U.S. SECURITIES AND EXCHANGE
COMMISSION


Washington,
D.C. 20549





FORM 10-K





ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For
the fiscal year ended January 31, 2008


Commission
file number: 0--49996





AMERICAN
GOLDFIELDS INC.


(Exact
name of registrant as specified in its charter)





Nevada
            71-0867612(State
      of incorporation)
            (I.R.S.
      Employer Identification No.)





200-4170
Still Creek Drive


Burnaby, B.C. Canada V5C
6C6


(Address
of principal executive offices)





(604)
299-6600


(Registrant’s
telephone number, including area code)





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


None





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


Common
Stock, $0.001 par value








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





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





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





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





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





Large
accelerated filer  ̈     Accelerated
filer  ̈     Non-accelerated
filer  ̈ (Do not
check if a smaller reporting company)     Smaller Reporting
Company x


1


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





The
issuer’s revenues for its most recent fiscal year were $Nil





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity as July 31, 2007 was approximately $26,868,241.





The
number of shares of the issuer’s common stock issued and outstanding as of April
28, 2008 was 21,292,878 shares.





Documents
Incorporated By Reference:  None





2


TABLE
OF CONTENTS








PagePART
      IItem
      1
              Business
              4Item
      1A
              Risk
      Factors
              8Item
      1B
              Unresolved
      Staff Comments
              11Item
      2
              Properties
              11Item
      3
              Legal
      Proceedings
              35Item
      4
              Submission
      of Matters to a Vote of Security Holders
              35PART
      II
              
              36Item
      5
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              36Item
      6
              Selected
      Financial Data
              38Item
      7
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
              38Item
      7A
              Quantitative
      and Qualitative Disclosures About Market Risk.
              41Item
      8
              Financial
      Statements and Supplementary Data.
              41Item
      9
              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
              63Item
      9A
              Controls
      and Procedures
              63Item
      9A(T)
              Controls
      and Procedures
              63Item
      9B
              Other
      Information
              63PART
      III
              
              64Item
      10
              Directors,
      Executive Officers and Corporate Governance
              64Item
      11
              Executive
      Compensation
              66Item
      12
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              68Item
      13
              Certain
      Relationships and Related Transactions, and Director
      Independence
              69Item
      14
              Principal
      Accountant Fees and Services
              72PART
      IV
              
              73Item
      15
              Exhibits,
      Financial Statement Schedules
              73SIGNATURES
              
              74








3


PART I





ITEM
1.                      DESCRIPTION
OF BUSINESS





General





American
Goldfields Inc. (the “Company” or “we”), f/k/a Baymont Corporation, is a natural
resource exploration stage company engaged in the acquisition and exploration of
properties for deposits of gold or silver. We were incorporated on December 21,
2001 under the laws of the State of Nevada. Since then, we have engaged
primarily in the acquisition and exploration of mining interests in properties
that may potentially have deposits of gold and silver. To date, we have not
earned any revenues.





In
December 2001, we caused the incorporation of our wholly owned subsidiary,
Baymont Explorations Inc., under the laws of British Columbia. Through this
subsidiary we acquired a 75% undivided interest in a group of mineral claims
known as the Bor Claims, being four mineral claims covering a total area of 247
acres located in the Omineca Mining Division of the Province of British
Columbia, Canada. The interest was purchased from Lorne B. Warren of Smithers,
British Columbia, the beneficial owner of the claims, for US$2,500. In April
2004 we terminated our interest in this property.





On
various dates in 2004 and 2005, we entered into separate agreements with
MinQuest Inc. (“MinQuest”) granting us an option to purchase 100% of MinQuest’s
mining interests in six different properties located in various parts of the
State of Nevada, which we plan to explore for the purpose of determining whether
there are any commercially exploitable deposits of gold or silver. None of the
properties presently has any mineral deposits. The properties are undeveloped
and do not contain any open-pit or underground mines. There is no mining plant
or equipment located on the properties, and there is no power supply to the
properties. Our planned exploration program is exploratory in nature and no
mineral reserves may ever be found.





Further
exploration of all of our mineral claims is required before a final
determination as to their viability can be made. No commercially viable mineral
deposit may exist on our mineral claims. Our plan of operations is to carry out
exploration work on these claims in order to ascertain whether they possess
deposits of gold or silver. We can provide no assurance to investors that our
mineral claims contain a commercially viable mineral deposit until appropriate
exploratory work is done and an evaluation based on that work concludes further
work programs are justified. At this time, we definitely have no reserves on our
mineral claims.





Corporate
History




From the
date of its incorporation until February 5, 2004, the Company was controlled by
Mr. Alfredo De Lucrezia, who was its sole officer and director and had
legal and beneficial ownership of 6,000,000 (pre-forward split) shares of the
Company’s common stock, or 66.8% of the issued and outstanding share capital of
the Company.  On February 5, 2004 Mr. Lucrezia appointed Donald
Neal and Gregory Crowe to the Board and resigned as the Company’s sole officer.
Mr. Neal was duly appointed as the Chief Executive Officer, Chief Financial
Officer, Treasurer and Secretary of the Company. Mr. Neal’s appointment to
the Board became effective on February 5, 2004, and Mr. Crowe became a
member of the Board on February 23, 2004, ten days after the mailing of the
Information Statement regarding such changes. On such date, Mr. Lucrezia
resigned as a director of the Company.





4


On
February 10, 2004, Mr. Lucrezia sold 3,000,000 shares of Common Stock to
each of Donald Neal and Gregory Crowe pursuant to a Purchase and Sale Agreement
dated as of such date.  The purchase price for each share of common
stock was $0.035, amounting in the aggregate to $105,000 for each of
Messrs. Crowe and Neal. Immediately subsequent to this sale
Mr. Lucrezia no longer held any shares of capital stock or other equity in
the Company.





On
February 10, 2004, Messrs. Neal and Crowe entered into a Shareholders’
Agreement dated as of such date. The agreement provided that for so long as the
person holds any of the 3,000,000 shares which he received from Alfredo De
Lucrezia, the directors shall vote such shares to maintain two persons on our
board, or such number as the shareholders agree. Upon any vote to appoint
representatives to the Board, each shareholder agreed that he shall vote his
shares for the other shareholder. If one of the shareholders is no longer a
shareholder, or if the Board or our shareholders decided to remove one of the
Board members, or the shareholder no longer holds any of the 3,000,000 shares
which he received from Mr. Lucrezia, then the other shareholder agreed to
vote his shares to either maintain the number of Board members as one or to
nominate a second Board member. The agreement also provided that for all other
matters in which shares are voted, the two shareholders shall vote their
3,000,000 shares together as determined by the unanimous decision of the
shareholders.  Each of the shareholders also agreed that he would not,
directly or indirectly, sell, pledge, gift or in any other way dispose of any of
the 3,000,000 shares which he received from Mr. Lucrezia. This transfer
restriction shall apply to such shares in all situations during all times that
such individual holds any of the 3,000,000 shares.





On
February 23, 2004, the Company approved a 6:1 forward stock split. As a result
of the stock split, an additional 44,928,565 shares of common stock were issued.
The par value of the common stock remained unchanged at $0.001 per common share
but the authorized number of common stock increased to 600,000,000 from
100,000,000.





On
February 24, 2004, the Company and a majority of the Company’s stockholders
authorized the changing of the Company’s name to American Goldfields Inc. The
name change became effective March 31, 2004.





On March
31, 2004, each of Messrs. Neal and Crowe returned 15,000,000 shares (such
number reflects the 6:1 stock split) of common stock to treasury for no
proceeds. The Company did not record a gain or loss as a result of this
transaction. Since it is customary for a mining exploration company to acquire
properties  with the  issuance  of stock, this is
an option which Messrs. Neal and Crowe  considered not only
feasible and reasonable, but the only  practicable  method
for the  company to acquire  property in light of the
Company’s current financial condition. The  stockholders/directors
determined that they would prefer to dilute their personal equity interests in
the Company now rather than have the stockholders incur
significant  dilution in the future when,  and if, a
potential seller feels that the directors of the company have too significant of
an equity interest.





On May
26, 2004, Mr. Richard Kern joined the Board of Directors of the Company.
Mr. Kern is also the President of MinQuest Inc. All of the Company’s
current mineral properties have been optioned from MinQuest. In addition,
MinQuest has been engaged by the Company as its principal exploration contractor
for all exploration performed on the Company’s current properties. As a result,
a significant portion of the Company’s expenses have been the result of
activities performed directly by Mr. Kern or by subcontractors managed by
Mr. Kern or MinQuest.





On
January 11, 2006 the Company's Board of Directors elected Dr. David Gladwell as
a member of the Board of Directors of the Company.





5


On July
12, 2006, the Company granted stock options to Mr. Neal.  Pursuant to
such agreement, Mr. Neal was granted 200,000 options, with each option entitling
him to purchase one share of common stock at a price of $1.00 until July 12,
2016.





On July
12, 2006 the Company and Mr. Neal entered into an Agreement, pursuant to which
the Company acquired 3,000,000 common shares of the Company’s stock owned by Mr.
Neal for a purchase price of $0.01 per share.   The payment of
the $30,000 purchase price was made on April 30, 2007.





On July
14, 2006 Mr. Crowe resigned as a Director of the Company.  In
connection with his resignation, the Company and Mr. Crowe entered into a
Redemption Agreement, dated July 14, 2006, pursuant to which Mr. Crowe agreed to
sell the 3,000,000 common shares of the Company owned by Mr. Crowe to the
Company at a price of $0.01 per share.  The Company paid Mr. Crowe
$30,000 and returned the shares to treasury for cancellation.





On
September 15, 2006, the Company's Board of Directors elected Mr. Jared Beebe as
a member of the Board of Directors of the Company.





Since May
2004, the Company has focused its exploration activity in the State of Nevada
and the Company’s subsidiary, Baymont Explorations Inc. has been inactive. As a
result, during the year ended January 31, 2007, Baymont Exploration Inc. was
dissolved for failure to file Annual Reports with the Registrar of Companies in
British Columbia.  Baymont Explorations Inc. had no assets and its
sole liability was to its Parent Company.





Competition





The
mineral exploration industry, in general, is intensively competitive and even if
commercial quantities of ore are discovered, a ready market may not exist for
sale of same. Numerous factors beyond our control may affect the marketability
of any substances discovered. These factors include market fluctuations, the
proximity and capacity of natural resource markets and processing equipment,
government regulations, including regulations relating to prices, taxes,
royalties, land tenure, land use, importing and exporting of minerals and
environmental protection. The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may result in our not receiving
an adequate return on invested capital.





Compliance
with Government Regulation





We are
required to comply with all regulations, rules and directives of governmental
authorities and agencies applicable to the exploration of minerals in the United
States. The federal government and various state and local governments have
adopted laws and regulations regarding the protection of natural resources,
human health and the environment. We will be required to conduct all exploration
activities in accordance with all applicable laws and regulations. These may
include requiring working permits for any exploration work that results in
physical disturbances to the land and locating claims, posting claims and
reporting work performed on the mineral claims. The laws and regulations may
tell us how and where we can explore for natural resources, as well as
environmental matters relating to exploration and
development.  Because these laws and regulations change frequently,
the costs of compliance with existing and future environmental regulations
cannot be predicted with certainty.





6


Any
exploration or production on United States Federal land will have to comply with
the Federal Land Management Planning Act which has the effect generally of
protecting the environment. Any exploration or production on private property,
whether owned or leased, will have to comply with the Endangered Species Act and
the Clean Water Act. The costs of complying with environmental concerns under
any of these acts vary on a case by case basis. In many instances the cost can
be prohibitive to development. Environmental costs associated with a particular
project must be factored into the overall cost evaluation of whether to proceed
with the project.





There are
no costs to us at the present time in connection with compliance with
environmental laws other than the reclamation bonding requirements of the Bureau
of Land Management. However, since we do anticipate engaging in natural resource
projects, these costs could occur at any time. Costs could extend into the
millions of dollars for which we could be liable. In the event of liability, we
would be entitled to contribution from other owners so that our percentage share
of a particular project would be the percentage share of our liability on that
project. However, other owners may not be willing or able to share in the cost
of the liability. Even if liability is limited to our percentage share, any
significant liability would wipe out our assets and resources.





Employees





We have
no employees as of the date of this report other than Mr. Donald Neal, our
sole officer. Our sole officer and four directors (one of which is
Mr. Neal) provide planning and organizational services for us on a
part-time basis.





Any other
services required will be conducted largely through consultants and other third
parties.





Research
and Development Expenditures





We have
not incurred any research or development expenditures since our
incorporation.





Subsidiaries





We
previously incorporated a wholly-owned British Columbia subsidiary, Baymont
Explorations Inc.   Since May 2004, the Company has focused its
exploration activity in the State of Nevada and the Company’s subsidiary,
Baymont Explorations Inc. has been inactive. As a result, during the year ended
January 31, 2007, Baymont Exploration Inc. was dissolved for failure to file
Annual Reports with the Registrar of Companies in British
Columbia.  Baymont Explorations Inc. had no assets and its sole
liability was to its Parent Company.





Patents
and Trademarks





We do not
own any patents or trademarks.





7


ITEM
1A.                      RISK
FACTORS





Factors
that May Affect Future Results





1.
We will require additional funds to achieve our current business strategy and
our inability to obtain funding will cause our business to fail.





Based
upon current plans, we expect to incur operating losses in future periods. This
will happen because there are expenses associated with the acquisition and
exploration of natural resource properties. We will need to raise additional
funds through public or private debt or equity sales in order to fund our
operations and fulfill our contractual obligations. These financings may not be
available when needed. Even if these financings are available, it may be on
terms that we deem unacceptable or are materially adverse to your interests with
respect to dilution of book value, dividend preferences, liquidation
preferences, or other terms. Our inability to obtain financing would have an
adverse effect on our ability to implement our current exploration in Nevada,
and as a result, could require us to diminish or suspend our operations and
possibly cease our existence. Obtaining additional financing would be subject to
a number of factors, including the market prices for the mineral property and
silver and copper. These factors may make the timing, amount, terms or
conditions of additional financing unavailable to us.





2.
If we do not complete the required option payments and capital expenditure
requirements mandated in our respective agreements with MinQuest, we will lose
our interest in that respective property and our business may fail.





If we do
not make all of the property payments to MinQuest or incur the required
expenditures in accordance with the respective property option agreements we
will lose our option to purchase the respective property for which we have not
made the payments and may not be able to continue to execute our business
objectives if we are unable to find an alternate exploration interest. Since our
payment obligations are non-refundable, if we do not make any payments, we will
lose any payments previously made and all our rights to the
properties.




3.
Because all of our mineral properties have been optioned from MinQuest and one
of the Directors of the Company is also a Director of MinQuest, potential
conflicts of interest could impact our business.





Mr. Kern
joined the Board of Directors of the Company on May 26, 2004. Mr. Kern is
also the president of MinQuest. All of the Company’s mineral properties have
been optioned from MinQuest. As a result, MinQuest and Mr. Kern are related
parties to the Company and both MinQuest and Mr. Kern receive substantial
payments from the Company. In addition, the Company has agreed to use
Mr. Kern as the primary contractor on exploration undertaken to date on all
of its properties. The potential exists for conflicts of interest to occur from
time to time that could adversely affect the Company’s ability conduct its
business. Also, Mr. Kern is the most knowledgeable person regarding the
historical and current state of exploration on the mineral properties currently
optioned by the Company. If Mr. Kern were to terminate his relationship
with the Company, the Company would be adversely affected while we found a
suitable replacement.  To date, there have not been any conflicts of
interest between the Company and MinQuest or Mr. Kern.





8


4.
Because our Directors serve as Officers and Directors of other companies engaged
in mineral exploration, a potential conflict of interest could negatively impact
our ability to acquire properties to explore and to run our
business.





All of
our Directors and Officers work for other mining and mineral exploration
companies.  Due to time demands placed on our Directors and Officers,
and due to the competitive nature of the exploration business, the potential
exists for conflicts of interest to occur from time to time that could adversely
affect our ability to conduct our business. The Officers and Directors’
full-time employment with other entities limits the amount of time they can
dedicate to us as a director or officer. Also, our Directors and Officers may
have a conflict of interest in helping us identify and obtain the rights to
mineral properties because they may also be considering the same properties. To
mitigate these risks, we contract several geologists in order to ensure that we
are not overly reliant on any one of our Directors to provide us with geological
services.  However, we cannot be certain that a conflict of interest
will not arise in the future.  To date, there have not been any
conflicts of interest between any of our Directors or Officers and the
Company.





5.
Because of the speculative nature of exploration and development, there is a
substantial risk that our business will fail.





The
search for valuable natural resources as a business is extremely risky. We can
provide investors with no assurance that the property we have optioned in Nevada
contains commercially exploitable reserves. Exploration for natural reserves is
a speculative venture involving substantial risk. Few properties that are
explored are ultimately developed into producing commercially feasible reserves.
Problems such as unusual or unexpected formations and other conditions are
involved in mineral exploration and often result in unsuccessful exploration
efforts. In such a case, we would be unable to complete our business
plan.




