UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended September 30,
2009.


or





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





For the
transition period from to 
to





Commission
File Number : 333-142890.





AFFINITY GOLD
CORP.


(Exact
name of registrant as specified in its charter)





Nevada
                    26-4152475(State
      or other jurisdiction of incorporation or
                    (I.R.S.
      Employer Identification No.)organization)7950 Main Street, Suite 217
                    55369Maple Grove, MN
                    (Zip
      Code)(Address
      of principal executive offices)





763-424-4754


(Registrant’s
telephone number, including area code)





N/A


(Former
name, former address and former fiscal year, if changed since last
report)





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


xYes  ̈ No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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 whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer
               ̈
              Accelerated
      filer
               ̈Non-accelerated
      filer
               ̈ (Do not check if
      a smaller reporting company)
              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 x
No





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:





Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.


 ̈
Yes  ̈
No





APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:  51,231,195 shares of common
stock as of December 10, 2009.





TABLE OF
CONTENTS





USE
      OF NAMES
                3CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
                3PART
      I – FINANCIAL INFORMATION
                3Item
      1. Financial Statements
                3Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                6Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk.
                10Item
      4T. Controls and Procedures.
                10PART
      II - OTHER INFORMATION
                10Item
      1. Legal Proceedings
                10Item
      1A. Risk Factors
                10Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                11Item
      3. Defaults upon Senior Securities
                11Item
      4. Submission of Matters to a Vote of Security Holders
                11Item
      5. Other Information
                11Item
      6. Exhibits
                11


2


USE
OF NAMES





In this
quarterly report, the terms “Affinity,” “Company,” “we,” or “our,” unless the
context otherwise requires, mean Affinity Gold Corp. and its
subsidiary.





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





This
quarterly report on Form 10-Q and other reports that we file with the SEC
contain statements that are considered forward-looking
statements.  Forward-looking statements give the Company’s current
expectations, plans, objectives, assumptions or forecasts of future
events.  All statements other than statements of current or historical
fact contained in this quarterly report, including statements regarding the
Company’s future financial position, business strategy, budgets, projected costs
and plans and objectives of management for future operations, are
forward-looking statements.  In some cases, you can identify
forward-looking statements by terminology such as “anticipate,” “estimate,”
“plans,” “potential,” “projects,” “ongoing,” “expects,” “management believes,”
“we believe,” “we intend,” and similar expressions.  These statements
are based on the Company’s current plans and are subject to risks and
uncertainties, and as such the Company’s actual future activities and results of
operations may be materially different from those set forth in the forward
looking statements.  Any or all of the forward-looking statements in
this quarterly report may turn out to be inaccurate and as such, you should not
place undue reliance on these forward-looking statements.  The Company
has based these forward-looking statements largely on its current expectations
and projections about future events and financial trends that it believes may
affect its financial condition, results of operations, business strategy and
financial needs.  The forward-looking statements can be affected by
inaccurate assumptions or by known or unknown risks, uncertainties and
assumptions due to a number of factors, including:





·
            dependence
      on key personnel;


·
            competitive
      factors;


·
            the
      operation of our business; and


·
            general
      economic conditions in the United States, Peru and Latin
      America.





These
forward-looking statements speak only as of the date on which they are made, and
except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events.  In addition, we cannot assess the
impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.  All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the cautionary
statements contained in this quarterly report.





PART
I – FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





These
unaudited financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the SEC instructions to Form 10-Q.  In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included.  Operating results for the interim
period ended September 30, 2009, are not necessarily indicative of the results
that can be expected for the full year.





3




AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 Financial
      Statements-Consolidated
      Balance Sheets as of September 30, 2009, and March 31,
2009
                  
                  F-2Consolidated
      Statements of Operations for the Three Months and Six Months Ended
      September 30, 2009, and 2008, and Cumulative from
Inception
                  
                  F-3Consolidated
      Statement of Stockholders’ Equity for the Period From Inception through
      September 30, 2009
                  
                  F-4Consolidated
      Statements of Cash Flows for the Six Months Ended September 30, 2009, and
      2008, and Cumulative from Inception
                  
                  F-5Notes
      to Consolidated Financial Statements September 30, 2009, and
      2008
                  
                  F-6
  F-1
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 CONSOLIDATED
BALANCE SHEETS (NOTE 2)
 AS
OF SEPTEMBER 30, 2009, MARCH 31, 2009
 (Unaudited)
 
 September 30,
                                                                              
                                                                              March 31,2009
                                                                              
                                                                              2009Current
      Assets:Cash
      and cash equivalents
                                                                              
                                                                              $
                                                                              20,479
                                                                              
                                                                              
                                                                              $
                                                                              28,444Note
      receivable - Related party
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              236,000Prepaid
      insurance and taxes
                                                                              
                                                                              
                                                                              2,565
                                                                              
                                                                              
                                                                              
                                                                              -Total
      current assets
                                                                              
                                                                              
                                                                              23,044
                                                                              
                                                                              
                                                                              
                                                                              264,444Property
      and Equipment:Mineral
      property
                                                                              
                                                                              
                                                                              12,260,638
                                                                              
                                                                              
                                                                              
                                                                              -Machinery
      and equipment
                                                                              
                                                                              
                                                                              433,729
                                                                              
                                                                              
                                                                              
                                                                              -Furniture
      and fixtures
                                                                              
                                                                              
                                                                              2,074
                                                                              
                                                                              
                                                                              
                                                                              -Computer
      and office equipment
                                                                              
                                                                              
                                                                              1,569
                                                                              
                                                                              
                                                                              
                                                                              -Vehicle
      and transport
                                                                              
                                                                              
                                                                              20,372
                                                                              
                                                                              
                                                                              
                                                                              -12,718,382
                                                                              
                                                                              
                                                                              
                                                                              -Less
      - Accumulated depreciation
                                                                              
                                                                              
                                                                              (12,608
                                                                              )
                                                                              
                                                                              
                                                                              -Net
      property and equipment
                                                                              
                                                                              
                                                                              12,705,774
                                                                              
                                                                              
                                                                              
                                                                              -Other
      Assets:Deposit
      on office rent
                                                                              
                                                                              
                                                                              2,500
                                                                              
                                                                              
                                                                              
                                                                              -Total
      Assets
                                                                              
                                                                              $
                                                                              12,731,318
                                                                              
                                                                              
                                                                              $
                                                                              264,444LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      Liabilities:Accounts
      payable - Trade
                                                                              
                                                                              $
                                                                              47,293
                                                                              
                                                                              
                                                                              $
                                                                              1,590Accrued
      liabilities
                                                                              
                                                                              
                                                                              56,077
                                                                              
                                                                              
                                                                              
                                                                              21,489Due
      to related party - Stockholder
                                                                              
                                                                              
                                                                              44,313
                                                                              
                                                                              
                                                                              
                                                                              -Total
      current liabilities
                                                                              
                                                                              
                                                                              147,683
                                                                              
                                                                              
                                                                              
                                                                              23,079Total
      liabilities
                                                                              
                                                                              
                                                                              147,683
                                                                              
                                                                              
                                                                              
                                                                              23,079Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock, par value $0.001 per share; 10,000,000shares
      authorized; no shares issued and outstandingin
      September 2009, and March 2009
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              -Common
      stock, par value $0.001 per share; 250,000,000shares
      authorized; 51,231,195 shares and 65,260,815shares
      issued and outstanding in September 2009,and
      March 2009, respectively
                                                                              
                                                                              
                                                                              51,231
                                                                              
                                                                              
                                                                              
                                                                              65,261Additional
      paid-in capital
                                                                              
                                                                              
                                                                              16,529,183
                                                                              
                                                                              
                                                                              
                                                                              1,426,065Other
      comprehensive income
                                                                              
                                                                              
                                                                              225,313
                                                                              
                                                                              
                                                                              
                                                                              -(Deficit)
      accumulated during the exploration stage
                                                                              
                                                                              
                                                                              (4,222,092
                                                                              )
                                                                              
                                                                              
                                                                              (1,249,961
                                                                              )Total
      stockholders' equity
                                                                              
                                                                              
                                                                              12,583,635
                                                                              
                                                                              
                                                                              
                                                                              241,365Total
      Liabilities and Stockholders' Equity
                                                                              
                                                                              $
                                                                              12,731,318
                                                                              
                                                                              
                                                                              $
                                                                              264,444
 
 The
accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
  F-2
 
 AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) (NOTE 2)
 FOR
THE THREE MONTHS AND SIX MONTHS ENDED
 SEPTEMBER
30, 2009, AND 2008, AND CUMULATIVE
 FROM
INCEPTION (MARCH 27, 2007) THROUGH SEPTEMBER 30, 2009
 (Unaudited)
 
 Three Months Ended
                                                                      
                                                                      
                                                                      Six Months Ended
                                                                      
                                                                      
                                                                      CumulativeSeptember 30,
                                                                      
                                                                      
                                                                      September 30,
                                                                      
                                                                      
                                                                      From2009
                                                                      
                                                                      
                                                                      2008
                                                                      
                                                                      
                                                                      2009
                                                                      
                                                                      
                                                                      2008
                                                                      
                                                                      
                                                                      InceptionRevenues
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      -Expenses:Exploration
      costs
                                                                      
                                                                      
                                                                      12,388
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      12,388
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      12,388General
      and administrative -Professional
      fees
                                                                      
                                                                      
                                                                      92,084
                                                                      
                                                                      
                                                                      
