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, 2012




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)115 – 280 Nelson Street, Vancouver, BC Canada
V6B 2E2(Address of Principal Executive Offices)
(Zip Code)1-604-694-1432

(Registrant's Telephone Number, Including Area Code)












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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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o*


*The registrant has not yet been phased into the interactive data requirements.




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, 2012: $-0-




Aggregate market value of outstanding Common Stock held by non-affiliates:As of July 31, 2012, the aggregate market value of outstanding Common Stock of the registrant held by non-affiliates was approximately $82,582





Outstanding Common Stock: As of July 31, 2012, the Company had 54,470,740 shares of Common Stock outstanding.




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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
6ITEM 1B. UNRESOLVED STAFF COMMENTS
11ITEM 2. DESCRIPTION OF PROPERTIES
11ITEM 3. LEGAL PROCEEDINGS
14ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
14PART IIITEM 5. MARKET FOR COMPANY’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF

EQUITY SECURITIES
15ITEM 6. SELECTED FINANCIAL DATA
19ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
19ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
22ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
23ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
44ITEM 9A. CONTROLS AND PROCEDURES
44ITEM 9B. OTHER INFORMATION
46PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
46ITEM 11. EXECUTIVE COMPENSATION
48ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
50ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
51ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
51PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
52SIGNATURES
53















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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. The Company has been active in Uganda since 2007 where it has a 100% interest in two mineral properties as at July 31, 2012: Kidera and Nyanga. In August and September 2011, the Company ceased to have an interest in the Kigumba/Masindi  and Buhweju/Rubindi projects. The Company has been advised by the Uganda Ministry of Mines that EL0585 and EL0586 were issued in error and the Company is not entitled to these licenses. The Company is not pursuing rectification of this matter and considers itself not to have an interest in this project.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:






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Mailing Address
Corporate Office280 Nelson Street

Suite 115

Vancouver, BC

Canada

V6B 2E2
522 – 625 Howe Street, Vancouver, BC Canada

V6C 2T6



Tel: (604) 694-1432





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 wholly-owned subsidiary, African Mineral Fields Limited, has a 100% interest in two mineral projects in Uganda (comprising 3 mineral exploration licenses): Kidera and Nyanga.




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 $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.




The Mubende exploration licenses EL0116, EL0122 and EL0123 covering 780 sq. km expired in August 2009.  The Company reapplied for EL0122 and EL0123 in the Mubende area. The Company was granted new licenses over the same areas as EL0122 and EL0123, with new numbers EL0585 and EL0586 respectively. The Company has been advised by the Uganda Ministry of Mines that EL0585 and EL0586 were issued in error and the Company is not entitled to these licences. The Company is not pursuing rectification of this matter and no longer has an interest in this project.




Kigumba /Masindi Property




On May 12, 2008, a mineral exploration license covering 363 square kilometers of land in western Uganda (the “Kigumba/Masindi 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 was flown over 80% of Uganda. Since acquiring this licence, three additional licences totalling 1402.55 square kilometers were also acquired.




Work completed at the Kigumba/Masindi Property includes 84 soil samples collected along three sample lines totaling 9,400 metres and hand-held scintillometer readings taken along five lines totaling 11,545 metres. These surveys were conducted across the main uranium radiometric anomaly.






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The results of this ground survey indicated that there is a distinct enriched zone, with an element association of U, Th, K, Ce and La (the last two elements being Rare Earth Elements), which is closely associated with the airborne anomaly. The partial leach semi-quantitative analytical method shows that Uranium reaches a maximum value of 18 ppm above a background of some 1.6 ppm and Thorium has a maximum value of 103 ppm. The anomalous U and Th samples were re-analyzed by means of pressed pellet XRF for more quantitative results. The soil values show Uranium values reaching 35 ppm and Thorium values reaching 141 ppm.




One of the Company’s licences in this project expired in May, 2011 and the remainder expired in August and September 2011. The Company no longer has an interest in the Kigumba/Masindi project.




Buhweju/Rubindi Project




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




Work completed at the Buhweju/Rubindi property includes 113 stream sediment samples and 3 rock grab samples from rivers and streams which drain off the Buhweju plateau to the west. The results show no obvious areas of anomalous gold for follow up exploration. The preliminary assay reports indicated a value of >10 ppm in a sample on Rubindi EL, but this high value was not replicated on check and re-assay of this sample. Another sample on Kanoni EL returned 2.36 ppm gold in the first assay but again this was not replicated in the check assay, which returned <0.001ppm. There could be an indication of nugget coarse gold. Uranium (U) values are in general higher on the Kanoni EL, situated over basement rocks. These values are up to 74ppm.




One of the Company’s licences in this project expired in May, 2011 and the remaining license expired in September 2011. The Company no longer has an interest in the Buhweju/Rubindi property.




Kidera Project




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.   This license was renewed effective June 29, 2011 for two years but with reduced area of 240 square kilometers. The Company is evaluating this project for tantalum, rare earth metals and diamonds, based on interpretation of airborne radiometric and magnetic anomalies.




In 2010, a ground survey across a large radiometric anomaly and single point magnetic anomalies was completed. A total of 156 soil samples were collected along seven lines totaling 31,200 metres, 55 heavy mineral concentrate samples along four lines totaling 5,000 metres and 68 rock samples collected over outcropping granite.




This first phase of surface geochemical exploration has shown that there is a low potential for rare metals – REE, Tantalum and Niobium. The radiometric anomaly prominently displayed in the airborne coverage is underlain by silica rich per-aluminous granitic rocks. These rocks are not ideally suited for rare metal mineralisation, and the results indicate background levels with no clear evidence for anomalous concentrations. Results from heavy mineral concentrates show that six out of sixteen samples reported possible kimberlite indicator minerals.




Nyanga Project




On June 30, 2008, a mineral exploration license covering 23.28 square kilometers of land in central Uganda (the “Nyanga Property”) was granted to the Company. This license was renewed effective June 29, 2011 for two years but with reduced area of 11.52 square kilometers. On June 16, 2010, a further mineral exploration license covering 79.60 square kilometers was granted to the west and north of the original Nyanga license.The Company intends to evaluate the tantalum potential at this project.






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An exploration report on the Nyanga quarry was obtained by the Company which included historical information and work conducted in 2000. Results from this period indicate selected high grades of tantalum and niobium in channel trench samples from historical artisanal mine workings.




Property Agreements – China




Yunnan Long Teng Mining Ltd. – Huidong Property




Through a joint venture agreement, the Company previously had interest, or contingent interest, in the Huidong Property, comprising 83.29 square kilometers in Sichuan Province, China. 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). The Company subsequently entered into a number of amending agreements (including penalties for late payment) relating to the sale of Long Teng. The penalties for late payment added a further RMB 1,260,000 in payments bringing the total sale price of Long Teng to RMB 22,260,000 ($3,256,730).  As at July 31, 2012, Magnus had received $3,137,829 in proceeds from the sale of Long Teng, not including proceeds collected and not remitted by an intermediary the Company engaged to effect exchange of the currency to US Dollars and transmission to the Company’s office in Canada, and was still owed $118,901 by the intermediary.