6.
Because our sole executive officer does not have formal training specific to the
technicalities of mineral exploration, there is a higher risk our business will
fail




Mr. Neal,
our sole executive officer, does not have formal training as a geologist or in
the technical aspects of management of a mineral exploration company. Our
management lacks technical training and experience with exploring for, starting,
and operating a mine. With no direct training or experience in these areas, our
management may not be fully aware of the specific requirements related to
working within this industry. Consequently, our operations, earnings, and
ultimate financial success could suffer irreparable harm due to management’s
lack of experience in this industry.





7.
Because we have not commenced business operations, we face a high risk of
business failure due to our inability to predict the success of our
business





We are in
the initial stages of exploration of our mineral claims, and thus have no way to
evaluate the likelihood that we will be able to operate the business
successfully. We were incorporated on December 21, 2001 and to date have been
involved primarily in organizational activities, and the acquisition and
exploration of the mineral claims. We have not earned any revenues as of the
date of this report.





9


8.
Because of the unique difficulties and uncertainties inherent in mineral
exploration and the mining business, we face a high risk of business
failure





Potential
investors should be aware of the difficulties normally encountered by
early-stage mineral exploration companies and the high rate of failure of such
enterprises. The likelihood of success must be considered in light of the
problems, expenses, difficulties, complications and delays encountered in
connection with the exploration of the mineral properties that we plan to
undertake. These potential problems include, but are not limited to,
unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates.





9.
Because we anticipate our operating expenses will increase prior to our earning
revenues, we may never achieve profitability





Prior to
completion of our exploration stage, we anticipate that we will incur increased
operating expenses without realizing any revenues. We therefore expect to incur
significant losses into the foreseeable future. We recognize that if we are
unable to generate significant revenues from the exploration of our mineral
claims, we will not be able to earn profits or continue operations. There is no
history upon which to base any assumption as to the likelihood that we will
prove successful, and we can provide investors with no assurance that we will
generate any operating revenues or ever achieve profitable operations. If we are
unsuccessful in addressing these risks, our business will most likely
fail.




10.
Because of the speculative nature of exploration of mineral properties, there is
substantial risk that no mineral deposits will be found and this business will
fail





The
search for valuable minerals as a business is extremely risky. Exploration for
minerals is a speculative venture necessarily involving substantial risk. The
expenditures to be made by us in the exploration of the mineral claims may not
result in the discovery of mineral deposits. Problems such as unusual or
unexpected formations and other conditions are involved in mineral exploration
and often result in unsuccessful exploration efforts. In such a case, we would
be unable to complete our business plan.





11.
Because of the inherent dangers involved in mineral exploration, there is a risk
that we may incur liability or damages as we conduct our business





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





12.
Because access to our mineral claims may be restricted by inclement weather, we
may be delayed in our exploration





Access
to our mineral properties may be restricted through some of the year due to
weather in the area. As a result, any attempt to test or explore the property is
largely limited to the times when weather permits such activities. These
limitations can result in significant delays in exploration efforts. Such delays
can have a significant negative effect on our results of
operations.





10


13.
Because our President has only agreed to provide his services on a part-time
basis, he may not be able or willing to devote a sufficient amount of time to
our business operations, causing our business to fail





Mr. Neal,
our sole officer, provides his management services to a number of companies.
Because we are in the early stages of our business, Mr. Neal will not be
spending a significant amount of time working for the Company. Mr. Neal
expects to expend approximately five hours per week on our business. Later, if
the demands of our business require the full business time of Mr. Neal, he
is prepared to adjust his timetable to devote more time to our business.
However, it still may not be possible for Mr. Neal to devote sufficient
time to the management of our business, as and when needed, especially if the
demands of Mr. Neal’s other interests increase. Competing demands on
Mr. Neal’s time may lead to a divergence between his interests and the
interests of other shareholders.





Risks
Related To Legal Uncertainty and Regulations





14.
As we undertake exploration of our mineral claims, we will be subject to
compliance with government regulation that may increase the anticipated cost of
our exploration program





There are
several governmental regulations that materially restrict mineral exploration.
We will be subject to the federal, state and local laws of the United States and
Nevada as we carry out our exploration program. We may be required to obtain
work permits, post bonds and perform remediation work for any physical
disturbance to the land in order to comply with these laws. While our planned
exploration program budgets for regulatory compliance, there is a risk that new
regulations could increase our costs of doing business and prevent us from
carrying out exploration program.





ITEM
1B                      UNRESOLVED
STAFF COMMENTS





There are
no unresolved staff comments.





ITEM
2.                      DESCRIPTION
OF PROPERTIES





We
currently maintain our corporate office at 200-4170 Still Creek Drive, Burnaby,
B.C., Canada, at a cost of CDN $616 per month. This rental is based on a one
year lease that commenced March 1, 2008.





We have
interests in the following real properties:





11


GILMAN
PROPERTY











Map of
Gilman Property located in western Nevada.





On May 7,
2004, the Company completed the formal agreement with MinQuest for an option to
acquire a 100% interest in a property known as the Gilman
Property.  The agreement requires minimum annual property option
payments with a total of $85,000 required to be paid by May 15, 2009. The
agreement also requires minimum annual exploration expenditures with a grand
total of $450,000 in expenditures required to be incurred on the property by May
15, 2009. The agreement is subject to a 3% royalty payable to MinQuest with the
Company being able to repurchase up to two-thirds of the royalty for $1,000,000
for each 1% repurchased. The Company is not required to use MinQuest for
exploration undertaken on the Gilman Property. However, at its discretion, the
Company has engaged MinQuest as the principal contractor for exploration
performed to date.




On March
22, 2005, the Company executed an amendment to the Gilman Property Option
Agreement. As a result of the amendment, the Company’s obligation to incur
$50,000 in exploration expenditures on the Gilman Property by May 2005 was moved
to May 2009.  On May 29, 2006 by way of a letter agreement the Company
and MinQuest agreed to adjust the exploration expenditure commitments such that
the amount due to be spent by May 15, 2006 was moved to May 15,
2007.  The result is that the Company was required to spend
approximately $153,000 by May 15, 2007.  With agreement from MinQuest,
upon completion of the drill program expected to be completed by the second
quarter of 2008, the Company will have met its exploration obligations to
January 31, 2008.  All other terms and commitments of the original
agreement remain unchanged.


12




To
January 31, 2008, the Company had made the initial option payment of $10,000 due
on signing as well as the $15,000 annual option payments due in May 2007, 2006
and 2005.  In addition the Company has incurred approximately $132,000
in exploration expenditures on the property. In the event the Company does not
make the indicated option payments and incur the exploration expenditures, when
demanded, the Company will lose its interest in the property.





Description
and Location of the Gilman Property





The
Gilman Property is located in Lander County, Nevada approximately 28 kilometers
south of the town of Austin, 282 kilometers east of Reno. The property consists
of 19 contiguous, unpatented mineral claims covering an approximate 390 acre
area over the eastern flank of the Toiyabe Range on the North Toiyabe Peak and
Kingston US Geological Survey 7 1⁄2’ quadrangle mapsheets. The property is
accessed from Austin by following State Highway 376 for 16 kilometers. A gravel
road leads west 3.5 kilometers to the main area of interest on the
property.





Land
claims in the district are administered under Department of Interior, Bureau of
Land Management (“BLM”) and Department of Agriculture, Forest Service (“USFS”)
under the Federal Land Policy and Management Act of 1976. The Gilman claims
cover portions of Sections 7, 8, 17, and 18 in Township 16 North, Range 44 East
in Lander County, Nevada. None of the claims have been legally surveyed. All of
the claims are on USFS administered lands, while the access to the property is
across BLM land.





Three of
the claims on the Gilman Property are registered in the name of Mr. Herb
Duerr. Under a Letter Agreement dated July 25, 2002, MinQuest leased the three
claims. The Letter Agreement permits MinQuest to assign the property and terms
of the agreement to third parties. This agreement covers an approximate 1.6
kilometer area. MinQuest located an additional 16 claims which all fall within
the area of interest covered by the agreement MinQuest has with Mr. Duerr.
Mr. Duerr subsequently granted to MinQuest the rights necessary to allow
MinQuest to enter into agreements with third parties for the additional 16
claims. To maintain the claims in good standing, maintenance fees totaling $135
per claim are payable to the BLM on or before September 1 of each year.
Recording fees of approximately $15 per claim are required by Lander County each
year.





All of
the Gilman Property is within the Toiyabe National Forest, administered by the
USFS. Exploration within national forest lands must be permitted by the USFS.
Prior to undertaking exploration activities a Plan of Operations must be
submitted to the USFS for review. An environmental assessment and public input
is required necessitating an approximate four month lead time before undertaking
any disturbance. A reclamation bond to cover costs of such disturbances is
required to be posted with the USFS. Access to the Gilman Property is across BLM
administered land. As there are existing roads and tracks in place, no permit is
required to cross these lands. No permits have been applied for or are currently
issued for the Gilman Property.





Exploration
History of the Gilman Property





There is
no known production or history data from the Gilman Property, but several pits
and two adits are evidence of prior exploration activities. Numerous companies
conducted property reviews and sampled the showings in the area, which have
locally returned high concentrations of gold.





13


Geology
of the Gilman Mineral Claims





The
geology of the property is described in a December, 2002 report by Geoffrey N.
Goodall, President of Global Geological Consultants Ltd., a private consulting
firm. Mineralization on the Gilman Property is associated with a steep, easterly
dipping and northerly trending range front fault. Jasperoid and massive quartz
veining have developed along the fault zone and local east trending faults
offset the jasperoid. Sulphide rich quartz veining occurs at the base of the
silicified fault zone. Sulphides identified at Gilman include pyrite,
arsenopyrite, galena, chalcopyrite and sphalerite. The primary focus of
exploration at the Gilman Property is for structurally hosted high-grade
gold/silver mineralization. Mineralization at Gilman consists of a gossanous
shear zone and quartz veins along the base of a range front fault zone. Gold,
silver, and copper associated with the fault system have been located in the
area.





Current
State of Exploration





The
Gilman claims presently do not have any mineral reserves. The property that is
the subject to our mineral claims is undeveloped and does not contain any
open-pit or underground mines. There is no mining plant or equipment located on
the property that is the subject of the mineral claim. Currently, there is no
power supply to the mineral claim. Our planned exploration program is
exploratory in nature and no mineral reserves may ever be found.





Geological
Exploration Program





Evaluation
of the Gilman claims to January 31, 2007 had consisted of the preparation of a
topographic base map, and surface and underground geochemical sampling. In
addition, as part of the permitting process the Company undertook an
archeological review of the property.  During 2008, the Company
received a permit to drill on the Gilman Property.  The Board of
Directors has approved an $112,500 (excluding reclamation bond and claim filing
fees) drilling budget that includes three reverse circulation holes for a total
of 3,000 feet of drilling.  The program began in January 2008 with the
goal of testing a previously untested range front fault hosted quartz vein
system. Testing has been initiated at the northern end of a mile-long
target zone.  Due to heavy snowfall only one hole was drilled in
January 2008 before the rig had to be removed from the property.  It
is hoped that drilling will be restarted in April 2008.


14





IMPERIAL
PROPERTY











Map of
Imperial Property located in western Nevada.





On June
30, 2004, the Company entered into an agreement with MinQuest for an option to
acquire a 100% interest in a property known as the “Imperial
Property.”  The Company made the first scheduled option payment of
$60,000 upon signing the agreement. The agreement requires certain additional
minimum annual property option payments with a total of $80,000 required to be
paid by July 1, 2008. The agreement also requires minimum annual exploration
expenditures with a grand total of $500,000 in expenditures required to be
incurred on the property by July 1, 2009. The property option agreement is
subject to a 3% royalty payable to MinQuest. The Company is required to use
MinQuest for exploration conducted on the Imperial Property.




To
January 31, 2008, the Company had made the initial option payment of $60,000
upon signing the agreement as well as the $20,000 option payments due in July
2007, 2006 and 2005.  In addition the Company has incurred
approximately $276,000 in exploration expenditures on the property which
satisfies the Company’s expenditure requirements to July 1, 2007.  In
the event the Company does not make the indicated option payments and incur the
exploration expenditures, when demanded, the Company will lose its interest in
the property.





15


Description
and Location of the Imperial Property





The
Imperial Property is located in Esmeralda County, Nevada, approximately 60
kilometres southwest of Tonopah and 300 kilometers northwest of Las Vegas in the
Railroad Springs Mining District. The property consists of 24 mineral claims
elongated in an east-west direction, covering approximately 450 acres located in
Railroad Pass between the Montezuma Range to the northeast and the Silver Peak
Range to the southwest. The property covers portions of two adjacent US
Geological Survey 7 1⁄2’ quadrangle map sheets:  Lida Wash, Nevada and
Montezuma Peak, SW Nevada. The center of the property is situated at
approximately 117o 31’ 43”
West longitude and 37o 33’
North latitude.





Land
claims in the district are administered under Department of Interior, Bureau of
Land Management (“BLM”) under the Federal Land Policy and Management Act of
1976. The Imperial claims cover portions of Sections 34, 35, and 36 in Township
4S, Range 40 East in Esmeralda County, Nevada. None of the claims have been
legally surveyed. The property is most easily accessed from the community of
Silver Peak, Nevada by following US route 95 west from Tonopah for a distance of
35 kilometers and turning south onto paved State Highway 295 for 21 kilometers
and then west on a secondary gravel road for 500 meters to the eastern claim
boundary.





MinQuest
is the registered owner of 14 of the claims that make up the Imperial Property.
Ten of the claims (Lida 1 to Lida 10) are registered to Richard Kern, Michael
Forth, and James Motter. Under the terms of a Letter Agreement, the Lida claims
have been leased to MinQuest for a period of 20 years. The lease allows MinQuest
to transfer title to third parties providing all conditions of the original
agreement are met. To maintain the claims in good standing, maintenance fees
totaling $135 per claim are payable to the BLM on or before September 1 of each
year. Recording fees of approximately $15 per claim are required by Lander
County each year.





Exploration
History of the Imperial Property





The
Imperial was first developed in the 1920’s but apparently had little or no
production until the late 1930’s. The Imperial Mine produced approximately
10,000 tons of ore and was probably shut down at the beginning of World War II.
The mine has two adits, the longest of which has approximately 2,600 feet of
drifts and crosscuts. A 200 foot shaft, which is not accessible, is also located
on the property.





The
property has been explored by Energy Reserves Group, Goldsil Mining, Felmont
Oil, and Nevada Star Resource Corporation. Felmont conducted the bulk of the
work during 1983 – 1984 including drilling 19 reverse circulation holes. Five of
these holes intercepted significant thickness of oxide gold in “Carlin-style”
mineralization. Six of their holes were drilled on the area that hosted the
Imperial Mine. No other holes were drilled on this target that is more than a
mile long. Felmont dropped the property partly because they lost the rights to
the portion of the claim covering the Imperial Mine and partly because they were
taken over by Homestake.





Nevada
Star conducted a soil survey over the non-Imperial Mine claim block in 1987 and
partially tested the area around two of the better Felmont holes with shallow,
close-spaced grid drilling. This work which defined an area of gold
mineralization and confirmed the presence of Carlin-style gold in silty rocks
adjacent to northeast trending high angle feeder faults, was to be followed up
by drill testing of this and several other targets. However, Nevada Star was
unable to raise the capital needed to continue and relinquished the
property.





16


Geology
of the Imperial Mineral Claims





The
geology of the property is described in a December, 2002 report by Geoffrey N.
Goodall, President of Global Geological Consultants Ltd., a private consulting
firm. Regionally, the Imperial Property is located within the Walker Lane which
hosts several precious metal deposits. Two distinct types of gold mineralization
occur on the Imperial Property. The first type is associated with high angle
bodies of jasperoid that outcrop along the east-west axis of the property. The
second type of mineralization is identified from drill hole data in the eastern
part of the property. Here gold mineralization is associated with flat lying
bedding and is disseminated throughout highly altered limonite stained
decalcified siltstones.





Structurally,
two fault sets appear closely related to mineralization. The Imperial Fault and
other associated west-northwest structural zones have received the bulk of the
exploration within the district. Numerous northeast trending faults, some of
which are shown by soil geochemistry, have received little attention as possible
feeders. Nearly all gold anomalies from the eastern half of the claims have a
northeast trend. These anomalies are thought to be leakage along feeder
faults.





Three
primary Carlin-type targets are present at Imperial. The first and most
important is the Imperial Target that has only one hole on the favourable side
of the approximately 1,600 meter long structure. The second target, called the
Resource Target is an open-ended 500 meter long gold in soil anomaly along a
northeast trending fault system. A final target called the Jasperoid Breccia
Target is a large anomaly under cover in the central portion of the claim group.
The anomaly is 400 meters long and has gold in soil anomaly at its west
end.





Current
State of Exploration





The
Imperial claims presently do not have any mineral reserves. The property that is
the subject to our mineral claims is undeveloped but does contain two adits, the
longest of which has approximately 2,600 feet of drifts and crosscuts. There is
no mining plant or equipment located on the property that is the subject of the
mineral claim. Currently, there is no power supply to the mineral
claim.





