relatively short maturity dates or durations.

Comprehensive Loss

ASC 220, Comprehensive Income establishes standards for the
reporting and display of comprehensive loss and its components in the financial
statements. At January 31, 2011 and 2010, our companys only component of
comprehensive loss was foreign currency translation adjustments. Accordingly,
the balance of accumulated other comprehensive income was charged to operations.

Stock-Based Compensation

In accordance with ASC 718, Compensation  Stock Based
Compensation, our company accounts for share-based payments using the fair value
method. Common shares issued to third parties for non-cash consideration are
valued based on the fair market value of the services provided or the fair
market value of the common stock on the measurement date, whichever is more
readily determinable.

Business Segments

Our company operates in one segment and therefore segment
information is not presented.

Mining Properties and Exploration Costs

Exploration costs are charged to operations in the year in
which they are incurred. Costs of acquiring mineral properties are capitalized
until such time commencement of production commences or a determination that
such property is not commercially viable.

Mining properties are, upon commencement of production,
amortized over the estimated life of the ore body to which they relate or are
written off if the property is abandoned or if there is considered to be a
permanent impairment in value.

Investments in mining properties over which our company has
significant influence but not joint control are accounted for using the equity
method.

Site Restoration and Post Closure Costs

Expenditures related to ongoing environmental and reclamation
activities are expensed, as incurred, unless previously accrued. Provisions for
future site restoration and reclamation and other post closure costs in respect
of operating facilities are charged to operations over the estimated life of the
operating facility, commencing when a reasonably definitive estimate of the cost
can be made

Accounting Changes and Error Corrections

Our company follows ASC 250, Accounting Changes and Error
Corrections. Changes in accounting principle are reported through retrospective
application of the new accounting principle to all prior periods. Errors in the
financial statements of a prior period discovered subsequent to their issuance
shall be reported as a prior-period adjustment by restating the prior
period.

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements included in
this report for discussion of recent accounting pronouncements.

25

---

|Item 7A. | Quantitative and Qualitative Disclosures
      About Market Risk
|-------- | ----------------------------------------------------------------

As a smaller reporting company, we are not required to
provide the information required by this Item.

|Item 8. | Financial Statements and Supplementary
      Data
|------- | -------------------------------------------------

26

---

Report of Independent Registered Public Accounting
Firm

Shareholders and Board of Directors TAO MINERALS, LTD
Medellin, Columbia

I have audited the accompanying
consolidated balance sheets of TAO MINERALS, LTD, and Subsidiary (an Exploration
Stage Company) as of January 31, 2011 and 2010 and the related consolidated
statements of operations, stockholders deficit, and cash flows for each of the
years in the two-year period ended January 31, 2011. TAO MINERALS,LTDS
management is responsible for these financial statements. My responsibility is
to express an opinion on these financial statements based on my audit.

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

In my opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of TAO MINERALS, LTD, and Subsidiary (an Exploration
Stage Company) as of January 31, 2011, and 2010 and the results of its
operations and its cash flows for each of the years in the two-year period ended
January 31, 2011, in conformity with accounting principles generally accepted in
the United States of America.

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

|               | /s/ Larry Wolfe            
|-------------- | ---------------------------
|               | Larry Wolfe                
|Miami, Florida | Certified Public Accountant
|June 22, 2011  |                            

27

---

|TAO MINERALS LTD. and Subsidiary
|--------------------------------
|(An Exploration Stage Company)  
|Consolidated Balance Sheets     

|                                                                                                                                                                                    |   | January
      31, |   |   | January
      31, |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                                                                                                                                                                    |   | 2011              |   |   | 2010              |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|ASSETS                                                                                                                                                                              |   |                   |   |   |                   |  
|Current                                                                                                                                                                             |   |                   |   |   |                   |  
|Cash                                                                                                                                                                                | $ | 18,295            |   | $ | 7,865             |  
|Prepaids                                                                                                                                                                            |   | 8,695             |   |   | 36,120            |  
|Total current assets                                                                                                                                                                |   | 26,990            |   |   | 43,985            |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|Property and Equipment                                                                                                                                                              |   | -                 |   |   | 19,370            |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|Mineral Properties                                                                                                                                                                  |   |                   |   |   |                   |  
|Mineral Rights                                                                                                                                                                      |   | 132,500           |   |   | 129,921           |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|Total Mineral Properties                                                                                                                                                            |   | 132,500           |   |   | 129,921           |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|Total assets                                                                                                                                                                        | $ | 159,490           |   | $ | 193,276           |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                               |   |                   |   |   |                   |  
|Current                                                                                                                                                                             |   |                   |   |   |                   |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|Accounts payable and accrued expenses                                                                                                                                               | $ | 102,558           |   | $ | 150,385           |  
|Note payable                                                                                                                                                                        |   | 272,846           |   |   | 420,622           |  
|Derivative liability                                                                                                                                                                |   | 683,057           |   |   | 233,008           |  
|Due to related parties                                                                                                                                                              |   | 199,047           |   |   | 481,638           |  
|Stock issuance liability                                                                                                                                                            |   | 93,140            |   |   | 92,100            |  
|Other accrued liabilities                                                                                                                                                           |   | 228,618           |   |   | 120,812           |  
|Total current liabilities                                                                                                                                                           |   | 1,579,266         |   |   | 1,498,565         |  
|Note payable long term                                                                                                                                                              |   | -                 |   |   | 66,092            |  
|Total liabilities                                                                                                                                                                   |   | 1,579,266         |   |   | 1,564,657         |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|STOCKHOLDERS DEFICIT                                                                                                                                                               |   |                   |   |   |                   |  
|Share Capital                                                                                                                                                                       |   |                   |   |   |                   |  
|Authorized: Preferred stock: $0.001 par
      value 1,000,000 shares authorized None issued, allotted and
      outstanding                                                         |   | -                 |   |   | -                 |  
|                                                                                                                                                                                    |   |                   |   |   |                   |  
|Common stock: $0.001 par value,
      1,000,000,000 shares authorized 196,631,122 shares and 2,736,857
      shares issued and outstanding at January 31, 2011 and January 31, 2010 |   | 196,632           |   |   | 2,738             |  
|Additional paid-in capital                                                                                                                                                          |   | 13,033,514        |   |   | 7,345,090         |  
|Accumulated other comprehensive loss                                                                                                                                                |   | (39,255           | ) |   | (32,255           | )
|Deficit accumulated during exploration stage                                                                                                                                        |   | (14,599,401       | ) |   | (8,676,871        | )
|Total stockholders deficit                                                                                                                                                         |   | (1,408,510        | ) |   | (1,361,298        | )
|Non-controlling interest                                                                                                                                                            |   | (11,266           | ) |   | (10,083           | )
|Total deficit                                                                                                                                                                       |   | (1,419,776        | ) |   | (1,371,381        | )
|Total liabilities and deficit                                                                                                                                                       | $ | 159,490           |   | $ | 193,276           |  

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

28

---

|TAO MINERALS LTD. and Subsidiary     
|-------------------------------------
|(An Exploration Stage Company)       
|Consolidated Statements of Operations

|                                                             |   |                        |   |   | For the Year      |  
|------------------------------------------------------------ | - | ---------------------- | - | - | ----------------- | -
|                                                             |   |                        |   |   | Ended January 31, |  
|                                                             |   | From Inception to      |   |   | 2011              |  
|                                                             |   | January 31,
      2011 |   |   |                   |  
|                                                             |   | (Unaudited)            |   |   |                   |  
|                                                             |   |                        |   |   |                   |  
|OPERATING EXPENSES                                           |   |                        |   |   |                   |  
|Exploration expenses                                         | $ | 148,174                |   | $ | 25,524            |  
|Professional fees                                            |   | 293,218                |   |   | 51,450            |  
|Director fees                                                |   | 120,000                |   |   | -                 |  
|Consulting fees                                              |   | 1,489,506              |   |   | 395,156           |  
|Legal fees                                                   |   | 319,638                |   |   | 32,707            |  
|General and administrative                                   |   | 3,192,973              |   |   | 2,928,604         |  
|Impairment charge                                            |   | 4,719,650              |   |   | 19,650            |  
|LOSS FROM OPERATIONS                                         |   | 10,283,159             |   |   | 3,453,091         |  
|Total Operating Expenses                                     |   | (10,283,159            | ) |   | (3,453,091        | )
|OTHER INCOME (EXPENSE)                                       |   |                        |   |   |                   |  
|Derivative expense                                           |   | (1,863,579             | ) |   | (1,730,571        | )
|Loss on settlement of debt                                   |   | (1,456,151             | ) |   | -                 |  
|Interest expense                                             |   | (829,880               | ) |   | (740,051          | )
|Other income (loss), net                                     |   | (1,067                 | ) |   | -                 |  
|Foreign currency translation gain                            |   | 1,531                  |   |   | -                 |  
|TOTAL OTHER INCOME (EXPENSE)                                 |   | (4,149,146             | ) |   | (2,470,622        | )
|                                                             |   |                        |   |   |                   |  
|Net loss for the period                                      |   | (14,432,305            | ) |   | (5,923,713        | )
|Less: net loss attributable to noncontrolling
      interest |   | 11,266                 |   |   | 1,183             |  
|Net loss attributable to TAO common
      shareholders       | $ | (14,421,039            | ) | $ | (5,922,530        | )
|Other Comprehensive Loss                                     |   |                        |   |   |                   |  
|Foreign currency translation
      adjustment                |   | (39,255                | ) |   | (7,000            | )
|                                                             |   |                        |   |   |                   |  
|Comprehensive Loss                                           | $ | (14,460,294            | ) | $ | (5,929,530        | )
|                                                             |   |                        |   |   |                   |  
|LOSS PER SHARE  BASIC                                       |   |                        |   | $ | (0.10             | )
|                                                             |   |                        |   |   |                   |  
|WEIGHTED AVERAGE NUMBER OF ISSUED
      SHARES: - BASIC      |   |                        |   |   | 61,023,273        |  

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

---

|TAO MINERALS LTD. And Subsidiary     
|-------------------------------------
|(An Exploration Stage Company)       
|Consolidated Statements of Cash Flows

|                                            |   | From
      Inception to |   |   | For the
      Year |   |   | For the
      Year |  
|------------------------------------------- | - | ----------------------- | - | - | ------------------ | - | - | ------------------ | -
|                                            |   | January 31, 2011        |   |   | Ended              |   |   | Ended              |  
|                                            |   | (Unaudited)             |   |   | January 31, 2011   |   |   | January 31, 2010   |  
|Cash Provided by (Used for)
      Operating |   |                         |   |   |                    |   |   |                    |  
|Activities                                  |   |                         |   |   |                    |   |   |                    |  
|Net (loss) for the period                   | $ | (14,429,475             | ) | $ | (5,922,530         | ) | $ | (616,040           | )
|Stock issued for services                   |   | 3,286,386               |   |   | 2,604,000          |   |   | 102,000            |  
|Loss on settlement of debt                  |   | 1,456,151               |   |   | -                  |   |   | -                  |  
|Impairment charges                          |   | 4,719,650               |   |   | 19,650             |   |   | -                  |  
|Minority interest in loss                   |   | (12,831                 | ) |   | (1,183             | ) |   | (67                | )
|Changes in non-cash working capital items:  |   |                         |   |   |                    |   |   |                    |  
|Prepaids                                    |   | (8,695                  | ) |   | 27,425             |   |   | 10,491             |  
|Discount on note
      payable              |   | 557,826                 |   |   | 666,734            |   |   | 9,209              |  
|Accounts payable and accrued liabilities    |   | 1,403,274               |   |   | 657,912            |   |   | 357,234            |  
|Due to related
      parties                |   | (282,591                | ) |   | (282,591           | ) |   | -                  |  
|Derivative liability                        |   | 1,963,579               |   |   | 1,730,571          |   |   | 55,634             |  
|Cash used by
      operations               |   | (1,346,726              | ) |   | (500,012           | ) |   | (81,539            | )
|Investing Activities                        |   |                         |   |   |                    |   |   |                    |  
|Acquisition of subsidiary                   |   | (114,185                | ) |   | -                  |   |   | -                  |  
|Purchase of fixed assets                    |   | (19,370                 | ) |   | -                  |   |   | (2,550             | )
|Purchase of
      mineral rights            |   | (379,941                | ) |   | -                  |   |   | (16,501            | )
|Cash used by investing activities           |   | (513,496                | ) |   | -                  |   |   | (19,051            | )
|Financing Activities                        |   |                         |   |   |                    |   |   |                    |  
|Issuance of debt                            |   | 1,865,320               |   |   | 520,300            |   |   | 100,020            |  
|Issuance of common
      stock              |   | 55,310                  |   |   | -                  |   |   | -                  |  
|Cash provided by financing activities       |   | 1,920,630               |   |   | 520,300            |   |   | 100,020            |  
|                                            |   |                         |   |   |                    |   |   |                    |  
|Effect of Exchange Rate on Cash             |   | (42,113                 | ) |   | (9,858             | ) |   | 567                |  
|Cash Increase (Decrease) During the Period  |   | 18,295                  |   |   | 10,430             |   |   | (3                 | )
|Cash, Beginning of Period                   |   | -                       |   |   | 7,865              |   |   | 7,868              |  
|Cash and
      Equivalents, End of Period   | $ | 18,295                  |   | $ | 18,295             |   | $ | 7,865              |  

Supplemental Cash Flow Information;The Company
did not pay cash for either interest or taxes for the 12 months ended January
31, 2011 and 2010.