                                                                      1,500
                                                                      
                                                                      
                                                                      
                                                                      105,385
                                                                      
                                                                      
                                                                      
                                                                      3,500
                                                                      
                                                                      
                                                                      
                                                                      217,306Consulting
                                                                      
                                                                      
                                                                      3,804
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      3,804
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      8,493Other
      general and administrative
                                                                      
                                                                      
                                                                      45,740
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      67,097
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      69,042Stock-based
      compensation
                                                                      
                                                                      
                                                                      327,424
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      2,783,440
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      3,927,440Total
      general and administrative expenses
                                                                      
                                                                      
                                                                      469,052
                                                                      
                                                                      
                                                                      
                                                                      1,500
                                                                      
                                                                      
                                                                      
                                                                      2,959,726
                                                                      
                                                                      
                                                                      
                                                                      3,500
                                                                      
                                                                      
                                                                      
                                                                      4,222,281(Loss)
      from Operations
                                                                      
                                                                      
                                                                      (481,440
                                                                      )
                                                                      
                                                                      
                                                                      (1,500
                                                                      )
                                                                      
                                                                      
                                                                      (2,972,114
                                                                      )
                                                                      
                                                                      
                                                                      (3,500
                                                                      )
                                                                      
                                                                      
                                                                      (4,234,669
                                                                      )Other
      Income (Expense):Interest
      income
                                                                      
                                                                      
                                                                      4
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      11
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      12,605Interest
      (expense)
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      (28
                                                                      )
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      (28
                                                                      )Provision
      for Income Taxes
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -Net
      (Loss)
                                                                      
                                                                      $
                                                                      (481,436
                                                                      )
                                                                      
                                                                      $
                                                                      (1,500
                                                                      )
                                                                      
                                                                      $
                                                                      (2,972,131
                                                                      )
                                                                      
                                                                      $
                                                                      (3,500
                                                                      )
                                                                      
                                                                      $
                                                                      (4,222,092
                                                                      )
 Comprehensive
      (Loss):Foreign
      currency translation
                                                                      
                                                                      
                                                                      225,313
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      225,313
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      225,313Total
      Comprehensive (Loss)
                                                                      
                                                                      $
                                                                      (256,123
                                                                      )
                                                                      
                                                                      $
                                                                      (1,500
                                                                      )
                                                                      
                                                                      $
                                                                      (2,746,818
                                                                      )
                                                                      
                                                                      $
                                                                      (3,500
                                                                      )
                                                                      
                                                                      $
                                                                      ( 3,996,779
                                                                      )(Loss)
      Per Common Share:(Loss)
      per common share - Basic and Diluted
                                                                      
                                                                      $
                                                                      (0.01
                                                                      )
                                                                      
                                                                      $
                                                                      (0.00
                                                                      )
                                                                      
                                                                      $
                                                                      (0.05
                                                                      )
                                                                      
                                                                      $
                                                                      (0.00
                                                                      )Weighted
      Average Number of Common Shares Outstanding - Basic and
      Diluted
                                                                      
                                                                      
                                                                      58,016,110
                                                                      
                                                                      
                                                                      
                                                                      64,500,000
                                                                      
                                                                      
                                                                      
                                                                      61,715,246
                                                                      
                                                                      
                                                                      
                                                                      64,500,000
 
 The
accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
  F-3
 
 AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (NOTE 2)
 FOR
THE PERIOD FROM INCEPTION (MARCH 27, 2007) THROUGH SEPTEMBER 30,
2009
 
 (Deficit)AccumulatedDiscount on
                                                
                                                
                                                Additional
                                                
                                                
                                                Common
                                                
                                                
                                                Other
                                                
                                                
                                                During theCommon stock
                                                
                                                
                                                Common
                                                
                                                
                                                Paid-in
                                                
                                                
                                                Stock
                                                
                                                
                                                Comprehensive
                                                
                                                
                                                ExplorationDescription
                                                
                                                Shares
                                                
                                                
                                                Amount
                                                
                                                
                                                Stock
                                                
                                                
                                                Capital
                                                
                                                
                                                Subscribed
                                                
                                                
                                                Income
                                                
                                                
                                                Stage
                                                
                                                
                                                TotalsBalance
      - March 27, 2007
                                                
                                                
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                $
                                                -Common
      stock issued for cash
                                                
                                                
                                                64,500,000
                                                
                                                
                                                
                                                64,500
                                                
                                                
                                                
                                                (21,500
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                43,000Net
      (loss) for the period
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (4,505
                                                )
                                                
                                                
                                                (4,505
                                                )Balance
      - March 31, 2007
                                                
                                                
                                                64,500,000
                                                
                                                
                                                
                                                64,500
                                                
                                                
                                                
                                                (21,500
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (4,505
                                                )
                                                
                                                
                                                38,495Net
      (loss) for the period
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (45,586
                                                )
                                                
                                                
                                                (45,586
                                                )Balance
      - March 31, 2008
                                                
                                                
                                                64,500,000
                                                
                                                
                                                
                                                64,500
                                                
                                                
                                                
                                                (21,500
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (50,091
                                                )
                                                
                                                
                                                (7,091
                                                )Common
      stock issued for cash
                                                
                                                
                                                760,815
                                                
                                                
                                                
                                                761
                                                
                                                
                                                
                                                21,500
                                                
                                                
                                                
                                                282,065
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                304,326Stock-based
      compensation - Stock Options
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,144,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,144,000Net
      (loss) for the period
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (1,199,870
                                                )
                                                
                                                
                                                (1,199,870
                                                )Balance
      -March 31, 2009
                                                
                                                
                                                65,260,815
                                                
                                                
                                                
                                                65,261
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,426,065
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (1,249,961
                                                )
                                                
                                                
                                                241,365Common
      stock issued for cash
                                                
                                                
                                                285,060
                                                
                                                
                                                
                                                285
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                142,245
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                142,530Stock-based
      compensation - Stock Options
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                2,783,440
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                2,783,440Common
      stock subscribed - 72,820 shares
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                57,741
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                57,741Common
      stock subscribed - 100,000 shares
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                100,000Common
      stock issued for cash
                                                
                                                
                                                25,000
                                                
                                                
                                                
                                                25
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                24,975
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                25,000Common
      stock issued for stock subscriptions
                                                
                                                
                                                160,320
                                                
                                                
                                                
                                                160
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                145,081
                                                
                                                
                                                
                                                (145,241
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Cancellation
      of stock subscription - 12,500 shares
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (12,500
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (12,500
                                                )Common
      stock issued - Share Exchange Agreement
                                                
                                                
                                                12,000,000
                                                
                                                
                                                
                                                12,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                11,988,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                12,000,000Cancellation
      of common stock
                                                
                                                
                                                (26,500,000
                                                )
                                                
                                                
                                                (26,500
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                26,500
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Common
      stock subscription costs
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (7,123
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (7,123
                                                )Foreign
      currency translation
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                225,313
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                225,313Net
      (loss) for the period
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (2,972,131
                                                )
                                                
                                                
                                                (2,972,131
                                                )Balance
      - September 30, 2009
                                                
                                                
                                                51,231,195
                                                
                                                
                                                $
                                                51,231
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                16,529,183
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                225,313
                                                
                                                
                                                $
                                                (4,222,092
                                                )
                                                
                                                $
                                                12,012,500
 
 The
accompanying notes to consolidated financial statements are an
integral part of this consolidated statement.
  F-4
 
 AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS (NOTE 2)
 FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2009, AND 2008,
 AND
CUMULATIVE FROM INCEPTION (MARCH 27, 2007)
 THROUGH
SEPTEMBER 30, 2009
 
 Six Months Ended
                                                    
                                                    
                                                    CumulativeSeptember 30,
                                                    
                                                    
                                                    From2009
                                                    
                                                    
                                                    2008
                                                    
                                                    
                                                    InceptionOperating
      Activities:Net
      (loss)
                                                    
                                                    $
                                                    (2,972,131
                                                    )
                                                    
                                                    $
                                                    (3,500
                                                    )
                                                    
                                                    $
                                                    (4,222,092
                                                    )Adjustments
      to reconcile net (loss) to net cash(used
      in) operating activities:Depreciation
                                                    
                                                    
                                                    12,608
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    12,608Stock-based
      compensation
                                                    
                                                    
                                                    2,783,440
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    3,927,440Changes
      in assets and liabilities-Prepaid
      expenses
                                                    
                                                    
                                                    (2,565
                                                    )
                                                    
                                                    
                                                    3,500
                                                    
                                                    
                                                    
                                                    (2,565
                                                    )Deposit
      on office space
                                                    
                                                    
                                                    (2,500
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (2,500
                                                    )Accounts
      payable - Trade
                                                    
                                                    
                                                    45,703
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    47,293Accrued
      liabilities
                                                    
                                                    
                                                    34,588
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    56,077Net
      Cash (Used in) Operating Activities
                                                    
                                                    
                                                    (100,857
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (183,739
                                                    )Investing
      Activities:Note
      receivable - Related party
                                                    
                                                    
                                                    (100,000
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (336,000
                                                    )Purchases
      of property and equipment
                                                    
                                                    
                                                    (2,461
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (2,461
                                                    )Acquisition
      of subsidiary, net of cash acquired
                                                    
                                                    
                                                    (379,921
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (379,921
                                                    )Net
      Cash (Used in) Investing Activities
                                                    
                                                    
                                                    (482,382
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (718,382
                                                    )Financing
      Activities:Issuance
      of common stock for cash
                                                    
