SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON, D.C.
20549









FORM
10-K






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


For the
fiscal year ended July 31, 2008






OR






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


For the
transition period from ___________ to ___________




Commission
File Number 000-49961




MAGNUS
INTERNATIONAL RESOURCES INC.
 (Exact
Name of Registrant as Specified in its Charter)




Nevada
            98-0351859(State
      or other Jurisdiction of Incorporation
              or
      Organization)
            (IRS
      Employer
              Identification
      Number)101
      Convention Center Drive,
              7th
      Floor, Las Vegas, NV
            89109(Address
      of Principal Executive Offices)
            (Zip
      Code)1-888-888-1494
              (Registrant's
      Telephone Number, Including Area
Code)











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




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









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
the filing requirements for the past 90 days:    Yes
x   No
o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K:     Yes o   No
x




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





Large
      accelerated filer
            o
            Accelerated
      filer
            oNon-accelerated
      filer
            o (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 o   No
x




State
issuer’s revenues for its most recent fiscal year.  July 31, 2008:
$-0-




Aggregate market value of outstanding
Common Stock held by non-affiliates:As of October 29, 2008,
the aggregate market value of outstanding Common Stock of the registrant held by
non-affiliates was approximately $2,190,258.16




Outstanding Common Stock: As
of October 29, 2008, the Company had 54,756,454 shares of Common Stock
outstanding.


















ii






TABLE OF CONTENTS




PageUSE OF NAMES
            1CURRENCY
            1METRIC CONVERSION TABLE
            1UNCERTAINTY OF FORWARD-LOOKING
      STATEMENTS
            1PART IITEM 1. DESCRIPTION OF BUSINESS
            1ITEM 1A. RISK FACTORS
            9ITEM 1B. UNRESOLVED STAFF COMMENTS
            14ITEM 2. DESCRIPTION OF PROPERTIES
            14ITEM 3. LEGAL PROCEEDINGS
            23ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY
      HOLDERS
            24PART IIITEM
      5. MARKET FOR COMPANY’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OFEQUITY
      SECURITIES
            24ITEM 6. SELECTED FINANCIAL DATA
            27ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPERATION
            27ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
      MARKET RISK
            30ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
      DATA
            32ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING AND FINANCIAL DISCLOSURE
            65ITEM 9A. CONTROLS AND PROCEDURES
            65ITEM 9B. OTHER INFORMATION
            67PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
      CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
      ACT
            67ITEM 11. EXECUTIVE COMPENSATION
            69ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
      AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
            72ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS
            74ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
      SERVICES
            75PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENTS
      SCHEDULES
            76SIGNATURES
            77










iii
 Table of Contents




USE OF NAMES




In this
report, the terms “Magnus”, the “Company”, “we” or “us”, unless the context
otherwise requires, mean Magnus International Resources Inc. and its
subsidiaries.




CURRENCY




Unless
otherwise specified, all dollar amounts in this report are expressed in United
States dollars.




METRIC CONVERSION TABLE




To
      Convert Imperial Measurement Units
            
            To
      Metric Measurement Units
            
            Multiply
  byAcres
            
            Hectares
            
            0.4047Feet
            
            Meters
            
            0.3048Miles
            
            Kilometers
            
            1.6093Tons
      (short)
            
            Tonnes
            
            0.9071Gallons
            
            Liters
            
            3.7850Ounces
      (troy)
            
            Grams
            
            31.103Ounces
      (troy) per ton (short)
            
            Grams
      per tonne
            
            34.286




UNCERTAINTY OF FORWARD-LOOKING STATEMENTS




This
document, including any documents that are incorporated by reference, contains
forward-looking statements concerning, among other things, mineralized material,
proven or probable reserves and cash operating costs. Such statements are
typically punctuated by words or phrases such as “anticipates”, “estimates”,
“projects”, “foresees”, “management believes”, “believes” and words or phrases
of similar import. Such statements are subject to certain risks, uncertainties
or assumptions. If one or more of these risks or uncertainties materialize, or
if underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or projected. Important factors that could
cause actual results to differ materially from those in such forward-looking
statements are identified in this document under “Part I—Item 1.
Description of the Business and Risk Factors”. Magnus assumes no obligation to
update these forward-looking statements to reflect actual results, changes in
assumptions, or changes in other factors affecting such statements.




PART I




ITEM 1. DESCRIPTION OF BUSINESS




General
Overview




Magnus is
a mineral exploration company that specializes in identifying, acquiring and
developing precious and base metal properties. In Uganda, the Company has a 100%
interest in  eight mineral properties in Uganda, Mubende, Lugazi,
Mitoma, Mwerusandu, Rubindi, Kigumba, Kidera and Nyanga, a right to earn a 60%
interest in a ninth property, Mashonga, and a right to earn an 80% interest in a
tenth property, Ibanda. The Company has also been focused on gold projects in
China with its key mineral project being the Huidong Property. The Company has
completed the sale of its Huidong Property to a Chinese mining group, and 100%
of the ownership of the Huidong license has been transferred to this Chinese
Group. As of 31 October 2008, Magnus has received 7 million RmB and the Company
intends to collect the remaining 14 million RmB in installments over the next
several months.  As of 12 November 2008, the remaining payments for the
sale of Long Teng are delinquent and the Company has provided an allowance for
the uncollectibility of those payments due from the sale of the Huidong
Property.




1
 Table of Contents


The
Company was incorporated under the laws of the State of Nevada, USA on April 4,
2001 and has a July 31st fiscal
year end.




The
current addresses, telephone and facsimile numbers of the offices of the Company
are:




Canadian
      Office
            China
      Office
            Uganda
      Office280
      Nelson Street
              Suite
      115
              Vancouver,
      BC
              Canada
              V6B
      2E2
              
              Tel:
      (604) 694-1432
            Dushimingyuan
      Bldg.
              No.
      A-2708
              Central
      Renmin Road
              Kunming
      City, Yunnan Province
              650031
              People’s
      Republic of China
              
              Tel:
      86--871—3642422
              Fax:
      86- 871- 3642420
            Plot
      1A
              Mugwanya
      Road
              Entebbe,
      Uganda
              
              Tel:
      +256(0) 7734 63095





The price
of the Company’s common stock was quoted for trading on the over-the-counter
bulletin board (“OTCBB”) since March 25, 2003.  On November 14, 2007,
the Company received notice of the suspension of the quotation of its shares on
the OTCBB for one year for late filing of annual and/or quarterly reports, and
on December 6, 2007 the Company’s shares were removed from quotation on the
OTCBB.  The Company’s shares are now quoted for trading on the Pink
Sheets over-the-counter quotation system under the symbol “MGNU”.





Property
Agreements





Property
Agreements - Africa





In
Africa, the Company, through its indirect wholly-owned subsidiaries, African
Mineral Fields Limited and AB Mining Ltd. (each of which are wholly-owned by the
Company’s wholly-owned subsidiary, African Mineral Fields Inc. (“AMF”)), has a
100% interest in eight mineral properties in Uganda, the Mubende Property, the
Lugazi Property, the Mitoma Property, the Mwerusandu Property, the Rubindi
Property, the Kigumba Property, the Kidera Property and the Nyanga Property, and
has a right to earn a 60% interest in a the Mashonga Property, and a right to
earn an 80% interest in the Ibanda Property.





Mwerusandu
Property





On
November 8, 2007, Magnus entered into a license transfer agreement (the “License
Transfer Agreement”) with Flemish Investments Limited (“Flemish”) under which
Flemish agreed to transfer 100% of the right, title and interest to the licenses
comprising the Mwerusandu Property (comprised of three mineral exploration
licenses covering a total of 57.7 square kilometers of land in Uganda) and the
Mitoma Property (described below) to Magnus.  Flemish is a third party
property vendor in relation to Magnus. The Ugandan Department of Geological
Survey and Mines ratified the transfer of the licenses on December 20, 2007, and
accordingly Magnus now holds a 100% interest in the Mwerusandu
Property.  Flemish is entitled to receive from Magnus a net smelter
returns royalty on the Mwerusandu Property on a sliding scale between 0.5% (if
the gold price is below $250/oz.) and 2.1% (if the gold price is above
$1,200/oz.), depending on the price of gold when the NSR is being
paid.





In
addition to the licenses transferred to Magnus under the License Transfer
Agreement, Magnus received an additional exploration license covering 147.63 sq.
km.  During the year three licenses were renewed for a period of two
years, each with a 50% reduction in area, so that the Mwerusandu Property is now
comprised of four exploration licenses covering 175.43 sq. km.




2
 Table of Contents




Mitoma
Property




Under the
License Transfer Agreement, Flemish also agreed to transfer 100% of the right,
title and interest to the licenses comprising the Mitoma Property (comprised of
six mineral exploration licenses for a total of 279.0 square kilometers of land
in Uganda) to Magnus.  The Ugandan Department of Geological Survey and
Mines ratified the transfer of the licenses on December 20, 2007, and
accordingly Magnus now holds a 100% interest in the Mitoma
Property.  Flemish is entitled to receive from Magnus a net smelter
returns royalty on the Mitoma Property on a sliding scale between 0.5% (if the
gold price is below $250/oz.) and 2.1% (if the gold price is above $1,200/oz.),
depending on the price of gold when the NSR is being paid.





In
addition to the licenses transferred to Magnus under the License Transfer
Agreement, Magnus received an additional two exploration licenses covering
159.49 sq. km.  During the year, four licenses were renewed for a
period of two years with a 50% reduction in area and one license was
relinquished.  The Mitoma Property is now comprised of seven
exploration licenses covering 359.49 sq. km.





During
the year to date a limited infill soil survey was completed at the Kabira
license on the Mitoma Property. Some 43 soil samples were collected to test
previous anomalies delineated in previous exploration. The results do not
indicate an extensive zone of anomalous soil values.





Mubende
Property





On
September 1, 2006, AMF entered into an agreement (the “Mubende Agreement”) with
Flemish Investments Limited (“Flemish”) under which AMF purchased a 100% right,
title and interest in and to the mineral exploration licenses respecting 780
square kilometers of land in central Uganda (the “Mubende
Property”).  The purchase price paid by AMF for the Mubende Property
was US$25,000 and the issuance of 250,000 common shares of AMF (since exchanged
for Magnus shares).  In addition, under the Mubende Agreement AMF was
required to issue additional AMF common shares, to a maximum of 300,000
additional shares, to Flemish for each economically mineable ounce of gold on
the Mubende Property that is proven to be a measured and indicated
resource.  To date, there is not a measured or indicated resource on
the Mubende Property, and accordingly no additional shares have been issued to
Flemish.





Since
acquiring the Mubende Property, AMF has received an additional exploration
license covering 71.20 sq. km., so that the Mubende Property is now comprised of
three exploration licenses covering 851.20 sq. km.





During
the year to date a total of 1,001 soil samples and 46 rock grab samples were
collected on the Mubende Property along regional lines to test the edges of a
large granite batholith. The Company believes that the numerous gold and
tungsten occurrences on the Property as well as alluvial mining operations to
the west of the Property have a source from the edges of this granite body.
Results are pending and will be evaluated in the months going
forward.





Lugazi
Property





AMF also
acquired a 100% right, title and interest in and to a mineral exploration
license covering 261 square kilometers of land in central Uganda (the “Lugazi
Property”) on September 1, 2006 under an agreement (the “Lugazi Agreement”) with
Flemish.  The terms of the Lugazi Agreement are the same as those of
the Mubende Agreement, and to date there is not a measured or indicated resource
on the Lugazi Property and no additional shares have been issued to
Flemish.  Since acquiring the Lugazi Property, AMF has received four
additional exploration licenses covering 1,359.17 sq. km.  During the
year, one license was renewed for a period of two years, with a 50% reduction in
area, so that the Lugazi Property is now comprised of five exploration licenses
covering 1,487.69 sq. km.





A reverse
circulation drilling program was completed on the Lugazi Property in the year
which tested three prominent gold-in-soil geochemical anomalies. The 31 hole,
2,037m program tested these three anomalous zones which were co-incident with
magnetic rich horizons along lithological strike. The RC holes were drilled at
about 50m intervals along a fence across the soil anomaly, and were designed to
investigate the nature of the weathered profile to an average depth of some 65m.
As no previous gold mineralisation has been reported from this belt the Company
sought to understand the source of the anomalous gold in soils


3
 Table of Contents


and
attempt to identify possible structures that could be followed up during
subsequent phases of exploration. This drilling is the culmination of early
stage exploration at Lugazi which commenced in May 2006.





The most
significant RC drill results include:





§
            4m
      at 0.98 g/t gold from 18m in LUG006 at the Kiyola target (incl. 2m at
      1.3g/t)


§
            2m
      at 0.50 g/t gold from 64m in LUG007 at the Kiyola
  target


§
            2m
      at 1.50 g/t gold from 2m in LUG017 at the Nantula
  target


§
            2m
      at 1.20 g/t gold from 9m in LUG028 at the Katente
  target





A
regional geochemical program has also uncovered potential new gold targets on
other parts of the Lugazi belt.





On a more
regional scale, a total of 1,456 soil samples were collected along regional
lines, planned to investigate additional gold, as well as base metal rich
horizons. The final results, including infill sampling, are still pending and
will be evaluated as they become available.





Mashonga
Property





On August
30, 2007, AMF entered into a joint venture agreement (the “Mashonga Agreement”)
with a consortium of Ugandan businessmen respecting two mineral exploration
licenses and three location licenses covering 460.87 square kilometers of land
partially contiguous to AMF’s Mitoma Property in Uganda (the “Mashonga
Property”).  Under the Mashonga Agreement, Magnus has the right to
earn a 60% interest in the Mashonga Property by making aggregate cash payments
of US$650,000 to its joint venture partners, making a minimum US$4 million in
property exploration expenditures and completing a pre-feasibility study on the
property by August 30, 2012.  Magnus’ joint venture partners have the
right to accept common shares of Magnus in lieu of the cash
payments.  As of October 31, 2008, Magnus had paid US$70,000 to its
joint venture partners and had commenced exploration on the Mashonga
Property.  Once Magnus has earned its 60% interest in the Mashonga
Property, the parties may form a new joint venture company to further explore
and develop the Property.





During
the year to date at the Mashonga Property a preliminary soil sample program was
completed over targets with high-grade trench and rock sample values from
previous exploration activities, as well as from regional soil lines, to
investigate additional targets. In total 127 soil samples were collected;
results were mixed, showing good anomalous values over one target while having
inconsistent values over the other target.  The Company also conducted
an alteration mapping survey using PIMA analysis of surface rock samples. The
alteration pattern indicated an important transition from acidic to alkaline
regime along a prominent northwest structure. An RC drill program was conducted
at the Mashonga mine site during the summer 2008. To date a total of 667m has
been completed in 7 holes beneath the Mashonga mine. The full set of results is
still pending, as the Company decided to assay the samples for coarse or nuggety
gold using screen fire assay methods. As of July 31, 2008, Magnus has made
$310,136 of direct exploration expenditures on the Mashonga
Property.





Ibanda
Property





On May 1,
2008, the Company entered into an earn-in agreement (the “Ibanda Agreement”)
with Canmin-Gold Limited, a subsidiary of IBI Corporation,respecting a
mineral exploration license covering 332.70 square kilometers of land contiguous
in southwest Uganda, northeast of the Mashonga Property (the “Ibanda
Property”).  Under the Ibanda Agreement, Magnus has the right to earn
a 5% interest in the Ibanda Property for each $150,000 of expenditures that it
makes and may earn up to an 80% interest by making an aggregate of $2 million in
expenditures on the property within five years.  Upon Magnus earning
an 80%


4
 Table of Contents


interest
in the Property, the parties may form a joint venture under which each party
will be required to contribute its proportionate share of further expenditures
or have its interest be diluted.





Exploration
at Ibanda commenced during the year with soil samples and rock samples being
collected over previous gold-in-soil anomalies defined by a previous explorer in
the late 1990’s. To date the full set of results has not been received, due
largely to the huge number of samples that the laboratories have in
process.





Other
Projects





On May
12, 2008, a mineral exploration license covering 363 square kilometers of land
in western Uganda (the “Kigumba Property”) was granted to the Company. A 20km
long uranium anomaly on the license was picked up by processing the data from
the airborne geophysical survey which is being flown over 80% of Uganda. Since
acquiring this licence, three additional licences totalling 1402.55 square
kilometers were also acquired under the name of the Company’s indirect
wholly-owned subsidiary, AB Mining Ltd.





On May
12, 2008, a mineral exploration license covering 291 square kilometers of land
in southwestern Uganda (the “Rubindi Property”) was granted to the Company.
Since acquiring this licence, an additional licence covering 429 square
kilometers was also acquired under the name of AB Mining Ltd.





On June
30, 2008, a mineral exploration license covering 485 square kilometers of land
in central Uganda (the “Kidera Property”) was granted to the Company. The
Company intends to evaluate this project for tantalum, rare earth metals and
diamonds.





On June
30, 2008, a mineral exploration license covering 23.28 square kilometers of land
in central Uganada (the “Nyanga Property”) was granted to the Company. The
Company intends to evaluate the tantalum potential at this project.





Property
Agreements – China





Through
its joint venture agreements described below, the Company previously had
interests, or contingent interests, in two properties in China: the Huidong
Property, comprising 83.29 square kilometers in Sichuan Province; and the
Mangshi Property, comprising 113.96 square kilometers in Yunnan
Province.





Yunnan
Long Teng Mining Ltd. – Huidong Property





On May
28, 2008, Magnus executed an agreement (the “Transfer Agreement”) with Mr. Lai
Jinzang (“Jinzang”) under which Magnus agreed to sell its 90% interest in Yunnan
Long Teng Mining Ltd., which owns the exploration license underlying the Huidong
gold exploration property in Sichuan Province, China to
Jinzang.  Under the Transfer Agreement, Magnus was to receive; (i)
7,000,000 yuan (approximately US $1,000.000) within seven days of the execution
of the Transfer Agreement; (ii) a further 7,000,000 yuan within seven days of
the successful renewal of the exploration license underlying the Huidong
property; (iii) a further 4,900,000 yuan within seven days of the transfer of
Magnus’ 90% interest in Yunnan Long Teng Mining Ltd. to Jianzan; and (iv) a
further 2,100,000 yuan within seven days of the transfer of the remaining 10%
interest in Yunnan Long Teng Mining Ltd. held by Team 209 to Jinzang, whether
directly from Team 209 or indirectly from Team 209 to Magnus and then to
Jinzang.  In addition, Magnus retains a 3% net smelter royalty on any
minerals produced from the Huidong property under the exploration license in the
future, which should be paid quarterly.  In late May 2008, Jinzang
forwarded the first payment of 7,000,000 yuan to Magnus. The exploration license underlying the
property has successfully been renewed by the relevant Chinese authorities and
100% of the ownership interest in the company that possesses the license has
been transferred to the Jinzang. The remaining 14 million RmB (approximately
US$2 million) is now due and expected to be paid by the Chinese purchaser in
installments with full payment expected to be in the first quarter of
2009.  As of 12 November 2008, the remaining payments for the sale of Long
Teng are delinquent and the Company has provided an allowance for the
uncollectibility of those payments due from the sale of the Huidong
Property.





On July
6, 2004, the Company signed a formal cooperative joint venture contract (the
“Huidong Agreement”) with Geological Brigade Team 209 of the Nuclear Industry of
Yunnan Province (“Team


5
 Table of Contents


209”) to
form a new cooperative joint venture company, Yunnan Long Teng Mining Ltd.
(“Long Teng Mining”), a Sino-foreign Chinese corporation, to carry out minerals
exploration and development in an 83.29 square kilometer area of Huidong County
in Sichuan Province.





On May
12, 2008, the Company entered into an Agreement for Modification of Joint
Venture Rights & Interests (the “Modification Agreement”) with Team
209.  Under the Modification Agreement, the Company, which held a 90%
interest in Long Teng Mining and a 90% interest in Yunnan Western Mining Co.,
Ltd. (“Western”, which holds the mineral rights to the Mangshi Property,
described below), would obtain the remaining 10% interest in Long Teng Mining
from Team 209 in exchange for transferring the Company’s 90% interest in Western
to Team 209.  Magnus was also required to pay 1 million RMB
(approximately US$130,000) to Team 209 for previous services provided by Team
209 to Long Teng Mining and Western and payment of all the liabilities of
Western within 10 days after all documents submitted to governmental departments
receive approval.





Yunnan
Western Mining Co., Ltd. – Mangshi Property




Under the
Modification Agreement (described above), Magnus agreed to transfer its interest
in Western to Team 209 in exchange for Team 209’s interest in Long Teng Mining,
and Magnus will not be conducting further exploration or expending further
capital on the Mangshi Property.  The Modification Agreement was
consummated and accordingly the Mangshi Property is no longer material to the
Company.




On
November 25, 2005, Magnus acquired 100% of the issued and outstanding shares of
Golden River Resources Corp., a private British Columbia company (“Golden
River”), which was owned by First Fortune Investments Inc.  Golden
River is a party to a co-operative joint venture agreement dated August 29, 2003
(the “Mangshi Agreement”) with Team 209.  Under the Mangshi Agreement,
Golden River and Team 209 formed Western, a sino-foreign joint venture company
which held the rights to the Mangshi Property, a mineral exploration property
comprising approximately 113.96 square kilometres in Yunnan
Province.  Golden River had the right to earn a 90% interest in
Western Mining, with Team 209 retaining the other 10%.




Corporate
Structure




The
Company has one wholly owned subsidiary, African Mineral Fields Inc.
(incorporated under the laws of the British Virgin Islands), which in turn has
incorporated two subsidiaries, African Mineral Fields Limited and AB Mining
Limited (both incorporated under the laws of Uganda).

















6
 Table of Contents


The
following chart describes the Company’s corporate structure and material
subsidiaries:







Notes:




Employees




As of
November 1, 2008, the Company had two full-time employees (over and above its
directors, officers and consultants) employed in Vancouver, British Columbia
(one in an administrative capacity and one as a bookkeeper).




In
Uganda, the Company employs one person as senior geologist. The Company’s
operating subsidiary in Uganda, African Mineral Fields Limited, employs two
additional persons: one accountant and one housekeeper.




The
Company employs two persons in China who continue to assist in dealing with
matters relating to Long Teng and further payments due to Magnus for the sale of
its equity interest in Long Teng.





The
Company also uses consultants with specific skills to assist with various
aspects of its project evaluation, due diligence, acquisition initiatives,
corporate governance and property management.






7
 Table of Contents





Other Property Interests and Mining
Claims




The
Company currently only has interests in the above-noted properties in
Uganda.





Government
Regulation





Mining
operations and exploration activities are subject to various national, state,
provincial and local laws and regulations in the United States, Canada, and
Uganda as well as other jurisdictions, which govern prospecting, development,
mining, production, exports, taxes, labor standards, occupational health, waste
disposal, protection of the environment, mine safety, hazardous substances and
other matters.





The
Company believes that it is and will continue to be in compliance in all
material respects with applicable statutes and the regulations passed in the
United States, Canada and Uganda.  There are no current orders or
directions relating to the Company with respect to the foregoing laws and
regulations.





Environmental
Regulation





The
Company's exploration projects are subject to various federal, state and local
laws and regulations governing protection of the environment in North America,
and Uganda. These laws often change and, as a general matter, are becoming more
restrictive. The Company's policy is to conduct business in a way that
safeguards public health and the environment. The Company believes that its
operations are conducted in material compliance with applicable laws and
regulations.





Changes
to current local, state or federal laws and regulations in the jurisdictions
where the Company operates or may operate in the future could require additional
capital expenditures and increased operating costs. Although the Company is
unable to predict what additional legislation, if any, might be proposed or
enacted, additional regulatory requirements could impact the economics of its
projects.





In the
preceding year, there were no material environmental incidents or non-compliance
with any applicable environmental regulations. The Company estimates that it
will not incur material capital expenditures for environmental control
facilities during the current fiscal year.





Competition





Magnus is
a grassroots mineral exploration company.  The mineral exploration
industry is competitive, with many companies competing for the limited number of
precious and base metals acquisition and exploration opportunities that are
economic under current or foreseeable metals prices, as well as for available
investment funds.  With metal prices at their current levels, activity
in the industry has increased dramatically, and competition is also high for the
recruitment of qualified personnel and equipment.





The
Company believes no single company has sufficient market power to affect the
price or supply of gold or other minerals in the world market.





Subsequent
Events





On
October 31, 2008 Magnus closed its office in Vancouver and laid off two staff
persons as cost–cutting measures.  Currently, the Company is operating out
of the homes of the CEO, and two remaining Vancouver staff, an administrative
manager and bookkeeper.





It is our
intention to keep the remaining staff full-time until the 31 December 2008,
after which it is anticipated that they would move to a consulting basis.
Associated office overheads and staffing will therefore be significantly
reduced.





Magnus is
also in the process of finding a smaller office in Uganda and we have let go of
most of our staff there. We can use former full-time staff on a consulting basis
when needed.




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Our
office lease in China expires at the end of March 2009 and after it expires we
will no longer have a China office. It is anticipated that one or two staff
members will remain on the payroll in China until we are fully paid for the sale
of Long Teng.





Management
intends to reduce the total budget for Magnus for the year down to about US
$600,000 of costs (that are not currently loans or payables) for the coming
year. Thus costs will be reduced by a very significant amount. See also “Future
Plans” under Item 2 below.





ITEM 1A.  Risk Factors





The
following risk factors should be considered in connection with an evaluation of
the business of the Company:





THE
COMPANY'S LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO JUDGE ITS
PROSPECTS.





The
Company has a limited operating history upon which an evaluation of the Company,
its current business and its prospects can be based. You should consider any
purchase of the Company's shares in light of the risks, expenses and problems
frequently encountered by all companies in the early stages of its corporate
development.





LIQUIDITY
AND CAPITAL RESOURCES ARE UNCERTAIN.