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

---

|TAO MINERALS LTD. and Subsidiary                                       
|-----------------------------------------------------------------------
|(An Exploration Stage Company)                                         
|Consolidated Statement of Changes in Stockholders'
      Deficit       
|For the period September 23, 2004 (Inception) to January
      31, 2011

|                                                                                                           |  |              |   |   |         |   |   |              |  |   |             |   |   | Accumulated    |   |   |            |  
|---------------------------------------------------------------------------------------------------------- |  | ------------ | - | - | ------- | - | - | ------------ |  | - | ----------- | - | - | -------------- | - | - | ---------- | -
|                                                                                                           |  |              |   |   |         |   |   | Additional   |  |   |             |   |   | Deficit During |   |   | Total      |  
|                                                                                                           |  | Common stock |   |   | paid-in |   |   | Subscription |  |   | Exploration |   |   | Stockholders'  |  
|                                                                                                           |  | Shares       |   |   | Amount  |   |   | capital      |  |   | Receivable  |   |   | Stage          |   |   | (Deficit)  |  
|                                                                                                           |  |              |   |   |         |   |   |              |  |   |             |   |   |                |   |   |            |  
|Common stock issued to founders for cash
      ($0.20 per share)                                           |  | 270,400      |   | $ | 270     |   | $ | 53,810       |  | $ |             |   | $ | (47,320        | ) | $ | 6,760      |  
|Common stock issued for cash ($1.43 per share)                                                             |  | 39,180       |   |   | 39      |   |   | 55,792       |  |   | (425        | ) |   | (6,856         | ) |   | 48,550     |  
|-
      net loss for the year                                                                              |  | -            |   |   | -       |   |   | -            |  |   | -           |   |   | (5,577         | ) |   | (5,577     | )
|                                                                                                           |  |              |   |   |         |   |   |              |  |   |             |   |   |                |   |   |            |  
|Balance, January 31, 2005                                                                                  |  | 309,580      |   | $ | 309     |   | $ | 109,602      |  | $ | (425        | ) | $ | (59,753        | ) | $ | 49,733     |  
|                                                                                                           |  |              |   |   |         |   |   |              |  |   |             |   |   |                |   |   | -          |  
|Subscription receivable cancelled                                                                          |  | -            |   |   | -       |   |   | -            |  |   | 425         |   |   | -              |   |   | 425        |  
|- net loss for the
      year                                                                              |  | -            |   |   | -       |   |   | -            |  |   | -           |   |   | (48,916        | ) |   | (48,916    | )
|                                                                                                           |  |              |   |   |         |   |   |              |  |   |             |   |   |                |   |   |            |  
|Balance,
      January 31, 2006                                                                            |  | 309,580      |   | $ | 309     |   | $ | 109,602      |  | $ | -           |   | $ | (108,669       | ) | $ | 1,242      |  
|Common stock issued for mineral rights on
      April 20, 2006 at                                          |  |              |   |   |         |   |   |              |  |   |             |   |   |                |   |   |            |  
|$.348                                                                                                      |  | 12,500       |   |   | 13      |   |   | 4,349,987    |  |   | -           |   |   | -              |   |   | 4,350,000  |  
|Common stock cancelled April 24, 2006                                                                      |  | (63,000      | ) |   | (63     | ) |   | 63           |  |   | -           |   |   | -              |   |   | -          |  
|Net loss for the
      period                                                                              |  |              |   |   |         |   |   |              |  |   |             |   |   | (4,749,636     | ) |   | (4,749,636 | )
|                                                                                                           |  |              |   |   |         |   |   |              |  |   |             |   |   |                |   |   |            |  
|Balance,
      January 31, 2007                                                                            |  | 259,080      |   | $ | 259     |   | $ | 4,459,652    |  | $ | -           |   | $ | (4,858,305     | ) | $ | (398,394   | )
|Balance, January 31, 2007                                                                                  |  |              |   |   |         |   |   |              |  |   |             |   |   |                |   |   |            |  
|Common stock issued for services to officers, directors and
      consultants on September 25, 2007 at $24 |  | 17,500       |   |   | 18      |   |   | 419,982      |  |   | -           |   |   | -              |   |   | 420,000    |  
|Common stock issued for legal fees on
      September 25, 2007 at $24                                      |  | 2,500        |   |   | 3       |   |   | 59,997       |  |   | -           |   |   | -              |   |   | 60,000     |  
|Common stock issued for legal services on January 15, 2008
      at $19                                    |  | 5,455        |   |   | 5       |   |   | 103,631      |  |   | -           |   |   | -              |   |   | 103,636    |  
|Common stock issued for services on January
      15, 2008 At $19                                          |  | 1,000        |   |   | 1       |   |   | 18,999       |  |   | -           |   |   | -              |   |   | 19,000     |  
|Net loss for the
      period                                                                              |  | --           |   |   | -       |   |   | -            |  |   | -           |   |   | (833,424       | ) |   | (833,424   | )
|                                                                                                           |  |              |   |   |         |   |   |              |  |   |             |   |   |                |   |   |            |  
|Balance,
      January 31, 2008                                                                            |  | 285,535      |   | $ | 286     |   | $ | 5,062,261 $  |  |   | -           |   | $ | (5,691,729     | ) | $ | (629,182   | )

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

31

---

|TAO MINERALS LTD. and Subsidiary                                       
|-----------------------------------------------------------------------
|(An Exploration Stage Company)                                         
|Consolidated Statement of Changes in Stockholders'
      Deficit       
|For the period September 23, 2004 (Inception) to January
      31, 2011

|                                                                           |  |              |  |  |         |  |  |               |  |  |             |  |  | Accumulated    |   |  |           |  
|-------------------------------------------------------------------------- |  | ------------ |  |  | ------- |  |  | ------------- |  |  | ----------- |  |  | -------------- | - |  | --------- | -
|                                                                           |  |              |  |  |         |  |  | Additional    |  |  | Accumulated |  |  | Deficit During |   |  | Total     |  
|                                                                           |  | Common Stock |  |  | Paid in |  |  | Comprehensive |  |  | Exploration |  |  | Stockholders  |  
|                                                                           |  | Shares       |  |  | Amount  |  |  | Capital       |  |  | Adjustment  |  |  | Stage          |   |  | (Deficit) |  
|                                                                           |  |              |  |  |         |  |  |               |  |  |             |  |  |                |   |  |           |  
|Balance, January 31, 2008                                                  |  | 285,535      |  |  | 286     |  |  | 5,062,261     |  |  | -           |  |  | (5,691,729     | ) |  | (629,182  | )
|Common stock issued for legal services April 21, 2008 @ $11                |  | 7,250        |  |  | 7       |  |  | 79,743        |  |  | -           |  |  | -              |   |  | 79,750    |  
|Common stock issued for conversion of debt
      April 24, 2008 @ $9.60    |  | 12,500       |  |  | 13      |  |  | 119,987       |  |  | -           |  |  | -              |   |  | 120,000   |  
|Common stock issued for conversion of debt May 9, 2008 @
      $10         |  | 16,667       |  |  | 17      |  |  | 166,650       |  |  | -           |  |  | -              |   |  | 166,667   |  
|Common stock issued for conversion of debt
      May 20, 2008 @ $8         |  | 20,834       |  |  | 21      |  |  | 166,646       |  |  | -           |  |  | -              |   |  | 166,667   |  
|Common stock issued for conversion of debt May2 9, 2008 @
      $6         |  | 19,444       |  |  | 19      |  |  | 116,648       |  |  | -           |  |  | -              |   |  | 116,667   |  
|Common stock issued for conversion of debt
      June 9, 2008 @ $6         |  | 19,444       |  |  | 19      |  |  | 116,648       |  |  | -           |  |  |                |   |  | 116,667   |  
|Common stock issued for conversion of debt June 12, 2008 @4                |  | 20,834       |  |  | 21      |  |  | 83,312        |  |  | -           |  |  | -              |   |  | 83,333    |  
|Common stock issued for conversion of debt
      June 13, 2008 @ $1.40     |  | 20,833       |  |  | 21      |  |  | 29,146        |  |  | -           |  |  | -              |   |  | 29,167    |  
|Common stock issued for conversion of debt June 25, 2008 @
      $3.20     |  | 19,444       |  |  | 19      |  |  | 62,203        |  |  | -           |  |  | -              |   |  | 62,222    |  
|Common stock issued for conversion of debt
      July 2, 2008 @ $3         |  | 20,000       |  |  | 20      |  |  | 59,980        |  |  | -           |  |  |                |   |  | 60,000    |  
|                                                                           |  |              |  |  |         |  |  |               |  |  |             |  |  | -              |   |  |           |  
|Common stock issued for conversion of debt
      July 8, 2008 @ $2.80      |  | 21,795       |  |  | 22      |  |  | 61,004        |  |  | -           |  |  | -              |   |  | 61,026    |  
|Common stock issued for conversion of debt July 14, 2008 @
      $2.40     |  | 22,222       |  |  | 22      |  |  | 53,311        |  |  | -           |  |  | -              |   |  | 53,333    |  
|Common stock issued for conversion of debt
      July 16, 2008 @ $2.20     |  | 21,795       |  |  | 22      |  |  | 47,927        |  |  | -           |  |  | -              |   |  | 47,949    |  
|Common stock issued for conversion of debt July 18, 2008 @
      $2.20     |  | 25,000       |  |  | 25      |  |  | 54,975        |  |  | -           |  |  | -              |   |  | 55,000    |  
|Common stock issued for conversion of debt
      July 24, 2008 @ $2.20     |  | 24,244       |  |  | 24      |  |  | 53,313        |  |  | -           |  |  | -              |   |  | 53,337    |  
|Common stock issued for conversion of debt August 1, 2008 @
      $2       |  | 26,316       |  |  | 26      |  |  | 52,606        |  |  | -           |  |  | -              |   |  | 52,632    |  
|Common stock issued for conversion of debt
      August 14, 2008 @ $2      |  | 27,778       |  |  | 28      |  |  | 55,528        |  |  |             |  |  | -              |   |  | 55,556    |  
|Common stock issued for conversion of debt September 3,
      2008 @ $1.20 |  | 30,000       |  |  | 30      |  |  | 35,970        |  |  | -           |  |  | -              |   |  | 36,000    |  