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).




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








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Principal Products





At this time we do not have any product for sale as we are in the beginning stages of our exploration and development of our mineral properties to which we have indirectly acquired the exploration licenses.




Employees




As at July 31, 2012, the Company had no employees (over and above its directors, officers and consultants) employed in Vancouver, British Columbia.




The Company’s operating subsidiary in Uganda, African Mineral Fields Limited, employed three persons,  one accountant and two housekeepers, until December 31, 2011. Since January 1, 2012 the former accountant employee consults to the Company on an as-needed basis.




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




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.






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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.




Transfer Agent




The Company’s stock transfer agent is Pacific Stock Transfer Company of 4045 South Spencer Street, Suite 403, Las Vegas, Nevada 89119.




Available Information




The Company’s website is www.magnusresources.com, where information about the Company may be reviewed and obtained.  In addition, the Company’s filings with the Securities and Exchange Commission (“SEC”) may be accessed at the internet address of the SEC, which is http://www.sec.gov.  Also, the public may read and copy any materials that the Company files with at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580 Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.




Subsequent Events




None.




ITEM 1A.  RiskFactors




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, 2012, the Company had a loss from continuing operations of $300,911. At July 31, 2012, the Company had a working capital deficiency of $632,292. Magnus needs to raise additional capital by way of an offering of equity securities, an offering of debt securities, or by obtaining financing through a bank or other entity.




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.






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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 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 Pink Sheets quotation 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.






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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.




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.






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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 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.






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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, Canada 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.





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 dependent 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.





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 Arcview Entertainment Inc. (a motion picture distribution company).  This list may also expand in the future.





Mr. Taylor currently devotes 90% of his time to Magnus 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








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 Table of Contents








have (through potential future joint venture agreements or acquisitions) an interest. 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




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 two mineral projects in Uganda (comprising 3 mineral exploration licenses): Kidera and Nyanga.






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Properties in Uganda




Property Description and Location




The Kidera and Nyanga Properties comprising approximately 331.12 sq. km. are located in central, southern and southwestern Uganda in East Africa.  The properties are covered by valid exploration licenses, 3 in total.




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 240 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 two exploration license covering an area of 91.12 sq. km.




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. The Mubende exploration licenses EL0116, EL0122 and EL0123 covering 780 sq. km expired in August 2009.  The Company reapplied for EL0122 and EL0123 in the Mubende area. The Company was granted new licenses over the same areas as EL0122 and EL0123, with new numbers EL0585 and EL0586 respectively. The Company has been advised by the Uganda Ministry of Mines that EL0585 and EL0586 were issued in error and the Company is not entitled to these licenses. The Company is not pursuing rectification of this matter and no longer has an interest in this project.




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.






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Mineralization




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 bullseyes, 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 that 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.




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 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.




Exploration




Kidera Project





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 is evaluating this project for tantalum, rare earth metals and diamonds, based on interpretation of airborne radiometric and magnetic anomalies. This license was renewed in the fiscal year but reduced to 240 sq km.




During the year a ground survey across a large radiometric anomaly and single point magnetic anomalies was completed. A total of 156 soil samples were collected along seven lines totaling 31,200 metres, 55 heavy mineral concentrate samples along four lines totaling 5,000 metres and 68 rock samples collected over outcropping granite.




This first phase of surface geochemical exploration has shown that there is a low potential for rare metals – REE, Tantalum and Niobium. The radiometric anomaly prominently displayed in the airborne coverage is underlain by silica rich per-aluminous granitic rocks. These rocks are not ideally suited for rare metal mineralisation, and the results indicate background levels with no clear evidence for anomalous concentrations. Results from heavy mineral concentrates show that six out of sixteen samples reported possible kimberlite indicator minerals.




Nyanga Project




On June 30, 2008, a mineral exploration license covering 23.28 square kilometers of land in central Uganda (the “Nyanga Property”) was granted to the Company.  On June 16, 2010, a further mineral exploration license covering 79.60 square kilometers was granted to the west and north of the original Nyanga license. During the 2011 year, the original Nyanga mineral license was renewed but was reduced to 11.52 sq km. The Company intends to evaluate the tantalum potential at this project.






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An exploration report on the Nyanga quarry was obtained by the Company which included historical information and work conducted in 2000. Results from this period indicate selected high grades of tantalum and niobium in channel trench samples from historical artisanal mine workings.




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 1,001 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.


The regional geophysics also indicate anomalous uranium, potassium and thorium contents in radiometric surveys, related to the singo granite. No work has been completed to investigate the uranium potential.
  Future Plans




On its core properties in Uganda, Magnus intends to undertake low cost exploration and add value by evaluating new targets generated by the high resolution geophysical survey that has been completed over 80% of the country. The Company is targeting strategic minerals, in particular uranium, lithium, tantalum, Rare Earths and vermiculite, while at the same time investigating kimberlite potential (for diamonds) and expanding the existing knowledge base for gold mineralization.




Over the course of fiscal year 2013, the Company intends to partner or sell some of its Ugandan exploration portfolio. The Company intends to determine which projects it can reasonably maintain where it can conduct cost-effective further exploration and which projects will require significant capital that would necessitate teaming up with joint venture partners or the sale of particular projects.




Leased Office Space




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





Address

Approximate Size

Lease Term

Approx. Monthly Cost522-625 Howe Street

Vancouver, BC Canada

V6C 2T6

654 Square Feet

Month-to-month

C $2,274. (approximately $US 2,268)








ITEM 3.  LEGAL PROCEEDINGS




The Company is not involved in any legal proceedings at July 31, 2012.




ITEM 4.  SUBMISSIONOF MATTERS TO VOTE OF SECURITY HOLDERS




There were no matters submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report.






14
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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



1.19


2007January 31


1.40



.44April 30


.53



.35July 31


.61



.50October 31


.58



.372008January 31


.55



.26April 30


.37



.29July 31


.31



.21October 31


.25



.04
   15
 Table of Contents
   2009January 31


.08



.015April 30


.05



.0011July 31


.045



.004October 31


.05



.0132010January 31


.03



.008April 30


.05



.01July 31


.02



.01October 31


.02



.0092011January 31


.025



.012April 30


.03



.011July 31


.0375



.018October 29


.02



.009


2012January 31


.027



.010April 30


.0155



.0035July 31


.007



.002October 29


.005



.001






Holders





As of November 14, 2012, Magnus had at least 226 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.






16
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Securities Authorized for Issuance Under Equity Compensation Plans




The following table sets forth information as of the end of the fiscal year ended July 31, 2012, with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance, aggregated as follows: (i) all compensation plans previously approved by security holders; and (ii) all compensation plans not previously approved by security holders.