Exploration
of the enargite-bearing high-grade vein system is warranted simultaneously with
Carlin-style exploration. Our planned exploration program is exploratory in
nature and no mineral reserves may ever be found.





Geological
Exploration Program





The
Company has completed a two phase exploration drill program that focused on the
high-grade vein and disseminated gold targets within the Imperial Property. The
program included 31 reverse circulation holes for a total of 7,935 feet of
drilling.


17


The
results of the drilling are shown below:


IMPERIAL DRILLING
RESULTSHole
            
            
            Vertical
            Total
            From
            To
            Interval
            Gold
            SilverNo.
            Target
            Azimuth
            Angle
            Depth
            (feet)
            (feet)
            (feet)
            (oz/ton)
            (oz/ton)IR-1
            Imperial
      Fault
            218
            -40
            120
            70
            80
            10
            0.026
            <0.01IR-2
            Imperial
      Fault
            218
            -72
            300
            
            
            
            <0.01
            <0.01IR-3
            Imperial
      Fault
            202
            -40
            250
            50
            55
            5
            0.048
            0.03IR-4
            Imperial
      Fault
            202
            -75
            355
            100
            105
            5
            0.026
            0.02IR-4
            
            
            
            
            105
            115
            10
            0.502
            0.54IR-4
            
            
            
            
            115
            145
            30
            0.036
            0.06IR-5
            Imperial
      Fault
            202
            -45
            300
            0
            15
            15
            0.011
            0.047IR-5
            
            
            
            
            95
            105
            10
            0.016
            <0.01IR-6
            Imperial
      Fault
            202
            -80
            275
            
            
            
            <0.01
            <0.03IR-7
            Imperial
      Fault
            202
            -45
            200
            80
            85
            5
            0.019
            0.02IR-7
            
            
            
            
            120
            140
            20
            0.037
            0.14IR-8
            Imperial
      Fault
            202
            -75
            400
            30
            45
            15
            0.012
            0.03IR-8
            
            
            
            
            190
            225
            35
            0.020
            0.06IR-9
            Imperial
      Fault
            202
            -45
            255
            160
            175
            15
            0.071
            0.05IR-10
            Imperial
      Fault
            202
            -75
            450
            145
            160
            15
            0.020
            0.012IR-10
            
            
            
            
            170
            180
            10
            0.014
            0.02IR-11
            Resource
            304
            -46
            150
            
            
            
            <0.01
            <0.05IR-12
            Resource
            303
            -45
            200
            
            
            
            <0.01
            <0.13IR-13
            Resource
            302
            -45
            200
            55
            60
            5
            0.018
            0.04IR-13
            Resource
            
            
            
            90
            100
            10
            0.022
            0.02IR-14
            Resource
            302
            -45
            205
            45
            60
            15
            0.032
            0.01IR-15
            Resource
            303
            -45
            200
            
            
            
            <0.01
            <0.03IR-16
            Resource
            305
            -45
            200
            40
            45
            5
            0.011
            0.26IR-17
            Resource
            305
            -45
            200
            45
            65
            20
            0.035
            0.08IR-18
            Resource
            303
            -45
            200
            50
            55
            5
            0.012
            0.15IR-19
            Resource
            304
            -45
            200
            
            
            
            <0.01
            <0.28IR-20
            Resource
            303
            -45
            200
            
            
            
            <0.01
            <0.02IR-21
            Resource
            304
            -45
            200
            115
            125
            10
            0.018
            0.01IR-22
            Resource
            302
            -45
            190
            0
            35
            35
            0.072
            0.08IR-23
            Resource
            305
            -45
            85
            10
            25
            15
            0.017
            0.01IR-23
            
            
            
            
            60
            85
            25
            0.034
            0.02IR-23
            
            Including
      at bottom of hole
            80
            85
            5
            0.096
            0.01IR-24
            Resource
            305
            -45
            150
            25
            55
            30
            0.023
            0.20IR-25
            Jasperoid
      Breccia
            325
            -45
            250
            
            
            
            <0.010
            <0.52IR-26
            Jasperoid
      Breccia
            200
            -60
            300
            
            
            
            <0.010
            <0.02IR-27
            Imperial
      Fault
            345
            -60
            400
            85
            105
            20
            0.017
            0.05IR-27
            
            
            
            
            110
            120
            10
            0.018
            0.01IR-28
            Imperial
      Fault
            180
            -70
            400
            265
            270
            5
            0.035
            0.28IR-29
            Imperial
      Fault
            204
            -45
            300
            15
            25
            10
            0.022
            0.01IR-29
            
            
            
            
            30
            50
            20
            0.079
            0.03IR-29
            
            
            
            
            70
            75
            5
            0.407
            0.114IR-29
            
            
            
            
            75
            105
            30
            0.069
            0.132IR-30
            Imperial
      Fault
            204
            -75
            400
            
            
            
            <0.01
            <0.02IR-31
            Imperial
      Fault
            206
            -75
            400
            
            
            
            <0.01
            <0.01Total
            
            
            
            7,935


18


The first
phase of the program was completed in the fall of 2004 and included 10 drill
holes for a total of 2,995 feet. All of these holes were drilled on the Imperial
Target.  In addition to the drilling the Company has also conducted
underground sampling. A total of 40 samples have been taken of quartz vein
related mineralization underground. This work confirmed the presence of high
grade values in the two adits sampled and will help target further
drilling.





Of the
first ten drill holes drilled, several intersected stopes which were not visible
on existing underground maps. This was to be expected to some extent, as Phase I
of the drill program was designed to test an area of previous underground mining
which had already had extensive workings. Of particular interest was drill hole
IR-4 which intersected 10 feet of high grade gold. This 10 foot interval (105’
to 115’) averages 0.50 oz/ton gold occurs within a 40 foot interval (110’ to
140’) that averages 0.154 oz/ton gold. Seven of the ten holes drilled contain
gold intercepts exceeding 1.0 ppm (0.029 oz/ton).





The
second phase of the drilling was completed in the fall of 2005.  This
phase included 21 holes for a total of 4,940 feet.  The Company
drilled 14 holes in the Resource Target area with all but 5 containing +0.01
oz/ton gold intercepts.  Two of the holes intersected, or came close
to intersecting, the feeder structure within the favorable host sediment. Hole
IR-22 contained 35 feet averaging 0.072 oz/ton gold and IR-23 contained 25 feet
at 0.034 oz/ton gold including 5 feet at 0.096 oz/ton at the bottom of the
hole.  The drilling indicates the gold is located within one nearly
flat-lying favorable sedimentary unit (a calcareous siltstone) that is
approximately 50 feet thick. Gold grade drops off quickly as one moves away from
the feeder fault. Holes drilled beneath the mineralized unit, even those
intersecting the feeder fault, were barren. The flat-lying mineralization
appears to dip gently to the northwest and is approximately 200 feet wide and 40
to 50 feet thick. The gold bearing horizon has not been drilled to the
southwest.





Two holes
targeted the Jasperoid Breccia Target with one hole being drilled under the gold
bearing jasperoid and another targeting the possible intersection of the
northeast trending feeder fault with the Imperial fault.   Both
of these holes (IR-25 and26) were barren. Just as at the Resource Target, these
holes drilled beneath the favorable stratigraphy and missed the mineralization.
Future drilling should be collared above the favorable horizon in proximity to
the feeder fault.





In
addition to the drilling, a total of 40 channel (continuous and consistent
amount) samples were taken across veins exposed in the upper and lower adits.
Sample widths were noted. Once at the assay lab each was weighed. Sample
preparation, performed by ALS Chemex in Reno, Nevada, consisted of crushing the
entire sample, splitting off 1,000 grams, pulverizing all 1,000 grams and
splitting off 50 grams of this pulp for fire assay for gold and 50 grams for
silver.





Results
of all of the channel sampling done are noted in the table below:





19


IMPERIAL
UPPER ADIT RESULTS





Sample
      Number
            Weight
      (lb)
            Width
      (ft)
            Gold
      (oz/ton)
            Silver
      (oz/ton)IUA
      0
            4.97
            6.0
            0.232
            0.123IUA
      10
            5.08
            4.0
            0.507
            0.464IUA
      30
            7.63
            4.0
            0.035
            0.020IUA
      40
            6.86
            4.0
            0.275
            0.079IUA
      50
            8.80
            2.5
            0.248
            0.201IUA
      65
            5.76
            3.0
            0.340
            0.239IUA
      70
            9.10
            3.0
            0.271
            0.213IUA
      80
            7.46
            3.0
            0.165
            0.239IUA
      93
            6.18
            2.0
            0.249
            0.181IUA
      105
            9.26
            4.0
            0.331
            0.175IUA
      120
            9.88
            3.0
            0.615
            0.978IUA
      128
            6.31
            2.5
            1.517
            1.083IUA
      140
            8.60
            1.5
            0.106
            0.149IUA
      150
            6.31
            1.5
            0.045
            0.018IUA
      175
            7.59
            2.5
            7.636
            0.251IUA
      190
            11.18
            3.0
            0.112
            0.032IUA
      210
            10.10
            3.0
            0.127
            0.114IUA
      230
            11.79
            2.5
            0.012
            <0.015IUA
      250
            10.67
            2.0
            0.014
            0.018





IMPERIAL
LOWER ADIT





Sample
      Number
            Weight
      (lb)
            Width
      (ft)
            Gold
      (oz/ton)
            Silver
      (oz/ton)ILA
      50
            7.04
            1.0
            0.143
            0.742ILA
      70
            5.72
            1.5
            0.033
            0.053ILA
      90
            8.87
            2.5
            0.183
            0.850ILA
      110
            10.12
            3.0
            0.154
            0.844ILA
      137
            11.53
            2.0
            0.506
            1.451ILA
      152
            10.19
            1.5
            0.045
            0.085ILA
      170
            7.00
            1.5
            0.004
            0.015ILA
      202
            9.13
            2.0
            0.048
            0.020ILA
      250
            7.72
            2.5
            0.053
            <0.015ILA
      300
            7.37
            3.0
            0.004
            0.035ILA
      350
            8.16
            3.0
            0.002
            0.064ILA
      400
            8.65
            2.0
            0.013
            0.015ILA
      420
            7.15
            2.5
            0.341
            0.044ILA
      430
            10.52
            1.5
            0.379
            0.020ILA
      444
            7.90
            2.0
            0.159
            0.020ILA
      450
            10.01
            3.0
            0.102
            0.023ILA
      460
            12.52
            1.5
            0.089
            0.053ILA
      500
            10.27
            2.5
            0.178
            0.397ILA
      510
            8.98
            3.0
            0.497
            0.131ILA
      520
            5.19
            3.0
            0.148
            0.155ILA
      527
            5.96
            2.0
            0.113
            0.018





20


The
Company is currently reviewing its plans for the Imperial Property but did not
undertake an exploration on the Imperial Property in 2007 nor does it intend to
incur any significant exploration expenses on the property in 2008.





HERCULES
PROPERTY











Map of
Hercules Property located in western Nevada.




On
October 22, 2004, the Company entered into an agreement with MinQuest for an
option to acquire a 100% interest in a property known as the “Hercules
Property.”  Concurrent with the signing of the agreement, the Company
made the first property option payment of $20,000. The agreement requires
certain additional minimum annual property option payments totaling $200,000 and
minimum annual exploration expenditures totaling $4,050,000 to be paid or
incurred by November 25, 2014. The agreement is subject to a 3% royalty payable
to MinQuest with the Company being able to repurchase up to two-thirds of the
royalty for $3,000,000.  On May 29, 2006 by way of a letter agreement,
the Company and MinQuest agreed to adjust the timing of exploration expenditures
such that an aggregate amount of approximately $300,000 was to be spent by
September 1, 2006.





21


To
January 31, 2008, the Company had made the initial option payment of $20,000 due
on signing as well as the $20,000 option payments due in November 2007, 2006 and
2005.  In addition the Company has incurred approximately $714,000 in
exploration expenditures on the property which satisfies the Company’s
expenditure requirements to January 31, 2008.  In the event the
Company does not make the indicated option payments and incur the exploration
expenditures, when demanded, the Company will lose its interest in the
property.





Description
and Location of the Hercules Property





The
Hercules Property is located in Lyon County, Nevada, approximately 40 kilometers
southwest of Reno. Access is via 11 kilometers of paved and dirt road from
Dayton.  The property consists of 40 unpatented
claims.  Land claims in the district are administered under Department
of Interior, Bureau of Land Management (“BLM”) under the Federal Land Policy and
Management Act of 1976. MinQuest holds a 100% interest in these claims via
unpatented mining claims.





Exploration
History of the Hercules Property





The
Hercules Property was first discovered in 1860 by pioneers during the famous
“Washoe Rush”. Production from high grade veins started as early as 1870 and
occurred as late as 1956. The Hercules Mine, located on the property, had
production of 5,000 ounces of gold and 20,000 ounces of silver as indicated from
stoping. Recent exploration efforts began in the early 1980’s when placer mining
was attempted on the eastern portion of the property, below the Hercules Mine.
Since then, Asamera, St. Joe, Horizon Gold, Phelps Dodge and Adamas\GSL have
conducted exploration efforts totaling over US$2,000,000 in
expenditures.  Drilling undertaken by predecessor companies are as
follows:






            St.
      Joe
            1985
            11
      RC holes for 2,715 feet (882 m)
            Asamera
            1985
            10
      Core holes for 4,314 feet (1,400 m)
            Horizon
      Gold
            1986-90
            138
      RC holes for 18,091 feet (5,874 m)
            Phelps-Dodge
            1995-97
            17
      RC holes for a total of 8,805 feet (2,859
m)





A total
of 33,925 feet (11,015 m) in 176 holes have been completed on the property. The
vast majority of the drilling targeted shallow open pit heap-leachable gold
mineralization. No systematic exploration of the high-grade vein targets has
been completed.





Geology
of the Hercules Mineral Claims





The
property lies within the Walker Lane structural corridor.  The Walker
Lane is characterized by a strong northwesterly structural fabric causing
easterly rifting. As with much of the Walker Lane rocks at Hercules consist
dominantly of Tertiary age pyroclastic volcanics and volcaniclastic sediments
cover the entire property. The pyroclastic rocks have been intruded by several
volcanic vents and plugs. Thin post-mineral basalt and rhyodacite of Pliocene
age cover mineralization on the northern and western sides of the
property.





22


The
Hercules Property contains one of the most significant untested Comstock-type
vein systems in the Western U.S. The depth of erosion of the Hercules vein
system is evidenced by the following:





1.
            Multiple
      parallel veins that should merge at
depth.


2.
            Presence
      of low-temperature alteration minerals such as chalcedony, calcite, and
      kaolinite in exist in veins at current
surface.


3.
            Presence
      of low temperature elements such as mercury, arsenic and
      antimony.


4.
            A
      low silver to gold ratio relative to bonanza
  horizon.


5.
            Low
      base metal content (lead, zinc) relative to bonanza
    horizon.


6.
            Localized
      high-grade gold (+0.5 oz/ton) in veins at current erosion
      surface.





The
Hercules mineralization is largely localized along two parallel dip-slip
multi-vein structures which trend north-northeast. The structures have
near-vertical dips and have been offset by two east-west faults. Gold/silver is
hosted by permeable volcanics/volcaniclastics as well as by the high-angle
structures. The highest grade mineralization occurs in quartz veins within the
faults. Silicification and banded quartz-adularia veins are surrounded by
intense clay alteration grading to weak propylitic alteration.





The
second target type at Hercules is bulk-minable, heap-leachable gold/silver.This
area contains the following individual target areas:





•
            Zones
      C/D/E contain significant mineralization.within three separate pods.
      Drilling is wide spaced and incomplete between the three pods. The pods
      remain open ended along strike and down dip. These pods may join along
      strike.  Two claims not owned by MinQuest cover part of this
      resource. In the past, these claims were leased for reasonable
      terms.





•
            Zone
      A/B is an extension of the C/D/E/ zone. The A/B zone contains additional
      mineralization of gold and silver.





•
            The
      West Cliff Zone also contains additional mineralization as indicated in
      widely spaced drilling and surface sampling results. Untested
      mineralization occurs north of the West Cliff resource. This area has a
      5,000 feet (1620 m) strike length.





•
            The
      Loaves Zone is the last target in this
area.





All of
these areas remain open along strike and at depth.





St. Joe
and Horizon Gold performed bulk tests from drill cuttings and surface samples.
The average recovery for gold was 88%. The process involved crushing and
pulverizing the sample and completing a bottle roll using over 50 separate
samples. Although the tests are encouraging, further metallurgy is needed to
determine recoveries of various size fractions.





A bonanza
grade gold/silver deposit is the primary target at Hercules. All of the
mineralized vein structures listed previously are targets. Exploration should
begin in areas with higher-grade gold values at surface, with higher silver/gold
ratios, more base metals, higher temperature alteration suites and where
multiple veins occur. This will ensure the shallowest targets will be tested
first. The most likely site to start as indicated by initial study is area D and
E of the Hercules Mine target. Accurate drilling down dip in 100 m steps will
allow spot coring of the target horizon at 300-400 m beneath the
surface.