The accompanying notes are an integral part of these
financial statements

---

|TAO MINERALS LTD. and Subsidiary                                       
|-----------------------------------------------------------------------
|(An Exploration Stage Company)                                         
|Consolidated Statement of Changes in Stockholders'
      Deficit       
|For the period September 23, 2004 (Inception) to January
      31, 2011

|                                                                            |  |              |  |  |         |  |  |               |  |   |             |   |   | Accumulated    |   |   |            |  
|--------------------------------------------------------------------------- |  | ------------ |  |  | ------- |  |  | ------------- |  | - | ----------- | - | - | -------------- | - | - | ---------- | -
|                                                                            |  |              |  |  |         |  |  | Additional    |  |   | Accumulated |   |   | Deficit During |   |   | Total      |  
|                                                                            |  | Common Stock |  |  | Paid in |  |  | Comprehensive |  |   | Exploration |   |   | Stockholders  |  
|                                                                            |  | Shares       |  |  | Amount  |  |  | Capital       |  |   | Adjustment  |   |   | Stage          |   |   | (Deficit)  |  
|Common stock issued for conversion of debt
      September 30, 2008 @ $1.10 |  | 33,333       |  |  | 33      |  |  | 36,634        |  |   | -           |   |   | -              |   |   | 36,667     |  
|Common stock issued for conversion of debt September 9,
      2008 @ $1.40  |  | 30,000       |  |  | 30      |  |  | 41,970        |  |   | -           |   |   | -              |   |   | 42,000     |  
|Common stock issued for conversion of debt
      October 2, 2008 @ $1.20    |  | 33,333       |  |  | 33      |  |  | 39,967        |  |   | -           |   |   | -              |   |   | 40,000     |  
|Common stock issued for conversion of debt October 6, 2008
      @ $1       |  | 36,667       |  |  | 37      |  |  | 36,630        |  |   | -           |   |   | -              |   |   | 36,667     |  
|Common stock issued for conversion of debt
      October 7, 2008 @ $1       |  | 40,000       |  |  | 40      |  |  | 39,960        |  |   | -           |   |   | -              |   |   | 40,000     |  
|Common stock issued for conversion of debt October 9, 2008
      @ $1       |  | 43,333       |  |  | 43      |  |  | 43,280        |  |   | -           |   |   | -              |   |   | 43,323     |  
|Common stock issued for conversion of debt
      October 13, 2008 @ $.70    |  | 42,857       |  |  | 43      |  |  | 29,957        |  |   | -           |   |   | -              |   |   | 30,000     |  
|Common stock issued for conversion of debt October 15, 2008
      @ $.70    |  | 42,857       |  |  | 43      |  |  | 29,957        |  |   | -           |   |   | -              |   |   | 30,000     |  
|Common stock issued for conversion of debt
      October 16, 2008 @ $.70    |  | 47,619       |  |  | 48      |  |  | 33,285        |  |   | -           |   |   | -              |   |   | 33,333     |  
|Common stock issued for conversion of debt October 17, 2008
      @ $.70    |  | 47,619       |  |  | 48      |  |  | 33,285        |  |   | -           |   |   | -              |   |   | 33,333     |  
|Common stock issued for conversion of debt
      October 20, 2008 @ $.70    |  | 52,381       |  |  | 52      |  |  | 36,615        |  |   | -           |   |   | -              |   |   | 36,667     |  
|Common stock issued for conversion of debt October 23, 2008
      @ $.70    |  | 52,381       |  |  | 52      |  |  | 36,615        |  |   | -           |   |   | -              |   |   | 36,667     |  
|Common stock issued for conversion of debt
      October 29, 2008 @ $.50    |  | 60,000       |  |  | 60      |  |  | 29,940        |  |   | -           |   |   | -              |   |   | 30,000     |  
|Common stock issued for conversion of debt October 30, 2008
      @ $.50    |  | 61,644       |  |  | 62      |  |  | 30,521        |  |   | -           |   |   | -              |   |   | 30,583     |  
|Common stock issued for conversion of debt
      November 4, 2008 @ $.50    |  | 68,493       |  |  | 68      |  |  | 34,179        |  |   | -           |   |   | -              |   |   | 34,247     |  
|Common stock issued for conversion of debt November 10,
      2008 @ $.48   |  | 68,493       |  |  | 68      |  |  | 32,809        |  |   | -           |   |   | -              |   |   | 32,877     |  
|Common stock issued for conversion of debt
      November 17, 2008 @ $.48   |  | 68,493       |  |  | 68      |  |  | 32,809        |  |   | -           |   |   | -              |   |   | 32,877     |  
|Common stock issued for conversion of debt November 25,
      2008 @ $.30   |  | 66,667       |  |  | 67      |  |  | 19,933        |  |   | -           |   |   | -              |   |   | 20,000     |  
|Common stock issued for conversion of debt
      December 10, 2008 @ $.28   |  | 66,667       |  |  | 67      |  |  | 18,600        |  |   | -           |   |   | -              |   |   | 18,667     |  
|Acquisition of Subsidiary                                                   |  | -            |  |  | -       |  |  | -             |  |   | -           |   |   | (115,750       | ) |   | (115,750   | )
|Loss for the period                                                         |  | -            |  |  | -       |  |  | -             |  |   | -           |   |   | (2,253,352     | ) |   | (2,253,352 | )
|Foreign currency
      adjustment                                           |  | -            |  |  | -       |  |  | -             |  |   | (32,822     | ) |   | -              |   |   | (32,822    | )
|Balance, January 31, 2009                                                   |  | 1,624,772    |  |  | 1,624   |  |  | 7,114,804     |  | $ | (32,822     | ) | $ | (8,060,831     | ) | $ | (977,225   | )

The accompanying notes are an integral part of these
financial statements

---

|TAO MINERALS LTD. and Subsidiary                                       
|-----------------------------------------------------------------------
|(An Exploration Stage Company)                                         
|Consolidated Statement of Changes in Stockholders'
      Deficit       
|For the period September 23, 2004 (Inception) to January
      31, 2011

|                                                                     |  |              |  |  |         |  |   |               |  |   |             |   |   | Accumulated    |   |   |            |  
|-------------------------------------------------------------------- |  | ------------ |  |  | ------- |  | - | ------------- |  | - | ----------- | - | - | -------------- | - | - | ---------- | -
|                                                                     |  |              |  |  |         |  |   | Additional    |  |   | Accumulated |   |   | Deficit During |   |   | Total      |  
|                                                                     |  | Common Stock |  |  | Paid in |  |   | Comprehensive |  |   | Exploration |   |   | Stockholders  |  
|                                                                     |  | Shares       |  |  | Amount  |  |   | Capital       |  |   | Adjustment  |   |   | Stage          |   |   | (Deficit)  |  
|Balance, January 31, 2009                                            |  | 1,624,772    |  |  | 1,624   |  |   | 7,114,804     |  | $ | (32,822     | ) | $ | (8,060,831     | ) | $ | (977,225   | )
|Common stock issued for conversion of debt March 13, 2009
      @.26 |  | 76,923       |  |  | 77      |  |   | 19,923        |  |   | -           |   |   | -              |   |   | 20,000     |  
|Common stock issued for conversion of debt
      April 6, 2009 @.18  |  | 83,333       |  |  | 83      |  |   | 14,917        |  |   | -           |   |   | -              |   |   | 15,000     |  
|Common stock issued for conversion of debt April 15, 2009
      @.18 |  | 83,333       |  |  | 83      |  |   | 14,917        |  |   | -           |   |   | -              |   |   | 15,000     |  
|Common stock issued for conversion of debt
      April 22, 2009 @.18 |  | 100,000      |  |  | 100     |  |   | 17,900        |  |   | -           |   |   | -              |   |   | 18,000     |  
|Common stock issued for conversion of debt May 8, 2009 @.18          |  | 100,000      |  |  | 100     |  |   | 17,900        |  |   | -           |   |   | -              |   |   | 18,000     |  
|Common stock issued for conversion of debt
      May 12, 2009 @.18   |  | 100,000      |  |  | 100     |  |   | 17,900        |  |   | -           |   |   | -              |   |   | 18,000     |  
|Common stock issued for conversion of debt May 13, 2009
      @.18   |  | 100,000      |  |  | 100     |  |   | 17,900        |  |   | -           |   |   | -              |   |   | 18,000     |  
|Common stock issued for conversion of debt
      May 14, 2009 @.20   |  | 100,000      |  |  | 100     |  |   | 19,900        |  |   | -           |   |   | -              |   |   | 20,000     |  
|Common stock issued for conversion of debt May 15, 2009
      @.24   |  | 100,000      |  |  | 100     |  |   | 23,900        |  |   | -           |   |   | -              |   |   | 24,000     |  
|Common stock issued for conversion of debt
      May 19, 2009 @.18   |  | 100,000      |  |  | 100     |  |   | 17,900        |  |   | -           |   |   | -              |   |   | 18,000     |  
|Common stock issued for conversion of debt May 20, 2009
      @.20   |  | 100,000      |  |  | 100     |  |   | 19,900        |  |   | -           |   |   | -              |   |   | 20,000     |  
|Common Stock issued for note payable
      January 31, 2010 @$.40    |  | 68,496       |  |  | 71      |  |   | 27,329        |  |   | -           |   |   | -              |   |   | 27,400     |  
|Foreign currency adjustment                                          |  | -            |  |  | -       |  |   | -             |  |   | 567         |   |   | -              |   |   | 567        |  
|Loss for the period                                                  |  | -            |  |  | -       |  |   | -             |  |   | -           |   |   | (616,040       | ) |   | (616,040   | )
|Balance,
      January 31, 2010                                      |  | 2,736,857    |  |  | 2,738   |  | $ | 7,345,090     |  | $ | (32,255     | ) | $ | (8,676,871     | ) | $ | (1,361,298 | )

The accompanying notes are an integral part of these
financial statements

---

|TAO MINERALS LTD. and Subsidiary                                       
|-----------------------------------------------------------------------
|(An Exploration Stage Company)                                         
|Consolidated Statement of Changes in Stockholders'
      Deficit       
|For the period September 23, 2004 (Inception) to January
      31, 2011