                                                    
                                                    312,771
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    660,097Common
      stock subscription costs
                                                    
                                                    
                                                    (7,123
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (7,123
                                                    )Proceeds
      from related party - Stockholder
                                                    
                                                    
                                                    44,313
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    44,313Net
      Cash Provided by Financing Activities
                                                    
                                                    
                                                    349,961
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    697,287Effect
      of Exchange Rate Changes on Cash andCash
      Equivalents
                                                    
                                                    
                                                    225,313
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    225,313Net
      Increase (Decrease) in Cash
                                                    
                                                    
                                                    (7,965
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    20,479Cash
      and Cash Equivalents - Beginning of Period
                                                    
                                                    
                                                    28,444
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Cash
      and Cash Equivalents - End of Period
                                                    
                                                    $
                                                    20,479
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    20,479Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for:Interest
                                                    
                                                    $
                                                    28
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -Income
      taxes
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
 
 Supplemental
Information of Noncash Investing and Financing Activities:
 On August
14, 2009, the Company issued 12,000,000 shares of common stock, par value $0.001
per share, in exchange for 99.99 percent of the issued and outstanding shares in
the capital of AMR Project Peru, S.A.C.  The value of shares of common
stock issued by the Company was $12,000,000.
  On August
14, 2009, the Company converted $336,000 in loans to AMR Project Peru, S.A.C. to
intercompany debt to be eliminated in consolidation.
 
 The
accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
  F-5
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 (1)           Summary
of Significant Accounting Policies
 
 General Organization and
Business
 
 Affinity
Gold Corp. (“Affinity Gold” or the “Company” and formerly Syncfeed, Inc.) is a
Nevada corporation in the exploration stage.  The Company was
incorporated under the laws of the State of Nevada on March 27,
2007.  The original business plan of the Company was to engage in the
business of developing, manufacturing, and selling commercial feed specifically
for commercially raised and harvested Chinese Mitten-handed
Crabs.  Effective February 10, 2009, the Company changed its name from
Syncfeed, Inc. to Affinity Gold Corp. by way of a merger with its wholly owned
subsidiary Affinity Gold Corp., which was formed solely for the purpose of a
change in name.  In addition, the Company ceased its activities
related to its original business plan, and changed its focus to a new business
plan involving the acquisition, exploration, and development of gold
mineralization properties internationally.  The Company’s current
focus is gold exploration in Peru.  The accompanying consolidated
financial statements of Affinity Gold were prepared from the accounts of the
Company and its subsidiary under the accrual basis of accounting.
 
 On March
30, 2007, the Company completed a capital formation activity through a Private
Placement Offering (“PPO”), exempt from registration under the Securities Act of
1933, to raise up to $43,000 through the issuance 64,500,000 shares of its
common stock (post forward stock split), par value $0.001 per share, at an
offering price of $0.000667 per share.  As of March 31, 2007, the
Company closed the PPO and received proceeds of $43,000.  The Company
also commenced an activity to effect a Registration Statement on Form SB-2 with
the Securities and Exchange Commission to register 29,700,000 shares of its
outstanding shares of common stock (post forward stock split) on behalf of
selling stockholders.  The Registration Statement on Form SB-2 was
filed with the SEC on May 11, 2007, and declared effective on June 14,
2007.  The Company did not receive any of the proceeds of this
registration activity once the shares of common stock were
sold.  During the fiscal years 2009 and 2010, the Company has
completed four additional capital formation activities through PPO’s, exempt
from registration under the Securities Act of 1933, and raised a total of
$617,097 in gross proceeds from the issuance of 1,231,195 shares of common stock
(post forward stock split).
 
 Effective
August 14, 2009, Affinity Gold and AMR Project Peru, S.A.C. (“AMR”), a Peruvian
corporation, closed a Share Exchange Agreement whereby the Company acquired
99.99 percent of the issued and outstanding shares in the capital of AMR in
exchange for 12,000,000 shares of the common stock of the Company in the
aggregate to the shareholders of AMR on a pro rate basis in accordance with each
AMR shareholder’s percentage of ownership in AMR.  The business
combination completed by the Company and AMR was valued at
$12,000,000.  As part of the transaction, the Company acquired the
mining concession title in Peru named “AMR Project” covering 500 hectares
(1,235.52 acres) and the physical mining concession certificate as evidence by
Certificate No. 7996-2006-INACC-UDA granted to AMR by the Republic of Peru,
National Institute of Concessions and Mining Cadastre issued on December 11,
2006.
  F-6
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 Principles of
Consolidation
 
 The
accompanying consolidated financial statements include the accounts of the
Company and its 99.99 percent owned Peruvian subsidiary, AMR Project Peru,
S.A.C., a Peruvian corporation.  All significant intercompany accounts
and transactions have been eliminated in consolidation.
 
 Unaudited
Interim Financial Statements
 
 The
interim consolidated financial statements of Affinity Gold Corp. as of September
30, 2009, and March 31, 2009, and for the three and six months ended September
30, 2009, and 2008, and cumulative from inception, are
unaudited.  However, in the opinion of management, the interim
consolidated financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the Company’s
consolidated financial position as of September 30, 2009, and March 31, 2009,
and the results of its consolidated operations and its cash flows for the three
and six months ended September 30, 2009, and 2008, and cumulative from
inception.  These results are not necessarily indicative of the
results expected for the calendar year ending March 31, 2010.  The
accompanying consolidated financial statements and notes thereto do not reflect
all disclosures required under accounting principles generally accepted in the
United States of America.  Refer to the Company’s audited financial
statements as of March 31, 2009, filed with the SEC for additional information,
including significant accounting policies.
 
 Cash and Cash
Equivalents
 
 For
purposes of reporting within the consolidated statements of cash flows, the
Company considers all cash on hand, cash accounts not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments purchased with
a maturity of three months or less to be cash and cash equivalents.
 
 Property and
equipment
 
 Property
and equipment are recorded at historical cost.  Minor additions and
renewals are expensed in the year incurred.  Major additions and
renewals are capitalized and depreciated over their estimated useful
lives.  When property and equipment are retired or otherwise disposed
of, the cost and accumulated depreciation are removed from the accounts, and any
resulting gain or loss is included in the results of operations for the
respective period.  The Company uses the straight-line method of
depreciation.  The estimated useful lives for significant property and
equipment categories are as follows:
  F-7
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 Mineral
      property
                
                Units
      of productionMachinery
      and equipment
                
                5-10
      yearsFurniture
      and Fixtures
                
                10
      yearsComputer
      and office equipment
                
                4-5
      yearsVehicle
      and transport
                
                5
      years
 
 Revenue
Recognition
 
 The
Company is in the exploration stage and has yet to realize revenues from
operations.  Once the Company has commenced operations, it will
recognize revenues when delivery of products or completion of services has
occurred provided there is persuasive evidence of an agreement, acceptance has
been approved by its customers, the fee is fixed or determinable based on the
completion of stated terms and conditions, and collection of any related
receivable is probable.
 Mineral
Properties
 
 The
Company is primarily engaged in the business of the acquisition, exploration,
and development of gold mineralization properties internationally, with emphasis
on the exploration for gold in Peru.  Mineral claim and other property
acquisition costs are capitalized as incurred.  Such costs are carried
as an asset of the Company until it becomes apparent through exploration
activities that the cost of such properties will not be realized through mining
operations.  Mineral exploration costs are expensed as incurred, and
when it becomes apparent that a mineral property can be economically developed
as a result of establishing proven or probable reserve, the exploration costs,
along with mine development cost, are capitalized.  The costs of
acquiring mineral claims, capitalized exploration costs, and mine development
costs are recognized for depletion and amortization purposes under the
units-of-production method over the estimated life of the probable and proven
reserves.  If mineral properties, exploration, or mine development
activities are subsequently abandoned or impaired, any capitalized costs are
charged to operations in the current period.
 Impairment
of Long-Lived Assets
 The
Company evaluates the recoverability of long-lived assets and the related
estimated remaining lives at each balance sheet date.  The Company
records an impairment or change in useful life whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable or the
useful life has changed.  For the periods ended September 30, 2009,
and 2008, and cumulative from inception, the Company did not have any events or
changes in circumstances that impacted the recovery of long-lived
assets.
  F-8
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 Lease
Obligations
 
 All
noncancellable leases with an initial term greater than one year are categorized
as either capital or operating leases.  Assets recorded under capital
lease obligations are amortized according to the same methods employed for
property and equipment or over the term of the related lease, if
shorter.
 
 Loss
per Common Share – Basic and Diluted
 
 Basic
loss per share is computed by dividing the net loss attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the period.  Diluted loss per share is computed
similar to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive.
 
 Income
Taxes
 
 The
Company accounts for income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes”
(“SFAS No. 109”).  Under SFAS 109, deferred tax assets and liabilities
are determined based on temporary differences between the basis of certain
assets and liabilities for income tax and financial reporting
purposes.  The deferred tax assets and liabilities are classified
according to the financial statement classification of the assets and
liabilities generating the differences.
 
 The
Company maintains a valuation allowance with respect to deferred tax
assets.  The Company establishes a valuation allowance based upon the
potential likelihood of realizing the deferred tax asset and taking into
consideration the Company's financial position and results of operations for the
current period.  Future realization of the deferred tax benefit
depends on the existence of sufficient taxable income within the carryforward
period under Federal tax laws.
 