The
secondary target is open pit bulk-minable heap leachable gold/silver for which
some resources have already been established. The size and grade of these
resources could be increased by drilling across their feeder structures and by
drilling possible extensions.


23


The West
Cliff target is located in the southwest portion of the property. This area is
defined by 17 widely spaced drill holes and underground and surface channel
sampling results. Soil sampling and drilling suggests a second en-echelon zone
occurs 300 feet (100 m) east of the main zone.  The area is open ended
for 1000 feet (305m) north, 600 feet (180 m) south and down dip to the
west.  Only two holes have tested the parallel zone.





The
Loaves target consists of a zone of silicified volcanics containing banded
quartz veins. The zone has a strike length of over 5,000 feet (1520 m) and
extends under cover to the northwest. This zone is probably the offset extension
of the West Cliffs resource. Only two of ten holes drilled to date have tested
the structure. Previous drilling has targeted the footwall side of the fault.
Even so, long intervals of anomalous gold with occasional short intervals of
higher grade were encountered. This target requires angle drilling to test the
hanging wall side of the structure to penetrate the fault zone at depth and
along strike.





The
Hercules Mine and Extensions (C\D\E) targets cover the main Hercules structure
and parallel fault zones. Drilling and sampling from underground and outcrop
areas have encountered relatively thick intercepts of gold and silver. This wide
spaced drilling (both core and RC) and underground sampling indicate multiple
mineralized structures with associated disseminated mineralization. The core
samples were only partially assayed and may contain more gold than is displayed
on the cross sections. The zone remains open for at least 1000 feet (300 m)
north, over 1000 feet (300 m) south. Parallel mineralized structures are known
to exist further to the east within the claim block.





The
southern of the three Loaves targets contains 3 holes and surface panel
sampling. Soil sampling suggests a minimum of 1700 feet (515 m) of strike length
that remains untested.





Current
State of Exploration





The
Hercules claims have had a significant amount of exploration undertaken in their
history. However, they do not currently have any mineral reserves. The property
that is the subject to our mineral claims is undeveloped. There is no mining
plant or equipment located on the property that is the subject of the mineral
claim. Currently, there is no power supply to the mineral claim. Our planned
exploration program is exploratory in nature and no mineral reserves may ever be
found.





Geological
Exploration Program





The
exploration potential at the Hercules Property is considered excellent. Several
of the near-surface targets were poorly tested and are open between the current
targets. Obvious extensions of drilling, soil and rock gold anomalies and high
grade veins in old workings suggest not only an excellent chance of increasing
the known resource of open pit mineralization but of finding a world class
bonanza gold/silver deposit at depth. The vast majority of the previous resource
drilling was vertical and did not test for these potentially higher grade fault
zones.





During
2005 the Company undertook an exploration program on the Hercules
Property.  The program consisted of geologic mapping, geochemical
sampling, compilation of previous drilling data, and a re-evaluation of
geophysical surveys.  Also, a total of 105 soil samples were collected
on the north end of the property.  The geophysical targets on the
northern portion of the claim block were reviewed and evaluated.  The
information developed from previous exploration groups was combined with new
information from the geophysical surveys and recent mapping to place 7 reverse
circulation holes to determine strike, dip and stratigraphy within the A, B, C,
West Cliffs and Bread Loaves mineralized zones.  The structures
believed to be present in these areas would provide a pathway for mineral rich
fluids.  The fluids should pond within certain porous rock types below
impermeable stratigraphy.


24


Six drill
holes were located on the margins of the previously defined mineralized zones.
The seventh hole tested a parallel alteration zone to the west of any previous
drilling.  Seven drill holes were completed for 2,470 feet (753
m).  The drilling extended the known precious metals mineralization
near surface and between pods A-C.  The holes also defined several
fault zones that fed these mineralized areas.  Generally, the fault
zones were encountered within an impermeable mudstone unit.  The
faults were represented by bleaching, iron oxide and clay alteration within the
mudstone.  The faults were 3 to 8 meters wide and contained anomalous
gold values in the 0.01 to 0.05 g/t range.  It is believed that this
mudstone unit restricted the flow of mineralizing fluids and may have caused
ponding of the fluids at its base.





The
following table lists the intercepts in each drill hole:





Drill
      Hole #
            Gold
      Eq g/t
            Thickness
      (m)
            From
      (m)
            To
      (m)HY
      05-01
            0.95
            12.2
            6.1
            18.3HY
      05-02
            0.379
            1.5
            32.0
            33.50.33
            10.7
            44.2
            54.90.83
            3.0
            65.5
            68.5HY
      05-03
            0.58
            3.0
            32.0
            35.00.32
            4.5
            41.2
            45.70.54
            3.0
            51.8
            54.80.59
            6.1
            83.8
            89.9HY
      05-04
            0.38
            6.1
            3.0
            9.10.61
            1.5
            10.7
            12.20.45
            1.5
            42.7
            44.20.42
            1.5
            54.9
            56.4HY
      05-05
            NSVHY
      05-06
            0.55
            1.5
            51.8
            53.3HY
      05-07
            NSV





NSV = no
significant values found





All holes
successfully identified altered and mineralized structures.  Holes
05-01 through 05-04 extended the known ore zones of A through C east and
north.  It appears that drill hole 05-05 may have missed the West
Cliffs vein due to thicker alluvial cover than anticipated.  Hole
05-07 was the only hole that tested outside of the known
mineralization.  The hole intersected an opaline rich structure hosted
within basalt and andesite west of any previous drilling. The structure
contained sulfide minerals (mainly pyrite) and low temperature quartz, but did
not contain any significant precious metal values.  The cuttings were
not assayed for trace elements.  This structure is along strike of an
interpreted fault defined by an IP geophysical survey to the north.





During
2006 the Company completed a drill program consisting of 10 holes for a total of
4,805 feet which was completed in March 2007.





Hole
H0601 - tested altered volcanic rock on the west side of the
property.  This hole was angled at -45 degrees N25E to test a fault
zone containing silicified and pyritic mudstone and tuff at
surface.  This near surface zone of alteration was encountered from
surface to 45 feet. The hole passed through clay altered volcanic tuff and
remained in unaltered mudstone from 140 feet to 480 feet.  The last 20
feet of the drill hole from 480 to 500 feet contained unaltered
latite.  In other areas of the property the mudstone unit varies from
140 to 210 feet in thick.  Given the angle of the drill hole and the
possibility of relatively flat bedding, the true thickness of the mudstone in
H0601 is probably 230 to 240 feet.  This is consistent although a
little thicker than the suggested thickness from elsewhere on the
property.


25


Holes
H0602 to H0605 - targeted the eastern structural trend.  H0602,
H0602A and H0603 were step offs of the 2005 drilling efforts.  This
year’s drill holes were drilled at steeper angles from -60o to
-70o
and to depths of 500 to 600 feet to provide deeper penetration of the mudstone
unit in resource area “A”.  The holes were stepped back east from the
2005 drill holes by 100 feet.  No faults were apparent in the
mudstone, although the faulting projected from the 2005 drilling suggested a 60
to 65 degree dip to the east.





Hole
H0602 was drilled 100 feet east of H0501 N60W at an angle of -70.  The
hole penetrated 65 feet of post mineral dacite then encountered silicified and
clay altered volcanic agglomerate to 120 feet.  At this point the hole
was lost due to caving.  A five foot intercept of 2.32 ppm gold within
a broader 20 feet zone of .89 ppm gold was encountered immediately below the
dacite cap.





Hole
H0602A was drilled 20 feet northeast of 0602 due east at an angle of
-60.  This hole encountered 10 feet of 0.2 ppm gold from 75 to 85 feet
and at least one five foot sample that was a void (no sample
collected).  The alteration was similar to H0602 just below the
dacite.  H0602A contained 260 feet of mudstone before encountering an
unaltered crystal tuff to volcanic agglomerate at 490 feet.  No
alteration or elevated gold values were encountered below the initial gold
values described above.





Hole
H0603 was drilled 400 feet north of H0602 on the northern margin of the “A”
resource described in previous reports.  H0603 offset H0503 by 125
feet east.  Hole H0603 was set up to intersect the projected “A”
structure perpendicularly.  The hole was angled N60W at -70
degrees.  It entered the mudstone unit at 30 feet and remained in
mudstone for its entire length.  Clay alteration of the mudstone was
noted between 30 and 125 feet, but no significant gold values or silica were
present within this zone.   It is assumed that a fault zone down
dropping the mudstone to the west, artificially thickening the unit by repeating
the sequence.





Holes
H0604 and H0605 were drilled to the west of resource area “C”.  Hole
H0604 was drilled due east at -45o.  Hole H0605 was drilled S80E at
-45o.  The “C” resource area is poorly defined by
drilling.  Only 2 holes were previously drilled on the western side of
the “C” resource fault zone.  Only one of those contained ore grade
values and that hole was positioned on top of the fault.  The 2006
drill program stepped back 100 to 200 feet from the fault to determine if the
fault rolled back to the west.  Both holes encountered significant
near surface alteration and mineralization from 40 feet to depth.





Hole
H0604 was drilled furthest south and encountered 50 feet of 0.45 ppm gold from
70 feet to 120 feet.  An additional five feet assayed 0.42 ppm at 250
feet.  Both mineralized zones contained significant quartz veining,
silicification and argillization.  The second area of deeper
mineralization may be related to high-angle faulting.  Drill hole
H0605 was positioned 300 feet northwest of H0604.  H0605 penetrated
105 feet of alluvium before encountering 60 feet of 0.49 ppm
gold.  Within this mineralized interval, 25 feet of 0.71 ppm was
intercepted with a best of 1.345 ppm over five feet.  These intercepts
have significantly increased the area of the “C” resource and provided excellent
potential for discovery of additional resources to the west of the known
mineralization.





Holes
H0606 to 0608 – were all drilled in the West Ridge resource
area.  The holes offset known mineralization in the pediment and were
projected to encounter vein mineralization at depth.  All of the drill
holes encountered significant alteration with anomalous gold and silver values
over widths of 25 to 80 feet thick.  Generally, these altered zones
start immediately below alluvial cover.  The alteration consists of
stockwork quartz-calcite veining and silicification within a crystal tuff to
tuff breccia.





26


H0606 was
the furthest south drill hole in the 2006 drill program.  It offset
Phelps Dodge drill holes with significant mineralization in alluvium
cover.  Hole 0606 intersected the best overall gold and silver values
of the three holes drilled in this area.  The mineralization started
at the base of the alluvium (140 feet) and continued over a width of 55
feet.  The best interval averaged 0.47 ppm gold and 11 ppm silver over
40 feet or 10 feet of 0.72 ppm gold and 13 ppm silver.  Although these
values are not stunning, this hole extends mineralization from the Phelps Dodge
drilling.  It is the furthest west hole drilled to date and indicates
the mineralization continues to get better further to the west.





H0607 was
drilled about 400 feet northeast of H0606.  This hole contained
approximately 50 feet with an average of 0.1 ppm gold and 1 ppm
silver.  Although this is not ore grade, the zone is definitely
significant.  It suggests a rather large area of alteration which is
totally blind and open to the north, west and south in relatively flat landscape
which would be easy to explore.  Weak alteration and mineralization
continues in H0607 to 480 feet.  The drilling continued to 530 feet,
but alteration tapers off dramatically.





H0608 was
drilled about 300 feet further to the northeast to offset a Phelps Dodge drill
hole.  The PD hole encountered 20 feet of 0.23 opt gold (about 7.5 ppm
gold).  In H0608 the entire hole contained moderately altered volcanic
breccias with minor quartz stockworks and moderate bleaching of mafic
minerals.  The entire hole was anomalous in gold (0.0X
ppm).  Several individual zones contained 15 to 20 feet thick
intercepts of mineralized quartz veining.  The gold and silver values
remained weak compared to the previous drilling by Phelps
Dodge.  However, the discreet zones of mineralization generally
averaged 0.2 ppm gold and 12 ppm silver within thicker intercepts of 0.0X
ppm.  Individual five feet samples assayed 0.3 to 0.45 ppm gold and up
to 30 ppm silver.





Holes
H0609 and H0610 - targeted two altered structures within a crystal tuff
unit.  The mineralized area is 800 feet west of the western margin of
resource “A”.  Both drill holes were located to intersect apparent
mineralized structures observed on surface.  Drill hole H0609 was
drilled due east at -60 degrees.  It intersected 15 feet of gold
mineralization (0.66 ppm) from 65 to 80 feet.  This zone may be
related to bedding replacement of a volcanic tuff.





Hole
H0610 encountered 15 feet of 0.24 ppm gold and 3 ppm silver in a near surface
zone of silicified volcanic material between 55 and 70 feet.  An
additional zone of silicified and mineralized material was encountered between
180 and 200 feet.  This zone included an average of 0.2 ppm gold and 2
ppm silver which is likely coincident with the obvious structure on
surface.  Both drill holes encountered blind near surface
mineralization adjacent to structures that had been previously recognized and
drilled.





The 2006
drilling program was successful in expanding the known target areas and finding
new areas of near-surface, low grade gold and silver.  The new
intercepts in the “C” resource area (H0604 and H0605), and the West Cliffs zone
(H0606 through 0608) combined with the intercepts from the 2005 drilling program
in the “A” area indicate potential for an increase in the historic target
zones.  Drilling in the north central area also provided new evidence
for increasing targets (H0609 and 0610). The interpretation of the 2006 drilling
results also suggests faults previously believed to dip to the east may roll to
the west at relatively shallow depth.  This finding coupled with the
potential for increase of near-surface resources indicates changes are necessary
to the exploration philosophy at Hercules.





Future
drill programs will be concentrated on further developing the shallow targets on
both the east and west sides of the known structures.  Previously, the
historic drilling had concentrated on the east side of the structures, defining
the shallow resources in “A” through “C”.   The recent holes
drilled in the 2005 and 2006 exploration programs suggest further near-surface
targets are likely to be developed within the “A” through “C” areas, the West
Cliffs hanging wall and the central core between these two areas.  The
topography is relatively flat allowing for an inexpensive, shallow drilling
program.





27


Drilling
to depth on the structural zones remains a significant target for developing
high grade resources at depth.  Because of the interpretation of the
deeper drill holes completed during this program, it is recommended that the
next set of deep holes on the property should be drilled from west to east on
the northeastern veins within the “B” to “C” resource areas.  The
interpretation of the recent drilling suggests that the veins may roll over
developing dips of near vertical to westerly at depths of less than 500
feet.





During
2007 the Company conducted a drill program that was completed in March 2008. The
program included the drilling of 24 holes for a total 7,415 feet.  The
budget for the program approved by the Board of Directors was
$275,000.  The Company is awaiting the final assay and report
results.





CORTEZ
PROPERTY











Map of
the Cortez Properties located in western Nevada.







28


On
February 28, 2005, the Company entered into an agreement with MinQuest for an
option to acquire a 100% interest in properties known as the “Crescent Fault
Property,” the “Bankop Property,” and the “Bullion Mountain Property”
(collectively, the “Cortez Property”). Concurrent with the signing of the
agreement, the Company made the first property option payment of $65,000. The
agreement requires certain additional minimum annual property option payments
totaling $445,000 and minimum annual exploration expenditures totaling
$1,150,000 to be paid or incurred by February 15, 2010. The agreement is subject
to a 3% royalty payable to MinQuest. In addition, the Company is required to use
MinQuest for exploration activities undertaken on the properties.  On
May 29, 2006 by way of a letter agreement, the Company and MinQuest agreed to
adjust the timing of exploration expenditures such that an aggregate amount of
approximately $250,000 was to be spent by September 1, 2006.





To
January 31, 2008, the Company had made the initial option payment of $65,000 due
on signing as well as the $40,000 option payment due February 2007 and the
$30,000 option payment due in February 2006.  In addition the Company
has incurred approximately $230,000 in exploration expenditures on the
property.  With agreement from MinQuest, upon the completion of the
drill program planned for the second quarter of 2008 the Company will have met
its exploration requirements to February 15, 2008.  In the event the
Company does not make the indicated option payments and incur the exploration
expenditures, when demanded, the Company will lose its interest in the
property.





CRESCENT
FAULT PROPERTY





Description
and Location of the Crescent Fault Property





The
Crescent Fault Property is located in Eureka County, Nevada and consists of 33
unpatented claims. Access to the property is via paved highway and graded gravel
road. Land claims in the district are administered under Department of Interior,
Bureau of Land Management (“BLM”) under the Federal Land Policy and Management
Act of 1976. All claims are held by Desert Pacific Exploration (‘DPE’) and under
a Letter Agreement dated February 26, 2005 MinQuest acquired the rights to the
claims comprising the Crescent Fault Property from DPE. The Letter Agreement
allows MinQuest to assign its interest to third parties.