For the
year ended July 31, 2008, the Company had an operating loss of $1,618,022. At
July 31, 2008, the Company had a working capital deficiency of $1,946,157. The
Company needs to raise additional capital by way of being repaid the 14 million
RmB (about US $2 million) that is currently owed to Magnus for the sale of Long
Teng, an offering of equity securities, an offering of debt securities, or by
obtaining financing through a bank or other entity. As of 12 November 2008, the
remaining payments for the sale of Long Teng are delinquent and the Company has
provided an allowance for the uncollectibility of those payments due from the
sale of Long Teng. The Company has not established a limit as to the amount
of debt it may incur nor has it adopted a ratio of its equity to debt allowance.
If the Company needs to obtain additional financing, there is no assurance that
financing will be available from any source, that it will be available on terms
acceptable to us, or that any future offering of securities will be successful.
If additional funds are raised through the issuance of equity securities, there
may be a significant dilution in the value of the Company’s outstanding common
stock. The Company could suffer adverse consequences if it is unable to obtain
additional capital which would cast substantial doubt on its ability to continue
its operations and growth.





We
have a going concern opinion from our auditors, indicating the possibility that
we may not be able to continue to operate.





We
anticipate generating losses for the next 12 months.  Therefore, we
may be unable to continue operations in the future as a going
concern.  No adjustment has been made in the accompanying financial
statements to the amounts and classification of assets and liabilities which
could result should we be unable to continue as a going concern.  If
we cannot continue as a viable entity, our shareholders may lose some or all of
their investment in the Company.





There
can be no assurance that we will be capable of raising the additional funding
that we need to carry out our development and exploration
objectives.





The
further development and exploration of our mineral properties depends upon our
ability to collect on monies owed to the Company or obtain financing through
capital markets, or other means.  There is no assurance that we will
be successful in obtaining financing as and when needed. Unfavorable market
conditions may make it difficult or impossible for us to obtain debt financing
or equity financing on acceptable terms or at all.  Failure to collect
monies owed to the Company or to obtain additional financing


9
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on a
timely basis may cause us to postpone our development plans, forfeit rights in
some or all of our properties or reduce or terminate some or all of our
operations.





We
do not have experience in placing properties into production.





We have
no experience in placing mineral properties into production, and our ability to
do so will be dependent upon using the services of appropriately experienced
personnel or entering into agreements with other major resource companies that
can provide such expertise.  There can be no assurance that we will
have available to us the necessary expertise to take a mineral deposit into
production.





THE
VALUE AND TRANSFERABILITY OF THE COMPANY'S SHARES MAY BE ADVERSELY IMPACTED BY
THE LIMITED TRADING MARKET FOR ITS SHARES AND THE PENNY STOCK
RULES.





There is
only a limited trading market for the Company’s shares. The Company’s common
stock is quoted for trading on the over-the-counter market and “bid” and “asked”
quotations regularly appear on the Pink Sheets quotation market under the symbol
“MGNU”. There can be no assurance that the Company’s common stock will trade at
prices at or above its present level, and an inactive or illiquid trading market
may have an adverse impact on the market price. In addition, holders of the
Company’s common stock may experience substantial difficulty in selling their
securities as a result of the “penny stock rules”, which restrict the ability of
brokers to sell certain securities of companies whose assets or revenues fall
below the thresholds established by those rules.





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





The
Securities and Exchange Commission has defined “penny stock” under Rule 3a51-1
and as such our stock is penny stock.  Our securities are covered by
the penny stock rules, Rule 15g-9, which imposes additional sales practice
requirements, including disclosure requirements, on broker-dealers who sell to
persons other than established customers and “accredited
investors”.  The disclosure requirements may have the effect of
reducing the level of trading activity in the secondary market for stock that is
subject to the penny stock rules.  The penny stock rules may affect
the ability of broker-dealers to trade our securities.  We believe
that the penny stock rules discourage investor interest in, and limit the
marketability of, our common stock.





In
addition, the Financial Industry Regulatory Authority has adopted rules that
require a broker/dealer, when recommending an investment to a customer, to have
reasonable grounds for believing that the investment is suitable for that
customer.  Prior to recommending speculative low priced securities to
their non-institutional customers, broker/dealers must make reasonable efforts
to obtain information about the customer’s financial status, tax status,
investment objectives and other information.  Interpretations of these
rules suggest that there is a high probability that speculative low-priced
securities will not be suitable for some customers.  The Financial
Industry Regulatory Authority requirements make it more difficult for
broker/dealers to recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock.





Because
we do not intend to pay any cash dividends on our shares of common stock, our
stockholders will not be able to receive a return on their shares unless they
sell them.





We intend
to retain any future earnings to finance the development and expansion of our
business. We do not anticipate paying any cash dividends on our common stock in
the foreseeable future. Unless we pay dividends, our stockholders will not be
able to receive a return on their shares unless they sell them.





10
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FUTURE
SALES OF SHARES MAY ADVERSELY IMPACT THE VALUE OF THE COMPANY'S
STOCK.




If
required, the Company may seek to raise additional capital through the sale of
common stock. Future sales of shares by the Company or its stockholders could
cause the market price of its common stock to decline.




MINERAL
EXPLORATION AND DEVELOPMENT ACTIVITIES ARE SPECULATIVE IN NATURE.




Resource
exploration and development is a speculative business, characterized by a number
of significant risks including, among other things, unprofitable efforts
resulting not only from the failure to discover mineral deposits but from
finding mineral deposits which, though present, are insufficient in quantity and
quality to return a profit from production. The marketability of minerals
acquired or discovered by the Company may be affected by numerous factors which
are beyond the control of the Company and which cannot be accurately predicted,
such as market fluctuations, the proximity and capacity of milling facilities,
mineral markets and processing equipment and such other factors as government
regulations, including regulations relating to royalties, allowable production,
importing and exporting of minerals and environmental protection, the
combination of which factors may result in the Company not receiving an adequate
return of investment capital.





Substantial
expenditures are required to establish ore reserves through drilling, to develop
metallurgical processes to extract the metal from the ore and, in the case of
new properties, to develop the mining and processing facilities and
infrastructure at any site chosen for mining. Although substantial benefits may
be derived from the discovery of a major mineralized deposit, no assurance can
be given that minerals will be discovered in sufficient quantities and grades to
justify commercial operations or that funds required for development can be
obtained on a timely basis. Estimates of reserves, mineral deposits and
production costs can also be affected by such factors as environmental
permitting regulations and requirements, weather, environmental factors,
unforeseen technical difficulties, unusual or unexpected geological formations
and work interruptions. In addition, the grade of ore ultimately mined may
differ from that indicated by drilling results. Short term factors relating to
reserves, such as the need for orderly development of ore bodies or the
processing of new or different grades, may also have an adverse effect on mining
operations and on the results of operations. Material changes in ore reserves,
grades, stripping ratios or recovery rates may affect the economic viability of
any project.





THE
COMPANY WILL BE SUBJECT TO OPERATING HAZARDS AND RISKS WHICH MAY ADVERSELY
AFFECT THE COMPANY'S FINANCIAL CONDITION.





Mineral
exploration involves many risks, which even a combination of experience,
knowledge and careful evaluation may not be able to overcome. The Company's
operations will be subject to all the hazards and risks normally incidental to
exploration, development and production of metals, such as unusual or unexpected
formations, cave-ins or pollution, all of which could result in work stoppages,
damage to property and possible environmental damage. The Company does not have
general liability insurance covering its operations and does not presently
intend to obtain liability insurance as to such hazards and liabilities. Payment
of any liabilities as a result could have a materially adverse effect upon the
Company's financial condition





THE
COMPANY'S ACTIVITIES WILL BE SUBJECT TO ENVIRONMENTAL AND OTHER INDUSTRY
REGULATIONS WHICH COULD HAVE AN ADVERSE EFFECT ON THE FINANCIAL CONDITION OF THE
COMPANY.





The
Company's activities are subject to environmental regulations promulgated by
government agencies from time to time. Environmental legislation generally
provides for restrictions and prohibitions on spills, releases or emissions of
various substances produced in association with certain mining industry
operations, such as seepage from tailing disposal areas, which would result in
environmental pollution. A breach of such legislation may result in imposition
of fines and penalties. In addition, certain types of operations require the
submission and approval of environmental impact assessments. Environmental
legislation is evolving in a manner which means stricter standards and
enforcement, fines and penalties for non-compliance are more stringent.
Environmental assessments of proposed projects carry a
heightened


11
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degree of
responsibility for companies and directors, officers and employees. The cost of
compliance with changes in governmental regulations could have an adverse effect
on the financial condition of the Company.





The
operations of the Company including exploration and development activities and
commencement of production on its properties, require permits from various
federal, state, provincial and local governmental authorities and such
operations are and will be governed by laws and regulations governing
prospecting, development, mining, production, exports, taxes, labor standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. Companies engaged in the development
and operation of mines and related facilities generally experience increased
costs and delays in production and other schedules as a result of the need to
comply with applicable laws, regulations and permits.





Failure
to comply with applicable laws, regulations, and permitting requirements may
result in enforcement actions thereunder, including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed, and may
include corrective measures requiring capital expenditures, installation of
additional equipment, or remedial actions. Parties engaged in mining operations
may be required to compensate those suffering loss or damage by reason of the
mining activities and may have civil or criminal fines or penalties imposed for
violations of applicable laws or regulations and, in particular, environmental
laws.





THE
COMPANY’S PROPERTIES ARE LOCATED IN UGANDA, A DEVELOPING COUNTRY WHICH HAS
HISTORICALLY EXPERIENCED PERIODS OF CIVIL UNREST AND POLITICAL AND ECONOMIC
INSTABILITY.





All of
the Company’s African properties are located in Uganda, a developing country
which has historically experienced periods of civil unrest and political and
economic instability.  Although the political and economic climate in
Uganda is currently stable, any negative changes in governmental laws,
regulations, economic conditions, or political attitudes in Uganda are beyond
the control of the Company and may adversely affect its business.





The
Company’s operations may be affected in varying degrees by government
regulations, policies or directives with respect to restrictions on production
or sales, price controls, export controls, repatriation of income, income taxes,
carried interests for the state, expropriation of property and environmental
legislation. Magnus may also be required to negotiate property agreements with
the Ugandan government, which may impose conditions that will affect the
viability of the project such as providing the government with free carried
interests or providing subsidies for the development of the local infrastructure
or other social assistance. There can be no assurance that Magnus will be
successful in concluding such agreements on commercially acceptable terms or
that these agreements will be successfully enforced in Uganda.





As a
result of the limited but improving infrastructure present in Uganda, land
titles systems are not developed to the extent found in many developed nations.
Although Magnus believes that it has good title to its mineral properties in
Uganda, there is little it can do to control this risk. Magnus holds rights to
explore its mineral properties in Uganda, but no assurance can be given that the
Ugandan government will not revoke or significantly alter the conditions of the
applicable licenses and that such licenses will not be challenged or impugned by
third parties. There is no certainty that such rights or additional rights
applied for will be granted or renewed on terms satisfactory to Magnus. There
can be no assurance that claims by third parties against the Company’s
properties will not be asserted at a future date.





We
may be unable to enforce our legal rights in certain circumstances.





In the
event of a dispute arising at or in respect of our foreign operations, we may be
subject to the exclusive jurisdiction of foreign courts or may not be successful
in subjecting foreign persons to the jurisdiction of courts in the United States
or other jurisdictions.  We may also be hindered or prevented from
enforcing our rights with respect to a governmental entity or instrumentality
because of the doctrine of sovereign immunity.




12
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COMPETITION
MAY HAVE AN IMPACT ON THE COMPANY'S ABILITY TO ACQUIRE ATTRACTIVE MINERAL
PROPERTIES, WHICH MAY HAVE AN ADVERSE IMPACT ON THE COMPANY'S
OPERATIONS.





Significant
and increasing competition exists for the limited number of mineral acquisition
opportunities available. As a result of this competition, some of which is with
large established mining companies with substantial capabilities and greater
financial and technical resources than the Company, the Company may be unable to
acquire attractive mineral properties on terms it considers acceptable.
Accordingly, there can be no assurance that any exploration program intended by
the Company on properties it intends to acquire will yield any reserves or
result in any commercial mining operation.





DOWNWARD
FLUCTUATIONS IN METAL PRICES MAY SEVERELY REDUCE THE VALUE OF THE
COMPANY.





The
Company has no control over the fluctuations in the prices of the metals for
which it is exploring.  A significant decline in such prices would
severely reduce the value of the Company.





THE
COMPANY CURRENTLY RELIES ON CERTAIN KEY INDIVIDUALS AND THE LOSS OF ONE OF THESE
CERTAIN KEY INDIVIDUALS COULD HAVE AN ADVERSE EFFECT ON THE
COMPANY.





The
Company’s success depends to a certain degree upon certain key members of the
management. These individuals are a significant factor in the Company's growth
and success. The loss of the service of members of the management and certain
key employees could have a material adverse effect on the Company. In
particular, the success of the Company is highly dependant upon the efforts of
the President, Treasurer, Secretary, CEO and director of the Company, Graham
Taylor, the loss of whose services would have a material adverse effect on the
success and development of the Company.





THE
COMPANY DOES NOT MAINTAIN KEY MAN INSURANCE TO COMPENSATE THE COMPANY FOR THE
LOSS OF CERTAIN KEY INDIVIDUALS.





The
Company does not anticipate having key man insurance in place in respect of any
of its senior officers or personnel, although the Board has discussed and
investigated the prospect of obtaining key man insurance for Graham
Taylor.





THE
COMPANY’S PRESIDENT AND CHIEF EXECUTIVE OFFICER, GRAHAM TAYLOR, ALSO SERVES AS
PRESIDENT, CHIEF EXECUTIVE OFFICER AND/OR DIRECTOR FOR SOME OTHER ACTIVE
COMPANIES.





Mr.
Taylor also serves as president, chief executive officer and/or director for
other active companies, including Australian Mineral Fields Limited (which
conducts exploration activities in Australia) and Arcview Entertainment Inc. (a
motion picture distribution company).  This list may also expand in
the future.





Mr.
Taylor currently devotes 80% of his time to Magnus, 10% to Australian Mineral
Fields and 10% to Arcview Entertainment.  As Mr. Taylor focuses part
of his time on other companies, this may have a material adverse effect on the
success and development of the Company.





WE
ARE AN EXPLORATION STAGE COMPANY, AND THERE IS NO ASSURANCE THAT A COMMERCIALLY
VIABLE DEPOSIT OR "RESERVE" EXISTS ON ANY PROPERTIES FOR WHICH THE COMPANY HAS,
OR MIGHT OBTAIN, AN INTEREST.





The
Company is an exploration stage company and cannot give assurance that a
commercially viable deposit, or “reserve,” exists on any properties for which
the Company currently has (through a joint venture agreement) or may have
(through potential future joint venture agreements or acquisitions) an
interest.




13
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Therefore,
determination of the existence of a reserve depends on appropriate and
sufficient exploration work and the evaluation of legal, economic, and
environmental factors. If the Company fails to find a commercially viable
deposit on any of its properties, its financial condition and results of
operations will be materially adversely affected.





WE
REQUIRE SUBSTANTIAL FUNDS MERELY TO DETERMINE WHETHER COMMERCIAL MINERAL
DEPOSITS EXIST ON OUR PROPERTIES.





Any
potential development and production of the Company’s exploration properties
depends upon the results of exploration programs and/or feasibility studies and
the recommendations of duly qualified engineers and geologists. Such programs
require substantial additional funds. Any decision to further expand the
Company’s operations on these exploration properties is anticipated to involve
consideration and evaluation of several significant factors including, but not
limited to:





•
      Costs of bringing each property into production, including exploration
      work, preparation of production feasibility studies, and construction of
      production facilities;





•
      Availability and costs of
financing;





•
      Ongoing costs of production;





•
      Market prices for the minerals to be
produced;





•
      Environmental compliance regulations and restraints;
  and





•
      Political climate and/or governmental regulation and
    control.





GENERAL
MINING RISKS





Factors
beyond the control of Magnus may affect the marketability of any substances
discovered from any resource properties the Company may acquire. Metal prices,
in particular gold and copper prices, have fluctuated widely in recent years.
Government regulations relating to price, royalties, allowable production and
importing and exporting of minerals can adversely affect the Company. There can
be no certainty that the Company will be able to obtain all necessary licenses
and permits that may be required to carry out exploration, development and
operations on any projects it may acquire and environmental concerns about
mining in general continue to be a significant challenge for all mining
companies.





ITEM 1B.  UNRESOLVED STAFF COMMENTS





None.




ITEM 2.  DESCRIPTION OF PROPERTIES.




Summary




Magnus is
a mineral exploration company that specializes in identifying, acquiring and
developing precious and base metal properties.  Magnus’ objective is
to develop a balanced global portfolio of early-to-advanced stage projects and
is currently focused on gold projects in Uganda.  The Company has a
100% interest in  eight mineral properties in Uganda at Mubende,
Lugazi, Mitoma, Mwerusandu, Rubindi, Kigumba, Kidera and Nyanga, a right to earn
a 60% interest in a ninth property, Mashonga, and a right to earn an 80%
interest in a tenth property, Ibanda.





Properties
in Uganda





The
following disclosure with respect to the Lugazi, Mubende, Mitoma and Mwerusandu
Properties is


14
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Geological
Map of Uganda Identifying the Company’s Properties








based on
a technical report dated May 15, 2007 (the “Uganda Technical Report 1”) prepared
by Martin Taylor, an independent consulting geologist hired to complete Canadian
NI-43101 compliant reports on behalf of Magnus . The following disclosure with
respect to Mashonga is based on the report dated October 10, 2007 (the “Uganda
Technical Report 2”) prepared by Martin Taylor. The report is filed at
www.sedar.com.





Property
Description and Location





The
Lugazi, Mubende, Mitoma, Mwerusandu, Mashonga, Ibanda, Rubindi, Kigumba, Kidera
and Nyanga Properties comprising approximately 6,661.21 sq. km. are located in
central, southern and southwestern Uganda in East Africa.  The
properties are covered by valid exploration licenses, 30 in total, and valid
location licences, 3 in total.




Lugazi
Property





The
Lugazi Property is located some 50 km east of the capital Kampala in the Mukono
district of southern Uganda, and is approximately centred at Latitude 0° 18’N
and Longitude 32° 52’E.  The Property consists of five exploration
licenses covering an area of approximately 1,487.69 sq. km.







15
 Table of Contents




Mubende
Property




The
Mubende Property is located some 100 km west-northwest of the capital Kampala in
the Mubende and Kiboga administrative districts of south-central Uganda. The
Property is approximately centred at Latitude 0° 34’N and Longitude 31° 46’E,
and consists of three exploration licenses covering approximately 851.20 sq.
km.




Mitoma
Property




The
Mitoma Property is located some 320 km southwest of the capital Kampala in the
Bushenyi district of south-western Uganda. The Property is approximately centred
at Latitude 0° 35’S and Longitude 30° 05’E.  The property consists of
seven exploration licenses covering an area of 359.49 sq. km.




Mwerusandu
Property





The
Mwerusandu Property is located some 380 km southwest of the capital Kampala in
the Ntungamo district of south-western Uganda. The Property is approximately
centred at Latitude 1° 00’S and Longitude 30° 10’E.  The property
consists of four exploration licenses covering an area of 175.43 sq.
km.





Mashonga
Property





The
Mashonga Property is located some 400 km southwest of the capital Kampala in the
Bushenyi district of south-western Uganda. The Property is approximately centred
at Latitude 0° 23’S and Longitude 30° 09’E.  The property consists of
two exploration licenses and three location licences covering an area of 460.87
sq. km.





Ibanda
Property





The
Ibanda Property is located some 300 km southwest of the capital Kampala in the
Bushenyi district of south-western Uganda. The Property is approximately centred
at Latitude 0° 08’S and Longitude 30° 32’E.  The property consists of
one exploration license covering an area of 332.70 sq. km.





Rubindi
Property





The
Rubindi Property is located some 300 km southwest of the capital Kampala in the
Bushenyi and Mbarara districts of south-western Uganda. The Property is
approximately centred at Latitude 0° 20’S and Longitude 30° 32’E.  The
property consists of two exploration licenses covering an area of 720.00 sq.
km.





Kigumba
Property





The
Kigumba Property is located some 200 km north-northwest of the capital Kampala
in the Masindi district of western Uganda. The Property is approximately centred
at Latitude 1° 53’N and Longitude 31° 50’E.  The property consists of
four exploration licenses covering an area of 1,765.55 sq. km.





Kidera
Property





The
Kidera Property is located some 120 km north of the capital Kampala in the
Kamuli and Kayunga districts of central Uganda. The Property is approximately
centred at Latitude 1° 20’N and Longitude 32° 53’E.  The property
consists of one exploration license covering an area of 485.00 sq.
km.





Nyanga
Property





The
Nyanga Property is located some 380 km southwest of the capital Kampala in the
Ntungamo district of south-western Uganda. The Property is approximately centred
at Latitude 0° 57’S and Longitude 30° 11’E.  The property consists of
one exploration license covering an area of 23.28 sq. km.





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Regional
Geology




The
Archaean Ugandan Craton is part of the African Plate, a large area of
continental crust consisting of the accretion of small cratons (e.g. Uganda,
Tanzania) welded together by Proterozoic mobile belts.  Much of
northern and central Uganda is underlain by Archaean basement
gneisses.  The southwest part of the country, including the
exploration licenses of Magnus, is largely underlain by Proterozoic sediments,
minor volcanics and intrusive granites.  Major rift faulting commenced
in the Tertiary and continued to the present.  Tertiary volcanism of
mafic to intermediate composition and minor carbonatites also
occurred.  This includes the formation of large shield volcanoes, the
most prominent in Uganda being Mt. Elgon on the Kenyan border.  Great
thicknesses of Tertiary to Recent sediments fill the fault valleys, especially
along the Western, or Albertine, Rift in western Uganda.





Precambrian
rocks underlie two-thirds of Uganda. Archaean rocks are exposed in the southeast
where they are part of the extensive granite-greenstone terrane of the Tanzanian
Craton. Three major Proterozoic belts underlie central and west Uganda: the
Paleoproterozoic Buganda-Toro metasediments, the Mesoproterozoic
Karagwe-Ankolean (Kibaran) Belt in the southwest of the country and
Neoproterozoic Pan-African rocks. The Neoproterozoic includes the Bunyoro Series
with tillites and argillites, and the undeformed shallow water sediments of the
Bukoban Supergroup. Tertiary to Recent sediments have filled parts of the
down-faulted Western Rift. Tertiary carbonatites and Cenozoic volcanics are
related to rift activities and occur along the eastern and western borders of
the country.





The
Mashonga region is largely underlain by Igara Group quartz-muscovite schists,
quartzites and phyllites of the PalaeoProterozoic Buganda-Toro
System.  Younger granitic intrusions occur and there is evidence of
mafic-ultramafic igneous intrusive bodies (gabbroic or diorite). North of the
Mashonga Mine the Igara rocks are covered unconformably by Buhweju Group
quartzites and conglomerates of the MesoProterozoic Karagwe-Ankolean System.
North-south trending fold axes from isoclinal folded sequences are reported as
well as N-S and E-W trending structures.  The drainages in the mine
area trend southeast, suggesting there is a regional structure parallel to
this.





The
Buganda-Toro and Karagwe-Ankolean systems have been extensively folded into
tight synclines and anticlines, with upright axial planes and, in the southern
and central Mashonga area, the former has been intruded by synorogenic
porphyritic gneissic adamellites to post-orogenic biotite-bearing alkaline
granites and leucocratic, sub-alkaline, per-aluminous granites (“tin
granites”).  Historical economic Sn, tungsten (“W”), beryllium (“Be”),
niobium (“Nb”)/tantalum (“Ta”) deposits occur in similar rocks to the south of
the Mashonga Property, hosted within the metasediments on the periphery of the
granites.  The presence of abundant quartz veining, several gold
occurrences and the Sn-W-Be-Ta mineralization in this environment support the
typical hydrothermal and epithermal activity of the Intrusive-Related Gold
modeldriving the
exploration.





Informal
gold production from the Mashonga Mine is reported to come from an east-west
trending sheared quartz-vein zone. The mineralized shear appears to be hosted by
quartz-muscovite schist, at the contact between the schist and granitic
rock.  The wallrock of the mine pit, much of which is now filled by
slumped material, is comprised of schist and kaolinitized granite with
pegmatitic veins and quartz stockwork veining.




Mineralization


Lugazi
Property





The style
of gold mineralization at the Lugazi area is associated with a belt of
sedimentary rocks comprising the Paleoproterozoic Buganda-Toro system, and
surrounding granite gneisses. A thermal aureole granite (“TAG”) model is being
used in an attempt to understand the mineralization where an Intrusion Related
Gold system is expected along with skarn and pegmatite host rocks.




Mubende
Property





The style
of gold mineralization at the Mubende area is interpreted by the Company as
being associated with the roof zones of large batholiths such as the Singo
Granite. Greisen alteration has been identified by reconnaissance






17
 Table of Contents




exploration
and an Intrusion Related Gold (“IRG”) system is being modeled, with gold
mineralization in disseminated and quartz stockwork styles in the upper roof
zones of granites, or in large scale fault zones along the flanks of the
intrusions. Tungsten and gold occurrences have been identified on the Singo
granites and in surrounding meta-sediments.





Mitoma
Property





The
Mitoma area is characterized by the presence of historically economic tin,
tungsten, beryllium and niobium-tantalum deposits hosted within the
Mesoproterozoic metasediments located on the periphery of Proterozoic circular
porphyritic granite intrusives.   A TAG model is being used by
the Company as a guide to the mineralization where an Intrusion Related Gold
system is expected along with skarn and pegmatite host
rocks.  Disseminated sulphides have been observed in some quartzite
and schistose lithologies on the property, supported by the numerous gold, tin,
tantalum workings with alluvial gold panning has taken place on the license in
the past.





Mwerusandu
Property





The style
of gold mineralization at the Mwerusandu area is associated with sedimentary
rocks located in antiforms within the Karagwe-Ankolean system and in conjugate
fracture sets in quartzites close to the contact with large granite batholiths
termed arena granites. Disseminated sulphides have been observed in some
quartzite and schistose lithologies on the property, supported by the numerous
past gold, tin, tantalum and tungsten alluvial workings within the property. A
light green, arsenic rich alteration phase identified as scorodite is also
associated with gold mineralization at the Nyamulindira license. A TAG model is
being used in an attempt to understand the mineralization where an Intrusion
Related Gold system is expected along with skarn and pegmatite host
rocks.