Plan category
Number of securities to

be issued upon exercise of

outstanding options,

warrants and rights
Weighted-average

exercise price of

outstanding options,

warrants and rights
Number of securities remaining

available for future issuance under

equity compensation plans

(excluding securities reflected

in column (a))(a)
(b)
(c)Equity compensation plans approved by security holders
-
-
-Equity compensation plans not approved by security holders(1)
2,002,000 shares upon

exercise of stock options
$0.50 per share
3,998,000 stock optionsTotal
2,002,000
$0.50
3,998,000




Notes:(1)
The Company’s Board of Directors adopted a stock option plan on January 9, 2004.  See below for details of this plan.





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 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 unless otherwise approved by the Company’s board of directors. In the event an optionee who is an employee or consultant of the








17
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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 unless otherwise approved by the Company’s board of directors.




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 2,002,000 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.




Recent Sales of Unregistered Securities




The Company did not issue any equity securities in the fiscal year 2012.




Purchase of Equity Securities by the Company and Affiliated Purchasers




During the fiscal year ended July 31, 2012, no purchases were made by or on behalf of the Company or any “affiliated purchaser” (as defined in §240.10b-18(a)(3) of Regulation S-K), of shares or other units of any class of the Company’s equity securities.














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ITEM 6.  SELECTED FINANCIAL DATA




2012


2011


2010


2009


2008


2007


2006


2005


2004(Loss) from Continuing Operations


-300,911



-299,769



-481,615



-859,609



-2,871,756



-3,334,437



-6,976,433



-2,051,850



-1,737,327Net income (loss)

from discontinued

operations


-



60,000



1,940,712



64,098



1,253,733



-1,167,991



-2,425,401



-1,719,643



-Net income (loss )

for the year


-300,911



-239,769



1,459,097



-795,511



-1,618,023



-4,502,428



-9,401,834



-3,771,493



-(Loss) from Continuing Operations per share


-0.01



-0.01



-0.01



-0.02



-0.06



-0.08



-0.2



-0.08



-0.08Net income (loss)

from discontinued

operations per share


-



-



0.04



-



0.02



-0.03



-0.07



-0.07



-Net income (loss ) for the year per share


0.01



-



0.03



-



-0.03



-0.11



-0.27



-0.15



-1.08Total Assets


21,054



14,183



236,442



71,179



340,935



654,979



1,251,451



2,233,599



838,169





See notes 1 and 3 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, 2012, 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 obtained licenses and permits of its current property portfolio directly itself. The Company may enter into agreements that require it 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. Similarly, the Company may also find joint venture partners for its currently wholly-owned projects.




Outlook




At July 31, 2012, the price of gold was $1,614.10 per ounce (source: www.kitco.com) compared to $1,614.30 at July 31, 2011, representing a slight decrease. Gold prices have increased since July 31, 2010 but future prices are uncertain.
 
 The Company does not currently generate operating cash flows. Subject to sustained mineral prices, discovery of mineable reserves and successful financing, management expects to generate revenues and cash flows in the future.
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The Company had a working capital deficiency of $632,292 at July 31, 2012 (2011- $409,903).




The Company has 100% ownership of its Uganda projects and does not have any joint venture projects that require it to make expenditures to earn its interest.




While the Company has been successful in raising money by private placements of common shares and from loans 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 year ended July 31, 2012 was $300,911 or $0.01 per share compared to the previous year’s consolidated net income of $239,769 or $0.01 per share. Net loss from continuing operations for the year ended July 31, 2012 was $300,911 or $0.01 per share compared to the previous year’s net loss from continuing operations of $299,769 or $0.01 per share. The largest expense in 2012 was consulting fee primarily to the CEO. The second largest expense in 2012 was Interest on Loans from Related Parties & Shareholders.




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




Exploration expenses totaled $11,631 in 2012, compared to $20,575 in 2011, including geological expenses and exploration licenses. The decrease in 2012 is due to the further reduction of exploration activity in Uganda by Magnus because of lack of available capital.




Corporate administration and investor relations




Corporate administrative and investor relations costs were $48,318 in the 2012 year compared to $42,625 in 2011.  The increase is due to higher telecommunication fee and transfer filing fee in year 2012.




Interest





Interest expense increased from $40,908 in 2011 to $82,769 in 2012 due to higher average outstanding balance of shareholders’ loans upon which imputed interest was based.




Stock-based compensation




Stock-based compensation expenses of $nil decreased from $15,025 in 2011. The decrease from 2011 is due to granted options becoming fully vested in 2011.




Financial Position, Liquidity and Capital Resources




Cash used in Operations




Cash used in operations was $137,738 in the 2012 year compared to cash uses of $213,669 in 2011.   The decrease from 2011 is primarily due to payment of outstanding accounts payable and accrued liabilities in 2011 and the reduction in loss from operations as described above.






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Financing Activities




The Company received cash from financing activities of $(142,281) in the 2012 year compared to using cash of $18,064 in 2011. The increase is due to increase in demand loan and loans from shareholders in 2012.




Liquidity and Capital Resources




At July 31, 2012, the Company's total assets were $21,054 as compared to $14,183 in 2011. Long-term liabilities as of July 31, 2012 totaled $1,044,230 as compared to $966,880 in 2011.  The Company had a working capital deficiency of $632,292 at July 31, 2012 as compared to $409,903 at July 31, 2011. The increase is due to increase of shareholders’ loans.





Major uses of cash in the next fiscal year are expected to be related to proposed exploration activities in Uganda and corporate administration.





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 $20,908,198 as of July 31, 2012.   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 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.




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.




Over 2011 and  2012, the Company has decreased its costs significantly and intends to maintain costs at a minimum while allowing the Company to do the next phases of exploration on its projects. The Company will evaluate over the coming year whether it makes sense to divest or reduce some of its Uganda projects by either bringing in another partner(s), and/or selling in whole or in part its interests in such projects. In addition, the Company intends to raise some debt and equity financing in the coming year.




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 costs are capitalized and carried at cost, subject to write-down in case of impairment.  Exploration 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 development 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 of July 2012, the Company did not have proven or probable reserves.






21
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Off-Balance Sheet Arrangements




The Company has no off-balance sheet arrangements.




Transactions with Related Parties / Subsequent Events




In the year ended July 31, 2012, the Company incurred fees of $71,541 (2011 - $75,174) to the chief executive officer of the Company for consulting services rendered.  Total amount owed to the chief executive officer at July 31, 2012 for consulting services and expense reimbursement are $66,706 (July 31, 2011 - $ 5,254) and $2,600 (July 31, 2011-nil).




The Company incurred no fees to a former director of the Company for geological consulting services rendered in 2012.The total amount owed to this former director at July 31, 2012 in respect of fees is $44,134.




As at July 31, 2012, the Company had an accrued liability of $18,581 (2011 - $18,581) to a relative of a director in respect of consulting fees rendered in 2006.