Exploration
History of the Crescent Fault Property





The
Crescent Fault Property was explored by Homestake from 1983 to 1986, Noranda
from 1992 to 1994, and North Mining from 1995 to 1996. Past exploration includes
considerable rock chip sampling, geologic mapping, and drilling. Clastic
sediments have been silicified and argillized along a range front fault zone.
Drilling has tested part of the range front and some of the down dropped
section. Drilling on the property is summarized as follows:





Homestake
            1985-1986
            2
      holes drilled for 1,855 feetNoranda
            1992-1993
            8
      holes drilled for 4,436 feetNorth
            1995
            8
      holes drilled for 3,930 feet





Drilling
has intersected significant sphalerite and galena. The lead-zinc mineralization
appears to be related to epidote-chlorite skarn. The drilling has focused on
testing the surface expression of pyritic jasperoid and quartz veining developed
within parallel to sub-parallel faults to the range front. Potential down
dropped sections of mineralization may exist under alluvial cover. Outcrops of
jasperoid are developed along low angle thrust faults and high angle shear
zones. Tertiary age dikes have been noted along high angle faults trending
northwesterly.





29


Geology
of the Crescent Fault Property Mineral Claims





The
property was discovered while prospecting along the Crescent fault. One short
adit and a few small prospect pits were the only evidence of previous
exploration efforts prior to the first drill holes. The drilling has focused
along the range front, intersecting significant alteration and
mineralization.





The
regional geology consists of a package of Pennsylvanian to Permian carbonate to
siliciclastic sediments. This sediment package has been intruded by a possible
Cretaceous granodiorite to porphyry rhyolite. The range front has had both
strike-slip and dip-slip movement, down dropped along the Crescent fault. Placer
Dome has determined the strike-slip movement to be up to 1 mile in an
east-northeasterly direction. Many parts of the Crescent fault have been down
dropped over 1000 feet under alluvial cover. In the vicinity of the property,
drilling and geophysical data indicate a shelf of bedrock has been preserved at
depths ranging from 250 to 400 feet deep for up to 1000 feet from the fault
zone. Potential for a preserved portion of mineralized bed rock at reasonable
depth is very good.





Tertiary
volcanoclastics on the eastern part of the property are altered and quartz
veined along strike of the fault. Jasperoid shows slickensides indicating two
movements, one down dropped and one left lateral. Low angle faulting was noted
near the top of the ridge and has been down faulted along the range front, in
the next section west. The low angle faulting is represented by Ordovician chert
and quartzite thrust over Pennsylvanian carbonate. North to northwest trending
faults bisect the range front fault zone, down dropping and offsetting
mineralization in several areas. Possible Tertiary age dikes and sills have
intruded and healed several northwesterly faults and the crescent fault zone.
These dikes are argillized, iron stained and in a few places, quartz
veined.





The
property covers a well defined zone of alteration exposed along the range front
fault zone bounding the southeast portion of Crescent Valley. The alteration is
composed of jasperoid, decalcified limestone, silicified shale, and quartz
veining filling faults and fractures in intrusive rocks and siliciclastic
sediments. Tertiary age dikes have intruded the sediments and older intrusive
rocks, generally following a northwesterly trend. Alteration zones carry low
values in gold, silver and copper along with minor elevations of trace elements
typically identified in other disseminated gold deposits of the area. The
jasperoid is vuggy with weak, erratic gold and anomalous arsenic, mercury and
antimony on the surface.





The
Jasperoid target dips northwesterly under alluvium, paralleling the Crescent
Fault. Drilling has intercepted relatively shallow bedrock under the alluvium,
but no gold has been encountered to date. Extensions of the zone will be mapped
and sampled to further define this target area.





Skarn
mineralization is hidden. Skarn is weakly developed and spotty throughout the
area. Drilling has encountered high grade gold and base metals in carbonate
rocks.  Mapping of alteration phases may better define the Skarn
target. At present, the best potential target is a blind skarn zone with
high-grade gold potential.





Current
State of Exploration





The
Crescent Fault claims presently do not have any mineral reserves. The property
that is the subject to our mineral claims is undeveloped and does not contain
any open-pit or underground mines. There is no mining plant or equipment located
on the property that is the subject of the mineral claim. Currently, there is no
power supply to the mineral claim. Our planned exploration program is
exploratory in nature and no mineral reserves may ever be found.





30


Paved
roads come within 5 miles of the property and well maintained gravel roads
provide access within 1,000 feet of the property boundary. A dirt road is in
place and provides adequate access throughout the property. All currently
proposed drilling can be done without further road building.





Geological
Exploration Program





Potential
exists for the existence of relatively high-grade gold. The exploration
completed to date has identified mineralization within fault zones parallel to
the range front fault. Sampling has indicated weakly anomalous gold values exist
over 12,000 feet of strike length.  In 2005 the Company initiated a
program of geophysical and geochemical surveys over the pediment area along
strike of the mineralization.  The surveys were following up on the
observations of previous geophysicists and drill-hole data from former property
owners suggesting shallow pediment.  Five CSMT (Controlled Source
Magneto Telluric) survey lines were collected to determine changes in lithology
and potential parallel faulting to the main Crescent Fault.





Also in
2005 a reconnaissance auger sampling program was designed to test for concealed
gold mineralization in pediment cover.  The auger holes were
positioned 30 meters apart along each line and the lines were separated about
300 meters apart, perpendicular to the range front.  The holes tested
the caliche layer developed within transported material.  Gold
mineralization is known to leak from sources below and become entrapped in the
caliche layer.  This system is not widely used but is proven
technology in finding buried gold deposits in desert environments in both Nevada
and Australia.  It has been successful in finding at least two gold
deposits in the Battle Mountain area.





A total
of 175 samples were collected along 9 widely separated lines.  The
samples were tested for calcium carbonate on site and 31 elements in the
ALS/Chemex lab.  No gold was identified in any of the
samples.





The 2005
program of CSMT and auger drilling did not identify any significant drill
targets within the pediment zone.  The topography is too steep to
effectively conduct geophysical surveys to identify new drill targets on the
rest of the property.  However, the original drill targets still
remain.





The
exploration contractor has made several recommendations to the
Company.  Amongst the recommendations are that at least one drill hole
should be spotted to intersect the favorable host rocks at a depth of 300 meters
and a second hole should be placed to twin the original drill hole that
intersected 4 g/t gold.  This hole would determine the alteration type
and structural control of the mineralization.  It has also been
recommended that 5 additional drill holes be targeted at areas of gold in rock
chip that have yet to be drill tested.  Offsetting known
mineralization in previous drilling is also highly recommended.





The
Crescent Fault Property forms part of the Cortez Property and as such is covered
by the Cortez Property Option Agreement such that annual minimum property
expenditures can be incurred on any of the three properties making up the Cortez
Property.  Based on an evaluation of the previous work undertaken on
the Cortez Property and based upon recommendations from MinQuest, the Company
elected to conduct a drill exploration program on the Bankop Property in 2006 in
order to meet the Company’s exploration expenditure commitments under the Cortez
Property Option Agreement.  As a result, the Company did not undertake
an exploration program on the Crescent Fault claims in 2006.





For 2007
the Board of Directors has approved a budget of $150,000 for the Crescent Fault
Property.  The exploration plan includes drilling three or four holes
for a total of 2,000 feet.  The work has not yet been completed but it
is hoped that it will be undertaken in April or May 2008.  The Company
has not yet made its determination on its 2008 exploration
programs.





31


BANKOP
PROPERTY





Description
and Location of the Bankop Property





The
Bankop Property is located in eastern Lander County, Nevada, approximately 40
kilometers (25 miles) southeast of Battle Mountain and six kilometers (4 miles)
northwest of the Pipeline Mine. The property consists of 24 unpatented mining
claims. Land claims in the district are administered under Department of
Interior, Bureau of Land Management (“BLM”) under the Federal Land Policy and
Management Act of 1976. All claims are held by Desert Pacific Exploration
(‘DPE’) and under a Letter Agreement dated February 26, 2005 MinQuest acquired
the rights to the claims comprising the Bankop Property from DPE. The Letter
Agreement allows MinQuest to assign its interest to third parties.





Exploration
History of the Bankop Property





There has
been no production from the Bankop claims.





Historic
prospect pits, adits, and shafts occur throughout the low lying hills of the
area. The property has seen recent exploration efforts beginning as early as
1965. Exploration companies involved included U.S Mining and Exploration
Company, Inc., Phelps Dodge, Inc., Placer Amex, Inc., Cyprus Exploration
Company, Homestake Mining Company, U.S Borax, Placer Dome U.S. Inc., Noranda
Exploration, Inc. (Hemlo Gold, Inc.), Uranerz U.S.A., Inc. and Minorca Resources
Inc. This very large volume of geologic information is an extremely valuable
tool for further study of the property.





Geology
of the Bankop Mineral Claims





Regionally,
the Utah Camp property is situated within the Battle Mountain-Eureka Trend, a
northwest striking 30 to 40 mile wide (45 to 60 km) belt of mostly Paleozoic
rocks which are intruded by numerous Cretaceous to Tertiary age intrusives. All
bedrock mapped to date on the Bankop property is Upper Plate fine-grained
clastic rocks. Although these rocks are dominated by siliceous lithologies, they
do contain an appreciable thickness of carbonate-rich rocks. Deep drilling by
Uranerz contains thick sections of calcareous siltstone within the Valmy.
Calcareous sandstones make up a significant portion of the middle Elder
Formation. Both of these rock types are good host rocks for Carlin style
mineralization.





A
significant portion of the property is covered by Quaternary alluvium. Outcrop
is normally sparse, except where thick sections of quartzite occur. Colluvial
cover is relatively thick once the break in slope is reached traversing from
ridge top to valley.





Besides
the bedding plane faults associated with thrust slices, several high angle
faults have been mapped. The dominant trend is northeast and the next most
abundant trend is northwest. East-west high angle structures are most common in
the southern portion of the property.





Mineralization
occurring within the property is gold associated with arsenic and mercury. The
main alteration type is clay, and therefore, it is rare for the mineralization
to outcrop. Instead it is usually found in topographic lows. Bulldozer work has
exposed decalcified sandstone. This and several other gold anomalies in rocks
and soils within the property are indications of Carlin style mineralization.
Significant gold intercepts of Carlin style mineralization occur around a
bulldozer trench. Several holes drilled in this area have shown
mineralization.  All of the above holes were drilled
vertically.





32


A number
of companies have explored for Carlin style systems within the property.
Although these efforts provide an excellent database for further studies they
failed to define or test a single feeder structure. Because the property is
underlain by upper plate rocks not known to host large gold deposits elsewhere
in the district, the emphasis has been on deep drilling to test lower plate
carbonate rocks.  Without an associated feeder fault this effort will
be fruitless.





Current
State of Exploration





The
Bankop claims presently do not have any mineral reserves. The property that is
the subject to our mineral claims is undeveloped and does not contain any
open-pit or underground mines. There is no mining plant or equipment located on
the property that is the subject of the mineral claim. Currently, there is no
power supply to the mineral claim. Our planned exploration program is
exploratory in nature and no mineral reserves may ever be found.





Geological
Exploration Program





The work
program undertaken by the Company in 2005 included an auger program that
grid-sampled the entire claim block with 30 by 300 meter
centers.  This program was successful in further defining the trend
and extent of gold mineralization and identifying four other gold anomalies
elsewhere on the property.  The reconnaissance auger sampling program
was designed to further extend the known gold anomaly and potentially identify a
widening of the gold zone.  Areas of blossoming gold anomalies may
suggest structural intersections that should be drill tested.  The
auger holes were positioned 30 meters apart along each line and lines were
separated about 200 meters apart.  The holes penetrated the loess
cover in almost every instance and collected soil and/or rock from the bottom of
the hole.  Depths of penetration ranged from less than 0.3 meters to
over 7 meters.





Gold
values were generally widespread within the south half of the
property.  High grade values were encountered along several
lines.  The best value was collected from Line D near the middle of
the traverse.  A compilation of rock, soil, auger and drill
geochemistry for gold indicates three anomalous areas with multiple sample sites
and two single point anomalies.  The anomalous areas range from 600 by
150 meters to 30 by 30 meters.





A second
gold anomaly was identified on the southern portion of the claim
block.  This zone trends northerly and is 600 meters long and 150
meters wide.  The zone is hosted partly within the Ordovician Valmy
quartzite.  A brecciated fault zone defines the contact between the
Valmy and Elder Formations.   Gold values are elevated along this
fault zone.  However, the fault is oblique to the sample lines and has
limited coverage by the auger survey.





A third
gold anomaly was identified by Uranerz, but missed by the Auger
survey.  The anomaly is represented by two sample sites that fall
midway between lines A and B on the northern portion of the claim
block.





During
2006 the Company conducted a drill program that was completed in January
2007.    A total of seven holes covering 2,440 feet of the
initially planned 3,000 feet of drilling were completed on the
Property.  The drilling was terminated early because of extreme winter
weather causing equipment failure.  The 2006 drill program on the
Bankop Property was designed to test the expression of surface gold values
discovered in the previous work programs at relatively shallow
depths.  The surface expression of the gold values indicates at least
three separate targets variously named the South, Central and East
Targets.  The South and Central targets were drill-tested to determine
the strike and extent of faulting that presumably controlled the gold deposition
at surface.  The Company determined not to undertake an exploration
program on the Bankop portion of the Cortez property in 2007.  The
Company focused its resources on the Crescent Fault portion of the property in
2007.


33


The
Bankop Property forms part of the Cortez Property and as such is covered by the
Cortez Property Option Agreement such that annual minimum property expenditures
can be incurred on any of the three projects making up the Cortez
Property.  Based on an evaluation of the previous work undertaken on
the Cortez Property and based upon recommendations from MinQuest, the Company
elected to conduct a drill exploration program on the Crescent Fault Property in
2007 in order to meet the Company’s exploration expenditure commitments under
the Cortez Property Option Agreement.  The Company has not yet made
its determination on its 2008 exploration programs.





BULLION
MOUNTAIN PROPERTY





Description
and Location of the Bullion Mountain Property





The
Bullion Mountain Property is located in Lander County, Nevada within T29N, R46E
and consists of 18 mining claims. A portion of the claims is made up of the
Bully and Chief groups of claims.  Access is via gravel road south
from Battle Mountain  Land claims in the district are administered
under Department of Interior, Bureau of Land Management (“BLM”) under the
Federal Land Policy and Management Act of 1976. All claims are held by Desert
Pacific Exploration (‘DPE’) and under a Letter Agreement dated February 26, 2005
MinQuest acquired the rights to the claims comprising the Bullion Mountain
Property from DPE. The Letter Agreement allows MinQuest to assign its interest
to third parties.





Exploration
History of the Bullion Mountain Property





The
property may have been prospected as early as the 1870’s. Numerous prospect pits
and shallow adits dot the top of the ridge that makes up part of Bullion
Mountain. The most extensive prospecting occurs along low and high angle fault
zones with clear quartz veins. The fault zones generally trend
east-northeasterly. These veins can assay over a half ounce of gold across 1
meter.





The
property lies along the Pipeline fault zone which has been defined by Placer
Dome as having a northwesterly trend.  The Chief and Bully claims have
been previously explored by Placer Dome, Asarco, Hemlo, Lac, Barrick, and
Pallum. Recent work includes drilling by Asarco on the Bully claims and drilling
by Placer Dome and Pallum on the Chief claims.





Numerous
surface samples have identified high grade gold (>0.5 opt) in fault zones in
upper plate rocks. Drilling by Asarco has encountered 3 meters of 0.204 opt gold
on the Bully claims. Drilling by Pallum encountered 1.5 meters of 0.08 opt gold
and 15 meters of 0.02 opt gold on the Chief claims. Drilling by Placer Dome and
Pallum has identified a small, low grade gold target on the Chief
Claims.





Geology
of the Bullion Mountain Mineral Claims





Upper
plate Silurian to Devonian siliciclastic rocks have been thrust over Cambrian to
Silurian carbonate facies. The entire package of sediments has been intruded by
Tertiary age granite (Bullion Mountain granite). The Upper Plate assemblage is
hornfelsed and bleached near the margin of the intrusive.





The
entire area within the claim block is structurally complex with both low and
high angle faulting. High angle faults have displaced all rock
types.  ENE faults on the Bully claims contain significant gold
values.  Many of these ENE faults and shears have been healed with
quartz veins and jasperoid silica. Gold is generally found associated with
clear, crystalline quartz veins and narrow, argillized dikes. Many of the faults
of the area show secondary movement represented by several stages of quartz
veining. Recent exploration efforts have been limited to low angle fault zones
on the Chief claims and within a discreet area on the Bully
claims.


34


Drilling
has identified significant gold values on the Chief and Bully Claim
groups.  The Bully target area contains several high grade fault zones
within a breccia zone of lower grade material. The Chief area has been drilled
on a grid with roughly 200 foot centers. The drilling suggests a shallow dipping
fault breccia zone with consistent gold values. Both target areas may have high
angle faults providing plumbing for the gold mineralization in the area. At
present, a feeder fault has not been identified within the Chief claim boundary.
Exploratory drilling in the valley between Chief and Bully has encountered minor
gold values in upper plate rocks. Further work in this area is also
recommended.





Current
State of Exploration





The
Bullion Mountain claims presently do not have any mineral reserves. The property
that is the subject to our mineral claims is undeveloped and does not contain
any open-pit or underground mines. There is no mining plant or equipment located
on the property that is the subject of the mineral claim. Currently, there is no
power supply to the mineral claim. Our planned exploration program is
exploratory in nature and no mineral reserves may ever be found.