Mashonga
Property





The style
of gold mineralization at the Mashonga area is associated with shear zones
hosted by early-Proterozoic schists which are adjacent to late tin-bearing
granite intrusions. An unconformity related gold system is used to model the
style of mineralisation, with the younger, mid-Proterozoic Karagwe-Ankolean
system forming an unconformable relationaship with the older Buganda Toro
system. In the basement schists and granites, a TAG model is being used in an
attempt to understand the mineralization where an Intrusion Related Gold system
is expected along with skarn and pegmatite host rocks.





Artisanal
gold production from the Mashonga Mine is reported to come from an east-west
trending sheared-quartz vein zone, tentatively interpreted by Magnus to be a
splay off a northwest-trending regional structure. The mineralized shear appears
to be hosted by quartz-muscovite schist, or at the contact between the schist
and granitic rock. Parts of the open cast wallrock are kaolinitized granite with
pegmatitic veins and a quartz stockwork.





The
presence of anomalous platinum group elements (“PGE”) values in rock samples
from the mine area and possibly anomalous Terra Leach soils from further east
suggest the gold mineralization in the Buganda-Toro sediments may have a
significant PGE association.





In the
Mashonga area the Company believes there is an IRG style of mineralization. This
model takes into account both large veins which occur on the margins of granite
bodies as well as granite hosted sheeted, stockwork or pegmatitic veins. In the
larger veins such as mined at Mashonga, high gold grades can be
expected.  An economic deposit, however, is more likely to be a lower
grade, granite hosted system which calls for alternative exploration techniques
(multi-element geochemistry, IP to detect zones of silicification, magnetic halo
anomalies, recognition of metal/element assemblages and unique features such as
unidirectional solidification textures, greisens and
pegmatites.


18
 Table of Contents




Ibanda
Property





The style
of gold mineralization at the Ibanda area is similar to Mashonga, and is also
associated with shear zones hosted by early-Proterozoic schists which are
adjacent to late tin-bearing granite intrusions. An unconformity related gold
system is used to model the style of mineralisation, with the younger,
mid-Proterozoic karagwe Ankolean system forming an unconformable relationaship
with the older Buganda Toro system. In the basement schists and granites, a TAG
model is being used in an attempt to understand the mineralization where an
Intrusion Related Gold system is expected along with skarn and pegmatite host
rocks.





Rubindi
Property





The style
of gold mineralization at the Rubindi area is similar to Mashonga, and is also
associated with shear zones hosted by early-Proterozoic schists which are
adjacent to late tin-bearing granite intrusions. An unconformity related gold
system is used to model the style of mineralisation, with the younger,
mid-Proterozoic karagwe Ankolean system forming an unconformable relationaship
with the older Buganda Toro system. In the basement schists and granites, a TAG
model is being used in an attempt to understand the mineralization where an
Intrusion Related Gold system is expected along with skarn and pegmatite host
rocks.





Kigumba
Property





The style
of mineralization at the Kigumba area is expected to be related to a large 22km
long by up to 4km wide radiometrics anomaly, which was identified from the
airborne geophysical survey covering 80% of the country. The uranium response is
particularly strong, so the area will be tested initially for uranium potential
associated with the sheared limb of a folded sequence.





Kidera
Property





The style
of mineralization at the Kidera area is expected to be related to a large 7km by
5km circular radiometrics anomaly, which was identified from the airborne
geophysical survey covering 80% of the country. This radiometrics anomaly has a
similarity in size to the carbonatite complexes such as Tororo and Sukulu Hills,
located in the southeastern part of Uganda. The large anomaly will be examined
for vermiculite, phosphate and rare earth metals, commonly associated with
carbonatite rocks.  In addition, a field of distinct magnetic bulls
eyes, will be tested for diamond potential, as they resemble kimberlite
pipes.





Nyanga
Property





The style
of mineralization at the Nyanga area is tantalum which is associated with large
pegmatite bodies which are hosted by metasedimentary rocks of Karagwe-Ankolean
age. Mining operations at three locations at Nyanga occurred during the 1930 –
1960’s producing a total of 130,000t tantalum. These operations were suspended
in 1960. The Nyanga deposit is hosted by a pegmatite body measuring 370m and
with a width of approximately 54m.





Exploration





Lugazi
Property





A
detailed soil sampling program during the period 2006 and 2007, comprising over
1500 soil samples has delineated a strong 300 – 700m wide gold-in-soil anomaly
over a length of 3.5 km. The anomaly is offset to the east, and there are
indications that the anomaly is open ended in this direction. A fixed wing, high
resolution airborne magnetic and radiometric survey was flown on the Lugazi
licence and covered 574.5 sq km at 200m line spacing. The results from the
survey show a close correlation between the gold-in-soil anomaly and magnetic
rich stratigraphic horizons as well as elevated potassic levels.




A Reverse
Circulation (RC) drill program comprising a total of 31 holes for 2,037m was
completed in February 2008, along three lines at the Kiyola, Nantula and Katente
targets. The RC holes were drilled at about 50m intervals






19
 Table of Contents




along a
fence across the soil anomaly, and were designed to investigate the nature of
the weathered profile to an average depth of some 65m. As no previous gold
mineralisation has been reported from this belt the Company thought it would be
important to understand the source of the anomalous gold in soils and attempt to
identify possible structures that could be followed up during subsequent phases
of exploration. This drilling is the culmination of early stage exploration at
Lugazi which commenced in May 2006.





The most
significant RC drill results include:





§
            4m
      at 0.98 g/t gold from 18m in LUG006 at the Kiyola target (incl. 2m at
      1.3g/t)


§
            2m
      at 0.50 g/t gold from 64m in LUG007 at the Kiyola
  target


§
            2m
      at 1.50 g/t gold from 2m in LUG017 at the Nantula
  target


§
            2m
      at 1.20 g/t gold from 9m in LUG028 at the Katente
  target




The
Company also conducted a regional geochemical program which included the
collection of 1,356 soil samples along lines spaced at approximately 4km
intervals. These samples tested the gold and nickel potential of the Lugazi
belt. The program uncovered a gold anomaly on another portion of the Lugazi
belt, towards the east of the drill target.





Mubende
Property





A
regional alteration and structural interpretation over Mubende has been
completed. This information together with the historical airborne geophysical
data indicates that the eastern end of the Singo batholith could be prospective
for granite related gold systems. A follow-up soil geochemical program was
completed, which targeted the northern and southern boundaries of the granite
batholith. In total 996 soil samples were collected along lines on elevated
topography to avoid the wide swampy drainages in this region. The samples were
sieved to -80 mesh fraction and analyzed for gold by means of aqua regia and AAS
finish. Prior to these soil samples, a program of low level terra leach soil
sampling was completed over the southwestern portions of the licence. A total of
554 terra leach samples were collected. The results of the soil sampling have
not delineated any clear targets to follow up.





Mitoma
Property





To date
2,546 soil samples have been collected over different areas of the property in
seven phases.  The samples were analyzed with the Terra Leach partial
digest method and have delineated gold-in-soil anomalies at the Kahungye (EL
0023), Rugoma (EL 0025) and Rutaka (EL 0024) exploration licenses. The assay
results were received from soil samples analysed by Agua Regia together with
Pits at Kayhunge. The results from agua regia confirm anomalous gold within the
surface profile with levels between 20-30 ppb gold with one value of 50 ppb. The
results of pitting confirm low level gold (0.14 g/t) in the uppermost 30 cm in
Pit 2. The gold tenors in the bedrock schist vary between 0.02 g/t and 0.05 g/t.
The surface soil values in the 20-30 ppb range therefore appear to be reflecting
values in schist of 0.02-0.05 g/t Au. i.e. the magnitude of the soil anomaly
corresponds with values occurring in bedrock.





Exploration
at the southern licences, called Kabira (EL 0005, 0117, 0187, 0188), included
the collection of 957 soil samples, which were analysed for low level gold by
means of terra leach method. The results show very low levels of gold associated
with the metasediments of the Karagwe-Ankolean system. The main anomalous area
is located in the south-eastern portion of EL0005 where gold shows a clear
correlation with copper.





Mwerusandu
Property




Exploration
activity at the Mwerusandu Property has included: soil sampling over the
Nyamulindira and Kiana Mine licences and drill preparation for a planned RC
drill program. A total of 1,016 terra leach soil samples have been






20
 Table of Contents




collected,
mostly in the northern part of the area, which has defined a clear gold in soil
anomaly hosted by quartzites and schist’s of the mid-Proterozoic
Karagwe-Ankolean system, parallel to the contact with a granitoid body, referred
to as ‘arena’ granites. The northern part of the soil anomaly is 200m in length
and covers a silica-scorodite altered rock outcrop, while further to the south,
a 1km long anomaly is situated in a similar stratigraphic setting close to the
granite contact. The main target at Nyamulindira remains a scorodite rich
quartzite with 4-6 g/t of gold in rock grab samples and  a trench
intersection of 20.4 g/t of gold over 3.5m. The eastern Mwerusandu licenses are
located in a tin – beryllium rich belt and close to the historical Mwerusandu
tin mine which was mined up to the 1950’s.





Mashonga
Property





The
Mashonga Project is located in the Buhweju region of south-western Uganda. The
majority of gold produced in Uganda has been from alluvial deposits around the
Buhweju plateau, recovered by artisanal miners. Gold was first reported in this
area in 1933 and since then an estimated 200,000 oz have been produced from
alluvial sources. Gold from primary ‘lode’ sources has been produced locally
from small open-cut slot and shallow underground operations such as the Mashonga
mine.





Towards
the end of 2007, Magnus uncovered historical exploration reports from Mashonga
during the late 1990’s by Uganda Gold Mines Ltd. The reports include high grade
sample results from underground sampling of a shear zone at the Mashonga mine,
with 25.5 oz per short ton gold (874 g/t) and 309 g/t silver from a grab sample
of a lens a few feet wide. Another grab sample of the footwall to the shear zone
returned 276 g/t gold and 9.7 g/t silver.





Uganda
Gold also sampled a series of trenches located 1.5km east of the Mashonga mine
area. These trenches covered a strike length of 350m and report gold
intersections which include 4.6m at 24.7 g/t and 2.4m at 59.6 g/t. In addition,
a rock grab sample from one trench reported 228 g/t gold. A further target was
identified by Uganda Gold, located about 1km southeast of the mine. A single
rock grab sample returned 183 g/t gold and 200 g/t silver.





As part
of Magnus’ due diligence evaluation of the property in 2006 and 2007, rock grab
samples were collected from the mine dump at the open-cut slot mine. Of the
eight mafic schist samples collected from the surface mine dump, four returned
very high grade gold and PGE assay results, which include 58.8g/t gold, 4.15g/t
platinum and 3.68g/t palladium.





An RC
Drill program commenced in July 2008, and a total of 667m has been completed at
the Mashonga mine in 7 holes. This drilling tested the high grade polymetallic
mineralisation in east-west conjugate shears below the mine. Intended further
drilling is designed to test the 3km by 500m wide soil anomaly located 1km east
of the mine. The geology profile mapped from the hole intersections comprises a
series of sericite, quartz-biotite and mafic schists with granite pegmatite
bodies and quartz veining. Sulphides in the form of pyrite were recorded in all
six holes drilled. Results from this drilling are still pending due to the delay
in getting screen fire assays perfomed of coarser sample size.





As part
of a program to discover additional targets with similarities to the Mashonga
mine, a total of 803 soil samples have been collected along regional lines and
detailed grids. Of these, some 113 aqua regia sample results have been received
and indicate anomalous values at one of the targets identified by Uganda Gold
Ltd. A further 690 samples are yet to be analyzed.





The area
covering approximately 3km x 3 km around the Mashonga mine was mapped in detail,
with 67 rock samples sent for PIMA analysis. PIMA measures the white mica
spectra and enables the sericite content of the rocks to be measured and
provides an indication of the levels or alteration in the system. The results of
the PIMA show a clear and distinct zonation from an acid domain to an alkaline
domain. It is at this transition zone where gold will precipitate, and
structures which transect this zone will be targeted.


21
 Table of Contents


Ibanda
Property





The
Ibanda Property is located in the eastern part of the Buhweju region of
south-western Uganda. Exploration at this property has focussed on the
collection of 685 soil samples to verify a zone of historical work that
highlighted anomalous gold in soils. These anomalies are located at the
intersection of a major north-south structure and east-west faults. The results
are at a preliminary stage and will be modelled and interpreted.





Rubindi, Kiguma, Kidera and
Nyanga Properties





These
licenses were only acquired during the last quarter, and to date little
exploration activity has been completed. Some reconnaissance visits were
conducted in August and September of 2008 to assess the most optimum methods of
exploration.





Future
Plans





The main
expected source of capital for the year 2008-9 is the collection of monies owed
to Magnus by the purchaser of the Long Teng Mining (holder of the Huidong
project) in China. The buyer of Huidong intends to pay us the remaining RMB 14
million that they owe us once they have the funds available from another
divestiture of their own that they have in progress. Per that contract it shows
that they are due to be paid RMB 15 million in installments by the 22nd January
2009. Magnus expects to be paid the first RMB 1 million of the RMB 14 million
that remains outstanding in November 2008.
 
 As of 12
November 2008, the remaining payments for the sale of Long Teng are delinquent
and the Company has provided an allowance for the uncollectibility of those
payments due from the sale of Long Teng.
 
 Magnus
was sent RMB 7 million as the first payment in late May 2008. RMB 4.5 million of
these monies were sent from the purchaser’s bank account to the bank account of
an intermediary. Of these monies, we have so far received US $466,000 and we are
owed approximately US $200,000 – the balance of the RMB 7 million. The Company
intends to pursue this matter vigorously.
  While
market conditions are not currently very favorable for raising equity capital
for exploration companies, we anticipate that we could raise some equity capital
for Magnus over the course of the next year, especially if there was a
re-structuring of the Company’s capital structure.





Also, if
Magnus manages to obtain an OTC-BB listing and possibly an additional listing in
Canada then it is anticipated that the equity raising process could be
easier.





During
fiscal year 2008, Magnus raised more than US $1 million in equity financing and
more than US $1 million from the first payment for the sale of Long Teng. During
fiscal year 2007, Magnus raised US $2,756,377 in equity financing. In fiscal
year 2006, Magnus raised US $6,673,919. We have raised more than $15 million in
equity financing to date for Magnus and management believes that the Company
should be able to continue to raise equity capital in over the course of this
fiscal year and beyond, especially if the capital structure is
reduced.





Magnus is
currently seeking to divest some of its Uganda projects or reduce some of its
obligations to joint ventures by either bringing in other partners, and/or
selling in whole or in part its interests in such projects. The Company is in
the process of evaluating what the options are in this respect. It is the
Company’s intention to attempt to re-negotiate the Mashonga and Ibanda
agreements to reduce the financial obligations relating to each one. If this
cannot be accomplished and the Company cannot find third parties to reduce some
of its obligations then the Company may relinquish its interests in these joint
ventures.





Magnus’
costs have been decreased significantly and the Company intends to make other
significant cost-cuts.


22
 Table of Contents


As of 31
October 2008, Magnus has eliminated its Vancouver office and reduced its
Vancouver staffing to two. It is our intention to keep them full-time until the
31 December 2008, after which it is anticipated that they would move to a
consulting basis. Associated office overheads and staffing have therefore been
significantly reduced.





The
Company is also in the process of finding a smaller office in Uganda and the
staff has been reduced to one administrator/accountant and one housekeeper.
Former full-time staff can be used on a consulting basis when
needed.





Our
office lease in China expires on the 31 March 2009 and after it expires we will
no longer have a China office. It is anticipated that one or two staff members
will remain on the payroll in China until we are fully paid for the sale of Long
Teng. It is expected that Magnus will collect all monies due to the Company
prior to the end of March 2008 and that the China office will be closed prior to
the end of the office lease.





We intend
to reduce the total budget for Magnus for the year down to about US $600,000 of
costs (that are not currently loans or payables) for the coming year. Thus costs
will be reduced by a very significant amount allowing for us to advance some of
our projects in Uganda.





Contingent
on available funding, the Company intends to evaluate its Ugandan exploration
portfolio and determine which projects it can reasonably maintain where it can
conduct cost-effective further exploration.





Leased
Office Space





The
Company currently leases two administrative offices: in Kunming, China, and in
Entebbe, Uganda.  These leased properties are described in the table
below:





Address
            Approximate
      Size
            Lease
      Term
            Approximate
      monthly costMagnus
      has recently moved from its current office space and is looking for new
      spacePlot
      1A, Mugwanya Road
              Entebbe,
      Uganda
            Shared
      Space, 2,500 square feet
            To
      September 30, 2008, month-to-month thereafter
            USD
      $1,050China
      OfficeDushimingyuan Bldg.
              No.
      A-2708
              Central
      Renmin Road
              Kunming
      City, Yunnan Province
              650031
              People’s
      Republic of China
            1000
      sq. feet
            To
      March 31, 2009
            USD
      $727




ITEM 3. LEGAL PROCEEDINGS




On April
30, 2008, the Company filed a civil suit in Uganda against Geosearch, (Uganda)
Ltd., a drilling company that Magnus had retained to conduct a drill program on
certain of its properties in Uganda.  Under the civil suit, Magnus was
seeking repayment of US$75,000 which it had advanced to Geosearch to transport
the drill rig to be used on the drill program to Uganda.  Geosearch
failed to conduct the drill program set forth in the contract between Magnus and
Geosearch, and accordingly Magnus filed the civil suit to recover the $75,000
that it had advanced to Geosearch.  On June 13, 2008, Magnus
successfully obtained judgment against Geosearch. In July 2008, Magnus was
repaid the $75,000 by Geosearch.




23
 Table of Contents




Other
than as described above, management is not aware of any legal proceedings
contemplated by any governmental authority or any other party involving the
Company or its properties.  None of the Company’s directors, officer
or affiliates is (i) a party adverse to the Company in any legal proceedings, or
(ii) has an adverse interest to the Company in any legal
proceedings.  Management is not aware of any other legal proceedings
pending or that have been threatened against the Company or its
properties.




ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY
HOLDERS




N/A




PART II




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




Market
Information




The
common shares of Magnus are listed and posted for trading trading on the Pink
Sheets over-the-counter quotation system under the symbol “MGNU”. The market for
Magnus’ common stock is limited, volatile and sporadic.  The following
table sets forth the high and low sale prices relating to Magnus’ common stock
since it was listed and posted for trading on the OTCBB.  These
quotations reflect inter-dealer prices without retail mark-up, mark-down, or
commissions, and may not reflect actual transactions.




Quarter
      Ended2003
            High
      Trade
            Low
      TradeApril
      30
            0.025
            0.015July
      31
            1.50
            0.03October
      31
            2.25
            0.5052004January
      31
            0.725
            0.25April
      30
            1.35
            0.495July
      31
            1.11
            0.85October
      31
            1.26
            0.902005January
      31
            1.70
            1.18April
      30
            2.35
            1.55July
      31
            1.99
            1.65October
      31
            1.80
            1.642006January
      31
            2.25
            1.60April
      30
            3.93
            2.10July
      31
            2.50
            1.73October
      31
            1.93
            1.192007January
      31
            1.40
            .44April
      30
            .53
            .35July
      31
            .61
            .50October
      31
            .58
            .37






24
 Table of Contents




2008January
      31
            .55
            .26April
      30
            .37
            .29July
      31
            .31
            .21October
      31
            .25
            .04





Holders





As of
October 29, 2008, Magnus had at least 223 shareholders of record.




Dividends




The
Company has never paid dividends. While any future dividends will be determined
by the directors of the Company after consideration of the earnings, financial
condition and other relevant factors, it is currently expected that available
cash resources will be utilized in connection with the ongoing acquisition,
exploration and development programs of the Company.




Section
15(g) of the Securities Exchange Act of 1934




The
Company’s shares are covered by Section 15(g) of the Securities Exchange Act of
1934, as amended, which imposes additional sales practice requirements on
broker/dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouses). For
transactions covered by this Section 15(g), the broker/dealer must make a
special suitability determination for the purchase and must have received the
purchaser's written agreement to the transaction prior to the sale.
Consequently, Section 15(g) may affect the ability of broker/dealers to sell the
Company’s securities and also may affect your ability to sell your shares in the
secondary market.





Section
15(g) also imposes additional sales practice requirements on broker/dealers who
sell penny securities. These rules require a one page summary of certain
essential items. The items include the risk of investing in penny stocks in both
public offerings and the secondary market; terms important to an understanding
of the function of the penny stock market, such as "bid" and "offer" quotes, a
dealers "spread" and broker/dealer compensation; the broker/dealer compensation,
the broker/dealers duties to its customers, including the disclosures required
by any other penny stock disclosure rules; the customer’s rights and remedies in
causes of fraud in penny stock transactions; and, the NASD's toll free telephone
number and the central number of the North American Administrators Association,
for information on the disciplinary history of broker/dealers and their
associated persons.





Recent
Sales of Unregistered Securities





On August
28, 2007, the Company issued 362,500 units due to the closing of the Company’s
private placement at $0.40 per Unit for total proceeds of $145,000. Each unit
consists of one share of common stock of the Company and one-half of one share
purchase warrant, with each whole warrant entitling the holder to purchase one
additional share of common stock of the Company at $0.80 per warrant share until
August 28, 2009. On September 13, 2007 the Company issued 25,000 shares as a
finders’ fee in connection with the issuance of 250,000 of these
Units.





On
November 6, 2007, the Company issued 40,000 units (each a “Unit”) due to the
closing of the Company’s private placement at $0.50 per Unit for total proceeds
of $20,000. Each Unit consists of one share of common stock of the Company and
one-half of one share purchase warrant, with each whole warrant entitling the
holder to purchase one additional share of common stock of the Company at
US$1.00 per
warrant for two years.







25
 Table of Contents




On
December 18, 2007, the Company issued 62,500 units (each a “Unit”) due to the
closing of the Company’s private placement at $0.40 per Unit for total proceeds
of $25,000. Each Unit consists of one share of common stock of the Company and
one-half of one share purchase warrant, with each whole warrant entitling the
holder to purchase one additional share of common stock of the Company at
US$0.80 per warrant for two years.  In connection with this
subscription, the Company has agreed to grant registration rights for the shares
to be issued with the units and the shares to be issued upon exercise of the
warrants.  The Company agreed: (1) to file a registration statement
with the SEC by no later than December 15, 2007 (the “Scheduled Filing
Deadline”) to register the shares; (2) to pay liquidated damages in common
shares of the Company (each share valued at $0.40) equal to 10% of the
subscription proceeds paid to the Company if the Company fails to file the
registration statement by the Scheduled Filing Deadline and liquidated damages
in common shares (each share valued at $0.40) equal to 2% of the subscription
proceeds paid to the Company for each month following the Scheduled Filing
Deadline in which the Company fails to file the registration statement. In
addition, if the registration statement is not declared effective by the SEC on
or before 120 days after the date filed or if after the Registration Statement
has been declared effective by the SEC, sales cannot be made pursuant to the
Registration Statement, the Company will be obligated to pay liquidated damages
in common shares (each share valued at $0.40) equal to 2% per month for the
period the failure continues.





The
Company has agreed to pay certain individuals units as finders’ fees for
assisting the Company in raising funds in connection with its private placements
in previous years of units at $0.50 (each unit consisting of one common share
and one warrant exercisable at $1.00), $1.25 (each unit consisting of one common
share and one half warrant, with each whole exercisable at $2.00), $1.40 (each
unit consisting of one common share and one half warrant, with each whole
warrant exercisable at $2.00) and $1.60 (each unit consisting of one common
share and one half warrant, with each whole warrant exercisable at
$2.40).  It was determined that individuals who had successfully
placed certain investors into private placements would receive restricted shares
and warrants in the Company at the rate of 10% of the total number of private
placement units sold. The Company has allotted 217,189 units as finders’ fees at
January 31, 2008, with each unit valued at the same price as the units
placed.





On
February 1, 2008, the Company issued an aggregate of 3,341,184 units (each a
“Unit”) for an aggregate of US$840,000 or CAD$836,416 (at a price of CAD$0.25
per Unit). Each Unit consists of one share of common stock of the Company and
one-half of one share purchase warrant, with each whole warrant entitling the
holder to purchase one additional share of common stock of the Company at
CAD$0.50 per warrant share until two years from the date of issuance of the
warrants.  The Company paid $35,000 in cash and issued 115,350 shares
of common stock to a consultant as a finder’s fee in connection with the
issuance of Units.





On
February 11, 2008, the Company reached an agreement to settle certain
registration rights granted in connection with an issuance of units on May 2,
2007. Under the settlement, on February 18, 2008 the Company issued 272,000
shares in settlement of registration rights attached to 3,400,000 units issued
in full and final settlement of the liquidated damages owed by the Company to
the investor under such registration rights.





On April
15, 2008, the Company issued an aggregate of 230,805 common shares as finders
fees in connection with prior financings conducted by the Company.





On April
18, 2008, the Company issued an aggregate of 365,625 common shares to seven
persons in full and final settlement of an aggregate amount of $145,547 owing by
the Company to such persons.





On August
14, 2008, the Company issued an aggregate of 400,000 units (each a “Unit”) for
an aggregate of CAD $100,000 or (at a price of CAD$0.25 per Unit). Each Unit
consists of one share of common stock of the Company and one-half of one share
purchase warrant, with each whole warrant entitling the holder to purchase one
additional share of common stock of the Company at CAD$0.50 per warrant share
until two years
from the date of issuance of the warrants.  The Company paid $10,000
in cash to a consultant as a finder’s fee in connection with the issuance of
Units.







26
 Table of Contents




The funds
received from the investors mentioned above have been and will be used for
property exploration expenses, salaries, consultant fees, consultant expenses,
general and administrative expenses, working capital and property acquisition
payments.





ITEM 6. SELECTED FINANCIAL DATA





2008
            2007
            2006
            2005
            2004
            2003Loss
      from Continuing Operations
            2,871,756
            3,334,437
            6,976,433
            2,051,850
            1,737,327
            35,282Loss
      from Continuing Operations per share
            0.06
            0.08
            0.20
            0.08
            0.08
            0.00Total
      Assets
            340,935
            654,979
            1,251,451
            2,233,599
            838,169
            23





See notes
1 and 5 to the financial statements included herein for details of business
combinations and components held for sale which affect the comparability of this
data.