As at July 31, 2012, the Company had an accrued liability of $13,800 (July 31, 2011- $13,800) to a related party.




As at July 31, 2012, Magnus had received $3,137,829 in proceeds from the sale of Long Teng, not including proceeds collected and not yet remitted by an intermediary the Company engaged to effect exchange of the currency to US Dollars and transmission to the Company’s office in Canada, and was still owed $118,901 by the intermediary.




ITEM 7A.  QUANTITATIVE ANDQUALITIATIVE 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.




Exchange Rate




Our reporting currency is United States Dollars (“USD”).  In Uganda, the currency is the Ugandan shilling (“UGX”).  On July 31, 2012, the exchange rate was UGX 2,450= US$1.00. In China, the currency is the Renminbi yuan (“RMB”). On July 31, 2012, the exchange rate was RMB 1 = US $0.1581.




Interest Rate




The Company has restructured a substantial portion of the shareholders’ loans into three-year loans with a fixed interest rate of 8%.




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.




All principle and interest under long-term debt are due on July 31, 2014.






22
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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Index to the Financial Statements
IndexReport of Independent Registered Public Accounting Firm dated December 5, 2012
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


































23
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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 sheets of Magnus International Resources Inc.(an exploration stage company) as of July 31, 2012 and July 31, 2011, the related consolidated statement of stockholders’ equity (deficit) for the years ended July 31, 2012 and 2011, and the related statements of operations and cash flows for the years ended July 31, 2012 and July 31, 2011.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.
   We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform 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 provide a reasonable basis for our opinion.
   In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of July 31, 2012 and July 31, 2011 and the results of its operations and its cash flows for the years ended July 31, 2012 and July 31, 2011, and the changes in stockholders’ equity (deficit) for the years ended July 31, 2012, and July 31, 2011.
   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’s 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
  December 5, 2012


24
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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 312012


2011ASSETSCURRENT ASSETSCash

$
4,543


$
-Advances receivable from related party (Note 4)


-



-Prepaid expenses and other


16,511



14,183Proceeds of disposition receivable (Note 3)


-



-Total current assets


21,054



14,183Total assets

$
21,054


$
14,183LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESBank overdraft

$
-


$
430Accounts payable including related party payable of $69,835 (July 31, 2011- $49,388), (Note 10)


284,524



193,900Accrued liabilities including related party liabilities of $32,381 (July 31, 2011- $32,381), (Note 10)


100,295



107,756Liabilities for registration payments


122,000



122,000Loans from shareholders (Note 6 )


146,527



-Total current liabilities


653,346



424,086LONG TERM DEBT


1,044,230



966,880Total liabilities


1,697,576



1,390,966COMMITMENTS AND CONTINGENCIES (Notes 1, 2, 3, 4, 5, 6, 7, 8, 9,10,11,12 and 14)STOCKHOLDERS' DEFICITCommon stock (Note 9)Authorized 100,000,000 shares at par value of $0.001 eachIssued and outstanding 54,470,740


54,471



54,471Preferred stockAuthorized 1,000,000 shares at par value of $0.001 eachIssued and outstanding:200,000 Series "B"


200



200Additional paid-in capital


19,292,219



19,291,047Accumulated deficit prior to exploration stage


(77,143
)


(77,143
)Accumulated deficit during exploration stage


(20,908,198
)


(20,607,287
)Accumulated other comprehensive income (loss)


(38,071
)


(38,071
)Total stockholders' deficit


(1,676,522
)


(1,376,783
)Total liabilities and stockholders' deficit

$
21,054


$
14,183








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




25
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MAGNUS INTERNATIONAL RESOURCES INC.(An Exploration Stage Company)Consolidated Statements of Operations(Expressed in US Dollars)Exploration stageYear Ended July 31


through July 31,2012


2011


2012(Unaudited)EXPENSESConsulting

$
94,818


$
77,279


$
2,958,745Finder fees


-



-



674,375Investor relations


2,262



1,117



1,815,930Legal and professional fees


43,323



78,059



1,437,916Exploration licenses


4,959



7,813



974,288Geological expenses


6,672



12,762



2,127,746Amortization


-



-



159,881Salaries and benefits


9,895



21,705



1,215,323Stock-based compensation


-



15,025



3,115,861Registration payment arrangements


-



-



394,000Travel


-



3,593



1,008,554Write-down of abandoned assets


-



-



83,204Write-down of impaired assets


-



-



365,316Interest


82,769



40,908



389,651Other administrative expenses


56,214



41,508



2,192,918Total expenses


300,911



299,769



18,913,707Net (loss) from continuing operations

$
(300,911
)


(299,769
)


(18,913,707
)Gain on sales of subsidiaries (Note 3)


-



-



3,717,489Bad debt recovery (provision) related to proceeds of sales of subsidiaries


-



60,000



(118,901
)Gain/loss on sales of impaired assets of subsidiaries


-



-



15,212Loss from operations of components held for sale (Note 3)


-



-



(5,608,291
)Net income (loss) from discontinued operations


-



60,000



(1,994,491
)Net income (loss) for the period


(300,911
)

$
(239,769
)

$
(20,908,198
)Other comprehensive income (loss)Foreign currency translation


-



-



(38,071
)-Comprehensive (loss)

$
(300,911
)

$
(239,769
)

$
(20,946,269
)Net loss per common share - basic and fully diluted:Net (loss) from continuing operations

$
(0.01
)

$
(0.01
)


(0.43
)Net (loss) from discontinued operations


0.00



0.00



(0.05
)Net (loss) for the period

$
(0.01
)

$
(0.00
)


(0.48
)Weighted average number of common stock outstanding


54,470,740



54,470,740



43,692,646




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




26
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MAGNUS INTERNATIONAL RESOURCES INC.(An Exploration Stage Company)Consolidated Statements of Cash Flows(Expressed in US Dollars)Year Ended July 31


July 31,2012


2011


2012(Unaudited)Cash and cash equivalent from (used in) operating activities:Net (loss)

$
(300,911
)

$
(239,769
)

$
(20,908,198
)Adjustments to reconcile net loss to net cash used in operating activities:Stock-based compensation


-



15,025



3,115,861Stock issued / allotted for services and licenses


-



-



1,516,547Amortization of fixed assets


-



-



259,249Imputed interest on loans from shareholders


1,172



40,908



297,675Loss on dispositions and writedowns of fixed assets


-



-



416,495Interest accrued on long-term debt and demand loans


81,597



-



81,597Gain / recovery of bad debt on disposition of subsidiaries, net of provision for bad debt


-



(60,000
)


(3,598,588
)Net change in operating assets and liabilities:Advances receivable and prepaid expenses


(2,328
)


50,956



(1,997
)Bank overdraft


(430
)


-



-Assets of component held for sale


-



-



-Accounts payable and accrued liabilities


83,162



(20,789
)


251,252Liabilities for registration payments


-



-



394,000Liabilities of component held for sale


-



-



189,721Net cash and cash equivalent from (used in) operating activities


(137,738
)


(213,669
)


(17,986,386
)Cash and cash equivalent from (used in) investing activities:Proceeds received from disposition of subsidiary


-



60,000



3,137,829Proceeds from sales of impaired assets of subsidiaries


-



-



15,212Cash included in acquisition of African Mineral Fields Inc.