 Changes
in circumstances, such as the Company generating taxable income, could cause a
change in judgment about the realizability of the related deferred tax
asset.  Any change in the valuation allowance will be included in
income in the year of the change in estimate.
  F-9
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 Fair
Value of Financial Instruments
 The
Company estimates the fair value of financial instruments using the available
market information and valuation methods.  Considerable judgment is
required in estimating fair value.  Accordingly, the estimates of fair
value may not be indicative of the amounts the Company could realize in a
current market exchange.  As of September 30, 2009, and March 31,
2009, the carrying value of the Company's financial instruments approximated
fair value due to the short-term nature and maturity of these
instruments.
 
 Foreign
Currency Translation
 
 Affinity
Gold accounts for foreign currency translation pursuant to SFAS No. 52, “Foreign Currency Translation”
(“SFAS No. 52”).  The functional currency of the Company’s Peruvian
subsidiary is the Peruvian Nuevo Sole.  Under SFAS No. 52, all assets
and liabilities are translated into United States dollars using the current
exchange rate at the end of each fiscal period.  Revenues and expenses
are translated using the average exchange rates prevailing throughout the
respective periods.  Translation adjustments are included in other
comprehensive income (loss) for the period.  Certain transactions of
the Company’s Peruvian subsidiary are denominated in United States
dollars.  Translation gains or losses related to such transactions are
recognized for each reporting period in the related interim consolidated
statements of operations and comprehensive (loss).
 
 Deferred
Offering Costs
 
 The
Company defers as other assets the direct incremental costs of raising capital
until such time as the offering is completed.  At the time of the
completion of the offering, the costs are charged against the capital
raised.  Should the offering be terminated, deferred offering costs
are charged to operations during the period in which the offering is
terminated.
 
 Common
Stock Registration Expenses
 
 The
Company considers incremental costs and expenses related to the registration of
equity securities with the SEC, whether by contractual arrangement as of a
certain date or by demand, to be unrelated to original issuance
transactions.  As such, subsequent registration costs and expenses are
reflected in the accompanying financial statements as general and administrative
expenses, and are expensed as incurred.
  F-10
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 Stock-based
Compensation
 
 In
December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS
No. 123R”), which replaced SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS No. 123”) and superseded APB Opinion No. 25, “Accounting for Stock Issued to
Employees.”  In January 2005, the SEC issued Staff Accounting
Bulletin SAB”) No. 107, “Share-Based Payment,” which
provides supplemental implementation guidance for SFAS No. 123R.  SFAS
No. 123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the consolidated financial
statements based on the grant date fair value of the award.  SFAS No.
123R was to be effective for interim or annual reporting periods beginning on or
after June 15, 2005, but in April 2005, the SEC issued a rule that will permit
most registrants to implement SFAS No. 123R at the beginning of their next
fiscal year, instead of the next reporting period as required by SFAS No.
123R.  The pro-forma disclosures previously permitted under SFAS No.
123 no longer are an alternative to consolidated financial statement
recognition.  Under SFAS No. 123R, the Company must determine the
appropriate fair value model to be used for valuing stock-based payments, the
amortization method for compensation cost and the transition method to be used
at date of adoption.
 
 The
Company accounts for equity instruments issued in exchange for the receipt of
goods or services from other than employees in accordance with SFAS No. 123 and
the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18,
“Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling Goods or Services” (“EITF
96-18”).  Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable.  The value of equity
instruments issued for consideration other than employee services is determined
on the earlier of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
 
 Subsequent
Events
 
 The
management of the Company performs a review and evaluation of subsequent events
following the end of each quarterly and annual financial period.  For
the three and six month periods ended September 30, 2009, the review and
evaluation of subsequent events for proper accrual and disclosure was completed
through December 11, 2009, which was the date the financial statements were
available to be issued.
  F-11
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 Estimates
 
 The
accompanying consolidated financial statements of the Company are prepared on
the basis of accounting principles generally accepted in the United States of
America.  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
September 30, 2009, and March 31, 2009, and expenses for the periods ended
September 30, 2009, and 2008, and cumulative from inception.  Actual
results could differ from those estimates made by management.
 
 (2)       Exploration
Stage Activities and Going Concern
 
 The
Company is currently in the exploration stage, and has limited
operations.  The original business plan of the Company was to engage
in the business of developing, manufacturing, and selling commercial feed
specifically for commercially raised and harvested Chinese Mitten-handed
Crabs.  Effective February 10, 2009, the Company changed its name from
Syncfeed, Inc. to Affinity Gold Corp. by way of a merger with its wholly owned
subsidiary Affinity Gold Corp., which was formed solely for the purpose of a
change in name.  In addition, the Company ceased its activities
related to its original business plan, and changed its focus to a new business
plan involving the acquisition, exploration, and development of gold
mineralization properties internationally.  The Company’s current
focus is gold exploration in Peru.
 
 During
the period from March 27, 2007, through September 30, 2009, Affinity Gold was
organized and incorporated, completed various capital formation activities
through PPO’s, and effected a Share Exchange Agreement for a business
combination with AMR.  The Company also commenced an activity to
effect a Registration Statement on Form SB-2 with the Securities and Exchange
Commission to register 29,700,000 shares of its outstanding shares of common
stock (post forward stock split) on behalf of selling
stockholders.  The Registration Statement on Form SB-2 was filed with
the SEC on May 11, 2007, and declared effective on June 14, 2007.  The
management of Affinity Gold intends to conduct additional capital formation
activities through the issuance of its common stock and debt, and commence
operations.
 
 While
management of the Company believes that it will be successful in its capital
formation and planned operating activities, there can be no assurance that the
Company will be able to raise additional equity or debt capital, or be
successful in the development and sale of its planned product in order to
generate sufficient revenues to sustain its operations.
 
 F-12
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate the continuation of Affinity Gold as a going
concern.  The Company has incurred an operating loss since inception,
and its current cash resources are insufficient to meet its planned business
objectives.  These and other factors raise substantial doubt about
Affinity Gold‘s ability to continue as a going concern.  The
accompanying consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
 
 (3)       Loan
to Related Party - AMR
 
 Effective
January 21, 2009, the Company entered into a Loan Agreement with AMR (the “Loan
Agreement”) whereby the Company agreed to loan up to $400,000 to AMR to be used
to purchase equipment and supplies to conduct exploration and other mining
activities on the mining concession in Peru named “AMR Project.”  The
loan was made in anticipation of the completion and closing of a Share Exchange
Agreement between the parties, which was effected on August 14,
2009.  Under the terms of the Loan Agreement, once the Company
completed the business combination to acquire AMR as a 99.99 percent owned
subsidiary, the loan would become an intercompany loan between the entities, and
be dealt with as determined by the Board of Directors.  The loan was
non-interest bearing and carried a due date of April 10, 2010.  As of
March 31, 2009, the amount of the loan was $236,000.  As of August 14,
2009, the amount of the loan was $336,000, and was converted to an intercompany
receivable and payable arrangement by the Company and AMR, respectively, subject
to elimination in the presentation of consolidated financial
statements.
 
 (4)       Equity
Capital
 
 Forward Stock Split and Adjustments
to Authorized Capital
 
 On February
10, 2009, the Company implemented a 30-for-1 forward stock split of its
authorized, issued, and outstanding common stock.  As a result, the
authorized capital of the Company increased from 90,000,000 common shares to
2,700,000,000 common shares, par value $0.001 per share, and the issued and
outstanding common shares increased from 2,150,000 shares to 64,500,000
shares.  The authorized preferred stock of the Company remained the
same at 10,000,000 shares, par value $0.001 per share, with no shares issued or
outstanding.  The accompanying consolidated financial statements have
been adjusted accordingly to reflect this forward stock split.
 
 On July
23, 2009, the Company amended its Articles of Incorporation by reducing its
authorized capital of 2,700,000,000 shares of common stock, par value $0.001 per
share, and 10,000,000 shares of preferred stock, par value $0.001 per share, to
250,000,000 shares of common stock, par value $0.001 per share, and 10,000,000
shares of preferred stock, par value $0.001 per share.  The issued and
outstanding shares were not affected as a result of the decrease in the
authorized shares of common stock of the Company.
  F-13
 AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 Issuances and Cancellation of Common
Stock
 
 On March
30, 2007, the Company completed a capital formation activity through PPO #1,
exempt from registration under the Securities Act of 1933, to raise up to
$43,000 through the issuance 64,500,000 shares of its common stock (post forward
stock split), par value $0.001 per share, at an offering price of $0.000667 per
share.  As of March 31, 2007, the Company closed the PPO and received
proceeds of $43,000.
 
 The
Company also commenced an activity to effect a Registration Statement on Form
SB-2 with the Securities and Exchange Commission to register 29,700,000 shares
of its outstanding shares of common stock (post forward stock split) on behalf
of selling stockholders.  The Registration Statement on Form SB-2 was
filed with the SEC on May 11, 2007, and declared effective on June 14,
2007.  The Company did not receive any of the proceeds of this
registration activity once the shares of common stock were sold.
 
 On March
5, 2009, the Company completed a capital formation activity through PPO #2,
exempt from registration under the Securities Act of 1933, and raised $304,326
in gross proceeds from the issuance of 760,815 shares of common stock, par value
$0.001 per share, to 11 individuals.  The value of the shares issued
was $0.40 per share.
 