See Item
1A herein for explanation of risk factors which may cause this data not to be
indicative of future financial condition or results of operations.





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




The
following discussion and analysis should be read in conjunction with the
consolidated financial statements of the Company for the period ended July 31,
2008, and the related notes thereto.




Overview




Magnus is
currently in the development stage and is engaged in the acquisition,
exploration and development of precious and base metals.  To this end,
the Company has entered, and plans to enter, into various property agreements
(see “Description of Business” above).  Some of these agreements
require the Company to contribute capital toward the exploration and development
of various properties while requiring the joint venture partner to obtain or
contribute mineral rights for desirable mineral properties, and obtain all
required permits and licenses to commence exploration and mining activities. In
other cases, the Company obtains these licenses and permits itself.




Outlook




At July
31, 2008, the price of gold was $911.20 per ounce compared to $663.60 at July
31, 2007, representing an increase of approximately 37.3 %. Similarly, the value
of copper and the value of silver both increased during the same
period.  If this trend were to continue, the properties that are owned
and controlled by the Company which contain mineralized material could gain in
value. However, gold and other commodities prices have recently decreased, and
future prices are uncertain. On November 6, 2008, the price of gold was $732.10
per ounce.





The
Company does not currently generate operating cash flows. Subject to sustained
mineral prices and successful financing, management expects to generate revenues
and cash flows in the future.





The
Company had a working capital deficiency of $1,946,157 at July 31,
2008.





Total
cash requirements stipulated under the Company’s Mashonga Agreement is
$4,650,000.  Under the Mashonga Agreement, Magnus has the right to
earn a 60% interest in the Mashonga Property by making aggregate
cash payments of US$650,000 to its joint venture partners, making US$4,000,000
in property exploration expenditures and completing a pre-feasibility study on
the property by August 30, 2012.  Magnus’ joint venture partners have
the right to accept common shares of Magnus in lieu of the cash
payments.  To July 31, 2008, Magnus had made $40,000 in cash payments
and $181,489 in exploration expenditures on the Mashonga Property.






27
 Table of Contents




Total
cash requirements stipulated under the Company’s Ibanda Agreement is $2,000,000.
Under the Ibanda Agreement, Magnus has the right to earn an 80% interest in the
Ibanda Property by making aggregate exploration expenditures of $2,000,000 by
May 1, 2013. To July 31, 2008, Magnus had made $8,483 in exploration
expenditures on the Ibanda Property.





It is the
Company’s intention to attempt to re-negotiate the Mashonga and Ibanda
agreements to reduce the financial obligations relating to each one. If this
cannot be accomplished and the Company cannot find third parties to reduce some
of its obligations then the Company may relinquish its interests in these joint
ventures.





Beyond
the payments that are due to the Company from the sale of Long Teng, the Company
will need to raise additional funds through private placements in order to meet
its future investment requirements in the above properties. While the Company
has been successful in raising money by private placements in the past, there
are no guarantees that the Company will be successful in the future. Management
believes, however, that absent sufficient funding through a private placement or
some other financing the Company will not generate sufficient revenue to cover
any shortfall in the next year.




Results
from Operations




Summary




The
Company's consolidated net loss for the current fiscal year was $1,618,022 or
$0.03 per share compared to the previous year’s consolidated net loss of
$4,502,428 or $0.11 per share. The net loss in the year ended July 31, 2006 was
$9,401,834, or $0.27 per share.  The largest expense in 2008 was
related to the cost of exploration of the properties in Uganda (see “Property
Agreements”). The second largest expense in 2008 was related.to stock
option-based compensation.




Mineral
production and revenue




As the
Company is still an exploration stage company and in the exploration stage of
development on the Company’s properties, it has not, as of yet, produced any
revenues nor produced any minerals.




Exploration,
property evaluation and holding costs




The
Company is committed to make total cash payments and exploration expenditures of
$4,650,000 under the Mashonga Agreement (of which $221,489 was paid by July 31,
2008) and $2,000,000 under the Ibanda Agreement (of which $8,483 was paid by
July 31, 2008).




Exploration
expenses totaled $997,543 in 2008, including geological expenses, exploration
licenses and expenses included in the loss from operations of components held
for sale. The decrease from the total of $1,645,479 in 2007 and $3,251,792 in
2006  is due to the decrease in exploration activity at the properties
in China, partly offset by exploration expenses incurred on the African projects
since the acquisition of African Mineral Fields.




Corporate
administration and investor relations




Corporate
administrative and investor relations costs were $381,687 in the current fiscal
year compared to $246,772 in 2007 and $2,808,692 in 2006.  The
increase over 2007 is due to increased office activity with AMF being part of
Magnus for a full year in 2008, and needing to raise capital during a time of
tight stock market conditions.  Included in these costs are travel
expenses for executives and geologists to China and Uganda, travel to various
conferences, and other miscellaneous office expenses.






28
 Table of Contents




Registration
payment arrangements




See Part
II, Item 5 above, and Note 9 to the financial statements included herein for
details on the registration payment arrangements.




Stock-based
compensation




Stock-based
compensation expenses of $528,266 increased from $411,546 in 2007 and decreased
from the total of $1,068,142 in 2006. The decrease from 2006 is due to options
granted in 2004 becoming fully vested prior to 2007, to expiry of options on
termination of grantees, and to options granted to an investor relations firm in
2006 with immediate vesting, which did not recur in 2007 or 2008. The increase
from 2007 is due to the effect of re-pricing options in 2008.




Financial
Position, Liquidity and Capital Resources




Cash
used in Operations




Cash used
in operations was $2,419,648 in the current fiscal year compared to cash uses of
$2,614,207 in the previous year and $7,785,499 in 2006.   The
decrease form 2007 is insignificant the decrease form 2006 is attributable to
exploration being slowed down on the mineral properties in China since
2006.




Financing
Activities




The
Company received cash from financing activities of $1,354,767 in the current
fiscal year compared to $2,756,377 in the previous year and $6,673,919 in 2006.
The decrease is attributable to the China projects being relatively new,
conmbined with a booming world economy in 2006 with the result that the Company
was able to raise financing more easily in 2006.




Liquidity
and Capital Resources




At July
31, 2008, the Company's total assets were $340,935 as compared to $654,979 the
previous year. Long-term liabilities as of July 31, 2008 totaled $0 as compared
to $0 in the previous year.  The Company had a working capital
deficiency of $1,946,157 at July 31, 2008.




Major
cash commitments in the next fiscal year are related to proposed exploration
activities, corporate administration, investor relations and operations
(including financial commitments with respect to the properties in Uganda, as
described above).




The
consolidated financial statements have been prepared on a going-concern basis
which assumes that the Company will be able to realize assets and discharge
liabilities in the normal course of business for the foreseeable
future.




The
Company has experienced total losses during the exploration stage amounting to
$21,031,103 as of July 31, 2008.  As of July 31, 2008, the Company had
a total of $177,093 in cash and cash equivalents; however this amount is
insufficient to sustain operations over the course of the next twelve months.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.  The ability of the Company to meet its commitments
as they become payable, including the completion of acquisitions, exploration
and development of mineral properties and projects, is dependent on the ability
of the Company to obtain necessary financing or achieving a profitable level of
operations.  There are no assurances that the Company will be
successful in achieving these goals.






29
 Table of Contents




The
Company is in the process of exploring and evaluating its mineral properties and
projects and has not yet determined whether these properties contain
economically recoverable ore reserves.  The underlying value of the
mineral properties is entirely dependent on the existence of economically
recoverable reserves, the ability of the Company to obtain the necessary
financing to complete development and upon future profitable production or
sufficient proceeds from the disposition thereof.




The
financial statements do not give effect to adjustments to the amounts and
classifications to assets and liabilities that would be necessary should the
Company be unable to continue as a going concern.




Critical
Accounting Policies




Principles
of Consolidation





The
consolidated financial statements include accounts of the Company and its direct
and indirect wholly-owned subsidiaries.  All significant inter-company
balances and transactions are eliminated. The statement of operations includes
the results of operations for AMF since May 1, 2007, the date of acquisition, as
well as the results of Western Mining and Long Teng up to the dates of
disposition of those companies.




Mineral
Properties and Exploration Expenses




Mineral
property acquisition, exploration and development costs are charged to
operations as incurred until such time that proven or probable ore reserves are
discovered.  From that time forward, the Company will capitalize all
costs to the extent that future cash flow from reserves equals or exceeds the
costs deferred.  The deferred costs will be amortized using the
unit-of-production method when a property reaches commercial production. As at
July 31, 2008, the Company did not have proven or probable
reserves.




Transactions
with Related Parties / Subsequent Events




As of 31
October 2008, Magnus has eliminated its Vancouver office and reduced its
Vancouver staffing to two. It is Company’s intention to keep them on a full-time
basis until the 31 December 2008, after which it is anticipated that they would
move to a consulting basis. Associated office overheads and staffing will
therefore be significantly reduced.





We are
also in the process of finding a smaller office in Uganda and have reduced our
full-time staff to one administrator/accountant and one housekeeper. We can use
former full-time staff on a consulting basis when needed.





Our
office lease in China expires on the 31 March 2009 and after it expires we will
no longer have a China office. It is anticipated that one or two staff members
will remain on the payroll in China until we are fully paid for the sale of Long
Teng. It is expected that Magnus will collect all monies due to the Company
prior to the end of March 2008 and that the China office will be closed prior to
the end of the office lease.





We intend
to reduce the total budget for Magnus for the year down to about US $600,000 of
costs (that are not currently loans or payables) for the coming year. Thus costs
will be reduced by a very significant amount.




ITEM 7A.  QUANTITATIVE AND QUALITIATIVE DISCLOSURES
ABOUT MARKET RISK




Market
risk represents the risk of loss that may impact our financial position, results
of operations or cash flows due to adverse change in foreign currency and
interest rates.




30
 Table of Contents




Exchange
Rate





Our
reporting currency is United States Dollars (“USD”).  In Uganda, the
currency is the Ugandan shilling (“UGX”).  On November 5, 2008, the
exchange rate was UGX 1,850.5 = US$1.00. In China, the currency is the Renminbi
yuan (“RMB”). On November 5, 2008, the exchange rate was RMB 1 = US
$0.1464.





Interest
Rate





In
Uganda, interest rates are generally stable.  Loans of the Company, if
any, typically relate to trade payables and are short term.  However,
the Company’s debt is likely to rise if it develops a physical plant in
connection with any of its mineral properties, and if interest rates rose at the
same time this could have a significant impact on our operating and financing
activities.





We have
not entered into derivative contracts either to hedge existing risks or for
speculative purposes.

































31
 Table of Contents




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA




Index
to the Financial Statements




IndexReport of Independent Registered Public Accounting Firm
      dated November 10, 2006
              F-2Consolidated Balance Sheet
              F–4Consolidated Statement of Operations
              F–6Consolidated Statement of Cash Flows
              F–7Consolidated Statement of Stockholders’ Equity
      (Deficit)
              F–9Notes to the Consolidated Financial Statements
              F–10
            32
 Table of Contents
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
   The
Board of Directors and Stockholders of
 Magnus
International Resources Inc.
 (An
exploration stage company)
  We have
audited the accompanying consolidated balance sheet of Magnus International Resources Inc.(an exploration stage company) as of July 31, 2008 and July 31, 2007, the
related consolidated statements of stockholders’ equity (deficit), operations
and cash flows for the years ended July 31, 2008 and July 31, 2007 and for the
period from August 1, 2002 (re-entered into exploration stage on June 2, 2003
described in Note 2) to July 31, 2008.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audit. The
consolidated financial statements as of July 31, 2005 and for the cumulative
period from August 1, 2002 to July 31, 2005 were audited by other auditors whose
reports dated October 31, 2003, October 15, 2004 and November 15, 2005 expressed
unqualified opinions on those statements.  The financial statements for the
period from August 1, 2002 to July 31, 2005 include total revenues and net loss
of $nil and $5,585,963 since inception ($77,143 before re-entering into
exploration stage and $5,508,820 after re-entering into exploration stage),
respectively.  Our opinion on the statements of stockholders’ equity
(deficit), operations and cash flows for the period August 1, 2002 (re-entered
into exploration stage on June 2, 2003) to July 31, 2008, insofar as it relates
to amounts for prior periods through July 31, 2005 is based solely on the
reports of other auditors.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  We believe that
our audits and the reports of the other auditors provide a reasonable basis for
our opinion.
  In our
opinion, based on our audits and the reports of other auditors, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of the Company as of July 31, 2008 and July
31, 2007 and the results of its operations and its cash flows for the years
ended July 31, 2008 and July 31, 2007, and for the cumulative period from August
1, 2002 (re-entered into exploration stage on June 2, 2003) to July 31, 2008 in
conformity with U.S. generally accepted accounting
principles.
  The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2, the Company has
recurring losses from operations since inception , a cash deficiency, a working
capital deficiency and has a shareholder deficit that raise substantial doubt
about its ability to continue as a going concern.  Management’s plans in
regard to these matters are also described in Note 2.  The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
   Schumacher
& Associates, Inc.
 Certified
Public Accountants
 2525
15th
Street, Suite 3H
 Denver,
Colorado 80211
  November
13, 2008
 33
 Table of Contents


MAGNUS
      INTERNATIONAL RESOURCES INC.(An
      Exploration Stage Company)Consolidated Balance Sheets(Expressed
      in US Dollars)Note
      2 - Basis of Presentation - going concern
              
              July
      31
              
              
              July
      312008
              
              
              2007ASSETSCURRENT
      ASSETSCash
              
              $
              177,093
              
              
              $
              433,569Prepaid
      expenses and other
              
              
              63,842
              
              
              
              86,800Proceeds
      of disposition receivable net of reserve (Note 3)
              
              
              100,000
              
              
              
              -Total
      current assets
              
              
              340,935
              
              
              
              520,369Fixed
      assets (Note 4)
              
              
              -
              
              
              
              134,610Investment
      in Joint Ventures (Note 5)
              
              
              -
              
              
              
              -Mineral
      Property Licenses (Note 5)
              
              
              -
              
              
              
              -Total
      assets
              
              $
              340,935
              
              
              $
              654,979LIABILITIES
      AND STOCKHOLDERS' (DEFICIT)CURRENT
      LIABILITIESDemand
      loan payable (Note 6)
              
              $
              30,715
              
              
              $
              -Accounts
      payable including related party payable of $83,312 (July 31, 2007 -
      $25,029) (Note 11)
              
              
              376,285
              
              
              
              231,539Accrued
      liabilities including related party liabilities of $87,381 (July 31, 2007
      - $67,672) (Note 11)
              
              
              236,024
              
              
              
              356,638Liabilities
      for registration payments (Note 9)
              
              
              182,000
              
              
              
              440,000Liabilities
      of components held for sale (Note 5)
              
              
              -
              
              
              
              602,239Loans
      from shareholders (Note 7)
              
              
              1,462,069
              
              
              
              1,057,485Total
      current liabilities
              
              
              2,287,093
              
              
              
              2,687,901COMMITMENTS
      AND CONTINGENCIES (Notes 1, 2, 3, 5, 7, 9, 11, 12, 13 and
    15)STOCKHOLDERS'
      (DEFICIT)Common
      stock (Note 9)Authorized
      100,000,000 shares at par value of $0.001 each issued and outstanding
      54,070,740 (2007 - 49,541,490)
              
              
              54,071
              
              
              
              49,542Preferred stock (Note 10) without liquidation preferenceAuthorized
      1,000,000 shares at par value of $0.001 each issued and
      outstanding:0
      Series "A" (2007 - 100,000)
              
              
              -
              
              
              
              100200,000
      Series "B"
              
              
              200
              
              
              
              200Subscriptions
      received
              
              
              100,000
              
              
              
              165,000Common
      stock to be issued
              
              
              -
              
              
              
              537,620Additional
      paid-in capital
              
              
              19,046,586
              
              
              
              16,757,613Accumulated
      (deficit) prior to exploration stage
              
              
              (77,143
              )
              
              
              (77,143
              )Accumulated
      (deficit) during exploration stage
              
              
              (21,031,104
              )
              
              
              (19,413,082
              )Accumulated
      other comprehensive income (loss)
              
              
              (38,768
              )
              
              
              (52,772
              )Total
      stockholders' (deficit)
              
              
              (1,946,158
              )
              
              
              (2,032,922
              )Total
      liabilities and stockholders' (deficit)
              
              $
              340,935
              
              
              $
              654,979
   The
accompanying notes to the consolidated financial statements are an integral part
of these statements.


34
 Table of Contents




MAGNUS
      INTERNATIONAL RESOURCES INC.(An
      Exploration Stage Company)Consolidated Statements of Operations(Expressed
      in US Dollars)Exploration
      stageYears
      Ended July 31
              
              
              through
      July 31,2008
              
              
              2007
              
              
              2006
              
              
              2008EXPENSESConsulting
              
              $
              325,222
              
              
              $
              345,548
              
              
              
              1,022,398
              
              
              $
              2,610,216Finder
      fees
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              674,375Investor
      relations
              
              
              30,461
              
              
              
              37,798
              
              
              
              1,728,729
              
              
              
              1,821,765Legal
      and professional fees
              
              
              173,018
              
              
              
              307,367
              
              
              
              374,253
              
              
              
              1,145,343Exploration
      licenses
              
              
              105,101
              
              
              
              67,515
              
              
              
              745,277
              
              
              
              917,893Geological
      expenses
              
              
              892,442
              
              
              
              603,313
              
              
              
              367,979
              
              
              
              1,863,734Amortization
              
              
              53,997
              
              
              
              47,823
              
              
              
              31,780
              
              
              
              159,881Salaries
      and benefits
              
              
              206,475
              
              
              
              310,541
              
              
              
              246,302
              
              
              
              1,002,003Stock-based
      compensation (Note 12)
              
              
              528,266
              
              
              
              411,546
              
              
              
              1,068,142
              
              
              
              2,857,309Registration
      payment arrangements (Note 9)
              
              
              14,000
              
              
              
              440,000
              
              
              
              -
              
              
              
              454,000Travel
              
              
              108,343
              
              
              
              188,696
              
              
              
              379,539
              
              
              
              987,247Write-down
      of abandoned assets (Note 5)
              
              
              83,204
              
              
              
              -
              
              
              
              -
              
              
              
              83,204Write-down
      of impaired assets
              
              
              -
              
              
              
              365,316
              
              
              
              -
              
              
              
              365,316Other
      administrative expenses
              
              
              351,226
              
              
              
              208,974
              
              
              
              1,012,034
              
              
              
              2,029,517Total
      expenses
              
              
              2,871,755
              
              
              
              3,334,437
              
              
              
              6,976,433
              
              
              
              16,971,803Net
      (loss) from continuing operations
              
              
              (2,871,755
              )
              
              
              (3,334,437
              )
              
              
              (6,976,433
              )
              
              
              (16,971,803
              )Gain
      on sales of subsidiaries (Note 5)
              
              
              3,582,801
              
              
              
              -
              
              
              
              -
              
              
              
              3,582,801Bad
      debt related to proceeds of sale of subsidiaries (Note 5)
              
              
              (2,240,800
              )
              
              
              -
              
              
              
              -
              
              
              
              (2,240,800
              )Loss
      from operations of components held for sale (Note 5)
              
              
              (88,268
              )
              
              
              (1,167,991
              )
              
              
              (2,425,401
              )
              
              
              (5,401,302
              )Net
      (loss) for the year
              
              
              (1,618,022
              )
              
              
              (4,502,428
              )
              
              
              (9,401,834
              )
              
              
              (21,031,104
              )Other
      comprehensive income (loss)Foreign
      currency translation
              
              
              14,004
              
              
              
              (38,069
              )
              
              
              (14,703
              )
              
              
              (38,768
              )Comprehensive
      (loss)
              
              $
              (1,604,018
              )
              
              $
              (4,540,497
              )
              
              
              (9,416,537
              )
              
              $
              (21,069,872
              )Net
      loss per common share - basic and fully diluted:Net
      (loss) from continuing operations
              
              $
              (0.06
              )
              
              $
              (0.08
              )
              
              
              (0.20
              )Loss
      from operations of components held for sale
              
              $
              (0.00
              )
              
              $
              (0.03
              )
              
              
              (0.07
              )Net
      (loss) for the year
              
              $
              (0.03
              )
              
              $
              (0.11
              )
              
              
              (0.27
              )Weighted
      average number of common stock outstanding
              
              
              51,930,143
              
              
              
              42,073,618
              
              
              
              34,808,816


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




35
 Table of Contents




MAGNUS
      INTERNATIONAL RESOURCES INC.(An
      Exploration Stage Company)Consolidated Statements of Cash Flows(Expressed
      in US Dollars)Exploration
      stageYears
      Ended July 31
              
              
              through
      July 31,2008
              
              
              2007
              
              
              2006
              
              
              2008Cash
      and cash equivalent from (used in) operating activities:Net
      (loss)
              
              $
              (1,618,022
              )
              
              $
              (4,502,428
              )
              
              
              (9,401,834
              )
              
              $
              (21,031,104
              )Adjustments to reconcile net loss to net cash used in operating
      activities:Stock-based
      compensation
              
              
              528,266
              
              
              
              411,546
              
              
              
              1,068,142
              
              
              
              2,857,309Stock
      issued / allotted for services and licenses
              
              
              147,547
              
              
              
              -
              
              
              
              255,000
              
              
              
              1,516,547Amortization
      of fixed assets
              
              
              53,997
              
              
              
              100,991
              
              
              
              77,980
              
              
              
              259,249Imputed
      interest on loans from shareholders
              
              
              78,072
              
              
              
              29,322
              
              
              
              -
              
              
              
              107,394Loss
      on dispositions and writedowns of fixed assets
              
              
              83,204
              
              
              
              345,203
              
              
              
              3,300
              
              
              
              431,707Gain
      on disposition of subsidiaries, net of bad debt
              
              
              (1,342,001
              )
              
              
              
              
              
              
              
              
              
              
              (1,342,001
              )Net
      change in operating assets and liabilities:Prepaid
      expenses and other
              
              
              22,958
              
              
              
              (20,019
              )
              
              
              54,939
              
              
              
              (49,328
              )Deposit
      receivable
              
              
              -
              
              
              
              250,000
              
              
              
              (250,000
              )
              
              
              -Assets
      of component held for sale
              
              
              -
              
              
              
              39,194
              
              
              
              (30,354
              )
              
              
              -Accounts
      payable and accrued liabilities
              
              
              24,847
              
              
              
              70,323
              
              
              
              293,221
              
              
              
              447,903Liabilities
      for registration payments
              
              
              14,000
              
              
              
              440,000
              
              
              
              -
              
              
              
              454,000Liabilities
      of component held for sale
              
              
              (412,517
              )
              
              
              221,661
              
              
              
              144,107
              
              
              
              189,721Net cash and cash equivalent from (used in) operating
      activities
              
              
              (2,419,649
              )
              
              
              (2,614,207
              )
              
              
              (7,785,499
              )
              
              
              (16,158,603
              )Cash
      and cash equivalent from (used in) investing activities:Proceeds
      received from disposition of subsidiary
              
              
              781,242
              
              
              
              -
              
              
              
              -
              
              
              
              781,242Cash
      included in acquisition of African Mineral Fields Inc.
              