-



-



282Purchase of capital assets


-



-



(670,321
)Net cash and cash equivalent from (used in) investing activities


-



60,000



2,483,002Cash and cash equivalent from financing activities:Issue of Preferred Shares


-



-



100Demand loan received


-



-



30,000Repayment of demand loan/Loan


-



-



(30,715
)Options exercised


-



-



573,000Warrants exercised


-



-



3,589,332Subscriptions received


-



-



11,135,384Finders' fees paid in respect of private placements


-



-



(376,855
)Loans from shareholders


166,800



(18,064
)


655,132Repayment of loans from shareholders


(24,519
)


-



(24,519
)Net cash and cash equivalent from financing activities


142,281



(18,064
)


15,550,859Effect of other comprehensive income (loss) on cash


-



-



(42,955
)Increase (decrease) in cash and cash equivalent


4,543



(171,733
)


4,520Cash and cash equivalent, beginning of period


-



171,303



23Cash and cash equivalent, end of period

$
4,543


$
(430
)

$
4,543Supplemental Cash Flow InformationNon-cash itemsImputed interest expense credited to additional paid-in capital


1,172



40,908



298,175Imputed interest converted to long-term debt


-



302,801



302,801Loans from shareholders converted to long-term debt


-



633,239



633,239Accounts payable converted to long-term debt


-



30,840



30,840






The accompanying notes to the consolidated financial statements are an integral part of these statements.
  27
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   MAGNUS INTERNATIONAL RESOURCES INC.(An Exploration Stage Company)Consolidated Statement of Stockholders' Equity(Deficit)(Expressed in US Dollars)Common Stock


Amount


Preferred stock


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, 2010


54,470,740



54,471



200



(38,071
)


19,537,915



(20,367,518
)


(77,143
)


(890,146
)Stock-based compensation


-



-



-



-



15,025



-



-



15,025Conversion of imputed interest to actual interest


-



-



-



-



(302,801
)


-



-



(302,801
)Imputed interest on loans from shareholders


-



-



-



-



40,908



-



-



40,908Net loss for the period


-



-



-



-



-



(239,769
)


-



(239,769
)Balance July 31, 2011


54,470,740



54,471



200



(38,071
)


19,291,047



(20,607,287
)


(77,143
)


(1,376,783
)Imputed interest on loans from shareholders


-



-



-



-



1,172



-



-



1,172Net loss for the period


-



-



-



-



-



(300,911
)


-



(300,911
)Balance July 31, 2012


54,470,740



54,471



200



(38,071
)


19,292,219



(20,908,198
)


(77,143
)


(1,676,522
)
    The accompanying notes to the consolidated financial statements are an integral part of these statements.
   28
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MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   1. BASIS OF PRESENTATION
  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 are 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, 2012.
  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 Spin Event Marketing Inc., Magnus BVI and Magnus HK have no transactions as of July 31,2012. Magnus HK has been deregistered pursuant to Section 291AA (9) of the Companies Ordinance of Hong Kong. Magnus HK was officially dissolved as of September 25, 2009.
  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). The Company subsequently entered into a number of amending agreements (including penalties for late payment) relating to the sale of Long Teng. As at July 31, 2012, Magnus had received $3,137,829 in proceeds from the sale of Long Teng, not including proceeds collected and retained by an intermediary the Company engaged to effect exchange of the currency to US Dollars and transmission to the Company’s office in Canada,  and was still owed $118,901 by the intermediary. See also Notes 3 and 5.
  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 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.
   29
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MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   On November 15, 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.
  In the year ended July 31, 2008, AMF acquired four more mineral exploration licenses and designated them as the Buhweju/Rubindi, Kigumba/Masindi, Kidera and Nyanga projects. Since acquiring these licenses, five additional licenses associated with these projects were acquired. During the year ended July 31, 2012, the Company’s licenses numbered EL0357 (Buhweju/Rubindi project) and EL0369 (Kigumba/Masindi project) have expired. The Company has been advised by the Uganda Ministry of Mines that EL0585 and EL0586 were issued in error and the Company is not entitled to these licenses. The Company is not pursuing rectification of this matter and considers itself not to have an interest in this project.
  Principles of Consolidation
  The consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries, Golden River,  Gravity Marketing, Magnus BVI, AMF and the two Ugandan subsidiaries.  All significant inter-company balances and transactions are eliminated.
  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.
  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, 2012 and 2011, the Company had $4,543 and $nil cash equivalents.
   30
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   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   Mineral Properties and Exploration Expenses
  Mineral property acquisition costs are capitalized and carried at cost, subject to write-down in case of impairment.  Exploration 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 development 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. To July 31, 2012, all costs of the Company’s properties in China and Uganda have been classified as exploration costs as the licenses included rights to explore and not to mine. As at July 31, 2012, the Company did not have proven or probable reserves.
  Asset Retirement Obligations
  The Company has adopted Accounting Standards Codification (“ASC”) ASC 410, Asset Retirement and Environmental  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.   ASC 410 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, 2012 the company has no asset retirement obligations.
  Advertising Expenses
  Advertising expenses are expensed as incurred. There is no advertising expense incurred for fiscal year ended July 31, 2012 and 2011.
  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 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
 