|                                                                             |  |              |  |  |         |  |   |               |  |   |             |   |   | Accumulated    |   |   |            |  
|---------------------------------------------------------------------------- |  | ------------ |  |  | ------- |  | - | ------------- |  | - | ----------- | - | - | -------------- | - | - | ---------- | -
|                                                                             |  |              |  |  |         |  |   | Additional    |  |   | Accumulated |   |   | Deficit During |   |   | Total      |  
|                                                                             |  | Common Stock |  |  | Paid in |  |   | Comprehensive |  |   | Exploration |   |   | Stockholders  |  
|                                                                             |  | Shares       |  |  | Amount  |  |   | Capital       |  |   | Adjustment  |   |   | Stage          |   |   | (Deficit)  |  
|Balance, January 31, 2010                                                    |  | 2,736,857    |  |  | 2,738   |  | $ | 7,345,090     |  | $ | (32,255     | ) | $ | (8,676,871     | ) | $ | (1,361,298 | )
|Common stock issued to settle debt February 25, 2010 @ $.08                  |  | 5,418,750    |  |  | 5,419   |  |   | 428,081       |  |   | -           |   |   | -              |   |   | 433,500    |  
|Common stock issued for conversion of debt
      June 15, 2010 @ $.04        |  | 7,115,133    |  |  | 7,115   |  |   | 157,112       |  |   | -           |   |   | -              |   |   | 164,227    |  
|Common stock issued for services June 5, 2010 @ $.16                         |  | 16,000,000   |  |  | 16,000  |  |   | 2,544,000     |  |   | -           |   |   | -              |   |   | 2,560,000  |  
|Common stock issued for conversion of debt
      August 5, 2010 @ $.011      |  | 2,000,000    |  |  | 2,000   |  |   | 20,000        |  |   | -           |   |   | -              |   |   | 22,000     |  
|Common stock issued for conversion of debt August 16, 2010
      @ $.011     |  | 4,931,818    |  |  | 4,932   |  |   | 49,318        |  |   | -           |   |   | -              |   |   | 54,250     |  
|Common stock issued for services August 19,
      2010 @ $.22                |  | 2,000,000    |  |  | 2,000   |  |   | 42,000        |  |   | -           |   |   | -              |   |   | 44,000     |  
|Common stock issued for conversion of debt August 24, 2010
      @ $.011     |  | 6,000,000    |  |  | 6,000   |  |   | 57,000        |  |   | -           |   |   | -              |   |   | 63,000     |  
|Common stock issued for conversion of debt
      September 9, 2010 @ $.006   |  | 6,999,999    |  |  | 7,000   |  |   | 35,000        |  |   | -           |   |   | -              |   |   | 42,000     |  
|Common stock issued for conversion of debt September 22,
      2010 @ $.0035 |  | 8,285,714    |  |  | 8,286   |  |   | 26,714        |  |   | -           |   |   | -              |   |   | 35,000     |  
|Common stock issued for conversion of debt
      October 12, 2010 @ $.0035   |  | 8,285,714    |  |  | 8,286   |  |   | 20,714        |  |   | -           |   |   | -              |   |   | 29,000     |  
|Common stock issued for conversion of debt October 20, 2010
      @ $.0035   |  | 7,142,857    |  |  | 7,143   |  |   | 17,857        |  |   | -           |   |   | -              |   |   | 25,000     |  
|Common stock issued for conversion of debt
      October 27, 2010 @ $.0035   |  | 4,285,714    |  |  | 4,286   |  |   | 10,714        |  |   | -           |   |   | -              |   |   | 15,000     |  
|Common stock issued for conversion of debt November 3, 2010
      @ $.0035   |  | 5,714,285    |  |  | 5,714   |  |   | 14,286        |  |   | -           |   |   | -              |   |   | 20,000     |  
|Common stock issued for conversion of debt
      November 8, 2010 @ $.0035   |  | 5,714,285    |  |  | 5,714   |  |   | 14,286        |  |   | -           |   |   | -              |   |   | 20,000     |  
|Common stock issued for conversion of debt November 9, 2010
      @ $.0035   |  | 7,142,857    |  |  | 7,143   |  |   | 17,857        |  |   | -           |   |   | -              |   |   | 25,000     |  
|Common stock issued for note payable
      November 11,2010 @ $.0035         |  | 12,857,142   |  |  | 12,857  |  |   | 32,143        |  |   | -           |   |   | -              |   |   | 45,000     |  
|Common stock issued for conversion of debt November 12,
      2010 @ $.0035  |  | 8,571,428    |  |  | 8,571   |  |   | 21,429        |  |   | -           |   |   | -              |   |   | 30,000     |  
|Common stock issued for conversion of debt
      November 15, 2010 @$.0035   |  | 8,571,428    |  |  | 8,571   |  |   | 21,429        |  |   | -           |   |   | -              |   |   | 30,000     |  
|Common stock issued for conversion of debt November 18,
      2010 @ $.0035  |  | 10,000,000   |  |  | 10,000  |  |   | 25,000        |  |   | -           |   |   | -              |   |   | 35,000     |  
|Common Stock issued for note payable
      December 8, 2010 @ $.0035         |  | 14,000,000   |  |  | 14,000  |  |   | 35,000        |  |   | -           |   |   | -              |   |   | 49,000     |  

The accompanying notes are an integral part of these
financial statements

---

|TAO MINERALS LTD. and Subsidiary                                       
|-----------------------------------------------------------------------
|(An Exploration Stage Company)                                         
|Consolidated Statement of Changes in Stockholders'
      Deficit       
|For the period September 23, 2004 (Inception) to January
      31, 2011

|                                                                                 |  |              |  |  |         |  |   |               |  |   |             |   |   | Accumulated    |   |   |            |  
|-------------------------------------------------------------------------------- |  | ------------ |  |  | ------- |  | - | ------------- |  | - | ----------- | - | - | -------------- | - | - | ---------- | -
|                                                                                 |  |              |  |  |         |  |   | Additional    |  |   | Accumulated |   |   | Deficit During |   |   | Total      |  
|                                                                                 |  | Common Stock |  |  | Paid in |  |   | Comprehensive |  |   | Exploration |   |   | Stockholders  |  
|                                                                                 |  | Shares       |  |  | Amount  |  |   | Capital       |  |   | Adjustment  |   |   | Stage          |   |   | (Deficit)  |  
|Common Stock issued for conversion of debt
      and interest December 16, 2010  |  |              |  |  |         |  |   |               |  |   |             |   |   |                |   |   |            |  
|@ $.0035                                                                         |  | 22,857,142   |  |  | 22,857  |  |   | 57,143        |  |   | -           |   |   | -              |   |   | 80,000     |  
|Common Stock issued for note payable
      December 29, 2010 @ $.0035            |  | 9,285,714    |  |  | 9,286   |  |   | 23,214        |  |   | -           |   |   | -              |   |   | 32,500     |  
|Common Stock issued for note payable and interest January
      5, 2011 @ $.0034 |  | 5,000,000    |  |  | 5,000   |  |   | 12,500        |  |   | -           |   |   | -              |   |   | 17,500     |  
|Conversion of interest on January 28, 2011
      @ $.0035                        |  | 5,714,285    |  |  | 5,714   |  |   | 14,286        |  |   | -           |   |   | -              |   |   | 20,000     |  
|Derivative liabilities relating to debt converted to shares                      |  | -            |  |  | -       |  |   | 1,991,341     |  |   | -           |   |   | -              |   |   | 1,991,341  |  
|Foreign currency adjustment                                                      |  | -            |  |  | -       |  |   | -             |  |   | (7,000      | ) |   | -              |   |   | (7,000     | )
|Loss for the
      period                                                        |  | -            |  |  | -       |  |   | -             |  |   | -           |   |   | (5,922,530     | ) |   | (5,922,530 | )
|Balance, January 31, 2011                                                        |  | 196,631,122  |  |  | 196,632 |  | $ | 13,033,514    |  | $ | (39,255     | ) | $ | (14,599,401    | ) | $ | (1,408,510 | )

The accompanying notes are an integral part of these
financial statements

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

|1. | Organization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | This summary of accounting policies for Tao Minerals Ltd.
      is presented to assist in understanding the Company's financial
      statements. The accounting policies conform to U.S. generally accepted
      accounting principles and have been consistently applied in the
      preparation of the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Nature of Operations and Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Tao Minerals, Ltd. (the Company) is a natural resource
      exploration company with an objective of acquiring, exploring and if
      warranted and feasible, developing natural resource properties. The
      Company was incorporated under the laws of the State of Nevada on
      September 23, 2004, and has been in the exploration stage since
      inception.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | As reflected in the accompanying financial statements,
      the Company is in the exploration stage and has cumulative negative cash
      flows from operations of $1,346,726 since inception and losses of
      $5,922,530 for the year ended January 31, 2011. This raises substantial
      doubt about its ability to continue as a going concern. These consolidated
      financial statements have been prepared on the assumption that the Company
      is a going concern, meaning it will continue in operation for the
      foreseeable future and will be able to realize assets and discharge
      liabilities in the ordinary course of operations. The financial statements
      do not include any adjustments that might result from the outcome of this
      uncertainty. The ability of the Company to continue as a going concern is
      dependent on the Companys ability to raise additional capital and
      implement its business plan. The financial statements do not include any
      adjustments that might be necessary if the Company is unable to continue
      as a going concern.                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Management believes that actions presently being taken to
      obtain additional funding and implement its strategic plans provide the
      opportunity for the Company to continue as a going concern. Management
      plans to raise equity financings over the next twelve months to finance
      operations. There is no guarantee that the Company will be able to
      complete any of these objectives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | These consolidated financial statements and related notes
      are presented in accordance with accounting principles generally accepted
      in the United States, and are expressed in US dollars. These consolidated
      financial statements include the accounts of TAO Minerals, LTD (Parent
      or TAO) and its 99% owned subsidiary, Minera TAO, SA Minera.
      Collectively, the consolidated entities are referred to herein as the
      Company. All significant inter-company transactions have been
      eliminated. The Companys fiscal year end is January 31.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Accounting Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The preparation of financial statements in conformity
      with US generally accepted accounting principles requires management to
      make estimates and assumptions that affect the reported amounts of assets
      and liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. The Company regularly evaluates
      estimates and assumptions related to valuation of long-lived assets, stock
      based compensation and deferred income tax asset valuation allowances. The
      Company bases its estimates and assumptions on current facts, historical
      experience and various other factors that it believes to be reasonable
      under the circumstances, the results of which form the basis for making
      judgments about the carrying values of assets and liabilities and the
      accrual of costs and expenses that are not readily apparent from other
      sources. The actual results experienced by the Company may differ
      materially and adversely from the Companys estimates. To the extent there
      are material differences between the estimates and the actual results,
      future results of operations will be affected.

37

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

Cash Equivalents

For purposes of the statement of cash
flows cash equivalents usually consist of highly liquid investments which are
readily convertible into cash with maturity of three months or less when
purchased.

Concentrations

The Company has no significant
off-balance-sheet concentrations of credit risk such as foreign exchange
contracts, options contracts or other foreign hedging arrangements. The Company
maintains the majority of its cash balances with one financial institution, in
the form of demand deposits. The companys assets and operations are
concentrated in the country of Colombia, South America.

Mineral Interests

Mineral interests associated with other
than owned properties are classified as tangible assets. As of January 31, 2011,
the Company had capitalized $132,500 related to the mineral rights. The mineral
rights will be amortized using the units-of-production method when production at
each project commences.

Long-Lived Assets

In accordance with ASC 360, Property
Plant and Equipment, the Company tests long-lived assets or asset groups for
recoverability when events or changes in circumstances indicate that their
carrying amount may not be recoverable. Circumstances which could trigger a
review include, but are not limited to: significant decreases in the market
price of the asset; significant adverse changes in the business climate or legal
factors; accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of the asset; current period cash
flow or operating losses combined with a history of losses or a forecast of
continuing losses associated with the use of the asset; and current expectation
that the asset will more likely than not be sold or disposed significantly
before the end of its estimated useful life. Recoverability is assessed based on
the carrying amount of the asset and its fair value which is generally
determined based on the sum of the undiscounted cash flows expected to result
from the use and the eventual disposal of the asset, as well as specific
appraisal in certain instances. An impairment loss is recognized when the
carrying amount is not recoverable and exceeds fair value. At January 31, 2011,
the Company recognized an impairment loss of $19,650 relating to capital assets
whose carrying value was no longer recoverable and exceeded fair value.

Foreign Currency
Translation

The Companys functional and reporting
currency is the United States dollar. Management has adopted ASC 740 Foreign
Currency Translation Matters. Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date. Non-monetary assets and liabilities denominated in foreign
currencies are translated at rates of exchange in effect at the date of the
transaction. Average monthly rates are used to translate revenues and expenses.
Gains and losses arising on translation or settlement of foreign currency
denominated transactions or balances are included in the determination of
income. The Company has not, to the date of these financial statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.

The financial statements of the
subsidiary are translated to United States dollars in accordance with ASC 740
using period-end rates of exchange for assets and liabilities, and average rates
of exchange for the year for revenues and expenses. Translation gains (losses)
are recorded in accumulated other comprehensive income (loss) as a component of
stockholders deficit. Foreign currency transaction gains and losses are
included in current operations.

38

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

Environmental Costs

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

Loss per Share

The Company computes net earnings
(loss) per share in accordance with ASC 260, Earnings Per Share, which requires
presentation of both basic and diluted earnings per share (EPS) on the face of
the income statement. Basic EPS is computed by dividing net earnings (loss)
available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period. Diluted EPS gives effect to
all dilutive potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS, the average stock price for the period is used
in determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti-dilutive. The Company has $375,800 of convertible
debentures which can be converted to common stock. These shares have not been
included in any weighted average computations since the effect would be
anti-dilutive.

Income Taxes

The Company accounts for income taxes
under the ASC 740, Income Taxes. Under ASC 740, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under ASC 740, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

Fair Value of Financial
Instruments

Our financial instruments consist
principally of cash, accounts payable, derivative liabilities, amounts due to
related parties, stock issuance liabilities and convertible notes. Pursuant to
ASC 820, Fair Value Measurements and Disclosures, and ASC 825, Financial
Instruments, the fair value of our cash equivalents is determined based on
Level 1 inputs, which consist of quoted prices in active markets for identical
assets, the fair value of derivative liabilities, stock issuance liabilities and
convertible notes are determined based on Level 3 inputs, which consist of
unobservable inputs to the valuation methodology that are significant to the
measurement of the fair value of the assets or liabilities. We believe that the
recorded values of all of our other financial instruments approximate their
current fair values because of their nature and respective relatively short
maturity dates or durations.