 On April
30, 2009, the Company completed a capital formation activity through PPO #3,
exempt from registration under the Securities Act of 1933, and raised $142,530
in gross proceeds from the issuance of 285,060 shares of common stock, par value
$0.001 per share, to two individuals.  The value of the shares issued
was $0.50 per share.
 
 On August
10, 2009, the Company completed a capital formation activity through PPO #4,
exempt from registration under the Securities Act of 1933, and raised $45,240 in
gross proceeds from the issuance of 60,320 shares of common stock, par value
$0.001 per share, to one individual.  The value of the shares issued
was $0.75 per share.
 
 Effective
August 14, 2009, in connection with the closing of a Share Exchange Agreement,
the Company issued 12,000,000 shares of common stock, par value $0.001 per
share, exempt from registration under the Securities Act of 1933, to the holders
of capital stock of AMR in exchange for the Company receiving 99.99 percent of
the issued and outstanding shares in the capital of AMR.  No
underwriters were involved in the Share Exchange Agreement, which was valued at
$12,000,000.
  F-14
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 Concurrently
with the closing of the Share Exchange Agreement on August 14, 2009, by letter
agreement dated May 8, 2009, between the Company and Mr. Antonio Rotundo,
President, CEO, CFO, and Director of the Company, Mr. Rotundo cancelled
26,500,000 shares of the 27,800,000 shares of common stock of the Company
registered in his name.  As a result of the cancellation of the shares
of common stock and the Share Exchange Agreement, Mr. Rotundo has remaining
9,988,000 shares of common stock of the Company registered in his
name.
 
 On
September 30, 2009, the Company completed a capital formation activity through
PPO #5, exempt from registration under the Securities Act of 1933, and raised
$125,000 in gross proceeds from the issuance of 125,000 shares of common stock,
par value $0.001 per share, to two individuals.  The value of the
shares issued was $1.00 per share.
 
 Stock Option Plan and Related Option
Grants
 
 On
February 11, 2009, the Board of Directors approved the adoption of the Affinity
Gold Corp. 2009 Stock Option and Incentive Plan (the “Plan”).  The
purpose of the Plan is to attract and retain the best available personnel for
positions of responsibility within the Company; provide additional incentives to
employees of the Company; provide Directors, consultants and advisors of the
Company with an opportunity to acquire a proprietary interest in the Company to
encourage their continued provision of services to the Company to provide such
persons with incentives and rewards for superior performance more directly
linked to the profitability of the Company’s business and increases in
stockholder value; and, generally, to promote the success of the Company’s
business and the interest of the Company and all of the
stockholders.  The Company has reserved 5,000,000 shares of common
stock, par value $0.001 per share, for issuance under the Plan, subject to
adjustment to protect against dilution in the event of certain changes in the
Company’s capitalization.
 
 The
following is a summary of stock options granted under the Plan:
 
 On
February 11, 2009, the Company granted an option to purchase 1,000,000 shares of
its common stock at an exercise price of $0.60 per share to its President and
Chief Executive Officer.  The option vested at the rate of 50 percent
on the date of grant, and the remaining 50 percent vests in equal monthly
proportions over a period of five months from the grant date.  As of
September 30, 2009, the option was fully vested.  The option period is
five years.
 
 On
February 11, 2009, the Company granted an option to each of two members of the
Company’s Board of Directors to purchase 600,000 shares (total 1,200,000 shares)
of its common stock at an exercise price of $0.60 per share.  The
options vested at the rate of 50 percent on the date of grant, and the remaining
50 percent for each option vests in equal monthly proportions over a period of
five months from the grant date.  As of September 30, 2009, the
options were fully vested.  The option period for each option is five
years.
  F-15
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 The fair
value of the options was estimated at the date of grant using the Black-Scholes
pricing model, with the following weighted average assumptions:
 
 Risk-free interest rate
                        
                        
                        1.15
                        %Expected dividend yield
                        
                        NoneExpected life
                        
                        2.56 yearsExpected volatility
                        
                        
                        110.17
                        %
 The
weighted-average grant-date fair value of options on February 11, 2009, was
$1.79 per share.
 
 The
risk-free interest rate used in the Black-Scholes valuation method is based on
the implied yield currently available in U.S. Treasury securities at maturity
with an equivalent term.  The Company has not declared or paid any
dividends and does not currently expect to do so in the future.  The
expected term of options represents the period that the stock-based awards are
expected to be outstanding and was determined based on projected holding periods
for the remaining unexercised shares.  Consideration was given to the
contractual terms of the stock-based awards, vesting schedules, and expectations
of future employee behavior.  Expected volatility is based on the
Company’s historical volatility of its stock price.
 
 The
Company’s stock price volatility and option lives involve management’s best
estimates, both of which impact the fair value of the option calculated under
the Black-Scholes methodology and, ultimately, the expense that will be
recognized over the period of the option.
 
 When
options are exercised, the policy of the Company is to issue previously unissued
shares of common stock to satisfy share option exercises.  As of
September 30, 2009, the Company had 198,768,805 shares of authorized but
unissued common stock.
 
 No tax
benefits were attributed to the stock-based compensation expense because a
valuation allowance was maintained for substantially all net deferred tax
assets.  The following table summarizes stock option activity for the
Company through the periods ended September 30, 2009:
  F-16
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 Weighted
                        
                        
                        Weighted AverageAverage
                        
                        
                        Remaining
                        
                        
                        AggregateOptions
                        
                        
                        Exercise Price
                        
                        
                        Contractual Term
                        
                        
                        Intrinsic ValueOutstanding
      - March 31, 2009
                        
                        
                        2,200,000
                        
                        
                        $
                        0.60
                        
                        
                        4.83
      years
                        
                        
                        $
                        3,927,440Granted
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Forfeited
      or expired
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Outstanding
      - September 30, 2009
                        
                        
                        2,200,000
                        
                        
                        $
                        0.60
                        
                        
                        4.33
      years
                        
                        
                        $
                        3,927,440Vested
      and Exercisable -
                        
                        
                        2,200,000
                        
                        
                        $
                        0.60
                        
                        
                        4.33
      years
                        
                        
                        $
                        3,927,440
 (5)
              Income
      Taxes
 
 The
provision (benefit) for income taxes for the periods ended September 30, 2009,
and 2008, were as follows (assuming a 34 percent effective tax
rate):
 
 2009
              
              
              2008Current
      Tax Provision:Federal-Taxable
      income
              
              $
              -
              
              
              $
              -Total
      current tax provision
              
              $
              -
              
              
              $
              -Deferred
      Tax Provision:Federal-Loss
      carryforwards
              
              $
              1,010,500
              
              
              $
              1,190Change
      in valuation allowance
              
              
              (1,010,500
              )
              
              
              (1,190
              )Total
      deferred tax provision
              
              $
              -
              
              
              $
              -
  The
Company had deferred income tax assets as of September 30, 2009, and March 31,
2009, as follows:
 
 September 30,
              
              
              March 31,2009
              
              
              2009Loss
      carryforwards
              
              $
              1,435,500
              
              
              $
              425,000Less
      - Valuation allowance
              
              
              (1,435,500
              )
              
              
              (425,000
              )Total
      net deferred tax assets
              
              $
              -
              
              
              $
              -  F-17
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 The
Company provided a valuation allowance equal to the deferred income tax assets
for the periods ended September 30, 2009, and 2008, because it is not presently
known whether future taxable income will be sufficient to utilize the loss
carryforwards.
 
 As of
September 30, 2009, and March 31, 2009, the Company had approximately $4,222,092
and $1,249,961, respectively, in tax loss carryforwards that can be utilized in
future periods to reduce taxable income, and will begin to expire in the year
2027.
 
 (6)
              Related
      Party Transactions
 
 As of
September 30, 2009, the Company owed $44,313 (March 31, 2009 - $0) for loans
from one individual who is a stockholder of the Company.  The loans
are for working capital purposes, and are unsecured, non-interest bearing, and
have no specific terms for repayment.
 
 As
described in Note 3, effective January 21, 2009, the Company entered into a Loan
Agreement with AMR whereby the Company agreed to loan up to $400,000 to AMR to
be used to purchase equipment and supplies to conduct exploration and other
mining activities on the AMR Project mining concession in Peru.  The
loan was made in anticipation of the completion and closing of a Share Exchange
Agreement between the parties, which was effected on August 14,
2009.  Under the terms of the Loan Agreement, once the Company
completed the business combination to acquire AMR as a 99.99 percent owned
subsidiary, the loan would become an intercompany loan between the entities, and
be dealt with as determined by the Board of Directors.  The loan was
non-interest bearing and carried a due date of April 10, 2010.  As of
March 31, 2009, the amount of the loan was $236,000.  As of August 14,
2009, the amount of the loan was $336,000, and was converted to an intercompany
receivable and payable arrangement by the Company and AMR, respectively, subject
to elimination in the presentation of consolidated financial
statements.
 
 (7)
              Commitments
      and Contingencies
 
 The
Company has an operating lease agreement in effect for office
space.  Total rental expense related to the operating lease amounted
to $3,750 and $6,125 for the three months and six months ended September 30,
2009, respectively.  The lease term is for a period of one year with
an annual rental fee of $15,000.  The lease agreement may be renewed
for a period of two years
  F-18
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 (8)
              Business
      Combination - AMR
 
 On March
2, 2009, the Company entered into an asset purchase agreement (the “Asset
Purchase Agreement”) with AMR, whereby the Company agreed to pay $200,000 and to
issue 12,000,000 shares of common stock of the Company to AMR in accordance with
the terms and conditions of the Asset Purchase Agreement as consideration for
the acquisition of the mining concession title named “AMR Project” covering 500
hectares (1,235.52 acres) and the physical mining concession certificate as
evidence by Certificate No. 7996-2006-INACC-UDA granted to AMR by the Republic
of Peru, National Institute of Concessions and Mining Cadastre issued on
December 11, 2006, including all improvements, structures, and equipment on and
used by AMR on such mining concession rights, which rights are located in the
Inambari River Basin of Puno, Peru.  The closing of the Asset Purchase
Agreement was to be held on April 30, 2009.
 