 
 31
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  MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   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, 2012 and 2011 because common stock equivalents consisting of options outstanding at July 31, 2012 to acquire 2,002,000 (2011 - 2,002,000) shares of common stock. .
  Fair Value of Financial Instruments
  The carrying value of cash and accounts payable and accrued liabilities at July 31, 2012 and 2011, reflected in these financial statements approximates their fair value due to the short-term maturity of the instruments. The carrying value of long term debt at July 31, 2012 reflected in these financial statements approximates its fair value due to the interest rate on the debt, which is equivalent to a fair market interest rate for such instruments.
  Comprehensive Income
  The Company has adopted ASC 220, Comprehensive Income.  Comprehensive income includes net income and all changes in equity during a period that arise 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 ASC 740, Income Taxes.  ASC 740 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  single supplier to supply (1) the exploration licenses, (2) the manpower, and (3) the majority of the technical expertise for the minerals exploration for the Company’s projects in Uganda.
  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 ASC 360, Property, Plant and Equipment. 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.
   32
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   As at July 31, 2008, the Company wrote down all its long-lived assets in Canada and Uganda to $nil due to impairment analysis.
  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
  The Company has implemented the provisions of ASC 718Compensation-Stock Compensation. Compensation expense is recorded in accordance with the fair value recognition provisions of ASC 718 for options issued.
  The Company has a stock-based compensation plan that is described more fully in Note 11.
  New Accounting Pronouncements
  There were various accounting standards and interpretations issued during 2012 and 2011, 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 $20,908,198 as of July 31, 2012.  As of July 31, 2012, the Company had $4,543 cash and cash equivalents and had a working capital deficiency of $632,292.Cash and cash equivalents are 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 as a going concern.  The ability of the Company to meet its commitments as they become payable, including the exploration and development of mineral properties and projects, is dependent on the ability of the Company to obtain necessary financing.  There are no assurances that the Company will be successful in achieving these goals.  There is significant doubt as to the Company’s ability to continue as a going concern.
  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.
   33
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   In 2012 and 2011, the Company decreased its costs significantly and intends to maintain costs at a minimum while allowing the Company to do the next phases of exploration on its projects. The Company will evaluate over the coming year whether it makes sense to divest or reduce some of its Uganda projects by either bringing in another partner(s), and/or selling in whole or in part its interests in such projects. In addition, the Company intends to raise some equity or debt financing in the coming year.
  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 $ nil (July 31, 2011 - $nil) consist of $118,901 receivable in respect of the sale of Yunnan Long Teng Mining Ltd. (July 31, 2011 - $118,901), carried net of an allowance for uncollectible amounts of $118,901 (July 31, 2011 - $118,901). The Company did not collect any of this receivable in the year ended July 31, 2012. The Company collected $60,000 in 2011.
  4. RECEIVABLE FROM RELATED PARTY
  The Company has $10, 159 as receivable as at July 31, 2012 for sharing office space with Lucia Minerals, a private company controlled by the Company’s CEO. This receivable is carried net of an allowance for uncollectible amount of $10,159 as at July 31, 2012.
 
 5. MINERAL PROPERTIES AND JOINT VENTURES
 
 At July 31, 2012, the Company is involved in the following projects with respect to mineral properties and exploration licenses in China and Uganda.
  Yunnan Long Teng Mining Ltd.
  As at July 31, 2012, Magnus had received $3,137,829 in proceeds from the sale of Long Teng, not including proceeds collected and retained by an intermediary the Company engaged to effect exchange of the currency to US Dollars and transmission to the Company’s office in Canada,  and was still owed $118,901 by the intermediary. See note 3.
  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 years ended July 31, 2006 and 2007 AMF paid the first $35,000 cash and issued the 500,000 shares to the Grantor.
  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 and 2007 AMF paid the first $170,000 cash and issued the 500,000 shares to the Grantor.
   34
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   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. then held a 100% interest in the Mwerusandu Property and Mitoma properties. The Grantor was 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 fiscal year 2008, three licenses were renewed for a period of two years, each with a 50% reduction in area, so that the Mwerusandu Property was then comprised of four exploration licenses covering 175.43 sq. km. During the  year ended July 31, 2010, three of the licenses expired and were not renewed. A further license was transferred to Kamu Kamu Drilling Experts Ltd. (“Kamu Kamu”) as part of an agreement to settle a legal action brought against the Company by Kamu Kamu in December 2008. The Company no longer holds any licenses at Mwerusandu.
  In the year ended July 31, 2008, AMF received two additional exploration licenses on the Mitoma property covering 159.49 sq. km.  During 2008 four licenses were renewed for a period of two years with a 50% reduction in area and one license was relinquished.  At July 31, 2009, the Mitoma Property comprised of seven exploration licenses covering 359.49 sq. km. During the year ending July 31, 2010, three licenses expired and was relinquished. A further four licenses were transferred to Kamu Kamu as part of the settlement agreement. As at July 31, 2012, the Company no longer holds any licenses at Mitoma.
  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 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.
  In the year ended July 31, 2008, AMF received four additional exploration licenses on the Lugazi property covering 1359.17 sq. km. During the year ended July 31, 2010, the five Lugazi licenses were transferred to Kamu Kamu as part of the settlement agreement. As at July 31, 2012, the Company no longer holds any licenses at Lugazi.
  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.  The Mubende exploration licenses expired in August 2009.
   35
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   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 May 12, 2008, a mineral exploration license covering 363 square kilometers of land in western Uganda (the “Kigumba/Masindi Property”) was granted to the Company. Since acquiring this license, three additional licenses totalling 1,402.55 square kilometers were also acquired under the name of the Company’s indirect wholly-owned subsidiary, ABM. The original Kigumba license expired on May11, 2011. Subsequent to July 31, 2012 the remainder of the Kigumba/Masindi licenses has expired.
  On May 12, 2008, a mineral exploration license covering 291 square kilometers of land in southwestern Uganda (the “Buhweju/Rubindi Property”) was granted to the Company. Since acquiring this license, an additional license covering 429 square kilometers was also acquired under the name of ABM. The original Rubindi license expired on May11, 2011. Subsequent to July 31, 2012 the remaining Buhweju/Rubindi license has expired.
  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.  This license was renewed effective June 29, 2011 for two years but with reduced area of 240 square kilometers.
  On June 30, 2008, a mineral exploration license covering 23.28 square kilometers of land in central Uganda (the “Nyanga Property”) was granted to the Company. On June 16, 2010, a further mineral exploration license covering 79.60 square kilometers was granted to the west and north of the Nyanga license. The original Nyanga license was renewed effective June 29, 2011 for two years but with reduced area of 11.52 square kilometers.
  A summary of the licenses in Uganda 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 0309

Kidera

Kidera

Lake Kyoga

June 29, 2013


240

UGX 2,400,000EL 0328

Nyanga

Nyanga

Ntungamo

June 29, 2013


11.52

UGX 115,200EL 0631

Nyanga West

Nyanga

Ntungamo

June 16, 2013


79.60

UGX 796,000331.12

UGX 3,311,200$1,352
 
 
 6. LOANS FROM SHAREHOLDERS
 
 The Company has a loan from a shareholder (who is also the Company’s CEO) of $19,338 which does not bear interest and is due on demand. The Company has recognized imputed interest in the amount of $1,172 in the year ended July 31, 2012 on the loan, which is included in interest expense and in additional paid-in capital, since the imputed interest is not payable.
   36
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   The company has loans from another shareholder and companies related to shareholders which arose in the year ended July 31, 2012 in the amount of $127,189, including accrued interest of $4,247. These loans are due on demand and bear interest at the rate of 8% per annum.
  7. LONG TERM DEBT
 