Comprehensive Loss

ASC 220, Comprehensive Income
establishes standards for the reporting and display of comprehensive loss and
its components in the financial statements. At January 31, 2011 and 2010, the
Companys only component of comprehensive loss was foreign currency translation
adjustments. Accordingly, the balance of accumulated other comprehensive loss
was charged to operations.

39

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

Stock-Based
Compensation

In accordance with ASC 718,
Compensation  Stock Based Compensation, the Company accounts for share-based
payments using the fair value method. Common shares issued to third parties for
non-cash consideration are valued based on the fair market value of the services
provided or the fair market value of the common stock on the measurement date,
whichever is more readily determinable.

Business Segments

The Company operates in one segment and
therefore segment information is not presented.

Mining Properties and Exploration
Costs

Exploration costs are charged to
operations in the year in which they are incurred. Costs of acquiring mineral
properties are capitalized until such time commencement of production commences
or a determination that such property is not commercially viable.

Mining properties are, upon
commencement of production, amortized over the estimated life of the ore body to
which they relate or are written off if the property is abandoned or if there is
considered to be a permanent impairment in value.

Investments in mining properties over
which the company has significant influence but not joint control are accounted
for using the equity method.

Site Restoration and Post Closure
Costs

Expenditures related to ongoing
environmental and reclamation activities are expensed, as incurred, unless
previously accrued. Provisions for future site restoration and reclamation and
other post closure costs in respect of operating facilities are charged to
operations over the estimated life of the operating facility, commencing when a
reasonably definitive estimate of the cost can be made

Accounting Changes and Error
Corrections

The Company follows ASC 250, Accounting
Changes and Error Corrections. Changes in accounting principle are reported
through retrospective application of the new accounting principle to all prior
periods. Errors in the financial statements of a prior period discovered
subsequent to their issuance shall be reported as a prior-period adjustment by
restating the prior period.

Reclassifications

Certain reclassifications have been
made to the prior periods financial statements to conform to the current years
presentation, including the reclassification of amounts due to related parties
that were included in accounts payable at the year ended January 31, 2010.

Recent Accounting
Pronouncements

The Company has implemented all new
accounting pronouncements that are in effect and that may impact its financial
statements and does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its
financial position or results of operations.

40

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

|3. | Acquisition of Mineral
Rights
|-- | -----------------------------

Golondrina Property

On October 22, 2004, the Company
acquired the mining rights to two claims collectively known as the Whale Mine
property for a purchase price of $3,000. The Company received rights to all
minerals contained in the Whale Mine property. During the year ended January 31,
2008 the Company abandoned the property and wrote off the capitalized amount of
$3,000.

On February 28, 2006, the Company
entered into an Assignment Agreement (the Definitive Agreement), with Primecap
Resources Inc., of Las Vegas, Nevada, (Primecap), concerning the acquisition of
Primecaps option (the Option), to acquire a 100% interest in the Risaldo La
Golondrina D14-082 mineral property located in Narino, Colombia (the
Property). Primecap had been granted the Option by Nueva California S.A., of
Medellin, Colombia, pursuant to the terms and conditions of a Heads of Agreement
dated August 23, 2004 (the HOA).

The Definitive Agreement provides for
the assignment of the Option for the following consideration:

Payment of US $150,000, (paid on April
13, 2006) and the issuance of 2,500,000 common shares in the capital stock of
the Company, subject to applicable trading restrictions, to Nueva California. In
addition, the Company will assume Primecaps financial obligations under the
HOA. The obligations under the HOA are:

| | 1.  | US$30,000 upon execution of the HOA, which amount has
      been paid;                         
| | --- | -----------------------------------------------------------------------------------------------
| |     |                                                                                                
| | 2.  | US$20,000 on or before August 23, 2005, which amount has
      been paid;                      
| |     |                                                                                                
| | 3.  | US$32,000 on or before August 23, 2006;                                                        
| |     |                                                                                                
| | 4.  | US$40,000 on or before August 23, 2007;                                                        
| |     |                                                                                                
| | 5.  | US$48,000 on or before August 23, 2008; and                                                    
| |     |                                                                                                
| | 6.  | US$160,000 on or before August 23, 2009.                                                       
| |     |                                                                                                
| | 7.  | 200,000 shares of the Assignor, as of August 23, 2004,
      which issuance has been completed;
| |     |                                                                                                
| | 8.  | 200,000 shares of the Assignor, as of August 23, 2005,
      which issuance has been completed;
| |     |                                                                                                
| | 9.  | 300,000 shares of the Assignor, as of August 23,
    2006;                                     
| |     |                                                                                                
| | 10. | 300,000 shares of the Assignor, as of August 23,
    2007                                      

On, June 30, 2006 the Company entered
into an amending agreement (the Agreement) which Agreement amended certain
terms of an assignment agreement (the Assignment Agreement) dated February 28,
2006, between our Company and Primecap Resources Inc. of Nevada, as amended by
an amending agreement dated March 15, 2006.

The Agreement amends the total
consideration that our Company is to pay Primecap Resources Inc. (Primecap) as
to $100,000 on or before July 1, 2006 and $100,000 on or before July 1, 2007.
This Agreement satisfys our obligation in assuming the above noted financial
obligations under the HOA. The first $100,000 payment has been made.

On May 9, 2008 we entered into a second
amending agreement which clarifies the first amending agreement as follows:

41

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

Items 1 through 6 of the HOA agreement
are deleted. The total amounts payable to Primecap remains as amended in the
first amendment. The second $100,000 payment is now due on or before August 1,
2008 and is included in accrued liabilties. As of January 31, 2009 the Company
has not issued the 300,000 shares of common stock due August 23, 2006 and the
300,000 shares of common stock due August 23, 2007. The Company has accrued
$51,000 as a liability for the issuance of 300,000 shares of common stock on
August 23, 2006 at $0.17 the closing price of the stock as of such date and
$41,100 for the issuance liability of 300,000 shares of common stock at August
23, 2007 at $0.137 the closing price of the stock at such date. The Company has
no further obligations under the HOA agreement other than those stated here.

During the year ended January 31, 2009
the Company wrote off the $350,000 capitalized cost of the Golondrina property.
The Company has not been fiscally able to obtain an appraisal or other means of
valuing the market value of such property.

El Colmillo Property

On September 13, 2006 Minera entered
into an option agreement with Agronomicas de Colombia (ADC) to acquire a
mineral rights concession from Colombia for a gold mine called El Colmillo
intthe municipality of Antioquia, Colombia. On April 2008 Minera obtained a six
month extension and on July 15, 2008 a modification of the original terms was
obtained. The terms of the contract are now as follows:

| | 1. | Payment of $80,000,000 Colombian pesos (COP)
      (approximately $50,000 US)                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 2. | Payment of $40,000,000 COP (approximately $25,000 US) on
      the 15th of every month until the initial and monthly payments reach
      $320,000,000 COP (approximately $200,000 US)                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 3. | A royalty of 40% of net production until $1,100,000,000
      COP (approximately $687,500 US) has been paid.                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | When 80% of item 3 has been reached ADC will pass legal
      title of the concession to Minera and will receive a 20% net royalty as
      long as the concession is maintained.                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 4. | Minera has paid $240,000,000 COP (approximately $150,000
      US) through December 2008 of the $320,000,000 COP (approximately $200,000
      US). During the month of December 2008 Minera personnel were met at the
      site by Colombian rebels that demanded a war tax. The Company immediately
      stopped its development efforts and reported the activity to the
      authorities. A force majeure clause in the contract allows Minera to cease
      operations until the cause that activates this clause is
  resolved.

The Company is still assessing the
security risk on this property and operations are still suspended.

Mutata Property

On October 12, 2010, the Company entered into a letter of
intent to acquire the Mutata property, a prospective gold and platinum project
in Colombia. The prospective acquisition consists of one concession that is
located approximately 200 kilometers north of Medellin in the northwest region
of the Antioquia Department known as Uraba. Collectively the concession covers
an area of over 4,900 hectares.

The letter of intent provides the Company the right to examine
the property for a period of one year and does not specify any acquisition terms
or conditions. Should the Company decide to acquire the property the Company
will negotiate and enter into a formal acquisition agreement. During the one
year period of assessment the Company is responsible for all ongoing costs. At
January 31, 2011, the Company was currently completing the due diligence related
to this property.

42

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

|4. | Property Plant and Equipment                                                                                                                                                                  
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                               
|   | During the year ended January 31, 2011, the Company
      recorded an impairment charge of $19,650 relating to long-lived assets for
      which the carrying value was no longer recoverable.
|   |                                                                                                                                                                                               
|5. | Related Party Transactions                                                                                                                                                                    
|   |                                                                                                                                                                                               
|   | a)                                                                                                                                                                                            
|   |                                                                                                                                                                                               
|   | b)                                                                                                                                                                                            
|   |                                                                                                                                                                                               
|   | c)                                                                                                                                                                                            
|   |                                                                                                                                                                                               
|6. | Notes Payable                                                                                                                                                                                 

| |                                                                                   |  | January 31, |   |  | January 31, |  
| | --------------------------------------------------------------------------------- |  | ----------- | - |  | ----------- | -
| |                                                                                   |  | 2011        |   |  | 2010        |  
| |                                                                                   |  | $           |   |  | $           |  
| | a)   Convertible notes - interest
      rate 10% per annum; due April 2010        |  |            |   |  | 125,000     |  
| | b)   Convertible notes - interest rate 8% per
      annum; due on demand.         |  |            |   |  | 370,602     |  
| | c)   Convertible notes - interest
      rate 10% per annum; due December 2, 2014  |  |            |   |  | 50,000      |  
| | d)   Demand loans - unsecured, non-interest bearing                               |  | 50,020      |   |  | 50,020      |  
| | e)   Convertible notes - interest
      rate 12% per annum; due May 28, 2011      |  | 125,800     |   |  |            |  
| | f)   Convertible notes - interest rate 12% per
      annum; due February 15, 2011 |  | 250,000     |   |  |            |  
| | Less: Discount on convertible
      notes                                         |  | (152,974    | ) |  | (108,908    | )
| | Convertible Notes                                                                 |  | 272,846     |   |  | 486,714     |  
| | Less: Current Portion                                                             |  | (272,846    | ) |  | (420,622    | )
| | Long Term Portion                                                                 |  |            |   |  | 66,092      |  

| | a) | On April 23, 2008, we entered into a securities purchase
      agreement for the sale of a $1,000,000 convertible note at 10% with a
      maturity of 2 years. We received $125,000 upon the closing and issued a
      note for the amount. Subsequent to the $125,000 funding the Company and
      the purchaser agreed to terminate the agreement and let the $125,000 note
      stand on its own.                                                                                                                                                                                              
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The note is convertible into common shares at 50% of the
      average volume weighted price of the shares for the five trading days
      prior to conversion. Conversion is at the option of the holder. Due to
      this provision, the embedded conversion option qualifies for derivative
      accounting under ASC 815-15 (See Note 10 below). This fair value of the
      derivative liability at issuance resulted a discount to the note payable.
      The carrying value of the convertible note was accreted over the term of
      the convertible note up to their value of $125,000.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | During the year ended January 31, 2011, the note and
      $41,250 of accrued interest was converted into 34,312,767 shares of the
      Companys common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | b) | In June 2008 the Company entered into a short term note
      in the amount of $500,000 due July 31, 2008 bearing interest at 8%. The
      note is convertible into common shares at 50% of the lowest closing bid
      price                                                                                                                                                                                                                                                                                                                                                                       