              
              -
              
              
              
              282
              
              
              
              -
              
              
              
              282Purchase
      of capital assets
              
              
              (2,591
              )
              
              
              (68,990
              )
              
              
              (287,077
              )
              
              
              (670,321
              )Net cash and cash equivalent from (used in) investing
      activities
              
              
              778,651
              
              
              
              (68,708
              )
              
              
              (287,077
              )
              
              
              111,203Cash
      and cash equivalent from financing activities:Issue
      of Preferred Shares
              
              
              -
              
              
              
              -
              
              
              
              100
              
              
              
              100Demand
      loan received
              
              
              30,000
              
              
              
              -
              
              
              
              -
              
              
              
              30,000Options
      exercised
              
              
              -
              
              
              
              -
              
              
              
              573,000
              
              
              
              573,000Warrants
      exercised
              
              
              -
              
              
              
              -
              
              
              
              2,969,332
              
              
              
              3,589,332Subscriptions
      received
              
              
              765,000
              
              
              
              2,265,000
              
              
              
              3,242,325
              
              
              
              11,135,384Finders'
      fees paid in respect of private placements
              
              
              (44,817
              )
              
              
              (221,200
              )
              
              
              -
              
              
              
              (376,855
              )Loans
      from shareholders
              
              
              604,584
              
              
              
              712,577
              
              
              
              (110,838
              )
              
              
              1,317,161Net
      cash and cash equivalent from financing activities
              
              
              1,354,767
              
              
              
              2,756,377
              
              
              
              6,673,919
              
              
              
              16,268,122Effect
      of exchange rate changes on cash
              
              
              29,755
              
              
              
              (54,588
              )
              
              
              (18,819
              )
              
              
              (43,652
              )Increase
      in cash and cash equivalent
              
              
              (256,476
              )
              
              
              18,874
              
              
              
              (1,417,476
              )
              
              
              177,070Cash
      and cash equivalent, beginning of period
              
              
              433,569
              
              
              
              414,695
              
              
              
              1,832,171
              
              
              
              23Cash
      and cash equivalent, end of period
              
              $
              177,093
              
              
              $
              433,569
              
              
              
              414,695
              
              
              $
              177,093


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




36
 Table of Contents




MAGNUS
      INTERNATIONAL RESOURCES INC.(An
      Exploration Stage Company)Consolidated Statement of Stockholders' Equity
      (Deficit)(Expressed
      in US Dollars)Common
      Stock
              
              
              Amount
              
              
              Preferred
                stock
              
              
              Subscription
                received
              
              
              Promissory
      notes receivable for subscriptions
              
              
              Common
      Stock to be Issued
              
              
              Cumulative
      Other Comprehensive Income (loss)
              
              
              Additional
      Paid in Capital
              
              
              (Deficit)
                Accumulated
      During Exploration Stage
              
              
              (Deficit)
                Accumulated
      Prior to Exploration Stage
              
              
              Stockholders’
      Equity (Deficit)Balance
      July 31, 2005
              
              
              30,500,018
              
              
              $
              30,500
              
              
              $
              -
              
              
              $
              1,114,650
              
              
              $
              -
              
              
              $
              690,000
              
              
              $
              -
              
              
              $
              5,688,430
              
              
              $
              (5,508,820
              )
              
              $
              (77,143
              )
              
              $
              1,937,617Share
      subscriptions received
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,242,325
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,242,325Shares
      allotted as finders' fees
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              287,820
              
              
              
              -
              
              
              
              (287,820
              )
              
              
              -
              
              
              
              -
              
              
              
              -Finders'
      fee paid in cash
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (110,838
              )
              
              
              -
              
              
              
              -
              
              
              
              (110,838
              )Finders'
      fee shares issued
              
              
              200,000
              
              
              
              200
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (190,000
              )
              
              
              -
              
              
              
              189,800
              
              
              
              -
              
              
              
              -
              
              
              
              -Shares
      allotted for acqusition of mining licenses
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              255,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              255,000Stock-based
      compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,068,142
              
              
              
              -
              
              
              
              -
              
              
              
              1,068,142Shares
      issued pursuant to subscriptions
              
              
              3,456,550
              
              
              
              3,456
              
              
              
              -
              
              
              
              (3,871,975
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,868,519
              
              
              
              -
              
              
              
              -
              
              
              
              -Subscriptions
      received in cash for exercise of warrants
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,969,332
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,969,332Subscriptions
      received by promissory note for exercise of warrants
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,844,651
              
              
              
              (2,844,651
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Shares
      issued pursuant to exercise of warrants
              
              
              5,175,372
              
              
              
              5,176
              
              
              
              -
              
              
              
              (6,148,983
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              6,143,807
              
              
              
              -
              
              
              
              -
              
              
              
              -Shares
      issued pursuant to exercise of Options
              
              
              1,146,000
              
              
              
              1,146
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              571,854
              
              
              
              -
              
              
              
              -
              
              
              
              573,000Shares
      issued pursuant to agreement
              
              
              285,714
              
              
              
              286
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              (500,000
              )
              
              
              -
              
              
              
              499,714
              
              
              
              -
              
              
              
              -
              
              
              
              -Preferred
      stock subscribed and issued
              
              
              -
              
              
              
              -
              
              
              
              100
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              100Net
      loss for the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (14,703
              )
              
              
              -
              
              
              
              (9,401,834
              )
              
              
              -
              
              
              
              (9,416,537
              )Balance
      July 31, 2006
              
              
              40,763,654
              
              
              $
              40,764
              
              
              $
              100
              
              
              $
              150,000
              
              
              $
              (2,844,651
              )
              
              $
              542,820
              
              
              $
              (14,703
              )
              
              $
              17,631,608
              
              
              $
              (14,910,654
              )
              
              $
              (77,143
              )
              
              $
              518,141Share
      subscriptions received
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,265,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,265,000Reversal
      of  allottment of shares as finders' fees
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (5,200
              )
              
              
              -
              
              
              
              5,200
              
              
              
              -
              
              
              
              -
              
              
              
              -Finders'
      fee paid or payable in cash
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (221,200
              )
              
              
              -
              
              
              
              -
              
              
              
              (221,200
              )Stock-based
      compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              411,546
              
              
              
              -
              
              
              
              -
              
              
              
              411,546Shares
      issued pursuant to subscriptions
              
              
              5,100,000
              
              
              
              5,100
              
              
              
              -
              
              
              
              (2,250,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,244,900
              
              
              
              -
              
              
              
              -
              
              
              
              -Shares
      issued pursuant to acquisition of African Mineral Fields
    Inc.
              
              
              6,000,000
              
              
              
              6,000
              
              
              
              200
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (501,434
              )
              
              
              -
              
              
              
              -
              
              
              
              (495,234
              )
   37
 Table of Contents
  Shares
      issued for promissory notes cancelled
              
              
              (2,322,164
              )
              
              
              (2,322
              )
              
              
              -
              
              
              
              -
              
              
              
              2,844,651
              
              
              
              -
              
              
              
              -
              
              
              
              (2,842,329
              )
              
              
              -
              
              
              
              -
              
              
              
              -Imputed
      interest on loans from shareholders
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              29,322
              
              
              
              -
              
              
              
              -
              
              
              
              29,322Net
      loss for the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (38,069
              )
              
              
              -
              
              
              
              (4,502,428
              )
              
              
              -
              
              
              
              (4,540,497
              )Balance
      July 31, 2007
              
              
              49,541,490
              
              
              $
              49,542
              
              
              $
              300
              
              
              $
              165,000
              
              
              $
              -
              
              
              $
              537,620
              
              
              $
              (52,772
              )
              
              $
              16,757,613
              
              
              $
              (19,413,082
              )
              
              $
              (77,143
              )
              
              $
              (2,032,922
              )Share
      subscriptions received
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              765,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              765,000Share
      subscriptions received in conversion of shareholder's loan
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              200,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              200,000Shares
      cancelled pursuant to agreement for disposition of
      subsidiaries
              
              
              (285,714
              )
              
              
              (286
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (286
              )Reversal
      of share allotment pursuant to agreement for disposition of
      subsidiaries
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (255,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (255,000
              )Shares
      issued pursuant to subscriptions
              
              
              3,806,184
              
              
              
              3,806
              
              
              
              -
              
              
              
              (1,030,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,026,194
              
              
              
              -
              
              
              
              -
              
              
              
              -Cancellation
      of Series "A" preferred shares
              
              
              -
              
              
              
              -
              
              
              
              (100
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              100
              
              
              
              -
              
              
              
              -
              
              
              
              -Shares
      issued in settlement of registration payment liability
              
              
              272,000
              
              
              
              272
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              271,728
              
              
              
              -
              
              
              
              -
              
              
              
              272,000Shares
      issued for past and current services
              
              
              365,625
              
              
              
              366
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              145,181
              
              
              
              -
              
              
              
              -
              
              
              
              145,547Shares
      issued as finders' fees
              
              
              371,155
              
              
              
              371
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (282,620
              )
              
              
              -
              
              
              
              284,249
              
              
              
              -
              
              
              
              -
              
              
              
              2,000Finders'
      fees paid in cash
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (44,817
              )
              
              
              -
              
              
              
              -
              
              
              
              (44,817
              )Stock-based
      compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              528,266
              
              
              
              -
              
              
              
              -
              
              
              
              528,266Imputed
      interest on loans from shareholders
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              78,072
              
              
              
              -
              
              
              
              -
              
              
              
              78,072Net
      income for the period
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              14,004
              
              
              
              -
              
              
              
              (1,618,022
              )
              
              
              -
              
              
              
              (1,604,018
              )Balance
      July 31, 2008
              
              
              54,070,740
              
              
              $
              54,071
              
              
              $
              200
              
              
              $
              100,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (38,768
              )
              
              $
              19,046,586
              
              
              $
              (21,031,104
              )
              
              $
              (77,143
              )
              
              $
              (1,946,158
              )


The
accompanying notes to the consolidated financial statements are an integral part
of these statements.
  
 38
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 1. BASIS OF
PRESENTATIONANDSUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 Organization
and Description of Business
  The
Company was incorporated as Gravity Spin Holdings, Inc. in the State of Nevada
on April 4, 2001. On June 30, 2001, the Company acquired all the outstanding
stock of Gravity Spin, Inc. (“Gravity Spin”, formerly E-Fusion ATP Inc.), a
company incorporated on March 3, 2000 in Canada, by issuing 10,000,000 shares of
its common stock.  Gravity Spin engaged in advertising, sales
promotion, graphic design, branding, new media, and design services principally
in Canada.  The two companies were under common
control.  Prior to the acquisition, the Company had only nominal
assets and liabilities. The transaction was treated as a reverse acquisition for
accounting purposes, which is a capital transaction and not a business
combination. The Company sold its subsidiary, Gravity Spin, Inc., on June 2,
2003.
 
 Subsequent
to the sale of its operating subsidiary on June 2, 2003, the Company entered an
exploration stage in pursuit of new business opportunities (Note
5).  As an exploration stage company, the Company presents its
financial statements in conformity with the accounting principles generally
accepted in the United States that apply in establishing operating
enterprises.  The Company discloses the deficit accumulated during the
exploration stage and the cumulative statements of operations and cash flows
from the inception of the exploration stage through July 31, 2008.
 
 The
Company formed a subsidiary called Gravity Spin Event Marketing, Inc., in May
2003.  The Company formed two new subsidiaries called Magnus
International Resources Inc. (“Magnus BVI”) and Magnus Resources (HK) Limited
(“Magnus HK”) in April 2004 and December 29, 2003, respectively. Gravity
Marketing, Magnus BVI and Magnus HK have no transactions as of July 31,
2008.
 
 Effective
May 4, 2004 the Company changed its name to Magnus International Resources
Inc.  The Company has an office in Vancouver, Canada.
 
 On
September 29, 2004 the joint venture agreement entered into by the Company on
July 6, 2004 was approved by the Chinese government.  With the
approval, a new joint venture company, Yunnan Long Teng Mining Ltd., (“Long
Teng”) was formed.  The Company owned 90% of the issued shares of Long
Teng until May 28, 2008. On May 28, 2008, the Company entered an agreement to
sell 100% of Long Teng (including the remaining 10% the Company was then
negotiating to acquire) for proceeds of RMB 21,000,000 (approximately
$3,072,000). On July 10, 2008 Chinese government approval of the sale was
received. See also Notes 3 and 5.
  The
Company owns 100% of Golden River Resources Corp. (“Golden River”). Golden River
was participating in a co-operative joint venture in China until December, 2007.
Under the joint venture, Golden River acquired a 90% interest in the
sino-foreign joint venture company Yunnan Western Mining Ltd. (“Western Mining”)
by making capital contributions on the schedule required by the joint venture
agreement. On November 15,
  39
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
  2007 the
Company entered an amending agreement (replacing an agreement entered on May 12,
2007) to sell its 90% interest in Western Mining to the joint venture partner in
consideration for the remaining 10% of Long Teng that the Company did not
already own. On May 30, 2008 the Company entered a final amending agreement to
finalize the terms of the transfer, as more fully described in Note 5. The
registered ownership of Western Mining was transferred to the former joint
venture partner in December 2007 in reliance on the amending
agreement.
  On May 1,
2007, the Company closed a share purchase agreement by which the Company
acquired all of the issued and outstanding shares in the capital of African
Mineral Fields Inc. (“AMF”), a company incorporated under the laws of the
British Virgin Islands. The Company’s chief executive officer indirectly held a
controlling interest in AMF, and was the chief executive and a director of AMF,
prior to the acquisition. In exchange, the shareholders of AMF received six
million shares of common stock of the Company and 200,000 Series “B” preferred
shares.
 
 Through
the acquisition of AMF, the Company acquired a 100% interest in two gold
projects, Lugazi and Mubende, and an exclusive option to acquire 100% interest
in a further two gold properties, Mwerusandu and Mitoma (later reduced to a
purchase of the licenses), in Uganda. See Note 5.
 
 In the
year ended July 31, 2008 AMF incorporated two subsidiary companies, African
Mineral Fields Limited (“AMF Ltd.”) and AB Mining Ltd. (“ABM”), under the laws
of Uganda for the purpose of holding legal interest in exploration licenses in
Uganda. The Uganda subsidiaries have no operations of their own.
 
 Principles
of Consolidation
 
 The
consolidated financial statements include accounts of the Company and its
wholly-owned subsidiaries, Golden River,Gravity Marketing,
Magnus BVI and Magnus HK, AMF and the two Ugandan subsidiaries.  All
significant inter-company balances and transactions are eliminated. The
statement of operations presented for 2007 includes the results of operations
for AMF since May 1, 2007, the date of acquisition. The statements of operations
include the results of operations for Western Mining and Long Teng until the
effective dates of the sales of those subsidiaries.
 
 The
assets of AMF at the time of acquisition have been reflected in these financial
statements at their historical cost to AMF, since the transaction was between
related parties. The carrying values of AMF’s assets at time of the acquisition
consisted of cash of $282 and prepaid expenses of $14,514.
 
 40
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 Cash
and Cash Equivalents
  Cash
equivalents comprise certain highly liquid instruments with a maturity of three
months or less when purchased.  As at July 31, 2008 and 2007, the
Company did not have any cash equivalents.
  Mineral
Properties and Exploration Expenses
  Mineral
property acquisition, exploration and development costs are charged to
operations as incurred until such time that proven or probable ore reserves are
discovered.  From that time forward, the Company will capitalize all
costs to the extent that future cash flow from reserves equals or exceeds the
costs deferred.  The deferred costs will be amortized using the
unit-of-production method when a property reaches commercial production. As at
July 31, 2008, the Company did not have proven or probable
reserves.
  Asset
Retirement Obligations
  The
Company has adopted SFAS No. 143, Accounting for Asset Retirement
Obligations which requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is
incurred.   SFAS No. 143 requires a liability to be recorded for
the present value of the estimated site restoration costs with corresponding
increase to the carrying amount of the related long-lived asset.  The
liability will be accreted and the asset will be depreciated over the life of
the related assets.  Adjustments for changes resulting from the
passage of time and changes to either the timing or amount of the original
present value estimate underlying the obligation will be made. As at July 31,
2008 the company has no asset retirement obligations.
  Fixed
Assets
  Fixed
assets are carried at cost less a provision for depreciation on a straight-line
basis over their estimated useful lives as follows:
  Computer
      equipment
              3
      to 5 yearsComputer
      software
              3
      yearsField
      equipment
              5
      yearsLeasehold
      improvements
              2
      yearsOffice
      furniture and equipment
              5
      yearsVehicles
              10
      years
 
 Advertising
Expenses
  Advertising
expenses are expensed as incurred.
  Foreign
Currency
  The
parent company’s operation of the Company is located in Canada.  It
maintains both U.S. Dollar and Canadian Dollar bank accounts. The functional
currency is the Canadian Dollar. Transactions in foreign currencies other than
the functional currency, if any, are remeasured into the functional currency at
the rate in effect at the time of the transaction. Remeasurement
gains
 
 41
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 and
losses that arise from exchange rate fluctuations are included in income or loss
from operations. Monetary assets and liabilities denominated in the functional
currency are translated into U.S. Dollars at the rate in effect at the balance
sheet date.  Revenue and expenses denominated in the functional
currency are translated at the average exchange rate.  Other
comprehensive income includes the foreign exchange gains and losses that arise
from translating from the functional currency into U.S. Dollars.
 
 The
operations of Long Teng and Western Mining are located in China, and they
maintain their accounting records in Chinese Renminbi Yuan (“RMB”). The
functional currency is the Chinese Renminbi Yuan. Transactions in foreign
currencies other than the functional currency, if any, are remeasured into the
functional currency at the rate in effect at the time of the transaction.
Remeasurement gains and losses that arise from exchange rate fluctuations are
included in income or loss from operations. Monetary assets and liabilities
denominated in the functional currency are translated into U.S. Dollars at the
rate in effect at the balance sheet date.  Revenue and expenses
denominated in the functional currency are translated at the average exchange
rate.  Other comprehensive income includes the foreign exchange gains
and losses that arise from translating from the functional currency into U.S.
Dollars.
 
 The  operations
of AMF are located in Uganda, and AMF maintains its accounting records in US
dollars. The functional currency is the US dollar. Transactions in foreign
currencies other than the functional currency, if any, are remeasured into the
functional currency at the rate in effect at the time of the transaction.
Remeasurement gains and losses that arise from exchange rate fluctuations are
included in income or loss from operations.
 
 Use
of Estimates
  The
preparation of the Company’s consolidated financial statements in conformity
with generally accepted accounting principles of the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.  Management makes
its best estimate of the ultimate outcome for these items based on historical
trends and other information available when the financial statements are
prepared.    Actual results could differ from those
estimates.
 
 Loss
Per Share
  Basic
earnings (loss) per share of common stock is computed by dividing the net
earnings (loss) by the weighted average number of common shares outstanding
during the period.  Diluted earnings (loss) per share is equal to the
basic loss per share for the year ended July 31, 2008, 2007 and 2006 because
common stock equivalents consisting of options to acquire 3,315,000 (2007 -
4,291,500, 2006 – 4,935,000) shares of common stock and warrants to acquire
5,713,141 (2007 - 3,974,874, 2006 –1,524,874) shares of common stock that are
outstanding at July 31, 2008 are anti-dilutive, however, they may be dilutive in
future.
  
 42
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 Fair
Value of Financial Instruments
  The
carrying value of cash and accounts payable and accrued liabilities at July 31,
2008 and 2007, reflected in these financial statements approximates their fair
value due to the short-term maturity of the instruments.
 
 Comprehensive
Income
  The
Company has adopted Statement of Financial Accounting Standards (SFAS) No. 130,
“Reporting Comprehensive Income”.  Comprehensive income includes net
income and all changes in equity during a period that arises from non-owner
sources, such as foreign currency items and unrealized gains and losses on
certain investments in equity securities.
 
 Income
taxes
  The
Company records deferred taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes."  The statement requires recognition of deferred tax assets and
liabilities for temporary differences between the tax bases of assets and
liabilities and the amounts at which they are carried in the financial
statements, based upon the enacted tax rates in effect for the year in which the
differences are expected to reverse.  A valuation allowance is
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
 
 Concentrations
 
 The
Company uses one supplier to supply the exploration licenses and the manpower
and the majority of the technical expertise for the minerals exploration for the
Company’s projects in Uganda.
 
 The
Company holds cash in bank accounts that are not insured against financial
institution failure due to holding US currency in Canada and holding US and
Chinese currency in China.
 
 Impairment
of Long-Lived Assets
  The
Company periodically analyzes its long-lived assets for potential impairment,
assessing the appropriateness of lives and recoverability of unamortized
balances through measurement of undiscounted operation cash flows in accordance
with SFAS No. 144, Accounting
for the Impairment or Disposal of Long-lived Assets.If
impairment is deemed to exist, the asset will be written down to its fair
value.  Fair value is generally determined using a discounted cash
flow analysis.  As at July 31, 2007, the Company designated all its
long-lived assets in China as held for sale, and wrote down its assets in China
to $nil.  As at July 31, 2008, the Company wrote down all its
long-lived assets in Canada and Uganda to $nil due to impairment
analysis.
 
 
 43
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
  Finders’ fees
  Finders’
fees paid to consultants for referring investors are capitalized and
are offset against the proceeds of the offering if successful and are
expensed and charged to operations if the offering is not
successful.
 
 Stock-Based
Compensation
 
 As of
July 31, 2006, the Company has implemented the provisions of Statement of
Financial Accounting Standards No. 123 (revised 2004), Share- Based Payment(“SFAS
No. 123R”), which replaced Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based
Compensation (“SFAS No. 123”) as amended by No. 148, Accounting for Stock-Based
Compensation – Transition and Disclosure. Compensation expense is
recorded in accordance with the fair value recognition provisions of SFAS 123R
beginning in 2006 for options issued to employees. Prior to 2006, the Company
accounted for stock options granted to its employees and directors using the
intrinsic value method of accounting, as prescribed in Accounting Principles
Board Opinion No. 25 Accounting for Stock Issued to
Employees and related interpretations.  Under the intrinsic
value method, no compensation expense is recorded if the exercise price of the
options is equal to or greater than the market price of the underlying stock on
the date of grant.  As the exercise price of the Company’s employee
stock options equals the market price of the underlying stock on the date of the
grant, no compensation expense was recognized under APB25 for 2005 and
prior.
 
 Options
issued to non-employees are recorded in accordance with the fair value
recognition provisions of SFAS No. 123R, which are the same as the provisions
previously followed under SFAS No. 123.
 
 The
Company has a stock-based compensation plan that is described more fully in Note
12.
 
 New
Accounting Pronouncements
 
 In
June 2006, the FASB issued Interpretation 48, Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”). This
Interpretation prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. In addition, FIN 48 expands the disclosure
requirements concerning unrecognized tax benefits as well as any significant
changes that may occur in the next twelve months associated with such
unrecognized tax benefits. FIN 48 is effective for fiscal years beginning after
December 15, 2006. FIN 48 does not have a significant impact on the
financial statements of the Company.
 
 In
September 2006, the FASB issued Statement No. 157, Fair Value Measures. This
statement defines and establishes a framework for determining fair value and
expands disclosures about fair value measurements. This standard does not
require new fair value measurements, but does define fair value for
implementation of other standards that permit or require fair value measurement.
This statement is effective for fiscal years beginning after November 15,
2007. This statement is not expected to have a significant impact on future
financial statements of the Company.
 
 44
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 In
December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2, Accounting for Registration Payment
Arrangements. This FSP specifies that the contingent obligation to make
future payments or otherwise transfer consideration under a registration payment
arrangement, whether issued as a separate agreement or included as a provision
of a financial instrument or other agreement, should be separately recognized
and measured in accordance with FASB Statement No. 5, Accounting for Contingencies.The guidance in this FSP amends FASB Statements No. 133, Accounting for Derivative
Instruments and Hedging Activities,and No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity,and FASB
Interpretation No. 45, Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others,to include scope exceptions for registration
payment arrangements. This FSP further clarifies that a financial instrument
subject to a registration payment arrangement should be accounted for in
accordance with other applicable generally accepted accounting principles (GAAP)
without regard to the contingent obligation to transfer consideration pursuant
to the registration payment arrangement. The Company has applied the provisions
of EITF 00-19-2 in determining the accounting for registration payment
arrangements entered into by the Company in May 2007 and August 2007, as further
described in Note 9.
 
 In
February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115. This standard permits fair value measurement of certain financial
assets and liabilities in an effort to eliminate volatility of earnings created
by current practice. Most of the Statement applies only to companies that elect
fair value. However, the amendment to FASB Statement No. 115, Accounting
for Certain Investments in Debt and Equity Securities, applies to all entities
with available-for-sale and trading securities. This statement is effective for
the first fiscal period beginning after November 15, 2007. This statement
is not expected to have a significant impact on future financial statements of
the Company.
 
 There
were various other accounting standards and interpretations issued during 2008,
none of which are expected to have a material impact on the Company's financial
position, operations or cash flows.
   2.
BASIS OF PRESENTATION – GOING CONCERN
  These
consolidated financial statements have been prepared on a going-concern basis
which assumes that the Company will be able to realize assets and discharge
liabilities in the normal course of business for the foreseeable
future.
  The
Company has experienced losses since the inception of the exploration stage
amounting to $21,031,104 as of July 31, 2008.  As of July 31,
2008, the Company had a total of $177,093 in cash and cash equivalents and a
working capital deficiency, however this amount is insufficient to sustain
operations over the course of the next year. The Company has a shareholders’
deficit. These factors raise substantial doubt about the Company's ability to
continue
  
 45
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 as a
going concern.  The ability of the Company to meet its commitments as
they become payable, including the completion of acquisitions, exploration and
development of mineral properties and projects, is dependent on the ability of
the Company to collect the proceeds of disposition of the Company’s former
Chinese subsidiaries, obtain necessary financing or achieving a profitable level
of operations.  There are no assurances that the Company will be
successful in achieving these goals.
  The
Company is in the process of exploring and evaluating its mineral properties and
projects in Uganda and has not yet determined whether these properties contain
economically recoverable ore reserves.  The underlying value of the
mineral properties is entirely dependent on the existence of economically
recoverable reserves, the ability of the Company to obtain the necessary
financing to complete development and upon future profitable production or
sufficient proceeds from the disposition thereof.
  These
financial statements do not give effect to adjustments to the amounts and
classifications to assets and liabilities that would be necessary should the
Company be unable to continue as a going concern.
   3.
PROCEEDS OF DISPOSITION RECEIVABLE
 
 Proceeds
of disposition receivable amounting to $100,000 consist of $2,340,800 receivable
in respect of the sale of Long Teng Mining (See Notes 1 and 5), carried net of a
reserve for uncollectible amounts of $2,240,800.
   4.
FIXED ASSETS
 
 Fixed
assets consist of the following:
  July
      31, 2008
              
              
              July
      31, 2007Computer
      equipment
              
              $
              -
              
              
              $
              47,055Computer
      software
              
              
              -
              
              
              
              49,748Field
      equipment
              
              
              -
              
              
              
              -Leasehold
      improvements
              
              
              -
              
              
              
              40,758Office
      furniture and equipment
              
              
              -
              
              
              
              78,494Vehicles
              
              
              -
              
              
              
              --
              
              
              
              216,055Less:
      Accumulated depreciation
              
              
              -
              
              
              
              81,445$
              -
              
              
              $
              134,610
 46
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
  The
Company has recognized a loss of $83,204 for the abandonment of all of its fixed
assets in the Vancouver office equal to the net book value of fixed assets in
the amount of $83,204.
   5.
MINERAL PROPERTIES AND JOINT VENTURES
  To July
31, 2008, the Company had entered into the following material agreements with
respect to mineral properties and exploration licenses in China.
 
 Yunnan
Long Teng Mining Ltd.
 
 On July
6, 2004, the Company entered into a formal Cooperative Joint Venture Contract
(“JV Agreement”) with Geology Brigade 209 of the Nuclear Industry of Yunnan
Province of China ("Team 209") to form a new joint venture company called Yunnan
Long Teng Mining Ltd. (“Long Teng”), a Chinese corporation.  Long Teng
was to carry out mineral exploration and development in Luquan county, Yunnan
province and Huidong county, Sichuan province, China.  Under the terms
of the JV Agreement, the Company was to contribute $5,000,000 as an equity
investment into Long Teng over the next four (4) years and Team 209 will
transferred certain gold and copper exploration licenses to Long Teng in return
for US$678,513 (RMB5,500,000) and a 10% interest in Long Teng.  Upon
initial capital contributions by the Company and the transfer of the exploration
licenses by Team 209, the Company owned a 90% interest in Long
Teng.  Subject to certain conditions precedent being satisfied, the
Company was required to contribute $5,000,000 as follows:
 
 ·
              not
      less than $460,000 within three months after the issuance of the business
      license;
 ·
              $1,000,000
      within twenty-four months after the issuance of the business
      license;
 ·
              $1,550,000
      within thirty-six months after the issuance of the business license;
      and
 ·
              an
      additional $1,990,000 within forty-eight months after the issuance of the
      business license, if required, based on the results of the exploration by
      Long Teng.
 