 On April
30, 2009, the Company and AMR entered into an Amendment Agreement whereby the
parties decided to amend the transaction by changing the structure of the
arrangement from an Asset Purchase Agreement to a Share Exchange Agreement
resulting in AMR becoming a 99.99 percent owned subsidiary of the Company upon
the closing of the Share Exchange Agreement.  In addition, under the
Amendment Agreement, the Company and AMR agreed to terminate the Asset Purchase
Agreement.
 
 On May 8,
2009, the Company, AMR, and all of the stockholders of AMR entered into a Share
Exchange Agreement whereby the Company agreed to acquire 99.99 percent of the
issued and outstanding shares in the capital of AMR in exchange for the issuance
of 12,000,000 shares of common stock of the Company in aggregate to the
stockholders of AMR on a pro rata basis in accordance with each AMR
stockholder’s percentage of ownership in AMR.  The closing of the
Share Exchange Agreement was to be held on June 15, 2009, but was postponed
through several extension agreements.  The Share Exchange Agreement
was closed on August 14, 2009.  The value of the 12,000,000 shares of
common stock provided under the Share Exchange Agreement was $12,000,000, or
$1.00 per share.
 
 The total
purchase price of $12,150,639, consisting of $150,639 in acquisition expenses,
and $12,000,000 in common stock, was allocated as follows:
 
 Current
      assets
                      
                      $
                      3,882Mining
      property
                      
                      
                      12,036,507Property
      and equipment
                      
                      
                      446,250Total
      assets acquired
                      
                      
                      12,486,639Current
      liabilities assumed
                      
                      
                      336,000Total
      liabilities assumed
                      
                      
                      336,000Purchase
      price
                      
                      $
                      12,150,639
  F-19
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 (9)
              Recent
      Accounting Pronouncements
 
 In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement 133”
(“SFAS No. 161”).  SFAS No. 161 enhances required disclosures
regarding derivatives and
hedging activities, including enhanced disclosures regarding how:  (a)
an entity uses derivative instruments; (b) derivative instruments and related
hedged items are accounted for under FASB No. 133, “Accounting for Derivative
Instruments and Hedging Activities”; and (c) derivative instruments and
related hedged items affect an entity’s financial
position, financial performance, and cash flows.  Specifically, SFAS
No. 161 requires:
 
 -
              disclosure
      of the objectives for using derivative instruments in terms of underlying
      risk and accounting designation;
 -
              disclosure
      of the fair values of derivative instruments and their gains and losses in
      a tabular format;
 -
              disclosure
      of information about credit-risk-related contingent features;
      and
 -
              cross-reference
      from the derivative footnote to other footnotes in which
      derivative-related information is
disclosed.
 
 SFAS No.
161 is effective for fiscal years and interim periods beginning after November
15, 2008.  Earlier application is encouraged.  The
management of the Company does not expect the adoption of this pronouncement to
have a material impact on its financial statements.
 
 In May
2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”).  SFAS No. 162 is
intended to improve financial reporting by identifying a consistent framework,
or hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with U.S. generally
accepted accounting principles (“GAAP”) for nongovernmental
entities.
 
 Prior to
the issuance of SFAS No. 162, GAAP hierarchy was defined in the American
Institute of Certified Public Accountants (“AICPA”) Statement on Auditing
Standards (“SAS”) No. 69, “The
Meaning of Present Fairly in Conformity with Generally Accept Accounting
Principles.”  SAS No. 69 has been criticized because it is
directed to the auditor rather than the entity.  SFAS No. 162
addresses these issues by establishing that the GAAP hierarchy should be
directed to entities because it is the entity (not the auditor) that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP.
  F-20
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 The
sources of accounting principles that are generally accepted are categorized in
descending order as follows:
 
 a)
              FASB
      Statements of Financial Accounting Standards and Interpretations, FASB
      Statement 133 Implementation Issues, FASB Staff Positions, and American
      Institute of Certified Public Accountants (AICPA) Accounting Research
      Bulletins and Accounting Principles Board Opinions that are not superseded
      by actions of the FASB.
 
 b)
              FASB
      Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
      Accounting Guides and Statements of
Position.
 
 c)
              AICPA
      Accounting Standards Executive Committee Practice Bulletins that have been
      cleared by the FASB, consensus positions of the FASB Emerging Issues Task
      Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts
      (EITF D-Topics).
 
 d)
              Implementation
      guides (Q&As) published by the FASB staff, AICPA Accounting
      Interpretations, AICPA Industry Audit and Accounting Guides and Statements
      of Position not cleared by the FASB, and practices that are widely
      recognized and prevalent either generally or in the
    industry.
 
 SFAS No.
162 is effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendment to its authoritative
literature.  It is only effective for nongovernmental entities;
therefore, the GAAP hierarchy will remain in SAS 69 for state and local
governmental entities and federal governmental entities.  The
management of the Company does not expect the adoption of this pronouncement to
have a material impact on its financial statements.
 
 In May
2008, the FASB issued FASB Statement No. 163, “Accounting for Financial Guarantee
Insurance Contracts” (“SFAS No. 163”).  SFAS No. 163 clarifies
how FASB Statement No. 60, “Accounting and Reporting by
Insurance Enterprises” (“SFAS No. 60”), applies to financial guarantee
insurance contracts issued by insurance enterprises, including the recognition
and measurement of premium revenue and claim liabilities.  It also
requires expanded disclosures about financial guarantee insurance
contracts.
 
 The
accounting and disclosure requirements of SFAS No. 163 are intended to improve
the comparability and quality of information provided to users of financial
statements by creating consistency.  Diversity exists in practice in
accounting for financial guarantee insurance contracts by insurance enterprises
under SFAS No. 60, “Accounting
and Reporting by Insurance Enterprises.”  That diversity
results in inconsistencies in the recognition and measurement of claim
liabilities because of differing views about when a loss has been incurred under
FASB Statement No. 5, “Accounting for Contingencies”
(“SFAS No. 5”).  SFAS No. 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial
obligation.  It also requires disclosure about (a) the risk-management
activities used by an insurance enterprise to evaluate credit deterioration in
its insured financial obligations and (b) the insurance enterprise’s
surveillance or watch list.
  F-21
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 SFAS No.
163 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and all interim periods within those fiscal years,
except for disclosures about the insurance enterprise’s risk-management
activities.  Disclosures about the insurance enterprise’s
risk-management activities are effective the first period beginning after
issuance of SFAS No. 163.  Except for those disclosures, earlier
application is not permitted.  The management of the Company does not
expect the adoption of this pronouncement to have material impact on its
financial statements.
 
 On May
22, 2009, the FASB issued FASB Statement No. 164, “Not-for-Profit Entities: Mergers and
Acquisitions” (“SFAS No. 164”).  SFAS No. 164 is intended to
improve the relevance, representational faithfulness, and comparability of the
information that a not-for-profit entity provides in its financial reports about
a combination with one or more other not-for-profit entities, businesses, or
nonprofit activities.  To accomplish that, this Statement establishes
principles and requirements for how a not-for-profit entity:
 
 a.
              Determines
      whether a combination is a merger or an
  acquisition.
 b.
              Applies
      the carryover method in accounting for a
merger.
 c.
              Applies
      the acquisition method in accounting for an acquisition, including
      determining which of the combining entities the acquirer
    is.
 d.
              Determines
      what information to disclose to enable users of financial statements to
      evaluate the nature and financial effects of a merger or an
      acquisition.
 
 This
Statement also improves the information a not-for-profit entity provides about
goodwill and other intangible assets after an acquisition by amending FASB
Statement No. 142, Goodwill
and Other Intangible Assets, to make it fully applicable to
not-for-profit entities.
 
 SFAS No.
164 is effective for mergers occurring on or after December 15, 2009, and
acquisitions for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2009.  Early application is prohibited.  The management of
the Company does not expect the adoption of this pronouncement to have material
impact on its financial statements.
  F-22
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 On May
28, 2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“SFAS No.
165”).  SFAS No. 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be
issued.  Specifically, SFAS No. 165 provides:
 
 1.
              The
      period after the balance sheet date during which management of a reporting
      entity should evaluate events or transactions that may occur for potential
      recognition or disclosure in the financial
  statements.
 2.
              The
      circumstances under which an entity should recognize events or
      transactions occurring after the balance sheet date in its financial
      statements.
 3.
              The
      disclosures that an entity should make about events or transactions that
      occurred after the balance sheet
date.
 
 In
accordance with this Statement, an entity should apply the requirements to
interim or annual financial periods ending after June 15, 2009.  The
management of the Company does not expect the adoption of this pronouncement to
have material impact on its financial statements.
 
 On June
9, 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of
Financial Assets- an amendment of FASB Statement No. 140” (“SFAS No.
166”). SFAS No.
166 revises the derecognization provision of FASB Statement No. 140 “Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities” and will
require entities to provide more information about sales of securitized
financial assets and similar transactions, particularly if the seller retains
some risk with respect to the assets.  It also eliminates the concept
of a "qualifying special-purpose entity."
 