43

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

| |    | of the Companys common stock for the trailing 30 days.
      Due to this provision, the embedded conversion option qualifies for
      derivative accounting under ASC 815-15 (See Note 10 below). This fair
      value of the derivative liability at issuance resulted in a full discount
      to the note payable. The carrying value of the convertible note was
      accreted over the term of the convertible note up to their value of
      $500,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company was not able to repay the note and it was
      converted to a demand note. During the fiscal year end January 31, 2010,
      $102,000 of the note was converted into 1,043,590 shares of common stock
      resulting in the conversion loss of $102,000. On May 20, 2010, the
      Directors approved settlement agreements with two of its
lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | During the year ended January 31, 2011, the note and
      $14,000 of accrued interest was converted into 83,619,044 shares of the
      Companys common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | c) | On December 2, 2009, the Company entered into a
      convertible loan agreement for $50,000, due in 60 months, bearing 10%
      interest. The note is convertible into common shares at the lesser of
      $0.06 per share or 60% of the closing bid price for the 10 trading days
      preceding the conversion. Due to this provision, the embedded conversion
      option qualifies for derivative accounting under ASC 815-15 (See Note 10
      below). This fair value of the derivative liability at issuance resulted
      in a full discount to the note payable. The carrying value of the
      convertible note was accreted over the term of the convertible note up to
      their value of $50,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | On June 7, 2010, the Company issued 2,000,000 shares
      pursuant to the conversion of a loan agreement in the amount of $50,000
      plus accrued interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | d) | During the fiscal year ended January 31, 2010, the
      Company borrowed $50,020 of which $25,020 is owed to its President. The
      loans are unsecured, due on demand and bear no interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | e) | During the year ended January 31, 2011, the Company
      entered into two 12% convertible debentures totaling $275,800 of which
      $125,800 is due in one year and $150,000 is due in 90 days. The terms of
      the debenture indicate both the holder and the Company is entitled, at its
      option, to convert at any time and from time to time, all or any part of
      the principal amount, plus accrued interest into common shares at a price
      per share equal to 50% of the lowest trading price of the common stock for
      the 30 days immediately prior to the notice of conversion. Due to this
      provision, the embedded conversion options qualify for derivative
      accounting under ASC 815-15 (See Note 10 below). This fair value of the
      derivative liabilities at issuance resulted in a full discount to the note
      payable. The carrying value of the convertible note was accreted over the
      term of the convertible note up to their values of $125,800 and $150,000
      respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | During the year ended January 31, 2011, the $150,000 note
      and $9,000 of accrued interest was converted into 45,428,571 shares of the
      Companys common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | f) | On August 15, 2010, the Company entered into a 12%
      convertible debenture due February 15, 2011 in the amount of $250,000. The
      Holder is entitled, at its option, to convert at any time and from time to
      time, all or any part of the principal amount of this debenture, plus
      accrued interest, into common shares, at a price per share equal to the
      lowest 50% of the average of the 3 (three) lowest closing bid prices of
      the common stock for the 30 trading days immediately prior to the date
      that the Company receives notice of the conversion or 50% of the lowest
      trading price for the 20 trading days prior to closing of this agreement.
      Likewise the Company is entitled, at its option, at any time and from time
      to time, to convert all or any part of the principal amount of the
      debenture, plus accrued interest, into shares of the Companys common
      stock at a price equal to 50% of the lowest traded price of the common
      stock for the prior 20 trading days that the Company issues such a notice
      of conversion. Due to this provision, the embedded conversion option
      qualifies for derivative accounting under ASC 815-15 (See Note 10 below).
      This fair value of the derivative liability at issuance resulted in a full
      discount to the note payable. The carrying value of the convertible note
      was accreted over the term of the convertible note up to their value of
      $250,000.

44

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

|7. | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|8. | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|9. | Fair Value Measurements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | ASC 825 defines fair value as the price that would be
      received from selling an asset or paid to transfer a liability in an
      orderly transaction between market participants at the measurement date.
      In determining fair value for assets and liabilities required or permitted
      to be recorded at fair value, the Company considers the principal or most
      advantageous market in which it would transact and it considers
      assumptions that market participants would use when pricing the asset or
      liability.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Fair Value Hierarchy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | ASC 825 establishes a fair value hierarchy that requires
      an entity to maximize the use of observable inputs and minimize the use of
      unobservable inputs when measuring fair value. A financial instruments
      categorization within the fair value hierarchy is based upon the lowest
      level of input that is significant to the fair value measurement. ASC 825
      establishes three levels of inputs that may be used to measure fair
      value.                                                                          

45

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

Level 1 applies to assets and
liabilities for which there are quoted prices in active markets for identical
assets or liabilities. Valuations are based on quoted prices that are readily
and regularly available in an active market and do not entail a significant
degree of judgment.

Level 2 applies to assets and
liabilities for which there are other than Level 1 observable inputs such as
quoted prices for similar assets or liabilities in active markets, quoted prices
for identical assets or liabilities in markets with insufficient volume or
infrequent transactions (less active markets), or model-derived valuations in
which significant inputs are observable or can be derived principally from, or
corroborated by, observable market data. Level 2 instruments require more
management judgment and subjectivity as compared to Level 1 instruments. For
instance: determining which instruments are most similar to the instrument being
priced requires management to identify a sample of similar securities based on
the coupon rates, maturity, issuer, credit rating and instrument type, and
subjectively select an individual security or multiple securities that are
deemed most similar to the security being priced; and determining whether a
market is considered active requires management judgment.

Level 3 applies to assets and
liabilities for which there are unobservable inputs to the valuation methodology
that are significant to the measurement of the fair value of the assets or
liabilities. The determination of fair value for Level 3 instruments requires
the most management judgment and subjectivity.

Pursuant to ASC 825, the fair value of
the cash equivalent is determined based on Level 1 inputs, which consists of
quoted prices in active markets for identical assets. Convertible notes payable
and derivative are valued based on Level 3 inputs, consisting of unobservable
inputs to the valuation methodology that are significant to the measurement of
the fair value of the assets or liabilities. The Company believes that the
recorded values of all of the other financial instruments approximate their
current fair values because of their nature and respective relatively short
maturity dates or durations.

Assets and liabilities measured at fair
value on a recurring basis were presented on the Companys balance sheet as at
January 31, 2011 as follows:

| |                           |  | Fair Value Measurements Using |  |  |                   | 
| | ------------------------- |  | ----------------------------- |  |  | ----------------- | 
| |                           |  | Quoted prices in              |  |  |                   | 
| |                           |  | active markets                |  |  | Significant other | 
| |                           |  | for identical                 |  |  | observable        | 
| |                           |  | instruments                   |  |  | Inputs            | 
| |                           |  | (Level 1)                     |  |  | (Level 2)         | 
| |                           |  | $                             |  |  | $                 | 
| |                           |  |                               |  |  |                   | 
| | Cash and cash equivalents |  | 18,295                        |  |  |                  | 
| | Convertible notes payable |  |                              |  |  |                   | 
| | Derivative liabilities    |  |                              |  |  |                  | 
| |                           |  | 18,295                        |  |  |                  | 

|    | The fair values of other financial instruments, which
      include accounts payable, and accrued liabilities approximate their
      carrying values due to the relatively short-term maturity of these
      instruments.            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                        
|10. | Derivative Liability                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                        
|    | ASC 815-15 lays out a procedure to determine if an
      equity-linked financial instrument (or embedded feature) is indexed to its
      own common stock.                                                                            
|    |                                                                                                                                                                                                                                        
|    | Convertible Debt - The embedded conversion option in the
      Companys convertible notes described in Note 6 contain a conversion
      feature that qualifies for embedded derivative classificiation. The fair
      value of these

46

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

liabilities will be re-measured at the
end of every reporting period and the change in fair value will be reported in
our consolidated statement of operations as a gain or loss on derivative
financial instruments.

The following table summarizes the
change in derivative liabilities for the year ended January 31, 2011:

| | Derivative Liabilities at January 31, 2010               | $ | 233,008    |  
| | -------------------------------------------------------- | - | ---------- | -
| | Addition of new derivative liabilities                   |   | 710,819    |  
| | Conversion of derivatives                                |   | (1,991,341 | )
| | Change in fair
      value of embedded conversion option |   | 1,730,571  |  
| | Derivative Liabilities at January 31, 2011               | $ | 683,057    |  

|    | The Company used the Black-Scholes option pricing model
      to value the embedded conversion feature using the following assumptions:
      number of options as set forth in the convertible notes agreements; no
      expected dividend yield; expected volatility ranging from 153% - 503%;
      risk-free interest rates ranging from 0.13% - 0.53% and expected terms
      based on the contractual term.                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|11. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | As of January 31, 2011, the Company had a net operating
      loss carryforward for income tax reporting purposes of approximately
      $10,048,000 that may be offset against future taxable income through 2030.
      Current tax laws limit the amount of loss available to be offset against
      future taxable income when a substantial change in ownership occurs.
      Therefore, the amount available to offset future taxable income may be
      limited. No tax benefit has been reported in the financial statements,
      because the Company believes there is a 50% or greater chance the
      carryforwards will expire unused. Accordingly, the potential tax benefits
      of the loss carryforwards are offset by a valuation allowance of the same
      amount

2011
    
    
    2010Deferred tax assets:Net operating loss carryforwards
    $
    10,048,000
    
    $
    8,480,000Gross deferred tax assets
    
    3,416,000
    
    
    2,883,000Less: valuation allowance
    
    (3,416,000
    )
    
    (2,883,000
    )Net deferred tax asset
    $
    --
    
    $
    --


A reconciliation of the differences
between the effective income tax rate and the statutory federal tax rate
follows:

2011
    
    
    2010Tax expense (benefit) at U.S. statutory
      rate
    
    34.00%
    
    
    34.00%State taxes, net of federal benefit
    
    --
    
    
    --Change in valuation allowance
    
    (34.00
    )
    
    (34.00
    )0.00
      %
    
    
    0.00
      %


|    | The net change in the valuation allowance for fiscal year
      end 2011 is $533,000 (2010 - $200,000).
|--- | -------------------------------------------------------------------------------------------------------
|    |                                                                                                        
|12. | Subsequent Events                                                                                      
|    |                                                                                                        
|    | Subsequent events were evaluated through June 13,
      2011.                                          
|    |                                                                                                        
|    | a)                                                                                                     

47

---

|TAO MINERALS LTD. and Subsidiary                   
|---------------------------------------------------
|(An Exploration Stage Company)                     
|Notes to the
      Consolidated Financial Statement

| |    | the Companys common shares at a price per share equal to
      50% of the lowest traded price of the Common Stock for the 20 trading days
      prior to the date of such notice of conversion. At January 31, 2011, the
      Company had not yet received any proceeds relating to this loan.
      Subsequent to the period end the Company received $250,000 and issued the
      note. Subsequent to January 31, 2011, the Company also converted $65,000
      of notes payable into 50,000,000 shares of the Companys common
    stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | b) | On December 1, 2010, the Company entered into a $250,000
      convertible note agreement. The note bears interest at 12% per year and is
      due on June 1, 2011. The note is convertible at the holders option into
      shares of the Companys common stock, at a price per share equal to the
      lower of 50% of the lowest closing bid price of the Common Stock for the
      30 trading days immediately prior to the date that the Company receives
      notice of conversion or 50% of the lowest traded price for the 20 trading
      days prior to the closing of this agreement. The note is convertible at
      the Companys option into the Companys common shares at a price per share
      equal to 50% of the lowest traded price of the Common Stock for the 20
      trading days prior to the date of such notice of conversion. At January
      31, 2011, the Company had not yet received any proceeds relating to this
      loan. Subsequent to the period end the Company received $250,000 and
      issued the note.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | c) | Subsequent to January 31, 2011, the holder of the
      convertible debenture described in Note 6(e) converted $43,870 of the
      outstanding debt into 21,935,000 shares of the Companys common
    stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | d) | Subsequent to January 31, 2011, the Company issued
      83,149,328 shares of common stock to settle $265,000 of principal and
      interest outstanding relating to the convertible note described in note
      6(f).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | e) | On March 4, 2011, the Company issued 3,428,571 shares of
      common stock for $12,000 consulting fees included in accounts payable at
      January 31, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | f) | On April 27, 2011, the Company issued 10,000,000 shares
      of common stock for $20,000 of debt included in accounts payable at
      January 31, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | g) | On May 17, 2011, the Company issued 7,461,874 shares of
      common stock for $13,058 of debt included in accounts payable at January
      31, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | h) | On May 24, 2011, the Company issued 10,000,000 shares of
      common stock for $10,000 of debt included in accounts payable at January
      31, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

48

---

|Item 9. | Changes in and Disagreements With
      Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------------

There were no disagreements with our accountants related to
accounting principles or practices, financial statement disclosure, internal
controls or auditing scope or procedure during the two fiscal years and
subsequent interim periods.

|Item 9A. | Controls and Procedures
|-------- | -----------------------

Managements Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our president (our
principal executive officer and our principal financial officer and principle
accounting officer) to allow for timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

As of January 31, 2011, the end of our fiscal year covered by
this report, we carried out an evaluation, under the supervision and with the
participation of our president (our principal executive officer and our
principal financial officer and principle accounting officer), of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our president (our principal executive
officer and our principal financial officer and principle accounting officer)
concluded that our disclosure controls and procedures were effective as of the
end of the period covered by this annual report.