 If
further funding is required for carrying out more exploration and development
activities, the Company was responsible for providing such
funding.  Team 209 would remain a 10% owner of Long Teng.
  The
Company was required to provide Team 209 with the equivalent of $750,000 in
shares of its common stock within 15 days after the issuance of the business
license of Long Teng, the joint venture company, and the completion of transfer
of exploration licenses for the two joint venture properties ($250,000 in shares
for successful transfer of the Luquan property license and $500,000 in shares
for the successful transfer of the Huidong license, respectively).  On
September 29, 2004, the JV Agreement was approved by the Chinese Government and
a business license for Long Teng Mining Ltd. was
issued.    The exploration license for one of the two
properties covered by the Joint Venture Agreement (Huidong) was successfully
transferred into the Joint Venture Company, Long Teng, on July 27,
2005.  In connection with this successful transfer, Magnus issued Team
209 $500,000 in common shares.  The parties agreed to value the common
stock at $1.75 at the time the exploration license had been successfully
transferred.  Thus, 285,714 shares were issued to Team 209 on August
26, 2005.
  47
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 In July
and August of 2005, the Board of Directors gathered all available geological
information surrounding the Luquan property, and upon consultation with senior
Company geologists, it was determined that the Company’s resources would be
better expended on the exploration of the Company’s two core projects and in
seeking out other prospective properties.  After consultation with
Team 209, it was agreed that Team 209 would not transfer the Luquan exploration
license to Long Teng Mining, and that the Luquan property would not be explored
by Long Teng Mining.
 
 The
Company agreed to pay a finder’s fee of 200,000 shares of its common stock
valued at $190,000 and $200,000 cash to a corporation. The finder’s fee,
totaling $390,000, was expensed in 2004.  The 200,000 shares were
issued on December 15, 2005.
 
 The
Company contributed $3,509,969 to Long Teng by July 31, 2007, and therefore met
the contribution obligations required to be made by the third anniversary of the
business license issuance, September 29, 2007.
 
 On May
28, 2008, the Company executed an agreement under which it agreed to sell its
interest in the Huidong Property. Under the agreement, the Company was to
receive: RMB 7,000,000  (approximately US$1,024,100) within seven days
of the execution of the agreement; a further RMB 7,000,000 within seven days of
the successful renewal of the exploration license underlying the Huidong
Property; a further RMB 4,900,000 (approximately US$716,900) within seven days
of the transfer of Magnus’ interest to the purchaser; and a further RMB
2,100,000 (approximately US$307,200) within seven days of the transfer of the
10% interest the Company was in process of acquiring from Team
209.  Furthermore, the Company retains a 3% Net Smelter Royalty on any
materials produced from the Huidong Property.  To date, the Company
has received the first payment of RMB 7,000,000 from the purchaser into the
Company’s bank account in China. The registered ownership of Long Teng was
transferred to the purchaser on June 14, 2008. The exploration license was
renewed on September 11 , 2008. As at the date of completion of these financial
statements, none of the remaining RMB 14,000,000 has been paid. The Company has
recorded a reserve for the full amount of this receivable. See also Note
3.  Of the first RMB 7,000,000, RMB 4,500,000 (approximately $658,000)
was collected on the Company’s behalf by an intermediary for exchange and
transmission to the company’s office in Canada. To July 31, 2008, RMB 2,500,000
(approximately $366,000) has been successfully remitted to Canada and another
RMB 640,200 (approximately $ 100,000) was remitted on September 9, 2008. The
remainder of the transmission has not been accomplished and the corresponding
receivable has been reserved. See also Note 3.
 
 On May
30.2008, the Company completed the acquisition of the remaining 10% of Long Teng
from the joint venture partner on the terms described below under “Yunnan
Western Mining Ltd.”
 
 The
Company had classified Long Teng as a component held for sale in the financial
statements for 2007 due to the impending Modification Agreement. and had written
off the fixed assets of both joint venture companies, as well as recognizing a
RMB 1,000,000 (approximately $US 146,000) liability to the former joint venture
partner under the Modification Agreement. The Company has recognized a gain on
disposition of Long Teng in the amount of
  
 48
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
  $3,533,000 due to the
proceeds received for sale of Long Teng and due to receiving credit for the
transfer of some assets previously written off and due to reduction of the
liability to the former joint venture partner pursuant to the amending
agreements to the original Modification Agreement.
  Yunnan
Western Mining, Ltd.
  On July
26, 2005, Magnus and First Fortune Investments Inc. entered into a Letter
Agreement (the “Letter Agreement”) whereby  Magnus agreed to acquire
100% of the issued and outstanding shares of Golden River Resources Corp., a
private British Columbia company (“Golden River”), which was owned by First
Fortune Investments Inc. (“First Fortune”), and which was participating in a
co-operative joint venture with Team 209 pursuant to an agreement dated August
29, 2003 (the “Mangshi Joint Venture”), between Golden River and Team 209. The
acquisition of Golden River was completed on November 25, 2005.
  Under the
Mangshi Joint Venture, Golden River and Team 209 formed a Sino-foreign joint
venture company, Yunnan Western Mining Ltd. (“Western Mining”).  The
Mangshi Joint Venture gives Golden River a 90% interest in Western Mining, which
holds a mineral exploration license comprising approximately 114 square
kilometers.  The license is located in the Luxi Gold Belt in the
western part of Yunnan Province, People’s Republic of China, and the property is
known as the Mangshi Property (“Mangshi”).
 
 Pursuant
to the Letter Agreement, Magnus acquired 100% of the shares of Golden River for
a total consideration of up to $400,000. $300,000 of the consideration was
payable to First Fortune and up to $100,000 is payable directly to Team 209 on
behalf of First Fortune towards Golden River’s outstanding debt owing to Team
209 with respect to operating costs of Western Mining to date.  The
Company has paid the $300,000 to First Fortune.
 
 Upon
closing the Letter Agreement on November 25, 2005, the Company assumed all of
Golden River’s obligations and benefits under the terms of the Mangshi Joint
Venture.  The terms of the Mangshi Joint Venture require Golden River
to expend, through its Sino-foreign joint venture company, Yunnan Western Mining
Ltd., a total of $3,010,000 on the area covered by the exploration license over
a period of roughly four years.  The amended Mangshi Joint Venture
capital contribution schedule, which was approved by the Yunnan Provincial
government, requires the following capital contributions by the following dates:
$500,000 by December 31, 2005; an additional $1,000,000 by December 31, 2006:
and an additional $1,510,000 by December 31, 2007.  Increments of 30%
interest in Western Mining shall be earned for every aggregate of $1,000,000
contributed by the Company.  Team 209 will retain a carried interest
of 10% in Western Mining upon the completion of the contributions by the Company
of the aggregate total of $3,010,000.  Further contributions by the
Company beyond $3,010,000 will not dilute the 10% carried interest of Team 209.
(Note 10). As at July 31, 2007, Golden River has directly contributed $1,500,470
in capital to Yunnan Western Mining Ltd.
   49
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 Within
the Mangshi exploration area are two smaller mining permits where Team 209 is
conducting small scale heap leach mining operations.  On October 29,
2005, the Company (through Western Mining) agreed to purchase these mining
permits from Team 209 (from a division of Team 209 known as 209 Geo-brigade of
Yunnan Provincial Nuclear Industry, Mangshi Gold Mine) in exchange for 150,000
shares of common stock of the Company. The shares have not yet been issued as of
July 31, 2006. The Company has recognized the allotment of the shares at a value
of $1.70 per share, being the trading price of the company’s stock on October
29, 2005.
 
 On
November 15, 2007 the Company entered an amending agreement (replacing a
Modification Agreement entered on May 12, 2007) to sell its 90% interest in
Western Mining to the joint venture partner in consideration for the remaining
10% of Long Teng that the Company did not already own. On May 30, 2008 the
Company entered a final amending agreement to finalize the terms of the
transfer. Under the final terms:
  ·
              the
      former joint venture partner obtained the majority of the fixed assets of
      Long Teng,
 ·
              the
      Company was responsible for all the liabilities of both joint venture
      companies less RMB 900,000 (approximately $132,000) credit given for fixed
      assets kept by the former joint venture
partner,
 ·
              the
      Company paid RMB 500,000 (approximately $73,000) cash to the former joint
      venture partner,
 ·
              the
      former joint venture partner surrendered for cancellation 285,714 shares
      of the Company, and
 ·
              the
      former joint venture partner surrendered the rights to 150,000 unissued
      shares the Company had previously allotted as consideration for
      exploration rights for Western
Mining.
  The
registered ownership of Western Mining was transferred to the former joint
venture partner in December 2007 in reliance on the amending
agreement.
 
 The
Company had classified Western Mining as a component held for sale in the
financial statements for 2007 due to the impending Modification Agreement. and
had written off the fixed assets of both joint venture companies, as well as
recognizing a RMB 1,000,000 (approximately $US 146,000) liability to the former
joint venture partner under the Modification Agreement. The Company has
recognized a gain on disposition of Western Mining in the amount of $49,801 due
to receiving credit for the transfer of some assets previously written off and
due to reduction of the liability to the former joint venture partner pursuant
to the amended agreement.
 
 Kangding
Kangma Mining Ltd.
 
 On
December 2, 2004 Magnus agreed to purchase Kangding Kangma Mining Ltd., Co.
(“Kangding” or “Kangding Kangma”), of Sichuan Province, China, which owns a
mining license for approximately 3 square kilometers in Sichuan Province known
as the Xintaizi mining area (“Xintaizi”).  Magnus and Team 209 had
planned to form a new joint venture company and apply for all necessary
approvals from the Chinese government to begin development of the Xintaizi
project.
 
  50
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 Under the
agreement to purchase Kangding Kangma, the Company was to pay, on behalf of Long
Teng, RMB 2,100,000 (approximately $253,725 US dollars) to Kangding Kangma’s
owners (the “Vendors”).  RMB 1,150,000 (about US$139,026) was paid to
the Vendors as of July 31, 2005, with the remaining RMB 950,000 due on the day
the transfer of Kangding Kangma’s equity is successfully registered in the name
of Magnus and Team 209 (in proportions of 90% and 10% respectively) and such
transfer is effected and approved under Chinese law.   As of
October 30, 2005, the equity in Kangding Kangma had been successfully
transferred to the Deputy General Manager of Long Teng, acting as agent to
Magnus.  However, the subsequent transfer of Kangding Kangma to Magnus
and Team 209 was significantly delayed.
 
 Initial
exploration work conducted by the Company indicated ore grades in the Xintaizi
area were insufficient to justify further exploration.  Team 209
formally agreed, in an agreement signed October 30, 2005, to assume ongoing
ownership and liability for Kangding Kangma and the Xintaizi Mining License, and
to compensate Magnus for the delays in the transfer of the
equity.  Under the Agreement on Compensation for the Failed Transfer
of Mining Rights for the Xintaizi Gold Mine in Kangding, Magnus, through Long
Teng Mining, will receive 1,500,000 RMB within 20 days of execution of the
Compensation Agreement.  From the date of execution of the
Compensation Agreement, Team 209 has assumed all ownership and liability for
Kangding Kangma and the Company has no further involvement in Kangding Kangma.
The compensation was recovered by way of offset against amounts owing by Yunnan
Long Teng Mining Ltd. to Team 209.
 
 African
Mineral Fields Inc.
 
 On May 8,
2006, African Mineral Fields Inc. (“AMF”) acquired an option to acquire a group
of three exploration licenses in Uganda (the “Mwerusandu Licenses”) and a group
of six exploration licenses in Uganda (the “Mitoma Licenses”) from a
previously unrelated third party (the “Grantor”).
 
 In order
to exercise the option on the Mwerusandu licenses, AMF was required to pay
$30,000 cash immediately and another $15,000 within three months, issue 500,000
shares to the Grantor and incur $2,000,000 on exploration of the licensed
properties over three years.
 
 During
the year ended July 31, 2006 AMF paid the first $30,000 cash and issued the
500,000 shares to the Grantor. During the year ended July 31, 2007 AMF paid
an additional $5,000 cash.
 
 In order
to exercise the option on the Mitoma licenses, AMF was required to pay $20,000
cash immediately and another $100,000 within 30 days, another $60,000 within
three months and another $55,000 within six months, issue 500,000 shares to the
Grantor and incur $2,000,000 on exploration of the licensed properties over
three years. During the year ended July 31, 2006 AMF paid the first $120,000
cash and issued the 500,000 shares to the Grantor. During the year ended July
31, 2007 AMF paid an additional $50,000 cash.
 
 On
September 1, 2006 the Company entered into an agreement to acquire one
exploration license in Uganda (the “Lugazi license”) from the Grantor for
consideration consisting of $25,000 cash, 250,000 shares with an agreed issue
 
 51
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
  price of
$0.05 per share or $12,500 in aggregate and additional contingent
consideration of 25,000 shares of the Company for each 25,000 economically
mineable ounces of gold proven in the future to be a measured and indicated
resource on the property covered by the Lugazi  license, up to a
maximum of 300,000 shares.
  On
September 1, 2006 the Company entered into an agreement to acquire two
exploration licenses in Uganda (the “Mubende licenses”) from the Grantor for
consideration consisting of $25,000 cash, 250,000 shares with an agreed issue
price of $0.05 per share or $12,500 in aggregate and additional contingent
consideration of 25,000 shares of the Company for each 25,000 economically
mineable ounces of gold proven in the future to be a measured and indicated
resource on the property covered by the Mubende licenses, up to a maximum of
300,000 shares.
 
 On
September 17, 2007 the Company completed the incorporation of a 100%-owned
subsidiary under the laws of Uganda named African Mineral Fields Limited (“AMF
Ltd.”) and approved the transfer of exploration licenses and options on
exploration licenses to the new subsidiary.
 
 On
November 8, 2007, AMF entered into a license transfer agreement (the “License
Transfer Agreement”) with the Grantor under which the Grantor agreed to transfer
100% of the right, title and interest to the licenses comprising the Mwerusandu
Property and the Mitoma Property to AMF Ltd. for consideration already paid
under the option agreements.  The Ugandan Department of Geological
Survey and Mines ratified the transfer of the licenses on December 20, 2007, and
accordingly AMF Ltd. now holds a 100% interest in the Mwerusandu Property and
Mitoma properties. The Grantor is entitled to receive from AMF Ltd. a net
smelter returns royalty on the Mwerusandu and Mitoma properties on a sliding
scale between 0.5% (if the gold price is below $250/oz.) and 2.1% (if the gold
price is above $1,200/oz.), depending on the price of gold when the NSR is being
paid.
 
 In
addition to the Mwerusandu licenses transferred to AMF Ltd. under the License
Transfer Agreement, AMF Ltd. received an additional exploration license covering
147.63 sq. km.  During the year three licenses were renewed for a
period of two years, each with a 50% reduction in area, so that the Mwerusandu
Property is now comprised of four exploration licenses covering 175.43 sq.
km.
 
 In the
year ended July 31, 2008, AMF has received two additional exploration license on
the Mitoma property covering 159.49 sq. km.  During the year, four
licenses were renewed for a period of two years with a 50% reduction in area and
one license was relinquished.  The Mitoma Property is now comprised of
seven exploration licenses covering 359.49 sq. km.
 
 In the
year ended July 31, 2008, AMF has received an additional exploration license on
the Mubende property covering 71.20 sq. km., so that the Mubende Property is now
comprised of three exploration licenses covering 851.20 sq. km.
 
 On August
30, 2007, AMF entered into an agreement (the “Mashonga Agreement”) with a
consortium of Ugandan businessmen respecting mineral exploration licenses
covering 460.84 square kilometers of land in Uganda (the “Mashonga
Property”).  Under the Mashonga Agreement, AMF has been granted an
option on a 60% interest in the Mashonga Property. To exrcise the option, AMF
must make aggregate cash payments of $US 650,000 to its joint
 
 52
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 venture
partners, make $US 250,000 in property exploration expenditures by August 30,
2008, make another $US 3.75 million in property exploration expenditures and
complete a pre-feasibility study on the property by August 30,
2012.  AMF’s joint venture partners have the right to accept common
shares of Magnus in lieu of the cash payments.  Once AMF has acquired
its 60% interest in the Mashonga Property, the parties will form a new joint
venture company to further explore and develop the Property.
 
 As at
July 31, 2008, AMF has paid the first payment of $40,000 under the agreement and
incurred $310,136 on exploration of the Mashonga Property. The remaining cash
payments required to exercise the option under the Mashonga Agreement are due as
follows:
  a) August
30, 2008 - $ 60,000,
 b) August
30, 2009 - $ 75,000,
 c) August
30, 2010 - $ 100,000,
 d) August
30, 2011 - $ 125,000,
 e) August
30, 2012 - $ 250,000.
 
 On May 1,
2008, the Company entered into an earn-in agreement (the “Ibanda Agreement”)
with Canmin-Gold Limited, a subsidiary of IBI Corporation,respecting a
mineral exploration license covering 332.70 square kilometers of land contiguous
in southwest Uganda, northeast of the Mashonga Property (the “Ibanda
Property”).  Under the Ibanda Agreement, the Company has the right to
earn a 5% interest in the Ibanda Property for each $150,000 of expenditures that
it makes and may earn up to an 80% interest by making an aggregate of $2 million
in expenditures on the property within five years.  Upon the Company
earning an 80% interest in the Ibanda Property, the parties will form a joint
venture under which each party will be required to contribute its proportionate
share of further expenditures or have its interest be diluted. To July 31, 2008
the Company has made exploration expenditures of $13,715 on the Ibanda
property
 
 On May
12, 2008, a mineral exploration license covering 363 square kilometers of land
in western Uganada (the “Kigumba Property”) was granted to the Company. The
Company plans to explore for uranium and gold across a 20km long uranium anomaly
which was picked up by processing the data from the airborne geophysical survey
which is being flown over 80% of Uganda. Since acquiring this licence, three
additional licences totalling 1402.55 square kilometers were also acquired under
the name of the Company’s indirect wholly-owned subsidiary, ABM.
 
 On May
12, 2008, a mineral exploration license covering 291 square kilometers of land
in southwestern Uganda (the “Rubindi Property”) was granted to the Company.
Since acquiring this licence, an additional licence covering 429 square
kilometers was also acquired under the name of ABM.
 
 On June
30, 2008, a mineral exploration license covering 485 square kilometers of land
in central Uganada (the “Kidera Property”) was granted to the Company. The
Company expects to explore for minerals such as tantalum and rare earth metals
associated with a carbonatite complex, as well as diamonds associated with
potential kimberlite pipes.
 
  53
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 On June
30, 2008, a mineral exploration license covering 23.28 square kilometers of land
in central Uganada (the “Nyanga Property”) was granted to the Company. The
tantalum potential at this project will be evaluated.
  A summary
of the licenses in Uganda covered by the above option agreements and license
acquisitions is as follows (annual rentals given in Ugandan Shillings amount,
with total shown also in approximate $US amount):
  EL
                Concession
                Project
                Approx.
                
                Area
      in
                AnnualNumber
                Name
                Name
                Location
                Expiry
      date
                Square
      km
                RentalEL
      0005
                Kabira
                Mitoma
                Bushenyi
                March
      22, 2010
                40
                UGX
      400,000EL
      0018
                Nyamulindira
                Mwerusandu
                Rubaare
                March
      22, 2010
                8.7
                UGX
      87,000EL
      0019
                Mwerusandu
      N
                Mwerusandu
                Rubaare
                March
      22, 2010
                9.75
                UGX
      97,500EL
      0022
                Mwerusandu
      W
                Mwerusandu
                Rubaare
                April
      21, 2010
                9.35
                UGX
      93,500EL
      0023
                Kahungye
                Mitoma
                Bushenyi
                April
      21, 2010
                9.5
                UGX
      95,000EL
      0024
                Rutaka
                Mitoma
                Bushenyi
                April
      21, 2010
                7.5
                UGX
      75,000EL
      0025
                Rugoma
                Mitoma
                Bushenyi
                April
      21, 2010
                4.9
                UGX
      49,000EL
      0117
                Kabira
      East
                Mitoma
                Kitaka
                August
      9, 2009
                138.1
                UGX
      1,440,000EL
      0020
                Lugazi
                Lugazi
                Jinja
                April
      21, 2010
                128.52
                UGX
      1,285,200EL
      0116
                Kiana
      Mine
                Mwerusandu
                Rubaare
                August
      9, 2009
                147.6
                UGX
      1,470,000EL
      0122
                Singo
      North
                Mubende
                Mubende
                August
      9, 2009
                500
                UGX
      5,000,000EL
      0123
                Singo
      South
                Mubende
                Mityana
                August
      9, 2009
                280
                UGX
      3,050,000EL
      0167
                Lugazi
      West
                Lugazi
                Mukono
                May
      16, 2009
                321.3
                UGX
      3,213,000EL
      0187
                Kabira
      North
                Mitoma
                Kitigata
                May
      8, 2010
                82.2
                UGX
      822,000EL
      0188
                Kabira
      West
                Mitoma
                Kabira
                May
      8, 2010
                77.3
                UGX
      773,000EL
      0121
                Mubende
                Mubende
                Mubende
                June
      22, 2009
                71.2
                UGX
      712,000EL
      0196
                Lugazi
      North
                Lugazi
                Mabira
                August
      5, 2010
                371.76
                UGX
      3,717,600EL
      0199
                Lugazi
      South
                Lugazi
                Grant
      Bay
                July
      24, 2010
                328.15
                UGX
      3,281,500EL
      0200
                Lugazi
      East
                Lugazi
                Jinja
                August
      5, 2010
                337.96
                UGX
      3,379,600EL
      0308
                Rubindi
                Rubindi
                Ibanda
                May
      11, 2011
                291
                UGX
      2,910,000EL
      0309
                Kidera
                Kidera
                Lake
      Kyoga
                June
      29, 2011
                485
                UGX
      4,850,000EL
      0310
                Kigumba
                Kigumba
                Masindi
                May
      11, 2011
                363
                UGX
      3,630,000EL
      0328
                Nyanga
                Nyanga
                Ntungamo
                June
      29, 2011
                23.28
                UGX
      232,800EL0059
                Mashonga
      South
                Mashonga
                Lubare
                Nov
      22, 2011
                383
                UGX
      3,830,000EL0084
                Mashonga
      North
                Mashonga
                Lubare
                March
      14, 2009
                77.5
                UGX
      775,000LL0229
                Nyakazinga
                Mashonga
                Lubare
                August
      26, 2009
                0.12
                UGX
      1,200LL0230
                Kibona
                Mashonga
                Lubare
                August
      26, 2009
                0.12
                UGX
      1,200LL0231
                Kyamukubwa
                Mashonga
                Lubare
                August
      26, 2009
                0.13
                UGX
      1,300EL0198
                Ibanda
                Ibanda
                Ibanda
                October
      4, 2010
                332.7
                UGX
      3,327,0004,829.66
                UGX
      48,239,400$29,659
  The
remaining future payments and expenditures required for the Company to exercise
the Mashonga option under the Mashonga Agreement and earn in the full 80%
interest in the Ibanda property under the Ibanda Agreement are as
follows:
  54
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
  Date
              
              Cash
      payments
              
              
              Exploration
      expendituresMashonga
      AgreementAugust
      30, 2008
              
              $
              60,000
              
              
              $
              -August
      30, 2009
              
              
              75,000
              
              
              
              -August
      30, 2010
              
              
              100,000
              
              
              
              -August
      30, 2011
              
              
              125,000
              
              
              
              -August
      30, 2012
              
              
              250,000
              
              
              
              3,689,864Ibanda
      AgreementMay
      1, 2013
              
              
              -
              
              
              
              1,986,285Total
              
              $
              610,000
              
              
              $
              5,676,149
 
 
 6.
DEMAND LOAN PAYABLE
 
 The
demand loan payable consists of principal of $30,000 plus accrued interest from
the commencement of the loan on June 2, 2008. The loan bears interest at the
rate of 15% per annum non-compounded. The loan is secured by a personal
guarantee of the Company’s Chief Executive Officer.
 
 
 7.
LOANS FROM SHAREHOLDERS
 
 The loans
from shareholders do not bear interest. One loan of $50,000 is repayable on
demand, the remainder have no stated terms of repayment. The Company has
recognized imputed interest in the amount of $ 78,072 (2007 - $29,322) on the
loans which is included in general and administrative expenses and in additional
paid-in capital, since the imputed interest is not payable.
 
 
 8.
LEASES
 
 The
Company has the following commitments for leased office premises:
  Vancouver,
Canada - $9,572 per month until July 31, 2011. See also Note 15.
 Entebbe
Uganda - $1,550 per month until September 30, 2008 and on month to month basis
thereafter. See also Note 15.
 Kunming,
China - $727 per month until March 31, 2009.
 
 The
Company is committed to payments of $C 9,063 (approximately $US 8,851 as at July
31, 2008) per year for the next four years for the lease of a
photocopier.
   55
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 9.
COMMON STOCK
  On August
28, 2007, the Company issued 362,500 units (each a “Unit”) due to the closing of
the Company’s private placement at $0.40 per Unit for total proceeds of
$145,000. Each Unit consists of one share of common stock of the Company and
one-half of one share purchase warrant, witheach whole warrant entitling
the holder to purchase one additional share of common stock of the Company at
US$0.80 per warrant share until August 28, 2009. On September 13, 2007 the
Company issued 25,000 shares as a finders’ fee in connection with the issuance
of 250,000 of these units.
  In
connection with 350,000 units of this issuance of units, the Company granted
registration rights for the shares issued with the units and the shares to be
issued upon exercise of the warrants.  The Company agreed: (1) to file
a registration statement with the SEC by no later than June 15,
2007  the “Scheduled Filing Deadline” to register the shares; and (2)
if it failed to file the registration statement by the Scheduled Filing
Deadline, to pay liquidated damages in cash in an amount equal to 1% of the
proceeds of the offering for each month following the Scheduled Filing Deadline
until the actual filing date. In addition, if the registration statement isnot declared effective by the SEC on or before 120 days after the date
filed or if after the Registration Statement has been declared effective by the
SEC, sales cannot be made pursuant to the Registration Statement, the Company
will be obligated to pay liquidated damages of 1% per month for the period the
failure continues. As at April 30, 2008, the Company has not filed the
registration statement and was obligated to pay liquidated damages. The
amount of the estimated total liability for liquidated damages, $14,000, has
been accrued in Liabilities for Registration Payments and is recognized in the
results of operations for the nine months ended April 30,
2008.
 