Geological
Exploration Program





Recommended
exploration work at the Bully and Chief portion on the property includes
detailed geologic mapping and sampling of the claim blocks. Drilling is
recommended within the previously defined resource area on the Chief claims.
Previous sampling on the Bully claims has identified high grade gold in narrow
veins throughout the claim block. Infrastructure is well established in the
Chief area. Access roads may have to be built into much of the Bully area. A
modest program of infill sampling and detailed mapping should help define drill
targets within the Bully claim group. Permitting should be relatively simple
since roads are in and the surrounding area is a well known mining field
situated on land administered by the US Bureau of Land Management.  No
exploration work was carried out on this property during 2006 or
2005.





The
Bullion Mountain Property forms part of the Cortez Property and as such is
covered by the Cortez Property Option Agreement such that annual minimum
property expenditures can be incurred on any of the three projects making up the
Cortez Property.  Based on an evaluation of the previous work
undertaken on the Cortez Property and based upon recommendations from MinQuest,
the Company elected to conduct a drill exploration program on the Bankop
Property in 2006 and the Crescent Fault Property in 2007 in order to meet the
Company’s exploration expenditure commitments under the Cortez Property Option
Agreement.  As a result, the Company did not undertake an exploration
program on the Bullion Mountain claims in 2007 or 2006.  The
determination for expenditure allocation in 2008 will be dependent upon the
review and analysis of the results of the 2007 drill program undertaken on the
Crescent Fault Property.  Once that process is complete, the Company
will determine its course of action for 2008.





ITEM
3.                      LEGAL
PROCEEDINGS





There are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company.  The Company’s property is not the subject of
any pending legal proceedings.





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





There was
no matter submitted to a vote of security holders during the fourth quarter of
the fiscal year ended January 31, 2008.


35


PART II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS





Market
Information





Our
common stock is traded on the Over the Counter Bulletin Board sponsored by the
National Association of Securities Dealers, Inc. under the symbol “AGFL.OTC:BB”.
The Over the Counter Bulletin Board is maintained by the NASDAQ Stock Market,
but does not have any of the quantitative or qualitative standards such as those
required for companies listed on the NASDAQ Small Cap Market or National Market
System. The following table sets forth the range of quarterly high and low
closing bids of the common stock as reported on http://finance.yahoo.com during
the fiscal years ending January 31, 2008 and 2007:





Financial Quarter
            Bid Information*Fiscal Year Ended January
    31,
            Quarter
            High Bid
            Low Bid2008
            Fourth
      Quarter
            $1.23
            $0.46Third
      Quarter
            $0.61
            $0.35Second
      Quarter
            $1.10
            $0.51First
      Quarter
            $1.74
            $0.702007
            Fourth
      Quarter
            $0.82
            $0.62Third
      Quarter
            $1.06
            $0.70Second
      Quarter
            $1.85
            $0.75First
      Quarter
            $2.11
            $0.60





*The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.





Holders
of Our Common Stock





The
Company estimates that as of April 15, 2008, we had fifty (50) registered
holders of shares of common stock.





Recent
Sales of Unregistered Securities





There
were no sales of equity securities of the Company by the Company during the
period covered by this report that were not registered under the Securities Act
of 1933, as amended.





Dividend
Policy





As of
April 28, 2008, there had been no dividends declared on the Company’s Common
Stock.  We have never declared or paid any cash dividends on our
common stock nor do we anticipate paying any in the foreseeable future.
Furthermore, we expect to retain any future earnings to finance our operations
and expansion. The payment of cash dividends in the future will be at the
discretion of our Board of Directors and will depend upon our earnings levels,
capital requirements, any restrictive loan covenants and other factors the Board
considers relevant.





36


There are
no restrictions in our articles of incorporation or bylaws that prevent us from
declaring dividends.  The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:





1.           We
would not be able to pay our debts as they become due in the usual course of
business; or





2.           Our
total assets would be less than the sum of our total liabilities plus the amount
that would be needed to satisfy the rights of shareholders who have preferential
rights superior to those receiving the distribution.





Securities
Authorized for Issuance under Equity Compensation Plans





The
following table presents certain information as of January 31, 2008 with respect
to compensation plans under which equity securities of the Company are
authorized for issuance:





Plan Category
            Number of Securities to be Issued Upon Exercise of
      Outstanding Options, Warrants, and Rights
              (a)
            Weighted-Average Exercise Price of Outstanding
      Options, Warrants, and Rights
              (b)
            Number of Securities Remaining Available for
      Future Issuance Under Equity Compensation Plans (Excluding Securities
      Reflected in Column (a))
              (c)Equity
      Compensation Plans Approved by Security Holders
            -
            -
            -Equity
      Compensation Plans Not Approved by Security Holders
            2,685,800(1)
            $1.41
            1,800,000Total
            2,685,800
            $1.41
            1,800,000





(1) Such
amount includes 850,000 common stock purchase options which are outstanding and
exercisable pursuant to the American Goldfields Inc.’s 2004 Stock Option
Plan.  It also includes 1,835,800 common stock purchase
warrants.





The
2004 Stock Option Plan





In March
2004, the Board of Directors adopted the American Goldfields Inc.’s 2004 Stock
Option Plan (the 2004 Plan) reserving 5,000,000 common shares for grant to
employees, directors and consultants. As of April 28, 2008, there were a total
of 3,200,000 options that had been granted under the plan. Of these, 850,000
remain outstanding and exercisable at a weighted average exercise price of $1.09
per option.  The following discussion describes material terms of
grants made pursuant to the stock option plans:





37


Pursuant
to the 2004 Stock Option Plan, grants of shares can be made to employees,
officers, directors, consultants and independent contractors of non-qualified
stock options as well as for the grant of stock options to employees that
qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986 (“Code”) or as non-qualified stock options. The Plan is
administered by the Option Committee of the Board of Directors (the
“Committee”), which has, subject to specified limitations, the full authority to
grant options and establish the terms and conditions for vesting and exercise
thereof. Currently the entire Board functions as the Committee.





In order
to exercise an option granted under the Plan, the optionee must pay the full
exercise price of the shares being purchased. Payment may be made either: (i) in
cash; or (ii) at the discretion of the Committee, by delivering shares of common
stock already owned by the optionee that have a fair market value equal to the
applicable exercise price.





Subject
to the foregoing, the Committee has broad discretion to describe the terms and
conditions applicable to options granted under the Plan. The Committee may at
any time discontinue granting options under the Plan or otherwise suspend, amend
or terminate the Plan and may, with the consent of an optionee, make such
modification of the terms and conditions of such optionee’s option as the
Committee shall deem advisable.





Purchases
of equity securities by the issuer and affiliated purchasers





None.





ITEM
      6.
            SELECTED
      FINANCIAL DATA





Not
applicable to smaller reporting companies





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





The
following discussion of our financial condition and results of operations should
be read in conjunction with the financial statements and the related notes
thereto included elsewhere in this Form 10-K. The matters discussed herein
contain forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended, which involve risks and uncertainties. All statements
other than statements of historical information provided herein may be deemed to
be forward-looking statements. Without limiting the foregoing, the words
“believes”, “anticipates”, “plans”, “expects” and similar expressions are
intended to identify forward-looking statements. Factors that could cause actual
results to differ materially from those reflected in the forward-looking
statements include, but are not limited to, those discussed under the heading
“Factors that May Affect Future Results” and elsewhere in this report and the
risks discussed in our other filings with the SEC. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management’s analysis, judgment, belief or expectation only as of the date
hereof. We undertake no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date
hereof.





38


Plan
of Operations





Our
business plan is to proceed with the exploration of the Gilman, Imperial,
Hercules and Cortez Properties to determine whether there are commercially
exploitable reserves of gold and silver or other metals. We had cash of $29,771
and a working capital deficit of ($171,456) as of January 31,
2008.  Subsequent to January 31, 2008 we received total proceeds of
$218,750 from the exercise of share purchase warrants.  Even with the
receipt of these proceeds we do not have sufficient cash available to fund all
of our planned exploration activities.  We shall require additional
funding and we anticipate that such funding will be in the form of equity
financing from the sale of our common stock. However, we cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock to fund additional phases of the exploration
program, should we decide to proceed. We believe that debt financing will not be
an alternative for funding any further phases in our exploration program. The
risky nature of this enterprise and lack of tangible assets places debt
financing beyond the credit-worthiness required by most banks or typical
investors of corporate debt until such time as an economically viable mine can
be demonstrated. We do not have any arrangements in place for any future equity
financing.





During
our exploration stage, our President will only be devoting approximately five
hours per week of his time to our business. We do not foresee the limited
involvement of our President as negatively impacting our Company over the next
twelve months as all exploratory work is being performed by outside consultants.
Additionally, we will not have a need to hire any employees over the next twelve
months; nor do we plan to make any purchases of equipment over the next twelve
months due to reliance upon outside consultants to provide all tools needed for
the exploratory work being conducted.





Results
of Operations for the Fiscal Year Ended January 31, 2008





We did
not earn any revenues during the fiscal year ended January 31, 2008 or 2007. We
do not anticipate earning revenues until such time as we have entered into
commercial production of our mineral properties. We are presently in the
exploration stage of our business and we can provide no assurance that we will
discover commercially exploitable levels of mineral resources on our properties,
or if such resources are discovered, that we will enter into commercial
production of our mineral properties.





For the
year ended January 31, 2008 we had a net loss of $955,613 compared to $692,299
for the prior year, an increase of $263,314.  Our loss for 2008 has
increased substantially over 2007 primarily due to an increase in mineral claim
payments and exploration expenditures to $860,227 in 2008 from $393,787 in 2007,
an increase of $466,440.   The increase was due to higher
exploration costs, stock-based compensation, and option payments.  The
increase in exploration expenditures was largely due to more exploration
expenses being incurred in 2008 compared to 2007.  In 2008 the Company
completed the 2008 drill program on the Hercules Property, commenced drilling on
the Gilman Property, and completed the 2007 drill programs on the Hercules and
Bankop Properties.  In 2007, the Company undertook a portion of the
drill programs on the Hercules and Bankop Properties.  Both of these
2007 exploration programs carried over into February and March 2007. Stock-based
compensation was $187,800 in 2008 compared to $195,600 in 2007.  In
2008, the stock-based compensation related to geology consultants and as a
result has been expensed to exploration expense. In 2007, the stock-based
compensation related to the granting of stock options to the Company’s President
and accordingly the expense was allocated to Consulting Fees.  The
balance of the increase in mineral claim payments and exploration expenditures
was a result of the Company making option payments totaling $95,000 in 2008
compared to $85,000 in 2007.  During 2008 the Company made option
payments under the Hercules $20,000 (2007 - $20,000), Imperial $20,000 (2007 -
$20,000), Gilman $15,000 (2007 - $15,000), and the Cortez $40,000 (2007 -
$30,000) property option agreements.





39


General
and administrative expenses were largely consistent between 2008 and
2007.  However, Professional Fees and Directors’ Fees both increased
in 2008.  Professional Fees increased from $25,219 in 2007 to $37,524
in 2008 due to an increase in the cost of audit and legal
fees.  Directors’ fees increased as a Director was added to the Board
in September 2006 so that for 2008 the Board had four members for the whole year
while in 2007 it had four members for only a portion of the year.





Liquidity
and Capital Resources





We had
cash of $29,771 and a working capital deficit of ($171,456) as of January 31,
2008. We anticipate that we will incur over the next twelve months:





$105,000
      in connection with property payments under the Company’s four option
      agreements. Of this amount, $50,000 was paid by the Company on February
      15, 2008 under the Cortez Property Option
  Agreement;





$793,000
      in property exploration expenses in order to meet the requirements of the
      Company’s property option
agreements;





$90,000
      for operating expenses, including working capital and general, legal,
      accounting and administrative expenses associated with reporting
      requirements under the Securities Exchange Act of
  1934.





Net cash
used in operating activities during the year ended January 31, 2008 was $704,014
compared to $372,950 during the year ended January 31, 2007.  The
increased cash used in operations was primarily due to an increase in the net
loss in 2008 ($955,613) compared to 2007 ($692,299). In addition, in 2008 there
was an outflow from the payment of Prepaid Expenses of $21,089 compared to an
inflow of $4,930 in 2007.  Also, in 2008 the Company increased its
accounts payable and accrued liabilities by $84,388 while in 2007 the amount of
the increase was $112,819.








Cash from
financing in 2008 related to $200,000 received from a private placement and
$199,500 from the exercise of common stock options partially offset by the
payment of the related party payable of $30,000.  In 2007 cash from
financing was due to $480,000 received from the exercise of stock options
partially offset by a $30,000 outflow related to the redemption of 3,000,000
common shares.  Cash used in investing activities in 2008 and 2007
related to the payment of refundable reclamation deposits to the State of Nevada
of $21,227 in 2008 and $6,534 in 2007.





Subsequent
to January 31, 2008 we received total proceeds of $218,750 from the exercise of
share purchase warrants.  Even with the receipt of these proceeds
current cash on hand is not sufficient to fund all of the Company’s operating
requirements for the next twelve months. We shall require additional funding and
we anticipate that such funding will be in the form of equity financing from the
sale of our common stock. However, we cannot provide investors with any
assurance that we will be able to raise sufficient funding from the sale of our
common stock to fund additional phases of the exploration program, should we
decide to proceed. We believe that debt financing will not be an alternative for
funding any further phases in our exploration program. The risky nature of this
enterprise and lack of tangible assets places debt financing beyond the
credit-worthiness required by most banks or typical investors of corporate debt
until such time as an economically viable mine can be demonstrated. We do not
have any arrangements in place for any future equity financing.





40


Off
Balance Sheet Arrangements





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





ITEM
7A                      QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK





Not
applicable.





ITEM
8.                      FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA





Index to
Consolidated Financial Statements:




1.
              Auditors’
      Report;
 2.
              Audited
      Consolidated Financial Statements for the year ended January 31, 2008,
      including:
 a.
              Consolidated
      Balance Sheets as at January 31, 2008 and
2007;
 b.
              Consolidated
      Statements of Operations for the years ended January 31, 2008 and 2007 and
      for the period from inception on December 21, 2001 to January 31,
      2008;
 c.
              Consolidated
      Statements of Cash Flows for the years ended January 31, 2008 and 2007 and
      for the period from inception on December 21, 2001 to January 31,
      2008;
 d.
              Statements
      of Stockholders’ Equity for the years ended January 31, 2008 and 2007 and
      for the period from inception on December 21, 2001 to January 31,
      2008;
 e.
              Notes
      to the Consolidated Financial
Statements.