Managements Report on Internal Control over Financial
Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Responsibility, estimates
and judgments by management are required to assess the expected benefits and
related costs of control procedures. The objectives of internal control include
providing management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with managements authorization and
recorded properly to permit the preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United
States. Our management assessed the effectiveness of our internal control over
financial reporting as of January 31, 2011. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Our management has concluded that, as of
January 31, 2011, our internal control over financial reporting is. Our
management reviewed the results of their assessment with our Board of Directors.

This annual report does not include an attestation report of
our companys registered public accounting firm regarding internal control over
financial reporting. Managements report was not subject to attestation by our
companys registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit our company to provide only
managements report in this annual report.

49

---

Inherent limitations on effectiveness of
controls

Internal control over financial reporting has inherent
limitations which include but is not limited to the use of independent
professionals for advice and guidance, interpretation of existing and/or
changing rules and principles, segregation of management duties, scale of
organization, and personnel factors. Internal control over financial reporting
is a process which involves human diligence and compliance and is subject to
lapses in judgment and breakdowns resulting from human failures. Internal
control over financial reporting also can be circumvented by collusion or
improper management override. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements on a
timely basis, however these inherent limitations are known features of the
financial reporting process and it is possible to design into the process
safeguards to reduce, though not eliminate, this risk. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial
Reporting

There have been no changes in our internal controls over
financial reporting that occurred during the three month period ended January
31, 2011 that have materially or are reasonably likely to materially affect, our
internal controls over financial reporting.

|Item 9B. | Other Information
|-------- | -----------------

None.

PART III

|Item 10. | Directors, Executive Officers and Corporate
      Governance
|-------- | ------------------------------------------------------------

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

Name
    Position Held
      with the Company
    Age
    Date First Elected or
      AppointedJames Sikora
    President, Chief Financial Officer and
      Director
    51
    February 1, 2006Duncan Bain
    Director
    55
    March 5, 2006Walter (Terry) Plummer
    Director
    70
    March 14, 2006


Business Experience

The following is a brief account of the education and business
experience during at least the past five years of each director, executive
officer and key employee of our company, indicating the persons principal
occupation during that period, and the name and principal business of the
organization in which such occupation and employment were carried out.

50

---

James Sikora, President, Chief Financial Officer and
Director

Mr. Sikora was appointed a director on February 1, 2006, was
appointed our president on March 5, 2006 and was appointed chief financial
officer on August 13, 2010.

Over a four-year career, Mr. Sikora supervised drill floor
operations on locations throughout Canada and the United States in the high
Arctic and offshore Newfoundland and Nova Scotia. Mr. Sikora completed offshore
safety, offshore survival and oilfield firefighting courses. Mr. Sikora became
Hydril Canadian tubular sales and service manager from 1985 to 1987 and
completed an extensive in-house sales and management training program at Hydril
Technology Center Houston.

In 1987, upon completion of the Canadian securities course Mr.
Sikora joined the equities brokerage business with McNeil Mantha. Mr. Sikora
joined Nesbitt Thompsons Edmonton office shortly thereafter, and over the
following three years Mr. Sikora became a licensed commodities broker and
options broker in addition to providing equities trading for his client base.

In 1990, Mr. Sikora left the brokerage industry to pursue a
career in public company finance and consulting. Over 15 years, Mr. Sikora has
worked with numerous public companies, providing financing from US, Canadian and
European sources in addition to guiding management decision-making on mining
projects all over the world.

In 2004 Mr. Sikora became president of Primecap Resources Inc.
a private company seeking exploration projects in Colombia.

Duncan Bain, Director

Mr. Bain was appointed a director on March 5, 2006.

Mr. Bain holds a P.Geo designation, is a fellow of the
Geological Association of Canada and is a member of the Prospectors and
Developers Association of Canada.

Walter (Terry) Plummer, Director

Mr. Plummer was appointed a director on March 14, 2006.

Mr. Plummer is the president of RMS-Ross Corporation, a company
engaged in machinery manufacturing and repairs, specializing in gold recovery
equipment. Mr. Plummer founded RMS-Ross Corporation in 1982. From February 1998
to June 2001, Mr. Plummer was a director and the president of Consolidated
Silver Tusk Mines Ltd., a junior mining exploration company listed on the TSX
Venture Exchange. Mr. Plummer is a member of the Canadian Institute of Mining
and a member of the Canadian Mineral Processing Association. Mr. Plummer also
sits on the board of General Gold Corporation, an exploration stage company in
the business of acquisition and exploration of mineral properties.

Family Relationships

There are no family relationships between any of our directors,
executive officers and proposed directors or executive officers.

Involvement in Certain Legal Proceedings

None of our directors, executive officers, promoters or control
persons has been involved in any of the following events during the past ten
years:

51

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1. A petition under the Federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such person, or
any partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of which he
was an executive officer at or within two years before the time of such
filing;

2. Such person was convicted in a criminal proceeding or is a
named subject of a pending criminal proceeding (excluding traffic violations and
other minor offenses);

3. Such person was the subject of any order, judgment, or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:

| | i.   | Acting as a futures commission merchant, introducing
      broker, commodity trading advisor, commodity pool operator, floor broker,
      leverage transaction merchant, any other person regulated by the Commodity
      Futures Trading Commission, or an associated person of any of the
      foregoing, or as an investment adviser, underwriter, broker or dealer in
      securities, or as an affiliated person, director or employee of any
      investment company, bank, savings and loan association or insurance
      company, or engaging in or continuing any conduct or practice in
      connection with such activity
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ii.  | Engaging in any type of business practice; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | iii. | Engaging in any activity in connection with the purchase
      or sale of any security or commodity or in connection with any violation
      of Federal or State securities laws or Federal commodities
  laws;                                                                                                                                                                                                                                                                                                                                                                                                                           

4. Such person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any Federal or State
authority barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in paragraph (f)(3)(i)
of this section, or to be associated with persons engaged in any such
activity;

5. Such person was found by a court of competent jurisdiction
in a civil action or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by the
Commission has not been subsequently reversed, suspended, or vacated;

6. Such person was found by a court of competent jurisdiction
in a civil action or by the Commodity Futures Trading Commission to have
violated any Federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been subsequently
reversed, suspended or vacated;

7. Such person was the subject of, or a party to, any Federal
or State judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged violation
of:

| | i.   | Any Federal or State securities or commodities law or
      regulation; or                                                                                                                                                                                                                                                
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                           
| | ii.  | Any law or regulation respecting financial institutions
      or insurance companies including, but not limited to, a temporary or
      permanent injunction, order of disgorgement or restitution, civil money
      penalty or temporary or permanent cease-and-desist order, or removal or
      prohibition order; or
| |      |                                                                                                                                                                                                                                                                                                                           
| | iii. | Any law or regulation prohibiting mail or wire fraud or
      fraud in connection with any business entity; or                                                                                                                                                                                                            

8. Such person was the subject of, or a party to, any sanction
or order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act
(15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange,
association, entity or organization that has disciplinary authority over its
members or persons associated with a member.

52

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

Section 16(a) of the Securities Exchange Act of 1934 requires
our executive officers and directors and persons who own more than 10% of our
common stock to file with the Securities and Exchange Commission initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our common stock and other equity
securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and
greater than 10% shareholders are required by the SEC regulations to furnish us
with copies of all Section 16(a) reports that they file.

Based solely on the reports received by the Company and on
written representations from certain reporting persons, we believe that the
directors, executive officers and persons who beneficially own more than 10% of
the Companys common stock during the fiscal year ended January 31, 2011 have
been in compliance with Section 16(a).

Code of Ethics

Effective May 11, 2009, our company's board of directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, members of our board of directors, our company's officers including our
president, chief executive officer and chief financial officer, employees,
consultants and advisors. As adopted, our Code of Business Conduct and Ethics
sets forth written standards that are designed to deter wrongdoing and to
promote:

| | 1. | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                              
| | 2. | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that we file with, or submit to, the
      Securities and Exchange Commission and in other public communications made
      by us;
| |    |                                                                                                                                                                                                                              
| | 3. | compliance with applicable governmental laws, rules and
      regulations;                                                                                                                                                   
| |    |                                                                                                                                                                                                                              
| | 4. | the prompt internal reporting of violations of the Code
      of Business Conduct and Ethics to an appropriate person or persons
      identified in the Code of Business Conduct and Ethics; and                            
| |    |                                                                                                                                                                                                                              
| | 5. | accountability for adherence to the Code of Business
      Conduct and Ethics.                                                                                                                                               

Our Code of Business Conduct and Ethics requires, among other
things, that all of our company's Senior Officers commit to timely, accurate and
consistent disclosure of information; that they maintain confidential
information; and that they act with honesty and integrity.

In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly Senior Officers, have a responsibility for
maintaining financial integrity within our company, consistent with generally
accepted accounting principles, and federal and state securities laws. Any
Senior Officer who becomes aware of any incidents involving financial or
accounting manipulation or other irregularities, whether by witnessing the
incident or being told of it, must report it to our company. Any failure to
report such inappropriate or irregular conduct of others is to be treated as a
severe disciplinary matter. It is against our company policy to retaliate
against any individual who reports in good faith the violation or potential
violation of our company's Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics is being filed with the
Securities and Exchange Commission as Exhibit 14.1 to our annual report for the
year ended January 31, 2009. We will provide a copy of the Code of Business
Conduct and Ethics to any person without charge, upon request. Requests can be
sent to: Tao Minerals Ltd., Officina 301 Edeficio El Crusero, Carrera 48, 12 Sur
 148 Medellin, Colombia.

53

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Committees of the Board

All proceedings of our board of directors were conducted by
resolutions consented to in writing by all the directors and filed with the
minutes of the proceedings of the directors. Such resolutions consented to in
writing by the directors entitled to vote on that resolution at a meeting of the
directors are, according to the corporate laws of the state of Nevada and the
bylaws of our company, as valid and effective as if they had been passed at a
meeting of the directors duly called and held.

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

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

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

Audit Committee and Audit Committee Financial Expert

Our board of directors has determined that none of our
directors qualifies as an "audit committee financial expert" as defined in Item
407(d)(5)(ii) of Regulation S-K, and is "independent" as the term is used in
Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as
amended.