 On
November 6, 2007, the Company issued 40,000 units (each a “Unit”) due to the
closing of the Company’s private placement at $0.50 per Unit for total proceeds
of $20,000. Each Unit consists of one share of common stock of the Company and
one-half of one share purchase warrant, with each whole warrant entitling the
holder to purchase one additional share of common stock of the Company at
US$1.00 per warrant share until November 6, 2009.
 
 On
December 18, 2007, the Company issued 62,500 units (each a “Unit”) due to the
closing of the Company’s private placement at $0.40 per Unit for total proceeds
of $25,000. Each Unit consists of one share of common stock of the Company and
one-half of one share purchase warrant, with each whole warrant entitling the
holder to purchase one additional share of common stock of the Company at
US$0.80 per warrant share until December 18, 2009.
 
 On
February 1, 2008, the Company issued an aggregate of 3,341,184 units (each a
“Unit”) for an aggregate of  $US 840,000 or Cdn$836,416 (at a price of
Cdn$0.25 per Unit). Each Unit consists of one share of common stock of the
Company and one-half of one share purchase warrant, with each whole warrant
entitling the holder to purchase one additional share of common stock of the
Company at Cdn$0.50 per warrant share until two years from the date of issuance
of the warrants.  The Company paid $35,000 in cash and issued 115,350
shares of common stock to a consultant as a finder’s fee in connection with the
issuance of Units.
 
 56
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 On
February 11, 2008, the Company reached an agreement to settle certain
registration rights granted in connection with an issuance of units on May 2,
2007. Under the settlement, on February 18, 2008 the Company issued 272,000
shares in settlement of registration rights attached to 3,400,000 units issued
in full and final settlement of the liquidated damages owed by the Company to
the investor under such registration rights.
  On April
15, 2008, the Company issued an aggregate of 230,805 common shares as finders
fees in connection with prior financings conducted by the Company.
 
 On April
18, 2008, the Company issued an aggregate of 365,625 common shares to seven
persons in full and final settlement of an aggregate amount of $145,547 owing by
the Company to such persons.
 
 On July
11, 2008, the Company received $100,000 as a subscription for 400,000 units
(each a “Unit”) at a price of Cdn$0.25 (approximately $US 0.25) per Unit. Each
Unit consists of one share of common stock of the Company and one-half of one
share purchase warrant, with each whole warrant entitling the holder to purchase
one additional share of common stock of the Company at Cdn$0.50 per warrant
share until two years from the date of issuance of the warrants. The 400,000
units have not yet been issued as at July 31, 2008. The Company accrued $9,717
($Cdn 10,000) as a finder’s fee  at July 31, 2008 in connection with
the issuance of Units.
 
 Concurrent
with the effective date of the final amending agreement for the transfer of the
Company’s interest in Western Mining in return for the remaining 10% interest in
Long Teng (see Note 5), the Company cancelled 285,714 common shares previously
issued to the joint venture partner and cancelled the allotment of 150,000
common shares previously allotted for issue to the joint venture partner in
consideration for licenses transferred to Western Mining.
 
 Effective
January 16, 2008, the Company amended the terms of an aggregate of 312,250
outstanding common share purchase warrants by: extending the term of the
warrants from their original expiry date of January 16, 2008 to July 16, 2009;
and reducing the exercise price of the warrants from $2.00 to
$0.75.  Furthermore, effective March 13, 2008, the
Company:
  ·
              amended
      the terms of 543,500 warrants by: extending the term of the warrants from
      their original expiry date of March 16, 2008 to September 16, 2009; and
      reducing the exercise price of the warrants from $2.00 to
      $0.75;
 ·
              amended
      the terms of 334,124 warrants by: extending the term of the warrants from
      their original expiry date of April 10, 2008 to October 10, 2009; and
      reducing the exercise price of the warrants from $2.40 to $0.75;
      and
 ·
              amended
      the terms of 175,000 warrants by: extending the term of the warrants from
      their original expiry date of November 23, 2008 to May 23, 2010; and
      reducing the exercise price of the warrants from $2.00 to
      $0.75.
 
 Warrants
outstanding and exercisable as of July 31, 2007 are as follows:
  57
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 Exercise
      Price
              
              
              Number
      of Warrants
              
              Expiry
      Date$
              0.75
              
              
              
              312,250
              
              07/16/2009$
              0.75
              
              
              
              543,500
              
              09/16/2009$
              0.75
              
              
              
              334,124
              
              10/10/2009$
              0.75
              
              
              
              175,000
              
              05/23/2010$
              0.80
              
              
              
              2,375,000
              
              05/02/2009$
              0.80
              
              
              
              181,250
              
              08/28/2009$
              0.80
              
              
              
              12,500
              
              09/13/2009$
              1.00
              
              
              
              20,000
              
              11/06/2009$
              0.80
              
              
              
              31,250
              
              12/18/2009$
              0.50
              
              
              
              1,728,267
              
              02/01/20105,713,141
 
 
 10.
PREFERRED STOCK
 
 On
October 15, 2007 the Chief Executive Officer of the Company surrendered for
cancellation the 100,000 issued and outstanding Series “A” preferred shares and
those shares were cancelled by the Company.
   11.
RELATED PARTY TRANSACTIONS
 
 Related
party transactions not disclosed elsewhere in the consolidated financial
statements are as follows:
 
 In the
year ended July 31, 2007, the Company accrued $120,000 (2006 - $120,000) to the
chief executive officer of the Company for consulting services rendered, $26,826
of which remained payable as at July 31, 2008 (2007 - $ 20,000).  The
Company incurred $120,000  to a director of the Company (2007 -
$35,079 paid to a former director) for geological consulting services rendered,
$95,000 (2007 - $35,079) of which remains payable as at July 31,
2008.
 
 The
Company has an accrued liability of $23,581 to a relative of a director in
respect of consulting fees rendered in 2006.
 
 The
Company issued 87,605 shares to relatives of directors as finders’ fees, which
are included in the finders’ fees as more fully described in note
9.
   58
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 12.
STOCK-BASED COMPENSATION
 
 The
Company’s 2004 Stock Option Plan (the “Plan”) allows the Company to award stock
options for up to 6,000,000 shares to its directors, officers, employees, and
consultants.  The plan is administered by the Company’s Board of
Directors, or its assigned committee, who has discretion as to the awards and
terms of the options to be issued. Upon exercise of options, shares are issued
from treasury.
 
 During
the year ended July 31, 2004, 4,000,000 (post-split) stock options were granted
under the Plan with the exercise price of $0.50 per share, being the market
price at the time of the grant.  Of these options, 1,660,000 were
issued to directors and employees and 2,340,000 were issued to
consultants.
 
 166,667
of 4,000,000 options vested on February 1, 2004 (the “Initial Vesting Date”)
with the reminder to vest in equal monthly proportions over a period of
twenty-three (23) months from the Initial Vesting Date.  The options
expire on January 26, 2009.
 
 During
the year ended July 31, 2005, 390,000 stock options were granted under the Plan
with the exercise price of $1.60 per share, being the market price at the time
of the grant.  Of these options, 130,000 were issued to directors and
employees and 260,000 were issued to consultants. The options vest in equal
monthly proportions over a period of thirty-six (36) months from the Initial
Vesting Date.  The options expire on February 18,
2010.  60,000 stock options granted to a consultant were forfeited
during the year ended July 31, 2005 and 326,000 stock options granted to
consultants were forfeited during the year ended July 31, 2006.
 
 During
the three months ended January 31, 2006, 1,398,000 stock options were granted
under the Plan with the exercise price of $1.70 per share, being the market
price at the time of the grant.  Of these options, 305,000 were issued
to directors and employees and 1,093,000 were issued to consultants. The options
vest in equal monthly proportions over a period of thirty-six (36) months from
the Initial Vesting Date.  653,000 of these options expire on November
1, 2011 and 745,000 expire on December 15, 2011. 75,000 options granted to a
consultant were forfeited during the year ended July 31, 2006.
 
 On
November 1, 2005, 250,000 stock options were granted under the Plan with the
exercise price of $1.75 and 250,000 stock options were granted under the Plan
with the exercise price of $3.50 pursuant to a services agreement. These options
vested immediately and expire on November 1, 2007.
 
 On
January 31, 2006, 60,000 stock options were granted under the Plan with the
exercise price of $2.15 per share, being the market price at the time of the
grant.  All of these options were issued to consultants. The options
vest in equal monthly proportions over a period of thirty-six (36) months from
the Initial Vesting Date of April 30, 2006. The options expire on January 31,
2012. 30,000 of these options were forfeited during the year ended July 31,
2006.
 
 On
February 1, 2006, 60,000 stock options were granted under the Plan to a
consultant, with the exercise price of $2.20 per share. The options vest in
equal monthly proportions over a period of thirty-six (36) months from the
Initial Vesting Date of February 1, 2006. The options expire on February 1,
2012.
 
 59
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 On April
12, 2006, 54,000 stock options were granted under the Plan to two employees,
with the exercise price of $2.59 per share. The options vest in equal monthly
proportions over a period of thirty-six (36) months from the Initial Vesting
Date of April 12, 2006. The options expire on April 12, 2012.
 
 On April
27, 2006, 210,000 stock options were granted under the Plan to three employees,
with the exercise price of $2.35 per share. The options vest in equal monthly
proportions over a period of thirty-six (36) months from the Initial Vesting
Date of April 27, 2006. The options expire on April 27, 2012.
 
 During
the year ended July 31, 2007, 244,444 unvested options expired upon the death of
a director of the Company and 499,056 options expired upon the termination of
employees and consultants.
 
 On
November 1, 2007 the Company granted 300,000 options to a director and 150,000
options to a senior employee, with exercise price of $0.50. Of the 300,000
options, 50,000 vested immediately and the remainder will vest over 30 months.
Of the 150,000 options, 8,334 vested immediately and the remainder will vest
evenly over 34 months.
 
 On
January 31, 2008 the Company granted 535,000 options with exercise price of
$0.50 to various employees and consultants. 1/36 of the options will vest on the
last day of each of the 36 months following the date of the grant. Any remaining
unexercised options will expire on January 31, 2013.
 
 On
January 31, 2008 the Company re-priced 854,000 options with previous exercise
prices ranging from $1.60 to $2.59 to the new exercise price of $0.50. At the
same time, the Company extended the expiry date on 2,730,000 options with
previous expiry dates ranging from January 2009 to November 2012. The new expiry
date is January 31, 2013. The fair values of the re-priced and extended options
have been re-estimated based on their new terms. The increase in estimated fair
values of fully vested options was recognized as stock-based compensation
expense for the three months ended January 31, 2008. The increase in estimated
fair values of not-fully-vested options is being recognized as stock-based
compensation expense over the remaining vesting period of the
options.
 
 On
May 28, 2008 the Company granted 50,000 options with exercise price of $0.50 to
a consultant. 1/36 of the options will vest on the last day of each of the 36
months following the date of the grant. Any remaining unexercised options will
expire on January 31, 2013.
 
 A summary
of the Company’s stock option activities is presented below:
 
 
 Employee/
              
              Non-employee
              
              Weighted
      Average Exercise Price
              
              Weighted
      Average Grant-date Fair Value
              
              Aggregate
      Intrinsic ValueDirector
              
              Options
              
              $
              
              $
              
              $Options Outstanding,
      July 31, 2003Options
      granted:
              
              1,624,000
              
              2,376,000
              
              0.50
              
              0.47
              
              1,880,000Options Outstanding,
      July 31, 2004
              
              1,624,000
              
              2,376,000
              
              0.50
              
              0.47
              
              1,880,000Options
      granted:
              
              130,000
              
              260,000
              
              1.60
              
              1.05
              
              409,500Options
      held by individuals who changed status from consultant to
      employee
              
              322,000
              
              (322,000)
              
              0.50
              
              0.47
              
              151,340Options
      forfeited
              
              -
              
              (60,000)
              
              1.60
              
              1.05
              
              63,000Options Outstanding,
      July 31, 2005
              
              2,076,000
              
              2,254,000
              
              0.59
              
              0.51
              
              2,226,500Options
      granted:
              
              569,000
              
              1,713,000
              
              2.01
              
              0.79
              
              1,805,120Options
      exercised:
              
              (1,050,000)
              
              (96,000)
              
              0.50
              
              0.47
              
              538,620Options
      held by individuals who changed status from  consultant to
      employee
              
              200,000
              
              (200,000)
              
              1.60
              
              1.05
              
              210,000Options
      forfeited
              
              -
              
              (431,000)
              
              0.76
              
              0.58
              
              249,370Options Outstanding,
      July 31, 2006
              
              1,795,000
              
              3,240,000
              
              1.24
              
              0.64
              
              3,243,630Options
      cancelled upon the death of a director
              
              (244,444)
              
              -
              
              1.66
              
              0.95
              
              (231,166)Options
      forfeited
              
              (235,833)
              
              (263,223)
              
              1.96
              
              0.96
              
              (455,574)Options Outstanding,
      July 31, 2007
              
              1,314,723
              
              2,976,777
              
              1.13
              
              0.60Options
      granted:
              
              600,000
              
              435,000
              
              0.50
              
              0.23Options
      forfeited
              
              (286,390)
              
              (1,725,110)
              
              1.34
              
              0.45Options Outstanding,
      July 31, 2008
              
              1,628,333
              
              1,686,667
              
              0.50
              
              0.16
 
 
 60
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 Compensation
cost related to options to vest in the future will be recognized as the related
options vest.
 
 Outstanding
options vest as follows:
  Range
      of
                
                
                
                Weighted
                
                
                
                ExpectedExercise
      Prices
                
                
                
                Average
      Exercise
                
                
                
                compensation
      cost forHigh
                
                Low
                
                Number
                
                Price
                
                Aggregate
                
                non-vested
      awardsVested
      at July 31,
                
                $
                
                $
                
                of
      Shares
                
                $
                
                Intrinsic
      Value
                
                $2008
      and earlier
                
                0.5
                
                0.5
                
                2,471,056
                
                0.5
                
                
                
                -2009
                
                0.5
                
                0.5
                
                418,111
                
                0.5
                
                
                
                89,8692010
                
                0.5
                
                0.5
                
                320,000
                
                0.5
                
                
                
                70,8832011
                
                0.5
                
                0.5
                
                105,833
                
                0.5
                
                
                
                15,5673,315,000
                
                
                
                
                
                176,319
  Non-vested
options are as follows:
 
 Number
      outstanding
              
              Total
      fair value
              
              Weighted
      average grant-date fair valueNon-vested
      options outstanding, July 31, 2007
              
              514,084
              
              411,546
              
              0.16Non-vested
      options outstanding, July 31, 2008
              
              843.944
              
              176,319
              
              0.21Options
      vested in 2007
              
              547,444
              
              329,573
              
              0.60
  If not
previously exercised or canceled, options outstanding at July 31, 2008 will
expire as follows:
  61
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 Range
      of Exercise Prices
                
                Number
                
                Weighted
      averageExpiry
      Date
                
                High
                
                Low
                
                of
      Shares
                
                exercise
      priceYear
      Ending July 31,2013
                
                0.5
                
                0.5
                
                3,315,000
                
                0.5
  The fair
values of the options granted November 1, 2007 were estimated at $0.35 per
share, the fair values of the options granted January 31, 2008 were estimated at
$0.14 per share, the fair values of the options re-priced and extended on
January 31, 2008 were estimated at $0.14 per share and the fair values of the
options granted May 28, 2008 were estimated at $0.13 per share. The fair values
of the options granted in the year ended July 31, 2006 were estimated at values
ranging from $0.18 per share to $1.08 per share. The fair values of the options
granted in the years 2005 and 2004 were estimated at $1.05 per share and $0.47
per share, respectively. The valuations were performed using the Black-Scholes
Option Pricing Model with the following weighted average
assumptions:
 
 2008
              
              2006
              
              2005
              
              2004Volatility:
              67
      to 72%
              
              53%
              
              80%
              
              256%Risk-free
      interest rate:
              2.43%
      to 3.23%
              
              4.04%
              
              3.13%
              
              2.54%Dividend
      yield:
              --
              
              --
              
              --
              
              --Expected
      lives                                (years):
              1
      to 5
              
              5
              
              5
              
              5
 
 Option-pricing
models require the use of highly subjective estimates and assumptions including
the expected stock price volatility.  Changes in the underlying
assumptions can materially affect the fair value estimates and therefore, in
management’s opinion, existing models do not necessarily provide reliable
measure of the fair value of the Company’s stock options.
 
 The
following table illustrates the effect on net earnings (loss) and earnings
(loss) per share for the 2008, 2007 and 2006 years as reported due to
implementation of SFAS 123R:
 
 2008
              
              
              2007
              
              
              2006Net
      loss before effect of SFAS 123R
              
              $
              (1,514,920
              )
              
              $
              (4,343,110
              )
              
              $
              (8,993,006
              )Deduct:
      Total stock-based employee
compensation  expenses
              
              
              (103,102
              )
              
              
              (159,318
              )
              
              
              (408,828
              )Net
      loss as reported 2008, 2007 and 2006
              
              $
              (1,618,022
              )
              
              $
              (4,502,428
              )
              
              $
              (9,401,834
              )Loss
      per share:Basic
      and diluted before effect of SFAS 123R
              
              $
              (0.03
              )
              
              $
              (0.10
              )
              
              $
              (0.26
              )Basic
      and diluted as reported 2008, 2007 and 2006
              
              $
              (0.03
              )
              
              $
              (0.11
              )
              
              $
              (0.27
              )
 
 62
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 
 13.
INCOME
TAXES
  The
Company is subject to United States income taxes, Canadian income taxes (to the
extent of its operations in Canada), Chinese income taxes (to the extent of its
operations in China) and Ugandan income taxes (to the extent of its operations
in Uganda).  The company had no income tax expense during the reported
periods due to net operating losses.
  A
reconciliation of income tax expense to the amount computed at the statutory
rates is as follows:
  2008
              
              
              2007
              
              
              2006Loss
      for the year
              
              $
              (1,618,022
              )
              
              $
              (4,502,428
              )
              
              $
              (9,401,834
              )Average
      statutory tax rate
              
              
              35
              %
              
              
              35
              %
              
              
              35
              %Expected
      income tax provision
              
              $
              (566,308
              )
              
              $
              (1,575,850
              )
              
              $
              (3,290,642
              )Impact
      of tax rate difference in foreign jurisdiction
              
              
              24,294
              
              
              
              51,264
              
              
              
              65,529Non-deductible
      stock-based compensation
              
              
              184,893
              
              
              
              144,041
              
              
              
              373,850Non-deductible
      imputed interest
              
              
              27,325
              
              
              
              10,263Non-deductible
      registration payment arrangements
              
              
              4,900
              
              
              
              154,000
              
              
              
              -Non-deductible
      asset write-downs
              
              
              29,121
              
              
              
              120,554
              
              
              
              -Licenses
      acquired through stock allotment
              
              
              -
              
              
              
              -
              
              
              
              84,150Tax
      basis of deferred expenses in excess of book cost
              
              
              (405,102
              )
              
              
              413,172
              
              
              
              997,078Unrecognized
      tax losses
              
              
              700,877
              
              
              
              682,556
              
              
              
              1,770,035Income
      tax expense
              
              $
              --
              
              
              $
              --
              
              
              $
              --
  Significant
components of deferred income tax assets are as follows:
  63
 Table of Contents
 MAGNUS
INTERNATIONAL RESOURCES INC.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 July
31, 2008
 (Expressed
in US Dollars)
 2008
              
              
              2007Net
      operating losses carried forward in United States
              
              $
              3,264,614
              
              
              $
              2,856,808Net
      operating losses carried forward in Uganda
              
              
              293,071
              
              
              
              113,503Excess
      of tax basis over book cost of deferred expenses in China
              
              
              1,407,630
              
              
              
              1,812,732Valuation
      allowance
              
              
              (4,965,315
              )
              
              
              (4,783,043
              )Net
      deferred income tax assets
              
              $
              -
              
              
              $
              -
  The
Company has net operating losses carried forward of $9,328,000 for United States
tax purposes and $2,224,000 for Ugandan tax purposes which will expire in 2028
if not utilized. No tax returns have been filed and all years are open for
examination.
  
 14.
SEGMENTED INFORMATION
 
 The
Company is operating in a single segment based upon the Company’s organizational
structure, the way in which its operations are managed and evaluated, the
availability of separate financial results and materiality
considerations.  The Company’s assets by geographical location are as
follows:
  July 31,
      2008
              
              
              July 31,
    2007Canada
              
              $
              87,290
              
              
              $
              441,619Africa
              
              
              41,263
              
              
              
              --China
              
              
              212,382
              
              
              
              213,360Total
              
              $
              340,935
              
              
              $
              654,979
   15.
SUBSEQUENT EVENTS
 
 On August
14, 2008, the Company issued 400,000 units (each a “Unit”) due to the closing of
the Company’s private placement at $Cdn 0.25 per Unit for total proceeds of
$100,000.
 
 In August
and September, 2008 the Company was granted four exploration licenses in Uganda
through its subsidiary ABM.
 
 On
October 31, 2008 the Company vacated its office in Vancouver in an attempt to
conserve cash until the proceeds of the disposition of the China subsidiaries is
collected. In the meantime, staff and consultants perform their duties from
their homes. The Company has negotiated a settlement of the lease obligation for
a one-time payment of $Cdn 10,000 (approximately $9,766). This amount has been
accrued in the
accounts.The
Company isalso in the process of finding a smaller office in Uganda and
has let go of most of the staff there. The Company may use former full-time
staff on a consulting basis when needed.
 
  64
 Table of Contents


Supplementary
Data





Year
      Ended July 31, 2005Fourth
      Quarter
            Third
      Quarter
            Second
      Quarter
            First
      QuarterNet
      sales
            -
            -
            -
            -Gross
      profit
            -
            -
            -
            -Net
      loss
            1,977,654
            723,567
            595,347
            474,925Net
      loss per share
            0.08
            0.03
            0.03
            0.02








Year
      Ended July 31, 2006Fourth
      Quarter
            Third
      Quarter
            Second
      Quarter
            First
      QuarterNet
      sales
            -
            -
            -
            -Gross
      profit
            -
            -
            -
            -Net
      loss
            3,171,367
            2,927,231
            2,666,007
            637,229Net
      loss per share
            0.09
            0.08
            0.08
            0.02






Year
      Ended July 31, 2007Fourth
      Quarter
            Third
      Quarter
            Second
      Quarter
            First
      QuarterNet
      sales
            -
            -
            -
            -Gross
      profit
            -
            -
            -
            -Net
      loss
            1,648,932
            794,509
            688,232
            1,370,755Net
      loss per share
            0.02
            0.02
            0.02
            0.03






Year
      Ended July 31, 2008Fourth
      Quarter
            Third
      Quarter
            Second
      Quarter
            First
      QuarterNet
      sales
            -
            -
            -
            -Gross
      profit
            -
            -
            -
            -Net
      loss (income)
            (561,148)
            765,391
            806,047
            607,731Net
      loss per share
            (0.01)
            0.01
            0.02
            0.01




Net
income for the fourth quarter of 2008 includes gains of $1,342,001 on
dispositions of subsidiaries in China. See Notes 1 and 5 to the finacial
statements included herein.




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




N/A




ITEM 9A. CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures




Our
management, with the participation of our President, evaluated the effectiveness
of our disclosure controls and procedures as of the end of the period covered by
this report. Based on that evaluation, our President concluded that our
disclosure controls and procedures as of the end of the period covered by this
report were effective such that the information required to be disclosed by us
in reports filed under the Securities Exchange Act of 1934 is (i) recorded,
processed, summarized and reported within the time


65
 Table of Contents




periods
specified in the SEC's rules and forms and (ii) accumulated and communicated to
our management, including our President, as appropriate to allow timely
decisions regarding disclosure. A controls system cannot provide absolute
assurance, however, that the objectives of the controls system are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been
detected.





Annual
Report of Management on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United
States.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives. Furthermore, smaller reporting companies face additional
limitations. Smaller reporting companies employ fewer individuals and find it
difficult to properly segregate duties. Often, one or two individuals control
every aspect of our operation and are in a position to override any system of
internal control. Additionally, smaller reporting companies tend to utilize
general accounting software packages that lack a rigorous set of software
controls.





Our
management, with the participation of the President, evaluated the effectiveness
of our internal control over financial reporting as of July 31, 2008. In making
this assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control
-- Integrated Framework. Based on this evaluation, our management, with the
participation of the President, concluded that, as of July 31, 2008, our
internal control over financial reporting was not effective due to material
weaknesses in the system of internal control.





Specifically,
management identified the following control deficiencies:





(1) We
have not properly segregated duties as one individual initiates, authorizes, and
completes all transactions. We have not implemented measures that would prevent
the individual from overriding the internal control system. We do not believe
that this control deficiency has resulted in deficient financial reporting
because the Chief Financial Officer is aware of his responsibilities under the
SEC's reporting requirements and personally certifies the financial reports;
and





(2) We
have installed accounting software that does not prevent erroneous or
unauthorized changes to previous reporting periods and does not provide an
adequate audit trail of entries made in the accounting software. We do not think
that this control deficiency has resulted in deficient financial reporting
because we have implemented a series of manual checks and balances to verify
that previous reporting periods have not been improperly modified and that no
unauthorized entries have been made in the current reporting
period.




Accordingly,
while we have identified certain material weaknesses in our system of internal
control over financial reporting, we believe that we have taken reasonable steps
to ascertain that the financial information contained in this Annual Report is
in accordance with generally accepted accounting principles. Management has
determined that current resources would be appropriately applied elsewhere and
when resources permit, they will alleviate material weaknesses through various
steps.




(a)
            Changes
      in Internal Control Over Financial
Reporting




There
have been no changes in our internal controls over financial reporting that
occurred during our fourth fiscal quarter of the period covered by this Annual
Report on Form 10-KSB that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial
reporting.