 This
statement is effective for financial asset transfers occurring after the
beginning of an entity's first fiscal year that begins after November 15,
2009.  The management of the Company does not expect the adoption of
this pronouncement to have a material impact on its financial
statements.
 
 In June
2009, the FASB issued FASB Statement 167 "Amendments to FASB Interpretation
No. 46(R)" (“SFAS No. 167”).  SFAS No. 167 amends certain
requirements of FASB Interpretation No. 46(R), “Consolidation of Variable Interest
Entities” to improve financial reporting by companies involved with
variable interest entities and to provide additional disclosures about the
involvement with variable interest entities and any significant changes in risk
exposure due to that involvement.  A reporting entity will be required
to disclose how its involvement with a variable interest entity affects the
reporting entity's financial statements.
  F-23
  AFFINITY
GOLD CORP. AND SUBSIDIARY
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, AND 2008
 (Unaudited)
 
 This
Statement shall be effective as of the beginning of each reporting entity’s
first annual reporting period that begins after November 15,
2009.  The management of the Company does not expect the adoption of
this pronouncement to have a material impact on its financial
statements.
 
 In June
2009, the FASB issued FASB Statement 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles - a
replacement of FASB Statement No. 162" ("SFAS No. 168").  SFAS
No. 168 establishes the FASB
Accounting Standards Codification (the "Codification") to become the single
official source of authoritative, nongovernmental US generally accepted
accounting principles (GAAP).  The Codification did not change GAAP
but reorganizes the literature.
 
 SFAS No.
168 is effective for interim and annual periods ending after September 15,
2009.  The management of the Company does not expect the adoption of
this pronouncement to have a material impact on its financial
statements.
 
 (10)
              Subsequent
      Events
 
 Loan Agreements
 
 On
November 12, 2009, Affinity Gold entered into a loan agreement (the “Ubique
Agreement”) with Ubique Ltd. (“Ubique”) whereby Ubique has agreed to lend to the
Company the principal amount of $250,000 (the “Ubique Loan”).  The interest
rate payable on the Ubique Loan is nine percent per annum, payable semiannually
on May 18, 2010, and November 18, 2010.  The Loan is due no later than
November 18, 2010, but may be repaid on an earlier date.  The total amount
of the Ubique Loan will be used exclusively to purchase equipment and for
furthering the exploration and development objectives related to the Company’s
mineral property in Peru.  The Ubique Loan is secured by existing equipment
in use on the Company’s mineral property in Peru, and any newly acquired
equipment purchased with funds from the Ubique Loan, which pledged equipment
shall at all times represent at least 125 percent of the outstanding amount of
the Ubique Loan.  The Ubique Agreement is to be construed, interpreted, and
governed in accordance with the laws of Switzerland.  On November 20,
2009, the Ubique Loan was funded and received by the Company.
 
 In
addition, on November 22, 2009, Affinity Gold entered into a loan agreement (the
“Openshore Agreement”) with Openshore Holdings Limited (“Openshore”) whereby
Openshore has agreed to lend to the Company the principal amount of $250,000
(the “Openshore Loan”).  The interest rate payable on the Openshore Loan is
nine percent per annum, payable semiannually on May 30, 2010, and November 30,
2010.  The Loan is due no later than 365 days after receipt by the Company
of funds from Openshore but may be repaid early.  The total amount of the
Openshore Loan will be used exclusively to purchase equipment and for furthering
the exploration and development objectives related to the Company’s mineral
property in Peru.  The Openshore Loan is secured by existing equipment
already in use on the Company’s mineral property in Peru, and any newly acquired
equipment purchased with funds from the Openshore Loan.  The Openshore
Agreement is to be construed, interpreted, and governed in accordance with the
laws of Switzerland.  As of December 11, 2009, Openshore had not funded the
$250,000 to the Company under the Openshore Agreement.
  F-24




ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





You
should read the following plan of operation together with our financial
statements and related notes appearing elsewhere in this quarterly
report.  This plan of operation contains forward-looking statements
that involve risks, uncertainties, and assumptions.  The actual
results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors.





Overview





Affinity
Gold Corp. is a junior mining company engaged in the exploration, acquisition
and development of small and medium sized mining concessions located within
Latin America. Our core strategy is to acquire and develop high-grade
low-cost gold properties, conducive to alluvial and open pit mining operations,
either through direct acquisition, joint ventures or partnerships.





We were
incorporated as “Syncfeed Inc.” in the State of Nevada on March 27,
2007.  Effective February 10, 2009, with the State of Nevada, we
completed a merger with our wholly owned subsidiary, Affinity Gold
Corp.  As a result, we changed our name from “Syncfeed Inc.” to
“Affinity Gold Corp.” to better reflect the intended direction and business of
our Company.





Also
effective February 10, 2009, with the State of Nevada, we effected a thirty (30)
for one (1) forward stock split of our authorized, issued and outstanding common
stock (the “Common Stock”).  As a result, our authorized capital
increased from 90,000,000 shares of Common Stock with a par value of $0.001 to
2,700,000,000 shares of Common Stock with a par value of $0.001.  Our
issued and outstanding share capital increased from 2,150,000 shares of Common
Stock to 64,500,000 shares of Common Stock.





The name
change and forward stock split took effect on the market at the open of business
on February 13, 2009.





Effective
July 23, 2009, we amended our Articles of Incorporation by reducing our
authorized capital of 2,700,000,000 shares of Common Stock with a par value of
$0.001 per share and 10,000,000 shares of Preferred Stock with a par value of
$0.001 per share to 250,000,000 shares of Common Stock with a par value of
$0.001 per share and 10,000,000 shares of Preferred Stock with a par value of
$0.001 per share.  The issued and outstanding shares were not affected
as a result of the decrease in the authorized shares of Common
Stock.





Our
Business





We were
previously engaged in the business of developing, manufacturing, and selling
commercial feed for commercially raised and harvested Chinese Mitten-handed
Crabs.  Following a change in control of our Company on January 9,
2009, and subsequent merger with our subsidiary Affinity Gold Corp. and forward
stock split effective February 10, 2009, we changed our focus to mineral
exploration concentrating on gold exploration in Peru and Latin
America.





On May 8,
2009, the Company entered into a share exchange agreement (the “Share Exchange
Agreement”) with AMR Project Peru, S.A.C.(“AMR”), a Peruvian corporation, and
all the shareholders of AMR, whereby the Company agreed to acquire 99.99% of the
issued and outstanding shares in the capital of AMR in exchange for the issuance
of 12,000,000 shares of common stock of the Company in aggregate to the
shareholders of AMR on a pro rata basis in accordance with each AMR
shareholders’ percentage of ownership in AMR.





AMR was
incorporated pursuant to the laws of Peru on October 7, 2005, and is the owner
of the mining concession title named “AMR Project” covering 500 hectares and the
mining concession certificate as evidenced by Certificate No.
7996-2006-INACC-UADA granted to AMR by the Republic of Peru, National Institute
of Concessions and Mining Cadastre on December 11, 2006 (the “Mining Concession
Rights”), which Mining Concession Rights are located in the Inambari River Basin
on the flat plains region at an altitude greater than 1500’ and accessible by
land and air, in the District of Ayapata, Province of Carabaya, Department of
Puno, Peru.




6





On August
14, 2009, the Share Exchange Agreement closed and as a result, AMR became a
99.99% owned subsidiary of the Company, and the Company is a holding company for
the business of AMR which is engaged in mineral exploration concentrating on
gold exploration in Peru and Latin America.





Mr.
Antonio Rotundo, our President, CEO, CFO and a Director, is the Subordinated
General Manager of AMR and his father, Mr. Mario Rotundo, is the General Manager
of AMR.





The
foregoing description of the Share Exchange Agreement does not purport to be
complete and is qualified in its entirety by reference to the Share Exchange
Agreement, which was attached as Exhibit 2.1 to the Form 8-K filed on August 21,
2009 and is incorporated herein by reference.





Concurrently
with the closing of the Share Exchange Agreement, by a letter agreement entered
into on May 8, 2009 (the “Letter Agreement”), between the Company and Mr.
Antonio Rotundo, the Company’s President, CEO, CFO and Director, cancelled
26,500,000 shares of the 27,800,000 shares of common stock of the Company
registered in his name.  As a result, Mr. Antonio Rotundo now only has
9,988,000 shares of common stock of the Company registered in his name, which
includes the 8,688,000 shares of common stock of the Company that were issued to
Mr. Antonio Rotundo as a result of the closing of the Share Exchange
Agreement.





The
foregoing description of the Letter Agreement does not purport to be complete
and is qualified in its entirety by reference to the Letter Agreement, which was
attached to the Form 8-K as Exhibit 10.2 filed on May 13, 2009, and which is
incorporated herein by reference.





Plan
of Operations





Our
overall strategy is to target the exploration and acquisition of small and
medium sized mining concessions that allow for economically viable development
and production with minimal net environmental impact when employing industry
best practices.  In addition to direct acquisitions, we plan to
compliment our growth through strategic joint ventures and partnerships where
and when appropriate.





We are
targeting small and medium-sized mining concessions for the following
reasons:





(1)
            the
      projects become revenue-producing within a relatively short period of
      time;





(2)
            overall
      startup costs are less of a burden;





(3)
            once
      started, these projects can quickly self-fund future
      development;





(4)
            environmental
      impacts can be managed and minimized;
and





(5)
            community
      relations and support tend to be easier to build and
    maintain.