 Long term debt of $1,044,230 (July 31, 2011- $966,880) consists of loans payable on July 31, 2012 of $966,880 plus accrued interest payable on July 31, 2012 of $77,350. Prior to July 31, 2011, the company had loans from shareholders and other related parties which did not bear interest and had no stated terms of repayment. Effective July 31, 2011, the Company reached agreement with the respective creditors to make these loans payable on July 31, 2014 with simple interest from July 31, 2011 at the rate of 8% also payable on July 31, 2014. The Company also agreed to convert imputed interest recognized to July 31, 2011 by the Company in the amount of $296,504, plus imputed interest of $6,297 recognized by AMF prior to acquisition of AMF by the Company, into debt payable on July 31, 2014 with simple interest from July 31, 2011 at the rate of 8% payable on the same date.
  8. LEASES
  The lease on the office premises in Entebbe Uganda expired in September 2008. The Company ceased to lease these premises on December 31, 2011.
  The lease on the office in Vancouver, Canada expired in April 2012. The Company currently pays rent of $CAD2, 274.35 (approximately $US 2,268) per month on month to month basis.
  The Company has a commitment for payments of $CAD 9, 063 (approximately $US 9,039) until July 31, 2012 for the lease of a photocopier.
  9. COMMON STOCK
  There are no warrants outstanding as at July 31, 2012.
  10. RELATED PARTY TRANSACTIONS
  Related party transactions not disclosed elsewhere in the consolidated financial statements are as follows:
  In the year ended July 31, 2012, the Company incurred fees of $71,541 (2011 - $75,174)to the chief executive officer of the Company for consulting services rendered.  Total amount owed to the chief executive officer at July 31, 2012 for consulting services and expense reimbursement are $66,706 (July 31, 2011 - $ 5,254) and $2,600 (July 31, 2011-nil). The Company owes a former director of the Company $$44,134 (July 31, 2011 - $44,134) in fees for geological consulting services rendered.
  At at July 31, 2012, the Company had an accrued liability of $18,581 (July 31, 2011 - $18,581) to a relative of a director in respect of consulting fees rendered in 2006.
  As at July 31, 2012, the Company had an accrued liability of $13,800 (July 31, 2011- $13,800) to a related party.
   37
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   11. 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 remainder to vest in equal monthly proportions over a period of twenty-three (23) months from the Initial Vesting Date.  The options were originally to 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 vested in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date.  The options were originally to 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 year ended July 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 vested in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date.  653,000 of these options were originally to expire on November 1, 2011 and 745,000 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 expired 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 vested in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date of April 30, 2006. The options were originally to 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 vested in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date of February 1, 2006. The options  expired on February 1, 2012.
   38
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   On April 12, 2006, 54,000 stock options granted under the Plan to two employees, with the exercise price of $2.59 per share. The options vested in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date of April 12, 2006. The options  expired on April 12, 2012.
  On April 27, 2006, 210,000 stock options granted under the Plan to three employees, with the exercise price of $2.35 per share. The options vested in equal monthly proportions over a period of thirty-six (36) months from the Initial Vesting Date of April 27, 2006. The options  expired 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 vested 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 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

409,500
    39
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
 Options 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, 2009 and 2010

1,628,333

1,686,667

0.50

0.16Options forfeited

(315,000)

(998,000)Options outstanding July 31, 2011

1,313,333

688,667

0.50Options Outstanding  July 31, 2012

1,313,333

688,667

0.50
 
 Compensation cost related to options is recognized as the related options vest. All outstanding options have vested prior to July 31, 2012.
  If not previously exercised or canceled, options outstanding at July 31, 2012 will expire as follows:
  Range of Exercise Prices

Number

Weighted averageExpiry Date

High

Low

of Shares

exercise priceYear Ending July 31,2013

0.5

0.5

2,002,000

0.50
 
  40
 Table of Contents
   MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)
   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.
  12.INCOME TAXES
  The Company is subject to United States income taxes, Canadian income taxes (to the extent of its operations in Canada) 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:
 
 2012


2011Income (Loss) for the year

$
(300,911
)

$
(239,769)Average statutory tax rate


35
%


35
%Expected income tax provision

$
(105,319
)

$
(83,919)Impact of tax rate difference in foreign jurisdiction


1,021



2,138Non-deductible stock-based compensation


-



5,259Non-deductible imputed interest


410



14,318Non-taxable bad debt recovery


-
)


(21,000
)Unrecognized tax losses


103,888



83,204Income tax expense

$
--


$
--
 
 Significant components of deferred income tax assets are as follows:
   41
 Table of Contents
  MAGNUS INTERNATIONAL RESOURCES INC.
 (An Exploration Stage Company)
 Notes to Consolidated Financial Statements
 July 31, 2012 and 2011
 (Expressed in US Dollars)


2012


2011Net operating losses carried forward in United States

$
3,583,543


$
3,485,447Net operating losses carried forward in Uganda


825,622



445,286Valuation allowance


(4,409,165
)


(3,930,732
)Net deferred income tax assets

$
-


$
-
 
 The Company has net operating losses carried forward of approximately $9,960,000 for United States tax purposes and $2,730,000 for Ugandan tax purposes which will expire in 2031 if not utilized. No tax returns have been filed and all years are open for examination.
  The valuation allowance increased by $103,888 in the year due to the effect of net operating loss in 2012.
  13. 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, 2011


July 31, 2011Canada

$
17,758


$
13,228Africa


3,296



955China


-



-Total

$
21,054


$
14,183
 
 14. SUBSEQUENT EVENTS
  The Company reviewed events subsequent to July 31, 2012 through December 5, 2012 and determined no additional disclosures are applicable.


42
 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
   Year Ended July 31, 2009Fourth Quarter
Third Quarter
Second Quarter
First QuarterNet sales
-
-
-
-Gross profit
-
-
-
-Net loss (income)
(17,656)
159,613
54,886
598,668Net loss per share
0.00
0.00
0.00
0.01






Year Ended July 31, 2010Fourth Quarter
Third Quarter
Second Quarter
First QuarterNet sales
-
-
-
-Gross profit
-
-
-
-Net loss (income)
104,925
112,212
(345,199)
(1,331,035)Net loss per share
0.00
0.00
(0.01)
(0.02)







43
 Table of Contents






Year Ended July 31, 2011Fourth Quarter
Third Quarter
Second Quarter
First QuarterNet sales
-
-
-
-Gross profit
-
-
-
-Net loss (income)
88,576
60,500
8,214
82,479Net loss per share
0.00
0.00
0.00
0.00
   Year Ended July 31, 2012Fourth Quarter
Third Quarter
Second Quarter
First QuarterNet sales
-
-
-
-Gross profit
-
-
-
-Net loss (income)
117,141
49,350
59,748
64,514Net loss per share
0.00
0.00
0.00
0.00





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




As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures.  Under the direction of our Chief Executive Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) there continue to be material weaknesses in the Company’s internal controls over financial reporting, that the weaknesses constitute a “deficiency” and that this deficiency could result in misstatements of the foregoing accounts and disclosures that could result in a material misstatement to the financial statements for the period covered by this report that would not be detected, and (ii) accordingly, our disclosure controls and procedures were not effective as of July 31, 2011.




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.