41




AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 
 FINANCIAL
STATEMENTS
 
 
 JANUARY
31, 2008 and 2007
 (Stated
in U.S. Dollars)
              
 42









REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Stockholders of
 American
Goldfields Inc.
 (An
exploration stage company)
 
  We have
audited the accompanying balance sheets of American Goldfields Inc. (an
exploration stage company) as at January 31, 2008 and 2007 and the related
statements of operations, cash flows, and stockholders’ (deficiency) equity for
each of the two years in the period ended January 31, 2008 and the cumulative
period from inception, December 21, 2001 to January 31, 2008.  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our 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.  The
Company is not required to have, nor were we engaged to perform, an audit of its
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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as at January 31, 2008
and 2007 and the results of its operations and its cash flows for the years
ended January 31, 2008 and 2007 and the cumulative period from inception,
December 21, 2001 to January 31, 2008, in conformity with accounting principles
generally accepted in the United States of America.
  The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations, has
negative cash flows, has a stockholders’ deficiency and is dependent upon
obtaining adequate financing to fulfill its exploration
activities.  These factors raise substantial doubt about its ability
to continue as a going concern.  Management’s plans in regard to these
matters are also described in Note 1.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
  
  Vancouver,
      Canada
              “Morgan
      & CompanyApril
      28, 2008
              Chartered
      Accountants







43
  
 (An
Exploration Stage Company)
 
 BALANCE
SHEETS
 (Stated
in U.S. Dollars)
 
 
 
 JANUARY
      312008
              
              
              2007ASSETSCurrent
      AssetsCash
      and cash equivalents
              
              $
              29,771
              
              
              $
              385,512Prepaid
      expenses
              
              
              22,788
              
              
              
              1,69952,559
              
              
              
              387,211Reclamation deposit
      (note 4)
              
              
              54,968
              
              
              
              33,741Web-site development costs,
      net (note 5)
              
              
              -
              
              
              
              500$
              107,527
              
              
              $
              421,452LIABILITIES
      AND STOCKHOLDERS’ (DEFICIENCY) EQUITYCurrent
      LiabilitiesAcco

                  unts payable and accrued liabilities
              
              $
              224,015
              
              
              $
              139,627Accounts
      payable – related party (note 7)
              
              
              -
              
              
              
              30,000224,015
              
              
              
              169,627Stockholders’(deficiency)
      equityPreferred
      Stock100,000,000
      shares authorized with a par value of $0.001 per share, none issued or
      outstanding
              
              
              -
              
              
              
              -Common Stock(note
      6)Authorized:600,000,000
      shares with a par value of $0.001 per shareIssued:20,980,378
      shares issued and outstanding at January 31, 2008 (January 31, 2007 –
      20,292,878)
              
              
              20,980
              
              
              
              20,293Additional
      paid-in capital
              
              
              2,919,530
              
              
              
              2,460,257Warrants
              
              
              829,604
              
              
              
              702,264Deficit
      accumulated during the exploration stage
              
              
              (3,886,602
              )
              
              
              (2,930,989
              )Total
      stockholders’ (deficiency) equity
              
              
              (116,488
              )
              
              
              251,825$
              107,527
              
              
              $
              421,452
 
 The
accompanying notes are an integral part of these financial
statements.
  44
  AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 STATEMENTS
OF OPERATIONS
 (Stated
in U.S. Dollars)
 
 
 
 YEAR
      ENDED JANUARY 31
              
              
              CUMULATIVE
      PERIOD FROM INCEPTION, DECEMBER 21, 2001 TOJANUARY
      312008
              
              
              2007
              
              
              2008ExpensesMineral
      claim payments and exploration expenditures
              
              $
              860,227
              
              
              $
              393,787
              
              
              $
              2,569,335Office
      and sundry
              
              
              39,138
              
              
              
              37,047
              
              
              
              499,418Rent
              
              
              4,855
              
              
              
              4,166
              
              
              
              20,021Professional
      fees
              
              
              39,480
              
              
              
              25,219
              
              
              
              177,676Transfer
      agent fees
              
              
              255
              
              
              
              470
              
              
              
              6,290Amortization
              
              
              500
              
              
              
              6,000
              
              
              
              18,000Interest
      expense
              
              
              -
              
              
              
              -
              
              
              
              1,070Directors’
      fees
              
              
              11,158
              
              
              
              6,489
              
              
              
              23,078Consulting
      fees
              
              
              -
              
              
              
              222,100
              
              
              
              583,027Total
      expenses
              
              
              (955,613
              )
              
              
              (695,278
              )
              
              
              (3,897,915
              )Interest
      income
              
              
              -
              
              
              
              2,979
              
              
              
              11,313Net
      loss for the period
              
              $
              (955,613
              )
              
              $
              (692,299
              )
              
              $
              (3,886,602
              )Basic
      and diluted loss per share
              
              $
              (0.05
              )
              
              $
              (0.03
              )Weighted
      average number of shares outstanding – basic and diluted
              
              
              20,577,330
              
              
              
              22,673,700
 
 
 
 
 
 
 
 
 
 
 
 The
accompanying notes are an integral part of these financial
statements.
  45
  AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 STATEMENTS
OF CASH FLOWS
 (Stated
in U.S. Dollars)
 
 YEAR
      ENDED JANUARY 31,
              
              
              CUMULATIVE
      PERIOD FROM INCEPTION, DECEMBER 21, 2001 TOJANUARY
      312008
              
              
              2007
              
              
              2008Cash
      provided by (used in):Operating
      activitiesNet
      loss for the period
              
              $
              (955,613
              )
              
              $
              (692,299
              )
              
              $
              (3,886,602
              )Adjustments
      to reconcile net loss to netCash
      flows used in operating activitiesStock-based
      compensation
              
              
              187,800
              
              
              
              195,600
              
              
              
              1,729,000Amortization
              
              
              500
              
              
              
              6,000
              
              
              
              18,000Changes
      in assets and liabilitiesPrepaid
      expenses
              
              
              (21,089
              )
              
              
              4,930
              
              
              
              (22,788
              )Accounts
      payable and accrued liabilities
              
              
              84,388
              
              
              
              112,819
              
              
              
              228,558(704,014
              )
              
              
              (372,950
              )
              
              
              (1,933,832
              )Financing
      activitiesProceeds
      from the exercise of stock options
              
              
              199,500
              
              
              
              480,000
              
              
              
              774,000Proceeds
      from the issue of common stock
              
              
              200,000
              
              
              
              -
              
              
              
              1,304,571Payment
      of amounts due to related party
              
              
              (30,000
              )
              
              
              -
              
              
              
              (30,000
              )Proceeds
      from loan
              
              
              -
              
              
              
              -
              
              
              
              60,000Repayment
      of loan principal
              
              
              -
              
              
              
              -
              
              
              
              (60,000
              )Cancellation
      of common stock
              
              
              -
              
              
              
              (30,000
              )
              
              
              (30,000
              )369,500
              
              
              
              450,000
              
              
              
              2,018,571Investing
      activityReclamation
      deposit
              
              
              (21,227
              )
              
              
              (6,534
              )
              
              
              (54,968
              )Increase
      (decrease) in cash and cash equivalents
              
              
              (355,741
              )
              
              
              (70,516
              )
              
              
              29,771Cash
      and cash equivalents, beginning of period
              
              
              385,512
              
              
              
              314,996
              
              
              
              -Cash
      and cash equivalents, end of period
              
              $
              29,771
              
              
              $
              385,512
              
              
              $
              29,771
 
 SCHEDULE
OF NON-CASH ACTIVITIES
 Cancellation
      of common stock (note 7)
              
              $
              -
              
              
              $
              30,000
              
              
              $
              30,000Settlement
      of accounts payable by contribution from a stockholder
              
              $
              -
              
              
              $
              -
              
              
              $
              4,543Web-site
      development costs related to non-employee stock-based
      compensation
              
              $
              -
              
              
              $
              -
              
              
              $
              8,000
 
 The
accompanying notes are an integral part of these financial
statements.
  46
  AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 STATEMENT
OF STOCKHOLDERS’ (DEFICIENCY) EQUITY
 
 Period
from Inception, December 21, 2001 to January 31, 2008
 (Stated
in U.S. Dollars)
  COMMON
      STOCKNUMBER
      OF COMMON SHARES
                
                
                PAR
      VALUE
                
                
                ADDITIONAL
                  PAID
      IN CAPITAL
                
                
                WARRANTS
                
                
                DEFICIENCY
      ACCUMULATED DURING THE EXPLORATION STAGE
                
                
                TOTAL
      STOCKHOLDERS’
                  (DEFICIENCY)
      EQUITYShares
      issued for cash on Incorporation at $0.001 per share
                
                
                6,000,000
                
                
                $
                6,000
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                6,000Shares
      issued for cash at $0.03 per share on January 31, 2002
                
                
                2,985,713
                
                
                
                2,986
                
                
                
                86,585
                
                
                
                -
                
                
                
                -
                
                
                
                89,571Net
      loss for the period
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (10,745
                )
                
                
                (10,745
                )Balance,
      January 31, 2002
                
                
                8,985,713
                
                
                
                8,986
                
                
                
                86,585
                
                
                
                -
                
                
                
                (10,745
                )
                
                
                84,826Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (54,598
                )
                
                
                (54,598
                )Balance,
      January 31, 2003
                
                
                8,985,713
                
                
                
                8,986
                
                
                
                86,585
                
                
                
                -
                
                
                
                (65,343
                )
                
                
                30,228Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (28,366
                )
                
                
                (28,366
                )Balance,
      January 31, 2004
                
                
                8,985,713
                
                
                
                8,986
                
                
                
                86,585
                
                
                
                -
                
                
                
                (93,709
                )
                
                
                1,862Stock
      split adjustment on February 23, 2004
                
                
                44,928,565
                
                
                
                44,928
                
                
                
                (44,928
                )
                
                
                -
                
                
                
                -
                
                
                
                -Contributions
      by shareholders
                
                
                -
                
                
                
                -
                
                
                
                4,543
                
                
                
                -
                
                
                
                -
                
                
                
                4,543Cancellation
      of common shares on March 31, 2004
                
                
                (30,000,000
                )
                
                
                (30,000
                )
                
                
                30,000
                
                
                
                -
                
                
                
                -
                
                
                
                -Stock-based
      compensation
                
                
                -
                
                
                
                -
                
                
                
                61,200
                
                
                
                -
                
                
                
                -
                
                
                
                61,200Exercise
      of common stock options
                
                
                1,500,000
                
                
                
                1,500
                
                
                
                88,500
                
                
                
                -
                
                
                
                -
                
                
                
                90,000Private
      placement, common share issuances for cash at $2.50 per unit on November
      4, 2004
                
                
                403,600
                
                
                
                404
                
                
                
                306,332
                
                
                
                702,264
                
                
                
                -
                
                
                
                1,009,000Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (325,261
                )
                
                
                (325,261
                )Balance,
      January 31, 2005
                
                
                25,817,878
                
                
                
                25,818
                
                
                
                532,232
                
                
                
                702,264
                
                
                
                (418,970
                )
                
                
                841,344Exercise
      of common stock options
                
                
                75,000
                
                
                
                75
                
                
                
                4,425
                
                
                
                -
                
                
                
                -
                
                
                
                4,500Stock-based
      compensation
                
                
                -
                
                
                
                -
                
                
                
                1,302,400
                
                
                
                -
                
                
                
                -
                
                
                
                1,302,400Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,819,720
                )
                
                
                (1,819,720
                )Balance,
      January 31, 2006 –carried forward
                
                
                25,892,878
                
                
                $
                25,893
                
                
                $
                1,839,057
                
                
                $
                702,264
                
                
                $
                (2,238,690
                )
                
                $
                328,524
   47
  AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 STATEMENT
OF STOCKHOLDERS’ (DEFICIENCY) EQUITY
 
 Period
from Inception, December 21, 2001 to January 31, 2008
 (Stated
in U.S. Dollars)
 (Continued)
 
 
 COMMON
      STOCKNUMBER
      OF COMMON SHARES
                
                
                PAR
      VALUE
                
                
                ADDITIONAL
                  PAID
      IN CAPITAL
                
                
                WARRANTS
                
                
                DEFICIENCY
      ACCUMULATED DURING THE EXPLORATION STAGE
                
                
                TOTAL
      STOCKHOLDERS’
                  (DEFICIENCY)
      EQUITYBalance,
      January 31, 2006 – brought forward
                
                
                25,892,878
                
                
                $
                25,893
                
                
                $
                1,839,057
                
                
                $
                702,264
                
                
                $
                (2,238,690
                )
                
                $
                328,524Cancellation
      of common stock on July 12, 2006
                
                
                (3,000,000
                )
                
                
                (3,000
                )
                
                
                (27,000
                )
                
                
                -
                
                
                
                -
                
                
                
                (30,000
                )Cancellation
      of common stock on July 14, 2006
                
                
                (3,000,000
                )
                
                
                (3,000
                )
                
                
                (27,000
                )
                
                
                -
                
                
                
                -
                
                
                
                (30,000
                )Exercise
      of common stock options
                
                
                400,000
                
                
                
                400
                
                
                
                479,600
                
                
                
                -
                
                
                
                -
                
                
                
                480,000Stock-based
      compensation
                
                
                -
                
                
                
                -
                
                
                
                195,600
                
                
                
                -
                
                
                
                -
                
                
                
                195,600Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (692,299
                )
                
                
                (692,299
                )Balance,
      January 31, 2007
                
                
                20,292,878
                
                
                
                20,293
                
                
                
                2,460,257
                
                
                
                702,264
                
                
                
                (2,930,989
                )
                
                
                251,825Private
      placement, common share issuances for cash at $0.64 per unit on December
      6, 2007
                
                
                312,500
                
                
                
                312
                
                
                
                72,348
                
                
                
                127,340
                
                
                
                -
                
                
                
                200,000Exercise
      of common stock options
                
                
                375,000
                
                
                
                375
                
                
                
                199,125
                
                
                
                -
                
                
                
                -
                
                
                
                199,500Stock-based
      compensation
                
                
                -
                
                
                
                -
                
                
                
                187,800
                
                
                
                -
                
                
                
                -
                
                
                
                187,800Net
      loss for the year
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (955,613
                )
                
                
                (955,613
                )Balance,
      January 31, 2008
                
                
                20,980,378
                
                
                $
                20,980
                
                
                $
                2,919,530
                
                
                $
                829,604
                
                
                $
                (3,886,602
                )
                
                $
                (116,488
                )














The
accompanying notes are an integral part of these financial
statements.
  48
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  1.      NATURE
OF OPERATIONS
  Organization
  The
Company was incorporated in the State of Nevada, U.S.A., on December 21,
2001.
 
 Exploration
Stage Activities
  The
Company has been in the exploration stage since its formation and has not yet
realized any revenues from its planned operations.  It is primarily
engaged in the acquisition and exploration of mining properties.  Upon
location of a commercial, minable reserve, the Company expects to actively
prepare the site for its extraction and enter a development stage.
 
 Going
Concern
  The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.
 
 As shown
in the accompanying financial statements, the Company has incurred a net losses
of $3,886,602 for the period from December 21, 2001 (inception) to January 31,
2008, and has no sales.  The future of the Company is dependent upon
its ability to obtain financing and upon future profitable operations from the
development of its mineral properties.  Management has plans to seek
additional capital through a private placement and public offering of its common
stock.  The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts of and classification of liabilities that might be necessary in the
event the Company cannot continue in existence.
 
 
 2.      SIGNIFICANT
ACCOUNTING POLICIES
  The
financial statements have, in management’s opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below:
  Basis of
Presentation
  In prior
years the annual financial statements were presented on a consolidated basis,
which included the accounts of the Company and its wholly-owned Canadian
subsidiary, Baymont Explorations Inc. (“Baymont”).  Since May 2004,
the Parent Company has focused its exploration activity in the State of Nevada
and the Company’s subsidiary has been inactive. As a result, during the year
ended January 31, 2007, Baymont was dissolved for failure to file Annual Reports
with the Registrar of Companies in British Columbia.  Baymont had no
assets and its sole liability was to its Parent Company.
 
 In
accordance with generally accepted accounting principles in the United States
financial statements for years prior to the dissolution of Baymont are to be
restated to eliminate the effect of Baymont.  Since Baymont had no
assets and its sole liability and its equity were eliminated on consolidation
there is no effect on prior years’ financial statements.
  49
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  2.      SIGNIFICANT
ACCOUNTING POLICIES - Continued
  Capital
Assets
  Web-site
development, including upgrades that extend the useful life of the web-site, is
recorded at cost.  Web-site development costs are amortized on a
straight-line basis over their estimated useful life of three
years.
 
 Mineral Claim Payments and
Exploration Expenditures
  The
Company expenses all costs related to the acquisition, maintenance and
exploration of its unproven mineral properties, to which it has secured
exploration rights.  If and when proven and probable reserves are
determined for a property and a feasibility study prepared with respect to the
property, then subsequent development costs of the property will be
capitalized.  To date, the Company has not established the commercial
feasibility of its exploration prospects. Therefore, all costs have been
expensed.
 
 Use of
Estimates
  The
preparation of financial statements, in conformity with accounting principles
generally accepted in the United States, requires management to make estimates
and assumptions of future events that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses for the
reporting period.  Areas requiring the use of estimates include
stock-based compensation, and accounts payable and accrued
liabilities.  Management believes the estimates are
reasonable.  However, actual results could differ materially from
those reported.
 
 Stock-Based
Compensation
  Effective
February 1, 2006, the Company adopted the provisions of SFAS No. 123(R)
“Share Based Payment”
(SFAS No. 123(R)).  SFAS No. 123(R) requires employee equity
awards to be accounted for under the fair value method.  Accordingly,
share-based compensation is measured at grant date based on the fair value of
the award.  No stock options were granted to employees during the
years ended January 31, 2008 or 2007, therefore no compensation expense is
required to be recognized under provisions of SFAS No. 123(R).
  Prior to
February 1, 2006, the company accounted for awards granted to employees under
its equity incentive plans using the intrinsic value method prescribed by
Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees” (APB 25), and related interpretations, and provided
the required pro forma disclosures prescribed by SFAS No. 123, “Accounting for Stock-Based
Compensation” (SFAS No. 123), as amended.   No stock
options were granted to employees during the year ended January 31, 2006 and
accordingly, no compensation expense was recognized under APB No. 25 and no
compensation expense was required to be recognized under provisions of SFAS No.
123(R) with respect to employees.
  50
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  2.      SIGNIFICANT
ACCOUNTING POLICIES - Continued
 
 Stock-Based Compensation -
continued
  Under the
modified prospective method of adoption for SFAS No. 123(R), the
compensation cost recognized by the company beginning on February 1, 2006
includes (a) compensation cost for all equity incentive awards granted
prior to, but not yet vested as of February 1, 2006, based on the grant-date
fair value estimated in accordance with the original provisions of SFAS
No. 123, and (b) compensation cost for all equity incentive awards
granted subsequent to February 1, 2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS
No. 123(R).  The company uses the straight-line attribution
method to recognize share-based compensation costs over the service period of
the award. Upon exercise, cancellation, forfeiture, or expiration of stock
options, or upon vesting or forfeiture of restricted stock units, deferred tax
assets for options and restricted stock units with multiple vesting dates are
eliminated for each vesting period on a first-in, first-out basis as if each
vesting period was a separate award. To calculate the excess tax benefits
available for use in offsetting future tax shortfalls as of the date of
implementation, the company followed the alternative transition method discussed
in FASB Staff Position No. 123(R)-3.
 