Our
exploration target is to find mineral bodies containing gold.  Our
success depends upon finding mineralized material.  This will require
a determination by a geological consultant as to whether any of our mineral
properties intended to be acquired contains reserves.  Mineralized
material is a mineralized body, which has been delineated by appropriate spaced
drilling or underground sampling to support sufficient tonnage and average grade
of minerals to justify removal.





We
continue to identify strategic acquisitions of additional concession rights
within the area of the AMR Project to ensure progress towards achieving future
growth objectives.





Limited
Operating History; Need for Additional Capital





There is
limited historical financial information about us upon which to base an
evaluation of our performance.  We are an exploration stage
corporation and have not generated any revenues from operations.  We
cannot guarantee we will be successful in our business
operations.  Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources,
possible delays in the exploration of any properties, and possible cost overruns
due to price and cost increases in services.




7





To become
profitable and competitive, we will conduct research and exploration of any
properties we acquire before we start production of any minerals we may
find.  If we don't find mineralized material or we cannot remove
mineralized material, either because we do not have the money to do it or
because it is not economically feasible to do it, we will cease operations and
our investors will lose their investment.





Liquidity
and Capital Resources





Our
independent registered auditors have issued a going concern
opinion.  This means that there is substantial doubt that we can
continue as an on-going business for the next 12 months unless we obtain
additional capital to pay our bills.  This is because we have not
generated any revenues and no revenues are anticipated until we locate mineral
deposits and begin removing and selling minerals.  There is no
assurance we will ever reach this point.  Accordingly, we must raise
cash from sources other than the sale of minerals found on any properties we
acquire.  Our only other source for cash at this time is investments
by others in the Company.  We must raise cash to implement our project
and stay in business.





The
operations of AMR are located in Peru, and AMR’s accounting records are
maintained in Peruvian Nuevo Soles (S/.).  The functional currency in
Peru is the Nuevo Sole.  For financial reporting purposes, the
financial information presented has been converted to US$ unless specifically
stated otherwise.





As of
September 30, 2009, we had a working capital deficiency of $124,639, whereas as
of March 31, 2009, we had positive working capital of
$241,365.  Cash and cash equivalents from March 27, 2007 (inception)
to September 30, 2009, have been insufficient to provide the working capital
necessary to operate.  As of September 30, 2009, our total assets
were $12,731,318 and consisted of cash and cash equivalents of $20,479, prepaid
insurance and taxes of $2,565, mineral property assets of $12,260,638, machinery
and equipment of $433,729, furniture and fixtures of $2,074, computer and office
equipment of $1,569, vehicle and transport assets of $20,372 and a deposit on
office rent of $2,500 less accumulated depreciation of $12,608 compared to
assets with a value of $264,444 as of March 31, 2009.





We may
not have enough money to complete our planned exploration of the AMR Project in
Peru, or any newly acquired properties.  If it turns out that we have
not raised enough money to complete our anticipated exploration programs, we
will try to raise additional funds from private placements or
loans.  At the present time, we are in the process of attempting to
raise additional money through a private placement and there is no assurance
that we will raise additional money in the future or that future financings will
be available to us on acceptable terms.  If we require additional
money and are unable to raise it, we will have to suspend or cease
operations.  Equity financing could result in additional dilution to
existing shareholders.





On
September 30, 2009, we issued 125,000 shares of common stock of the Company to
two individuals due to the closing of the Company’s private placement at $1.00
per share for total gross proceeds of $125,000.





Results
of Operation





As of
September 30, 2009, our total assets were $12,731,318 compared to $264,444 as of
March 31, 2009, our total liabilities were $147,683 compared to $23,079 as of
March 31, 2009; and we had cash and cash equivalent resources of $20,479
compared to $28,444 as of March 31, 2009.





Three
Month Period Ended September 30, 2009





Revenues.  We
have not generated any revenues to date from our operations.





Exploration
costs:  Exploration costs were $12,388 and $nil for the three
months ended September 30, 2009 and 2008, respectively as the Company did not
undertake any geological exploration during the three month period ended
September 30, 2008.




8





Professional
fees:  Professional fees were $92,084 and $1,500 for the three
months ended September 30, 2009 and 2008, respectively.  This increase
was due to the increased activity of the Company during the three months ended
September 30, 2009.





Consulting
fees:  Consulting fees were $3,804 and $nil for the three
months ended September 30, 2009 and 2008, respectively.  This increase
was due to the increased activity of the Company during the three months ended
September 30, 2009.





General and administrative
fees:  General and administrative expenses were $45,740 and
$nil for the three months ended September 30, 2009 and 2008,
respectively.  This increase was due to increased activity in the
Company during the three months ended September 30, 2009.





Stock-based
compensation:  Stock-based compensation expenses were $327,424
and $nil for the three months ended September 30, 2009 and 2008, respectively as
the Company did not provide any stock-based compensation for the three month
period ended September 30, 2008.





Loss from
operations:  Our loss from operations was $481,440 and $1,500
for the three months ended September 30, 2009 and 2008,
respectively.  This increase in loss from operations of $479,940
resulted from an increase in exploration costs, professional fees, consulting
fees, general and administrative expenses and stock-based compensation expenses
of the Company during the three months ended September 30, 2009.





Net
Loss:  Net loss was $481,436 and $1,500 for the three months
ended September 30, 2009 and 2008, respectively.  This increase in net
loss of $479,936 resulted from an increase in losses from operations offset by
interest income during the three months ended September 30, 2009.





Six
Month Period Ended September 30, 2009





Revenues.  We
have not generated any revenues to date from our operations.





Exploration
costs:  Exploration costs were $12,388 and $nil for the six
months ended September 30, 2009 and 2008, respectively as the Company did not
undertake any geological exploration during the six month period ended September
30, 2008.





Professional
fees:  Professional fees were $105,385 and $3,500 for the six
months ended September 30, 2009 and 2008, respectively.  This increase
was due to the increased activity of the Company during the six months ended
September 30, 2009.





Consulting
fees:  Consulting fees were $3,804 and $nil for the six months
ended September 30, 2009 and 2008, respectively.  This increase was
due to the increased activity of the Company during the six months ended
September 30, 2009.





General and administrative
fees:  General and administrative expenses were $67,097 and
$nil for the six months ended September 30, 2009 and 2008,
respectively.  This increase was due to increased activity in the
Company during the six months ended September 30, 2009.





Stock-based
compensation:  Stock-based compensation expenses were
$2,783,440 and $nil for the six months ended September 30, 2009 and 2008,
respectively as the Company did not provide any stock-based compensation for the
six month period ended September 30, 2008.





Loss from
operations:  Our loss from operations was $2,972,114 and $3,500
for the six months ended September 30, 2009 and 2008,
respectively.  This increase in loss from operations of $2,968,614
resulted from an increase in exploration costs, professional fees, consulting
fees, general and administrative expenses and stock-based compensation expenses
of the Company during the six months ended September 30, 2009.




9





Net
Loss:  Net loss was $2,972,131 and $3,500 for the six months
ended September 30, 2009 and 2008, respectively.  This increase in net
loss of $2,968,631 resulted from an increase in losses from operations and
interest expenses offset by interest income during the six months ended
September 30, 2009.





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 investors.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





As a
“smaller reporting company” (as defined by §229.10(f)(1)), we are not required
to provide the information required by this Item.





ITEM
4T. CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commission's rules and forms.  Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.





As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end
of the period covered by this report, we have carried out an evaluation of the
effectiveness of the design and operation of our company’s disclosure controls
and procedures.  Under the direction of our Chief Executive Officer,
we evaluated our disclosure controls and procedures and internal control over
financial reporting and concluded that (i) there continue to be material
weaknesses in the Company’s internal controls over financial reporting, that the
weaknesses constitute a “deficiency” and that this deficiency could result in
misstatements of the foregoing accounts and disclosures that could result in a
material misstatement to the financial statements for the current period that
would not be detected, and (ii) accordingly, our disclosure controls and
procedures were not effective as of September 30, 2009.





Changes
in Internal Controls Over Financial Reporting





There was
no change in our internal controls over financial reporting that occurred during
the period covered by this report, which has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.





PART
II - OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS





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





ITEM 1A. RISK FACTORS





As a
“smaller reporting company” (as defined by §229.10(f)(1)), we are not required
to provide the information required by this Item.




10





ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





Not
applicable.





ITEM 3. DEFAULTS UPON SENIOR SECURITIES





None.





ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





No
matters have been submitted to our security holders for a vote, through the
solicitation of proxies or otherwise, during the quarterly period ended
September 30, 2009.





ITEM 5. OTHER INFORMATION





Not
applicable.





ITEM
6. EXHIBITS





(a)
            Exhibit
      List





31.1
            Certificate
      pursuant to Rule 13a-14(a)


31.2
            Certificate
      pursuant to Rule 13a-14(a)


32.1
            Certificate
      pursuant to 18 U.S.C. §1350


32.2
            Certificate
      pursuant to 18 U.S.C. §1350


11


SIGNATURE





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





AFFINITY
      GOLD CORP.
                    (Registrant)Date:  December
      14, 2009
                  By:
      /s/ Antonio RotundoAntonio
      RotundoPresident,
      CEO, CFO and Director
                    (Principal
      Executive Officer and Principal Financial
      Officer)


12