66
 Table of Contents




ITEM 9B.  OTHER INFORMATION





Effective
January 16, 2008, the Company amended the terms of an aggregate of 312,250
outstanding common share purchase warrants by: extending the term of the
warrants from their original expiry date of January 16, 2008 to July 16, 2009;
and reducing the exercise price of the warrants from $2.00 to
$0.75.  Furthermore, effective March 14, 2008, the
Company:




·
            amended
      the terms of 543,500 warrants by: extending the term of the warrants from
      their original expiry date of March 16, 2008 to September 16, 2009; and
      reducing the exercise price of the warrants from $2.00 to
      $0.75;


·
            amended
      the terms of 334,124 warrants by: extending the term of the warrants from
      their original expiry date of April 10, 2008 to October 10, 2009; and
      reducing the exercise price of the warrants from $2.40 to $0.75;
      and


·
            amended
      the terms of 175,000 warrants by: extending the term of the warrants from
      their original expiry date of November 23, 2008 to May 23, 2010; and
      reducing the exercise price of the warrants from $2.00 to
      $0.75.




PART III




ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT




Current
Directors and Executive Officers





As of the
date of this Annual Report, the Company’s directors and executive officers are
as follows:





Name
            Age
            Offices
      HeldGraham
      Taylor
            39
            President,
      CEO, CFO, Secretary, Treasurer and DirectorSteven
      (Sek Toh) Tan
            72
            DirectorGavin
      Conway
            46
            Director
      and VP Exploration




The
Directors hold their positions until the next annual general meeting of the
Company’s shareholders or until their successors are duly elected and
qualified.  The Company’s executive officers serve at the pleasure of
the Board of Directors.





The
backgrounds of our directors and executive officers are as follows:





GRAHAM TAYLOR is the principal
founder of Magnus. He has been the President and CEO of the Company since
November 24, 2003. Mr. Taylor is also the founder and President of Technique
Capital Corporation, which was founded in 1999 and is a venture capital, mergers
and acquisitions, and corporate advisory firm for North American, Chinese and
other international companies. Mr. Taylor has eleven years of experience in the
world of global finance, having started his finance career in the investment
industry in London, England with the international investment banks Nomura
International and Banque National de Paris. In 1996, he returned to Vancouver,
British Columbia, Canada to establish himself as a financier to small cap
companies publicly listed in Canada and in the United States. Since that time,
Mr. Taylor has been involved in private and public securities deal structuring
and financing for a variety of companies spanning several different
industries.


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 Table of Contents


STEVEN TAN has been a director
of the Company since February 8, 2005. Mr. Tan is a professional engineer who
received his mechanical engineering certification from Loughborough University
(Midlands, United Kingdom) in 1960 and a D.I.C. degree from the Imperial College
of Science and Technology in London in 1961. In 1964, Mr. Tan founded Setron, a
company that he would turn into the largest television and electronic equipment
manufacturer in South East Asia, and which listed on the Singapore Stock
Exchange. Mr. Tan eventually sold Setron to Haw Par International in 1980. Also
in 1980, the Republic of Singapore acknowledged Mr. Tan's contributions to his
country by presenting him with a lifetime contribution Public Service Medal
(P.B.M.). Mr. Tan has extensive experience serving on the Boards of both public
and private companies, but has not served on the Board of a public company in
the last five years.





GAVIN CONWAY has been a
director of the Company since June 21, 2007 and is also the VP
Exploration.  He has 20 years worldwide experience in precious and
base metals exploration and mining as a country manager, project manager, senior
exploration geologist, geotechnical engineering geologist and mine
geologist.  Mr. Conway held several of these positions with Gold
Fields Ltd. and more recently acted as a consultant to Placer Dome’s generative
division in Europe and Africa.  He has worked on a variety of gold,
platinum and base metal projects in Africa, Asia, South America and
Europe.  Mr. Conway holds a B.Sc. (Honours) in geology and
geochemistry from the University of Cape Town and an M.Sc. in geology from
University of the Witwatersrand, Johannesburg.




Involvement
in Certain Legal Proceedings




To our
knowledge, during the past five years, no present or former director or
executive officer of the Company: (1) filed a petition under the federal
bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or
similar officer appointed by a court for the business or present of such a
person, or any partnership in which he was a general partner at or within two
yeas before the time of such filing, or any corporation or business association
of which he was an executive officer within two years before the time of such
filing; (2) was convicted in a criminal proceeding or named subject of a pending
criminal proceeding (excluding traffic violations and other minor offenses); (3)
was the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining him from or otherwise limiting the following activities:
(i) acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, associated person of any of the foregoing, or as an investment
advisor, underwriter, broker or dealer in securities, or as an affiliated
person, director of any investment company, or engaging in or continuing any
conduct or practice in connection with such activity; (ii) engaging in any type
of business practice; (iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal commodity laws; (4) was
the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any federal or state authority barring, suspending or
otherwise limiting for more than 60 days the right of such person to engage in
any activity described above under this Item, or to be associated with persons
engaged in any such activity; (5) was found by a court of competent jurisdiction
in a civil action or by the Securities and Exchange Commission to have violated
any federal or state securities law and the judgment in subsequently reversed,
suspended or vacate; (6) was found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.




Compliance
with Section 16(a) of the Exchange Act




Section
16(a) of the Exchange Act, as amended, requires our executive officers,
directors and persons who beneficially own more than 10% of our shares of common
stock to file reports of their beneficial ownership and changes in ownership
(Forms 3, 4 and 5, and any amendment thereto) with the SEC.  Executive
officers, directors, and greater-than-ten percent holders are required to
furnish us with copies of all Section 16(a) forms they file.




68
 Table of Contents




Based
solely upon a review of the Forms 3, 4, and 5 furnished to us for the fiscal
year ended July 31, 2007, we have determined that our directors, officers, and
greater than 10% beneficial owners complied with all applicable Section 16
filing requirements.




Information
concerning the Company's audit committee, including designation of the “Audit
Committee Financial Expert” under applicable Securities and Exchange Commission
rules




At the
present time, the Company does not have an audit committee, nor does it have a
financial expert on the Board of Directors.  The Company intends to
search for and have a financial expert appointed to the Board of Directors in
the near future. In addition, the Company intends to appoint an audit committee
in the near future.




Code
of Ethics




At the
present time, the Company has not adopted a code of ethics.  The
Company intends to adopt a code of ethics in the near future.




ITEM 11.  EXECUTIVE COMPENSATION




The
following table sets forth information with respect to compensation paid by the
Company to the Chief Executive Officer and other named executive officers during
the three most recent fiscal years.  The Company did not have any
other highly compensated executive officers with annual salary and bonus in
excess of $100,000 per year.





Name
      and Principal Position
            Fiscal
      Year
            Salary
            Bonus
            Other
      Annual Compen-sation
            Restricted
      Stock Awards
            Securities
      Underlying Options /SARS
            LTIP
      Payouts
            All
      Other Compen- sationGraham
      Taylor(1)
              President,
      CEO, CFO, Secretary, Treasurer and Director
            2008
              
              2007
              
              2006
              
              2005
              
              2004
            $120,000
              
              $120,000
              
              $120,000
              
              $120,000
              
              $90,000
            None
              
              None
              
              None
              
              None
              
              None
            None
              
              None
              
              None
              
              None
              
              None
            None
              
              None
              
              None
              
              None
              
              None
            None
              
              None
              
              None
              
              None
              
              1,600,000(2)
            None
              
              None
              
              None
              
              None
              
              None
            None
              
              None
              
              None
              
              None
              
              NoneGavin
      Conway (3)
              Director
      and VP Exploration in Africa
            2008
              
              2007
            $120,000
              
              $120,000
            None
              
              None
            None
              
              None
            None
              
              None
            300,000
              
              None
            None
              
              None
            None
              
              None





(1)  Mr. Graham
Taylor was appointed the President, CEO, CFO, Secretary, Treasurer and a
Director of the Company on November 24, 2003. As of December 1, 2003, Mr. Taylor
is being paid a consulting fee of $120,000 per year to serve as the President,
CEO, CFO, Secretary, Treasurer and a Director of the Company.





(2)  On January
26, 2004, the Board of Directors granted 4,000,000 stock options to various
directors, officers, employees and consultants of the Company.  Mr.
Taylor was granted 1,600,000 stock options with the following
terms:  1/24 of the options vested on February 1, 2004, and a further
1/24 of the original grant vests on the first day of each subsequent
month.  The exercise price for these stock options is $0.50 per
share.  These stock options have an expiry date of January 26, 2009.
As of the date of this Annual Report, Mr. Taylor has exercised 800,000 options.
See note 12 to the financial statements for details on assumptions made in
valuing options.


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 Table of Contents


(3)  Mr. Gavin
Conway was appointed Director of the Company on June 21, 2007 is the Company’s
VP Exploration in Africa.  On November 1, 2007, he was issued 300,000
options, 141,663 of which have vested as of the date of this Annual Report and
the remainder of which will vest evenly over 19 months.





Officers
and directors of the Company are reimbursed for any out-of-pocket expenses
incurred by them on behalf of the Company.  None of the Company's
directors or officers is currently a party to employment agreements with the
Company. The Company presently has no pension or annuity
programs.  However, as of August of 2005, the Company has initiated an
employment group health and benefits plan, which gives some employees and
consultants limited health, dental, travel insurance and life insurance
benefits.





No long
term incentive plan awards were made to any executive officer during the fiscal
year ended July 31, 2008.





Option/SAR
Grants in Fiscal Year





The
Company granted 300,000 options to a director and 150,000 options to a senior
employee on November 1, 2007.  Of the 300,000 options, 141,633 have
vested to date and the remainder will vest evenly over 19 months. Of the 150,000
options, 54,167 have vested to date and the remainder will vest evenly over 23
months. On January 31st, 2008
the Company granted 535,000 options to various employees and consultants which
will vest evenly over 36 months. The Company also granted 50,000 options to a
consultant on May 28, 2008 which will vest evenly over 36 months and on July 1,
2008 issued 50,000 options to an employee of which 8,334 vested immediately and
the remainder will vest over 30 months.





See Note
12 to the financial statements included herein for discussion of particular
option grants, duration and vesting periods, valuation methods and underlying
assumptions used in making the valuation calculations, and for description of
re-pricing of options in the year ended July 31, 2008.





The
following table describes the stock options of the Company that are currently
outstanding:





Name
            Securities
              Acquired
              on
      Exercise
              (#)
            Aggregate
              Value
              Realized
              ($)
            Unexercised
              Options/SARs
              at
      FY-End
              (#)
            Value
      of
              Unexercised
      in the
              Money
      Options/SARs
              at
      FY-End ($)Graham
      Taylor
              President,
      CEO and Director
            800,000
            $400,000
            800,000
      (Exercisable)
            $0
      (Exercisable)
              $ 0
      (Unexercisable)Michael
      Tan
              Consultant
            None
            None
            687,000
      (Exercisable)
              25,000
      (Unexercisable)
            $0(Exercisable)
              $ 0
      (Unexercisable)Tracey
      Gabert
              Employee
            None
            None
            120,833  (Exercisable)
              104,167
      (Unexercisable)
            $ 0
      (Exercisable)
              $
      0(Unexercisable)Mike
      Shannon
              Consultant
            16,000
            $8,000
            34,000
      (Exercisable)
              0
      (Unexercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)Tom
      Stepp
              Consultant
            None
            None
            24,000
      (Exercisable)
            $0
      (Exercisable)
              $ 0
      (Unexercisable)Xiang
      Li
              Employee
            None
            None
            32,111
      (Exercisable)
              7889
      (Unexercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)






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 Table of Contents




Qin
      Minzhu
              Consultant
            None
            None
            21,223
      (Exercisable)
              8,777
      (Unexercisable)
            $0
      (Exercisable)
              $0(Unexercisable)Jay
      Bassan
              Consultant
            None
            None
            24,000
      (Exercisable)
            $ 0
      (Exercisable)
              $ 0
      (UnexercisableAida
      Leung
              Consultant
            None
            None
            12,000
      (Exercisable)
            $0
      (Exercisable)
              $ 0
      (Unexercisable)Nick
      Leung
              Consultant
            None
            None
            12,000
      (Exercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)Patrick
      Cotter
              Consultant
            None
            None
            12,000
      (Exercisable)
            $0
      (Exercisable)
              $ 0
      (UnexercisableSteven
      Tan
              Director
            None
            None
            75,000
      (Exercisable)
            $
      0(Exercisable)
              $ 0
      (Unexercisable)Doug
      Smith
              Consultant
            None
            None
            27,500
      (Exercisable)
              2,500
      (Unexercisable)
            $0(Exercisable)
              $ 0
      (Unexercisable)Michael
      Raven
              Consultant
            None
            None
            39,167
      (Exercisable)
              60,833
      (Unexercisable
            $0(Exercisable)
              $
      0(Unexercisable)Hsien
      Loong Wong
              Consultant
            None
            None
            55,000
      (Exercisable)
              5,000
      (Unexercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)Wei
      Ming Chua
              Consultant
            None
            None
            55,000
      (Exercisable)
              5,000
      (Unexercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)Ruben
      S. Verzosa
              Consultant
            None
            None
            88,889
      (Exercisable)
              11,111
      (Unexercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)Leon
      Ma
              Consultant
            None
            None
            60,000
      (Exercisable)
              40,000
      (Unexercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)Rita
      Chou
              Consultant
            None
            None
            50,000
      (Exercisable)
              10,000
      (Unexercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)Elaine
      Xiong
              Employee
            None
            None
            24,667
      (Exercisable)
              35,333
      (Unexercisable)
            $ 0
      (Exercisable)
              $ 0
      (Unexercisable)Gavin
      Conway
              Director
      and VP
              Exploration
      in Africa
            None
            None
            141,633
      (Exercisable)
              158,367
      (Unexercisable)
            $ 0
      (Excercisable)
              $ 0
      (Unexercisable)Chris
      Picken
              Employee
            None
            None
            54,167(Exercisable)
              95,833
      (Unexercisable)
            $ 0
      (Excercisable)
              $ 0
      (Unexercisable)Emmanuel
      Mwajombe
              Employee
            None
            None
            8,333
      (Exercisable)
              41,667
      (Unexercisable)
            $ 0
      (Excercisable)
              $ 0
      (Unexercisable)






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 Table of Contents




Minnie
      Chung
              Employee
            None
            None
            10,000
      (Exercisable)
              50,000
      (Unexercisable)
            $ 0
      (Excercisable)
              $ 0
      (Unexercisable)Leigh
      Clasby
              Employee
            None
            None
            10,000
      (Exercisable)
              50,000
      (Unexercisable)
            $ 0
      (Excercisable)
              $ 0
      (Unexercisable)Griffin
      Corporate Concepts
              Consultant
            None
            None
            12,500
      (Exercisable)
              62,500
      (Unexercisable)
            $ 0
      (Excercisable)
              $ 0
      (Unexercisable)Steve
      Massey
              Consultant
            None
            None
            4,167
      (Exercisable)
              45,833
      (Unexercisable)
            $ 0
      (Excercisable)
              $ 0
      (Unexercisable)




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




The
following table sets forth information as of the date of this Annual Report,
with respect to the Company’s directors, named executive officers, and each
person who is known by the Company to own beneficially, more than five percent
(5%) of the Company’s common stock, and with respect to shares owned
beneficially by all of the Company’s directors and executive officers as a
group.  Common Stock not outstanding but deemed beneficially owned by
virtue of the right of an individual to acquire shares within 60 days is treated
as outstanding only when determining the amount and percentage of Common Stock
owned by such individual.  Except as noted, each person or entity has
sole voting and sole investment power with respect to the shares
shown.





As of the
date of this Annual Report, there are 54,756,454 shares of common stock issued
and outstanding.





Name
      and Address of
              Beneficial
      Owner
            Position
            Amount
      and Nature of
              Beneficial
      Ownership *
            Percent
      of
              Common
      Stock (1)Graham
      Taylor
              #3501-198
      Aquarius Mews
              Vancouver,
      BC
              V6Z
      2Y4
            President,
      Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and
      Director
            1,600,000
      (2)
            2.92%Steven
      Tan
              32-3088
      Francis Road
              Richmond,
      BC
              V7C
      5V9
            Director
            75,000
      (3)
            (*)





Excel
      Capital Corp.
              Suite
      4 Temple Bldg.
              Main
      & Prince William St. Charlestown, Federation of St. Kitts &
      Nevis
            Shareholder
            8,066,666
      (4)
            14.73%Emerson
      Capital Corp.
              Suite
      4 Temple Bldg.
              Main
      & Prince William St. Charlestown, Federation of St. Kitts &
      Nevis
            Shareholder
            8,066,668
      (5)
            14.73%






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 Table of Contents




Gavin
      Conway
              30
      NabWood Crescent
              Shipley,
      West Yorkshire
              United
      Kingdom
              BD184HX
            Director
      and VP Exploration
            458,300
      (6)
            (*)





All
      officers and directors as
              a
      group (3 persons)
            
            18,266,632
      (7)
            33.36%





(*)     indicates
less than 1%


(1)     Beneficial
ownership of common stock has been determined for this purpose in accordance
with Rule 13d-3 under the Exchange Act, under which a person is deemed to be the
beneficial owner of securities if such person has or shares voting power or
investment power with respect to such securities, has the right to acquire
beneficial ownership within 60 days or acquires such securities with the purpose
or effect of changing or influencing the control of the Company.


(2)     This
figure includes 800,000 shares directly owned by Mr. Graham Taylor and 800,000
stock options which have already vested.


(3)     This
figure includes 75,000 stock options which have already vested as of the date of
this Annual Report.


(4)     Excel
Capital Corp. is a corporation organized under the laws of the Federation of St.
Kitts & Nevis, West Indies.  Graham Taylor, the President and CEO
of Magnus, has indirect control over Excel Capital Corp. through an indirect
power to appoint advisors of Excel Capital Private Foundation, which owns Excel
Capital Corp.  Excel Capital Corp. also holds 42,500 Series B
Preferred Shares of Magnus.


(5)     Emerson
Capital Corp. is a corporation organized under the laws of the Federation of St.
Kitts & Nevis, West Indies.  Graham Taylor, the President and CEO
of Magnus, has indirect control over Emerson Capital Corp. through an indirect
power to appoint advisors of Emerson Capital Private Foundation, which owns
Emerson Capital Corp.  Emerson Capital Corp. also holds 42,500 Series
B Preferred Shares of Magnus.


(6)    This
figure includes 141,633 stock options which are owned by Mr. Conway and which
have vested as of the date of this Annual Report and 16,667 stock options which
will vest within 60 days of the date of this Annual Report. Mr. Conway also
holds 10,000 Series B Preferred Shares of Magnus.


(7)   This
figure includes 800,000 shares which are directly owned by Graham Taylor,
800,000 stock options which are owned by Graham Taylor and which have vested as
of the date off this Annual Report, 75,000 stock options which are owned by
Steven Tan and which have vested or will vest within 60 days of the date of this
Annual Report, 300,000 common shares and 158,300 stock options which have vested
or will vest within 60 days of this Annual Report and which are owned by Gavin
Conway, 8,066,666 common shares held by Excel Capital Corp. and 8,066,668 common
shares held by Emerson Capital Corp.





Securities
Authorized for Issuance under Equity Compensation Plans





On
January 9, 2004, the Board of Directors of the Company unanimously approved and
adopted a stock option plan (the “Stock Option Plan”).  The purpose of
the Stock Option Plan is to advance the interests of the Company and its
shareholders by affording key personnel of the Company an opportunity for
investment in the Company and the incentive advantages inherent in stock
ownership in the Company. Pursuant to the provisions of the Stock Option Plan,
stock options (the “Stock Options”) will be granted only to key personnel of the
Company, generally defined as a person designated by the Board of Directors upon
whose judgment, initiative and efforts the Company may rely including any
director, officer, employee or consultant of the Company.





The Stock
Option Plan is to be administered by the Board of Directors of the Company,
which shall determine (i) the persons to be granted Stock Options under the
Stock Option Plan; (ii) the number of shares subject to each option; (iii) the
exercise price of each Stock Option; and (iv) whether the Stock Option shall be
exercisable at any time during the option period of ten (10) years or whether
the Stock Option shall be exercisable in installments or by vesting only. The
Stock Option Plan provides authorization to the Board of Directors to grant
Stock Options to purchase a total number of shares of


73
 Table of Contents


common
stock of the Company, not to exceed thirty percent (30%) of the total issued and
outstanding shares of common stock of the Company as at the date of adoption by
the Board of Directors of the Stock Option Plan. At the time the Stock Option is
granted under the Stock Option Plan, the Board of Directors shall fix and
determine the exercise price at which shares of common stock of the Company may
be acquired; provided, however, that any such exercise price shall not be less
than that permitted under the rules and policies of any stock exchange or
over-the-counter market which is applicable to the Company.





In the
event an optionee who is a director or officer of the Company ceases to serve in
that position, any Stock Option held by such optionee generally may be
exercisable within up to ninety (90) days after the effective date that his
position ceases, and after such ninety-day period any unexercised Stock Option
shall expire. In the event an optionee who is an employee or consultant of the
Company ceases to be employed by the Company, any Stock Option held by such
optionee generally may be exercisable within up to ninety (90) days (or up to
thirty (30) days where the optionee provided only investor relations services to
the Company) after the effective date that his employment ceases, and after such
ninety or thirty-day period any unexercised Stock Option shall
expire.





No Stock
Options granted under the Stock Option Plan will be transferable by the
optionee, and each Stock Option will be exercisable during the lifetime of the
optionee subject to the option period of ten (10) years or limitations described
above. Any Stock Option held by an optionee at the time of his death may be
exercised by his estate within one (1) year of his death or such longer period
as the Board of Directors may determine.





The
exercise price of a Stock Option granted pursuant to the Stock Option Plan shall
be paid in cash or certified funds upon exercise of the option.





Incentive
Stock Options





The Stock
Option Plan further provides that, subject to the provisions of the Stock Option
Plan, the Board of Directors may grant to any key personnel of the Company who
is an employee eligible to receive options one or more incentive stock options
to purchase the number of shares of common stock allotted by the Board of
Directors (the “Incentive Stock Options”). The option price per share of common
stock deliverable upon the exercise of an Incentive Stock Option shall be no
less than fair market value of a share of common stock on the date of grant of
the Incentive Stock Option. In accordance with the terms of the Stock Option
Plan, “fair market value” of the Incentive Stock Option as of any date shall not
be less than the closing price for the shares of common stock on the last
trading day preceding the date of grant. The option term of each Incentive Stock
Option shall be determined by the Board of Directors, which shall not commence
sooner than from the date of grant and shall terminate no later than ten (10)
years from the date of grant of the Incentive Stock Option, subject to possible
early termination as described above.





As of the
date of this Annual Report, the Company has 3,315,000 Stock Options and/or
Incentive Stock Options outstanding. By action of the majority shareholders
which occurred on May 4, 2004, the majority of the shareholders of the Company
approved the Stock Option Plan and the Board of Directors is authorized, without
further shareholder approval, to grant stock options from time to time to
acquire up to an aggregate of 6,000,000 shares of the Company’s restricted
common stock.





ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS




Graham
Taylor, the Company’s President and CEO, has indirect control over Excel Capital
Corp. and Emerson Capital Corp. through an indirect power to appoint advisors of
Excel Capital Private Foundation and Emerson Capital Private Foundation, which
own Excel Capital Corp. and Emerson Capital Corp., respectively.




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ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND
SERVICES




Audit
Fees





The
aggregate fees billed for the last two fiscal years for professional services
rendered by the principal accountant for the audit of the Company’s annual
financial statements and review of financial statements included in the
Company’s Form 10-QSBs or services that are normally provided by the accountant
in connection with statutory and regulatory engagements for those fiscal years
was:





2008 – $
54,250  – Schumacher & Associates Inc.


2007 –
$118,700 – Schumacher & Associates Inc.


2006 – $
85,600 – Schumacher & Associates Inc.


2005 – $
77,942 – Moore Stephens Ellis Foster Ltd., Ernst & Young


2004 – $
13,710 – Moore Stephens Ellis Foster Ltd.


2003 – $
16,203 – Miller & McCollom





Audit
- Related Fees





The
aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountants that are reasonably related to the
performance of the audit or review of the Company’s financial statements and are
not reported in the preceding paragraph:





2008 –
Nil – Schumacher & Associates Inc.


2007 –
Nil – Schumacher & Associates Inc.


2006 –
Nil – Schumacher & Associates Inc.


2005 –
Nil – Moore Stephens Ellis Foster Ltd., Ernst & Young


2004 –
Nil – Moore Stephens Ellis Foster Ltd.


2004 –
Nil – Miller & McCollom


2003 –
Nil – Miller & McCollom





Tax
Fees





The
aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning was:





2008 –
Nil – Schumacher & Associates Inc


2007 –
Nil – Schumacher & Associates Inc.


2006 –
Nil – Shumacher and Associates Inc.


2005 –
Nil – Moore Stephens Ellis Foster Ltd., Ernst & Young


2004 –
Nil – Moore Stephens Ellis Foster Ltd.


2004 –
Nil – Miller & McCollom


2003 –
Nil – Miller & McCollom





All
Other Fees





The
aggregate fees billed in each of the last two fiscal years for the products and
services provided by the principal accountant, other than the services reported
in paragraphs (1), (2), and (3) was:





2008 –
Nil – Schumacher & Associates Inc


2007 –
Nil – Schumacher & Associates Inc.


2006 –
Nil – Schumacher and Associates Inc.


2005 –
Nil – Moore Stephens Ellis Foster Ltd., Ernst & Young


2004 –
Nil – Moore Stephens Ellis Foster Ltd.


2004 –
Nil – Miller & McCollom


2003 –
Nil – Miller & McCollom






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PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES




The
following exhibits are filed as part of this Annual Report:




Exhibit
      #31.1
            Certificate pursuant to Rule
      13a-14(a)32.1
            Certificate pursuant to 18 U.S.C. §1350



































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SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on this 13th day of November,
2008




MAGNUS
      INTERNATIONAL RESOURCES INC.
              (Registrant)By:
      /s/ Graham
      TaylorGraham
      TaylorPresident
      and Chief Executive Officer




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




Signature
            
            Title
            
            Date/s/
      Graham
      Taylor
              Graham
      Taylor
            
            President,
      CEO, CFO, Secretary, Treasurer and Director
            
            November
      13, 2008/s/
      Steven
      Tan
              Steven
      Tan
            
            Director
            
            November
      13, 2008/s/
      Gavin
      Conway
              Gavin
      Conway
            
            Director
            
            November
      13, 2008













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