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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, 2012. 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, 2012, 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.




(3) Certain internal controls were not fully operating and effective in a manner to effectively support the requirements of the financial reporting and period-end close process. Principally, this related to the controls and procedures surrounding the consistent completion, review and approval of key balance sheet account analyses and reconciliations. Material errors were corrected in the preparation of the financial statements for the year ended July 31, 2012. It is reasonably possible that, if not remediated, these control deficiencies could result in a material misstatement of the Company’s financial statements in a future annual or interim 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.




This annual report does not include an attestation report of the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.




(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-K that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.





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ITEM 9B.  OTHER INFORMATION




Prior to July 31, 2011, the company had loans from shareholders and other related parties which did not bear interest and had no stated terms of repayment. The Company has recognized imputed interest in the amount of $1,172 in the year ended July 31, 2012 (2011 -$ 40,908) on the loans. The imputed interest was credited to additional paid-in capital since the imputed interest was not payable. Effective July 31, 2011, the Company reached agreement with the respective creditors to make these loans payable on July 31, 2014 with simple interest from July 31, 2011 at the rate of 8% payable on the same date. The Company also agreed to convert imputed interest recognized to date by the Company in the amount of $296,504, plus imputed interest of $6,297 recognized by AMF prior to acquisition of AMF by the Company, into debt payable on July 31, 2014 with simple interest from July 31, 2011 at the rate of 8% payable on the same date.




PART III




ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS ANDCONTROL 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

43

President, CEO, CFO, Secretary, Treasurer and DirectorSteven (Sek Toh) Tan

76

Director





There are no family relationships between any of the Company’s directors or executive officers.




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 also serves as president, chief executive officer and/or director for Arcview Entertainment Inc.  Mr. Taylor has seventeen 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. 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.




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








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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 another public company in the last ten years.




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 years 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.




Based solely upon a review of the Forms 3, 4, and 5 furnished to us for the fiscal year ended July 31, 2011, 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 future. In addition, the Company intends to appoint an audit committee in the future.






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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.




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

Year

Consulting fee

($)

Bonus

($)

Stock awards

($)

Option awards

($)

Nonequity incentive plan

compensation

($)

Nonqualified

deferred

compensation

earnings

($)

All other

compensation

($)

Total

($)(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)Graham Taylor(1)

2012

$
71,541

$Nil

$Nil

$Nil

$Nil

$Nil

$Nil

$
71,541President, CEO, CFO, Secretary, Treasurer and Director

2011

$
75,174

$Nil

$Nil

$Nil

$Nil

$Nil

$Nil

$
75,1742010

$
70,937

$Nil

$Nil

$Nil

$Nil

$Nil

$Nil

$
70,937





(1)  Mr. Graham Taylor was appointed the President, CEO, CFO, Secretary, Treasurer and a Director of the Company on November 24, 2003. From December 1, 2003 to December 31, 2008, Mr. Taylor was 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. From January 1, 2009 to July 31, 2012 Mr. Taylor was paid a consulting fee of $6,250 Canadian per month.




(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.  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.





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 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, 2012.






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Outstanding Equity Awards at Fiscal Year-End





The following table contains disclosure concerning unexercised options; stock that has not vested; and equity incentive plan awards for each Named Executive Officer outstanding as of the end of the Company’s fiscal year ended July 31, 2012:





Name
Option awards
Stock awardsNumber of securities underlying unexercised options

(#) exercisable
Number of securities

underlying

unexercised

options

(#) unexercisable
Equity

incentive

plan awards: Number of

securities

underlying

unexercised

unearned

options

(#)
Option

exercise price

($)
Option expiration date
Number of shares or units of stock that have not vested

(#)
Market value of shares of units of stock that have not vested

($)
Equity

incentive

plan awards: Number of

unearned

shares, units or other rights that have not vested

(#)
Equity

incentive

plan awards: Market or payout value of

unearned

shares, units or other rights that have not vested

($)(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)Graham Taylor(1)

President, CEO, CFO, Secretary, Treasurer and Director
800,000 shares
Nil
Nil
$0.50
Jan. 31, 2013
Nil
$Nil
Nil
$Nil


Notes:(1)
Mr. Taylor was appointed as the President, CEO, CFO, Secretary, Treasurer and a director of the Company on November 24, 2003.





Director Compensation




The following table discloses the compensation of the directors of the Company for the Company’s fiscal year ended July 31, 2012 (unless already disclosed above):





Name
Fees earned or

paid in cash

($)
Stock awards

($)
Option awards

($)
Non-equity incentive

plan

compensation

($)
Nonqualified deferred

compensation earnings

($)
All other

compensation

($)
Total

($)(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)Graham Taylor(1)
See above
See above
See above
See above
See above
See above
See aboveSteven (Sek Toh) Tan(2)
Nil
Nil
Nil
Nil
Nil
Nil
Nil






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Notes:(1)
Mr. Taylor was appointed as a director and appointed the President, CEO, CFO, Secretary and Treasurer of the Company on November 24, 2003.(2)
Mr. Tan was appointed as a director of the February 8, 2005.





Narrative Disclosure to the Director Compensation Table




The Company granted 1,600,000 options to Graham Taylor on January 26, 2004 with an exercise price of $0.50. The options vested over 24 months. Mr. Taylor has exercised 800,000 of these options and 800,000 remain unexercised. Unexercised options will expire January 31, 2013.




The Company granted 75,000 options to Stephen Sek Toh Tan on February 17, 2005 with an exercise price of $1.60. The options vested over 24 months and were repriced at $0.50 on January 31, 2008. All 75,000 options remain unexercised. Unexercised options will expire January 31, 2013.




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 54,740,470 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

115 – 280 Nelson Street

Vancouver, BC

V6B 2E2

President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director

800,000(2)

1.46%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)

14.81%Emerson Capital Corp.

Suite 4 Temple Bldg.

Main & Prince William St. Charlestown, Federation of St. Kitts & Nevis

Shareholder

8,066,668 (5)

14.81%All officers and directors as a group (3 persons)



17,008,334 (6)

31.22%








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(*)     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 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 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; 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




See “Item 5. Market For Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities-Securities Authorized for Issuance Under Equity Compensation Plans” above.




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.




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:






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2012 – $28,600 – Schumacher & Associates Inc


2011 – $29,300 – Schumacher & Associates Inc.





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:





2012 – Nil – Schumacher & Associates Inc.


2011 – Nil – Schumacher & Associates Inc.





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:





2012 – Nil – Schumacher & Associates Inc.


2011 – Nil – Schumacher & Associates Inc.





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:





2012 – Nil – Schumacher & Associates Inc.


2011 – Nil – Schumacher & Associates Inc.




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 5th day of December, 2011.




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

President, CEO, CFO, Secretary,

December 5, 2012Graham Taylor

Treasurer and Director/s/ Steven Tan

Director

December 5, 2012Steven Tan