We believe that the members of our board of directors are
collectively capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial reporting. We
believe that retaining an independent director who would qualify as an "audit
committee financial expert" would be overly costly and burdensome and is not
warranted in our circumstances given the early stages of our development and the
fact that we have not generated any material revenues to date. In addition, we
currently do not have nominating, compensation or audit committees or committees
performing similar functions nor do we have a written nominating, compensation
or audit committee charter. Our board of directors does not believe that it is
necessary to have such committees because it believes the functions of such
committees can be adequately performed by our board of directors.

|Item 11. | Executive Compensation
|-------- | ----------------------

The particulars of the compensation paid to the following
persons:

- our principal executive officer;
- each of our two most highly compensated executive officers who were serving
  as executive officers at the end of the years ended January 31, 2011 and 2010;
  and
- up to two additional individuals for whom disclosure would have been
  provided under (b) but for the fact that the individual was not serving as our
  executive officer at the end of the years ended January 31, 2011 and 2010,

54

---

who we will collectively refer to as the named executive
officers of our company, are set out in the following summary compensation
table, except that no disclosure is provided for any named executive officer,
other than our principal executive officers, whose total compensation did not
exceed $100,000 for the respective fiscal year:

SUMMARY
      COMPENSATION TABLEName and Principal
      Position
    Year
    Salary ($)
    Bonus ($)
    Stock Awards
      ($)
    OptionAwards
      ($)
    Non-
      Equity IncentivePlan
      **Compensa-**tion ($)
    Change in
      Pension Value and **Nonqualified**
      Deferred **Compensation**Earnings
      ($)
    All
      Other **Compensa-** tion
      ($)
    Total ($)James Sikora(1)President and Chief Financial Officer
    2011 2010
    120,000 120,000
    200,000 Nil
    Nil 100,000
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    320,000 220,000Julio C. Calle(2)Former Chief Financial Officer
    2011 2010
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil NilJulio De Leon(3)Former Chief Financial Officer
    2011 2010
    N/A 49,500
    N/A Nil
    N/A Nil
    N/A Nil
    N/A Nil
    N/A Nil
    N/A Nil
    N/A 49,500


|(1) | Mr. Sikora was appointed president on March 5, 2006 and
      as chief financial officer on August 13, 2010.
|--- | ------------------------------------------------------------------------------------------------------------
|    |                                                                                                             
|(2) | Mr. Calle was appointed chief financial officer on July
      13, 2009 and resigned on August 13, 2010.     
|    |                                                                                                             
|(3) | Mr. De Leon was appointed chief financial officer on
      September 1, 2006 and resigned on July 13, 2009. 

Other than as set out below, there are no arrangements or plans
in which we provide pension, retirement or similar benefits for directors or
executive officers. Our directors and executive officers may receive share
options at the discretion of our board of directors in the future. We do not
have any material bonus or profit sharing plans pursuant to which cash or
non-cash compensation is or may be paid to our directors or executive officers,
except that share options may be granted at the discretion of our board of
directors.

On September 1, 2008, we entered into an executive employment
agreement with James Sikora, our president and chief executive officer. Pursuant
to the terms of the agreement, we agree to pay to Mr. Sikora an annual salary of
$120,000 and issue to Mr. Sikora 500,000 shares of preferred A stock. In
addition, Mr. Sikora is eligible to earn a cash bonus of up to $150,000 for each
twelve month period during the employment term. The agreement shall be for a
period of thirty-six (36) months.

Stock Option Plan

Currently, we do not have a stock option plan in favor of any
director, officer, consultant or employee of our company.

Stock Options/SAR Grants

During our fiscal year ended January 31, 2011 there were no
options granted to our named officers or directors.

Outstanding Equity Awards at Fiscal Year End

No equity awards were outstanding as of the year ended January
31, 2011.

55

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Option Exercises

During our Fiscal year ended January 31, 2011 there were no
options exercised by our named officers.

Compensation of Directors

We do not have any agreements for compensating our directors
for their services in their capacity as directors, although such directors are
expected in the future to receive stock options to purchase shares of our common
stock as awarded by our board of directors.

We have determined that none of our directors are independent
directors, as that term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the
Securities Exchange Act of 1934, as amended, and as defined by Rule
4200(a)(15) of the NASDAQ Marketplace Rules.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.

Indebtedness of Directors, Senior Officers, Executive
Officers and Other Management

None of our directors or executive officers or any associate or
affiliate of our company during the last two fiscal years, is or has been
indebted to our company by way of guarantee, support agreement, letter of credit
or other similar agreement or understanding currently outstanding.

Family Relationships

There are no family relationships between any of our directors,
executive officers or directors.

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

The following table sets forth, as of June 22, 2011, certain
information with respect to the beneficial ownership of our common shares by
each shareholder known by us to be the beneficial owner of more than 5% of our
common shares, as well as by each of our current directors and executive
officers as a group. Each person has sole voting and investment power with
respect to the shares of common stock, except as otherwise indicated. Beneficial
ownership consists of a direct interest in the shares of common stock, except as
otherwise indicated.

Name and Address of
      Beneficial Owner
    Amount and Nature of
      Beneficial Ownership
    Percentage of
      Class(1)James Sikora Officina 301 Edeficio El
      Crusero Carrera 48, 12 Sur - 148 Medellin, Colombia
    5,433,750 Common(2)
    1.56%Duncan Bain 49 Midale
      Crescent London, ON, Canada M5X 3C2
    5,000 Common
    .0015%


56

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Walter (Terry) Plummer 1804 Lindell
      Avenue Lindell Beach, BC, Canada V2R 4W7
    2,500 Common
    .0007%Julio C. Calle Officina 301 Edeficio El
      Crusero Carrera 48, 12 Sur - 148 Medellin, Colombia
    Nil
    0%Directors and Executive Officers as a
      Group
    5,441,250 Common
    1.80%


(1) Under Rule 13d-3, a beneficial owner of a security includes
any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise has or shares: (i) voting power, which
includes the power to vote, or to direct the voting of shares; and (ii)
investment power, which includes the power to dispose or direct the disposition
of shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power to
dispose of the shares). In addition, shares are deemed to be beneficially owned
by a person if the person has the right to acquire the shares (for example, upon
exercise of an option) within 60 days of the date as of which the information is
provided. In computing the percentage ownership of any person, the amount of
shares outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition rights. As
a result, the percentage of outstanding shares of any person as shown in this
table does not necessarily reflect the persons actual ownership or voting power
with respect to the number of shares of common stock actually outstanding on
June 22, 2011. As of June 22, 2011, there were 342,605,877  shares of our
companys common stock issued and outstanding.

(2) Includes 1,181,250 shares of common stock held in the name
of Minera Primecap Resources S.A. for which James Sikora holds dispositive
control.

Changes in Control

We are unaware of any contract or other arrangement or
provisions of our Articles or Bylaws the operation of which may at a subsequent
date result in a change of control of our company. There are not any provisions
in our Articles or Bylaws, the operation of which would delay, defer, or prevent
a change in control of our company.

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

Except as disclosed herein, no director, executive officer,
shareholder holding at least 5% of shares of our common stock, or any family
member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction since the year ended January 31, 2011, in
which the amount involved in the transaction exceeded or exceeds the lesser of
$120,000 or one percent of the average of our total assets at the year end for
the last three completed fiscal years.

Director Independence

We currently act with three directors, consisting of James
Sikora, Duncan Bain and Walter (Terry) Plummer. We have determined that Duncan
Bain and Walter (Terry) Plummer are each an independent director as defined in
NASDAQ Marketplace Rule 4200(a)(15).

We do not have a standing audit, compensation or nominating
committee, but our entire board of directors acts in such capacities. We believe
that our members of our board of directors are capable of analyzing and
evaluating our financial statements and understanding internal controls and
procedures for financial reporting. The board of directors of our company does
not believe that it is necessary to have an audit committee because we believe
that the functions of an audit committee can be adequately performed by the
board of directors. In addition, we believe that

57

---

retaining an independent director who would qualify as an
audit committee financial expert would be overly costly and burdensome and is
not warranted in our circumstances given the early stages of our
development.

|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

The aggregate fees billed for the most recently completed
fiscal year ended January 31, 2011 and for the fiscal year ended January 31,
2010 for professional services rendered by the principal accountant for the
audit of our annual financial statements and review of the financial statements
included in our quarterly reports on Form 10-Q and services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for these fiscal periods were as follows:

Year EndedJanuary 31, 2011 $
    January 31, 2010 $Audit Fees
    18,600
    13,400Audit Related Fees
    11,700
    6,250Tax Fees
    Nil
    NilAll Other Fees
    Nil
    NilTotal
    30,300
    19,650


Our board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.

Our board of directors has considered the nature and amount of
fees billed by our independent auditors and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
our independent auditors independence.

PART IV

|Item 15. | Exhibits, Financial Statement Schedules
|-------- | ---------------------------------------

|(a) | Financial Statements
|--- | --------------------
|    |                     
|    | (1)                 
|    |                     
|    | (2)                 
|    |                     
|(b) | Exhibits            

|Exhibit | Description                                                                                                                          
|------- | -------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                      
|(3)     | (i) Articles of
      Incorporation; and (ii) Bylaws                                                                                 
|3.1     | Articles of Incorporation
      (incorporated by reference from our Form SB-2 Registration Statement,
      filed on March 24, 2005).
|3.2     | Bylaws (incorporated by
      reference from our Form SB-2 Registration Statement, filed on March 24,
      2005).                   

58

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|Exhibit | Description                                                                                                                                                                                                                          
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                                      
|3.3     | Certificate of
        Change (incorporated by reference from our Current Report on Form 8-K,
        filed on March 24, 2006).                                                                                                      
|3.4     | Certificate of Change (incorporated
        by reference from our Current Report on Form 8-K, filed on November 12,
        2009).                                                                                                   
|(10)    | Material Contracts                                                                                                                                                                                                                   
|10.1    | Purchase and Sale Agreement dated
        October 22, 2004 (incorporated by reference from our Amendment No. 1 on
        Form SB-2/A Registration Statement, filed on April 28, 2005).                                              
|10.2    | Letter Agreement
        dated February 1, 2006 between our company and Nueva California S.A. and
        Primecap Resources Inc. (incorporated by reference from our Current Report
        on Form 8-K, filed on February 6, 2006).
|10.3    | Assignment Agreement dated February
        28, 2006 between our company and Primecap Resources Inc. (incorporated
        by reference from our Current Report on Form 8-K, filed on March 10, 2006).                               
|10.4    | Amending Agreement
        dated March 15, 2006 between our company and Primecap Resources Inc. (incorporated
        by reference from our Current Report on Form 8-K, filed on March 20, 2006).                                    
|10.5    | Consulting Agreement dated April
        1, 2006 between our company and James Sikora (incorporated by reference
        from our Current Report on Form 8-K, filed on April 20, 2006)                                               
|10.6    | Amending Agreement
        Dated June 30, 2006 between our company and Primecap Resources Inc. (incorporated
        by reference from our Current Report on Form 8-K, filed on July 14, 2006).                                      
|10.7    | Convertible Loan Agreement dated
        December 1, 2009 between our company and John C. Lama (incorporated by
        reference from our Current Report on Form 8-K, filed on December 11, 2009).                                  
|10.8    | Consulting Services
        Agreement between our company and Kerry Services Inc. (incorporated by
        reference from our Current Report on Form 8-K, filed on August 12, 2010)                                                  
|(31)    | 302 Certification                                                                                                                                                                                                                    
|31.1*   | Section
        302 Certification under Sarbanes-Oxley Act of 2002.                                                                                                                                                                  
|(32)    | 906 Certification                                                                                                                                                                                                                    
|32.1*   | Section
        906 Certification under Sarbanes-Oxley Act of 2002.                                                                                                                                                                  

|* | Filed herewith.
|- | ---------------

59

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SIGNATURES

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

|                     | TAO
      MINERALS LTD.                                
|-------------------- | -------------------------------------------------------
|                     | (Registrant)                                           
|                     |                                                        
|                     |                                                        
|Dated: June 27, 2011 | /s/
      James Sikora                                 
|                     | James Sikora                                           
|                     | President, Chief Executive Officer, Chief              
|                     | Financial Officer and Director                         
|                     | (Principal Executive Officer, Principal
      Financial
|                     | Officer and Principal Accounting Officer)              

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

|Dated: June 27, 2011 | /s/
      James Sikora                                 
|-------------------- | -------------------------------------------------------
|                     | James Sikora                                           
|                     | President, Chief Executive Officer, Chief              
|                     | Financial Officer and Director                         
|                     | (Principal Executive Officer, Principal
      Financial
|                     | Officer and Principal Accounting Officer)              
|                     |                                                        
|                     |                                                        
|Dated: June 27, 2011 | /s/
      Duncan Bain                                  
|                     | Duncan Bain                                            
|                     | Director                                               
|                     |                                                        
|                     |                                                        
|Dated: June 27, 2011 | /s/
      Walter (Terry) Plummer                       
|                     | Walter (Terry) Plummer                                 
|                     | Director                                               

60

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