 Impairment and Disposal of
Long-Lived Assets
  The
carrying value of intangible assets and other long-lived assets are reviewed on
a regular basis for the existence of facts or circumstances that may suggest
impairment, in accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”.  For assets that are to be held
and used, an impairment loss is recognized when the estimated undiscounted
future cash flows associated with the asset or group of assets is less than
their carrying value. If impairment exists, an adjustment is made to write the
asset down to its fair value, and a loss is recorded as the difference between
the carrying value and fair value.
  Environmental
      Costs
  Environmental
expenditures that relate to current operations are charged to operations or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are charged to operations. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable, and the cost can
be reasonably estimated. Generally, the timing of these accruals coincides with
the earlier of completion of a feasibility study or the Company’s commitments to
plan of action based on the then known facts.
  Cash and Cash
Equivalents
  The
Company considers all liquid investments, with an original maturity of three
months or less when purchased, to be cash equivalents.
  51
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  2.      SIGNIFICANT
ACCOUNTING POLICIES - Continued
  Foreign Currency
Translation
  The
Company’s functional currency is the U.S. dollar.  Transactions in
foreign currency are translated into U.S. dollars as follows:
 i)
              monetary
      items at the rate prevailing at the balance sheet
  date;
 ii)
              non-monetary
      items at the historical exchange
rate;
 iii)
              revenue
      and expense at the average rate in effect during the applicable accounting
      period.
  Exchange
gains or losses arising on translation are included in income (loss) for the
year.
  Income
Taxes
  The
Company follows Statement of Financial Accounting Standards No. 109 – “Accounting for Income Taxes”
(SFAS 109).  Pursuant to SFAS No. 109, deferred income tax assets and
liabilities are computed for differences between the financial statement
carrying amounts and the respective tax bases.  Deferred tax assets
and liabilities are measured using enacted or substantially enacted tax rates
expected to apply to the taxable income in the periods in which those
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred income tax assets to the amount
expected to be realized.  Potential benefits of net operating losses
have not been recognized in the financial statements because the Company cannot
be assured it is more likely than not it will utilize the net operating losses
carried forward in future years.
   Loss Per
Share
  Basic
earnings (loss) per share of common  stock is computed  by
dividing net income  (loss) available to common shareholders by the
weighted-average number of common shares outstanding for the
period.  Diluted  earnings  per  share
of
common  stock  reflect  the  potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised  or  converted  into
common stock or resulted in the issuance of common stock that then shared in the
earnings of the Company.
  At
January 31, 2008,  potential  common  shares of
2,685,800 (January 31, 2007 – 2,135,800)
related  to  common  stock  options and
warrants were  excluded  from  the
computation  of diluted  earnings  per share since
their  effect is anti-dilutive.
  Financial
Instruments
  The
Company's financial assets and liabilities consist of cash and accounts payable
and accrued liabilities.  Except as otherwise noted, it is
management's opinion that the Company is not exposed to significant interest or
credit risks arising from these financial instruments.  The fair
values of these financial instruments approximate their carrying values due to
the short-term maturities of these instruments.
  52
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  2.      SIGNIFICANT
ACCOUNTING POLICIES - Continued
  Asset Retirement
Obligations
  The
Company has adopted SFAS No. 143, “Accounting for Asset Retirement
Obligations”, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated retirement costs. The standard applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and normal use of the asset.
  SFAS No.
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The fair value of the liability is added to
the carrying amount of the associated asset and this additional carrying amount
is depreciated over the life of the asset. The liability is accreted at the end
of each period through charges to operating expense. If the obligation is
settled for other than the carrying amount of the liability, the Company will
recognize a gain or loss on settlement.
  New Accounting
Pronouncements
  FAS 155
  In
February 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 155, Accounting
for Certain Hybrid Financial Instruments - an amendment of FASB Statements No.
133 and 140(“FAS 155”).This Statement amends FASB Statements No. 133, Accounting for Derivative
Instruments and Hedging Activities, and No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities.This
Statement resolves issues addressed in Statement 133 Implementation Issue No.
D1, “Application of Statement 133 to Beneficial Interests in Securitized
Financial Assets.” This Statement:
 a)
              permits
      fair value re-measurement for any hybrid financial instrument that
      contains an embedded derivative that otherwise would require
      bifurcation,
 b)
              clarifies
      which interest-only strips and principal-only strips are not subject to
      the requirements of Statement 133,
 c)
              establishes
      a requirement to evaluate interests in securitized financial assets to
      identify interests that are freestanding derivatives or that are hybrid
      financial instruments that contain an embedded derivative requiring
      bifurcation,
 d)
              clarifies
      that concentrations of credit risk in the form of subordination are not
      embedded derivatives, and
 e)
              amends
      Statement 140 to eliminate the prohibition on a qualifying special-purpose
      entity from holding a derivative financial instrument that pertains to a
      beneficial interest other than another derivative financial
      instrument.
  This
Statement is effective for all financial instruments acquired or issued after
the beginning of an entity’s first fiscal year that begins after September 15,
2006. Earlier adoption is permitted as of the beginning of an entity’s fiscal
year, provided the entity has not yet issued financial statements, including
financial statements for any interim period for that fiscal year. Provisions of
this Statement may be applied to instruments that an entity holds at the date of
adoption on an instrument-by-instrument basis.
  53
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  2.      SIGNIFICANT
ACCOUNTING POLICIES - Continued
 
 New Accounting
Pronouncements - continued
 
 FIN 48
 
 In
June 2006, the FASB issued interpretation No. 48, “Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”). This
interpretation prescribes a recognition threshold and measurement attribute for
tax positions taken or expected to be taken in a tax return. This interpretation
also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. The
evaluation of a tax position in accordance with this interpretation is a
two-step process. In the first step, recognition, the Company determines whether
it is more-likely-than-not that a tax position will be sustained upon
examination, including resolution of any related appeals or litigation
processes, based on the technical merits of the position. The second step
addresses measurement of a tax position that meets the more-likely-than-not
criteria. The tax position is measured at the largest amount of benefit that is
greater than 50 percent likely of being realized upon ultimate settlement.
Differences between tax positions taken in a tax return and amounts recognized
in the financial statements will generally result in a) an increase in a
liability for income taxes payable or a reduction of an income tax refund
receivable, b) a reduction in a deferred tax asset or an increase in a deferred
tax liability or c) both a and b. Tax positions that previously failed to meet
the more-likely-than-not recognition threshold should be recognized in the first
subsequent financial reporting period in which that threshold is
met.
 Previously
recognized tax positions that no longer meet the more-likely-than-not
recognition threshold should be de-recognized in the first subsequent financial
reporting period in which that threshold is no longer met. Use of a valuation
allowance as described in FAS 109 is not an appropriate substitute for the
de-recognition of a tax position. The requirement to assess the need for a
valuation allowance for deferred tax assets based on sufficiency of future
taxable income is unchanged by this interpretation. This Interpretation is
effective for fiscal years beginning after December 15, 2006.
 
 FAS 157
 
 In
September 2006, FASB issued Statement No. 157, “Fair Value Measurements” (“FAS
157”). FAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with generally accepted accounting principles, and expands
disclosures about fair value measurements. The provisions of FAS 157 are
effective for fiscal years beginning after November 15, 2007.
 
  54
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  2.      SIGNIFICANT
ACCOUNTING POLICIES - Continued
 
 New Accounting
Pronouncements - continued
 
 FAS 158
  In
September 2006, FASB issued Statement No. 158 Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements
No. 87, 88, 106, and 132(R) (“FAS 158”). This Statement improves
financial reporting by requiring an employer to recognize the overfunded or
underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income of a business entity or changes in
unrestricted net assets of a not-for-profit organization. This Statement also
improves financial reporting by requiring an employer to measure the funded
status of a plan as of the date of its year-end statement of financial position,
with limited exceptions. An employer with publicly traded equity securities is
required to initially recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures as of the end of the
fiscal year ending after December 15, 2006.
 
 FAS 159
  In
February 2007, FASB issued Statement No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115”.This
Statement permits entities to choose to measure many financial instruments and
certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions.
  This
Statement is expected to expand the use of fair value measurement, which is
consistent with the Board’s long-term measurement objectives for accounting for
financial instruments. This Statement applies to all entities, including
not-for-profit organizations. Most of the provisions of this Statement apply
only to entities that elect the fair value option. However, the amendment to
FASB Statement No. 115, Accounting for Certain Investments
in Debt and Equity Securities, applies to all entities with
available-for-sale and trading securities. Some requirements apply differently
to entities that do not report net income. This Statement is effective as of the
beginning of an entity’s first fiscal year that begins after November 15,
2007.
  Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of FASB Statement No. 157, Fair Value Measurements.No
entity is permitted to apply this Statement retrospectively to fiscal years
preceding the effective date unless the entity chooses early adoption. The
choice to adopt early should be made after issuance of this Statement but within
120 days of the beginning of the fiscal year of adoption, provided the entity
has not yet issued financial statements, including required notes to those
financial statements, for any interim period of the fiscal year of adoption.
This Statement permits application to eligible items existing at the effective
date (or early adoption date).
  55
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
   2.     
SIGNIFICANT ACCOUNTING POLICIES - Continued
 
 New Accounting
Pronouncements - continued
 
 SFAS
141(4)
 
 In
December 2007, the FASB issued SFAS 141(4) “Business Combinations” and SFAS 160
“Non-controlling Interests in Consolidated Financial Statements”, which are both
effective for fiscal years beginning after December 15, 2008. SFAS 141(4), which
will replace FAS 141, is applicable to business combinations consummated after
the effective date of December 15, 2008.
  The
Company will adopt these policies when required.  The implementation
of these new standards is not expected to have a material effect on the
Company’s financial statements.
 
 
 3.  
   MINERAL PROPERTY INTERESTS
  Gilman
Property
  On May 7,
2004, the Company completed an agreement with MinQuest Inc. (‘MinQuest’) for an
option to acquire a 100% interest in the Gilman Property.   The
Gilman property consists of 19 contiguous, unpatented mineral claims covering
approximately 390 acres located in Lander County, Nevada, U.S.A.  Upon
signing the agreement the Company paid MinQuest $10,000.  By May 15,
2009 the Company must make additional minimum annual option payments totaling
$75,000 and incur annual exploration expenditures of an aggregate $450,000 on
the property.  The agreement is subject to a 3% royalty payable to
MinQuest with the Company being able to repurchase up to two-thirds of the
royalty for $1,000,000 for each 1% repurchased.
  On March
22, 2005, the Company executed an amendment to the Gilman Property Option
Agreement with MinQuest.  As a result of the amendment, the Company’s
obligation to incur $50,000 in exploration expenditures on the Gilman Property
by May 2005 was moved to May 2009.  On May 29, 2006 by way of a letter
agreement the Company and MinQuest agreed to adjust the exploration expenditure
commitments such that the amount due to be spent by May 15, 2006 was moved to
May 15, 2007. With agreement from MinQuest, upon completion of the drill program
expected to be completed by the second quarter of 2008, the Company will have
met its exploration obligations to January 31, 2008.  All other terms
and commitments of the original agreement remain unchanged.
  To
January 31, 2008, the Company had made the initial option payment of $10,000 due
on signing as well as the $15,000 option payments due in May 2007, 2006 and
2005.  In addition the Company has incurred approximately $132,000 in
exploration expenditures on the property. In the event the Company does not make
the indicated option payments and incur the exploration expenditures, when
demanded, the Company will lose its interest in the property.
  56
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  3.      MINERAL
PROPERTY INTERESTS - Continued
  Imperial
Property
  On June
30, 2004, the Company entered into an agreement with MinQuest for an option to
acquire a 100% interest in the Imperial Property. The Imperial Property consists
of 22 contiguous, unpatented mineral claims covering approximately 450 acres
located in Esmeralda County, Nevada, U.S.A.  Upon signing the
agreement the Company paid MinQuest $60,000.  The agreement requires
certain additional minimum annual option payments totaling $80,000 to be paid by
July 1, 2008.  The agreement also requires minimum annual exploration
expenditures with a grand total of $500,000 in expenditures required to be
incurred on the property by the July 1, 2009.  The property option
agreement is subject to a 3% royalty payable to MinQuest.  The Company
is required to use MinQuest for exploration conducted on the Imperial
Property.
  To
January 31, 2008, the Company had made the initial option payment of $60,000
upon signing the agreement (see also note 7) as well as the $20,000 option
payments due in July 2007, 2006 and 2005.  In addition the Company has
incurred approximately $276,000 in exploration expenditures on the property
which satisfied the Company’s expenditure requirements to July 1,
2007.  In the event the Company does not make the indicated option
payments and incur the exploration expenditures, when demanded, the Company will
lose its interest in the property.
  Hercules
Property
  On
October 22, 2004, the Company entered into an agreement with MinQuest for an
option to acquire a 100% interest in the Hercules Property.  The
Hercules Property consists of 40 mineral claims located in Lyon County, Nevada,
USA.  Upon signing the agreement the Company paid MinQuest
$20,000.  The agreement requires certain additional minimum annual
option payments totaling $200,000 and minimum annual exploration expenditures
totaling $4,050,000 to be paid or incurred by November 25, 2014.  The
agreement is subject to a 3% royalty payable to MinQuest with the Company being
able to repurchase up to two-thirds of the royalty for $3,000,000.
 
 To
January 31, 2008, the Company had made the initial option payment of $20,000 due
on signing as well as the $20,000 option payments due in November 2007, 2006 and
2005.  In addition the Company has incurred approximately $714,000 in
exploration expenditures on the property which satisfies the expenditure
requirements to January 31, 2008.  In the event the Company does not
make the indicated option payments and incur the exploration expenditures, when
demanded, the Company will lose its interest in the property.
  57
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  3.      MINERAL
PROPERTY INTERESTS - Continued
 
 Cortez
Property
  On
February 28, 2005, the Company entered into an agreement with MinQuest for an
option to acquire a 100% interest in the Crescent Fault Claims, the Bankop
Property, and the Bullion Mountain Property (collectively, the ‘Cortez
Property’).  The Cortez Property consists of an aggregate of
approximately 75 mineral claims located in Eureka and Lander Counties, Nevada,
U.S.A.  Upon signing the agreement the Company paid MinQuest
$65,000.  By February 15, 2010 the Company must make additional
minimum annual option payments totaling $445,000 and incur annual exploration
expenditures of an aggregate $1,150,000 on the property.  The property
option agreement is subject to a 3% royalty payable to MinQuest and the Company
is required to use MinQuest for exploration conducted on the Cortez
Properties.  On May 29, 2006 by way of a letter agreement, the Company
and MinQuest agreed to adjust the timing of exploration expenditures such that
an aggregate amount of approximately $250,000 was to be spent by September 1,
2006.
  To
January 31, 2008, the Company had made the initial option payment of $65,000 due
on signing as well as the $40,000 option payment due in February 2007 and the
$30,000 option payment due in February 2006.  In addition the Company
has incurred approximately $230,000 in exploration expenditures on the
property.  With agreement from MinQuest, upon the completion of the
drill program planned for the second quarter of 2008 the Company will have met
its exploration requirements to February 15, 2008.  In the event the
Company does not make the indicated option payments and incur the exploration
expenditures, when demanded, the Company will lose its interest in the
property.
 
 
 4.      RECLAMATION
DEPOSIT
  The
Company has been granted exploration permits from the State of Nevada for
several of its properties.  As part of the application process, the
Company is required to pay refundable deposits to the State as surety for the
estimated reclamation costs associated with planned exploration
programs.  Upon completion of required reclamation the Company will
receive a refund of the deposit.
 
 
 5.
              WEB-SITE
      DEVELOPMENT COSTS
  Web-site
development costs, totaling $18,000, represent capitalized costs of design,
configuration, coding, installation and testing of the Company’s web-site up to
initial installation.  Ongoing web-site post-implementation costs will
be charged to operations as incurred.
 
  58
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  6.
              COMMON
      STOCK
  a)
              Issued
      Common Shares
  
 i)
              On
      July 12, 2006, the Company granted stock options to its
      President.  Pursuant to such agreement, the Company’s President
      was granted 200,000 options, with each entitling him to purchase one share
      of common stock at a price of $1.00 until July 12,
  2016.
 
 ii)
              On
      July 12, 2006 the Company and its President entered into an Agreement,
      pursuant to which the Company acquired 3,000,000 common shares of the
      Company’s stock owned by the President for a purchase price of $0.01 per
      share.   The payment of the $30,000 purchase price was made
      in April 2007.  The shares were returned to treasury for
      cancellation.
 
 ii)
              In
      connection with the resignation of a Director, the Company and the
      Director entered into a Redemption Agreement (the “Agreement”), dated July
      14, 2006, whereby the Director agreed to sell 3,000,000 common shares of
      the Company owned by the Director to the Company at a price of $0.01 per
      share.  Pursuant to the Agreement the Company paid $30,000 to
      the Director and returned the shares to treasury for
      cancellation.
 
 iii)
              During
      the year ended January 31, 2008, 375,000 (2007 - 400,000) shares were
      issued, pursuant to exercise of stock options, for total consideration of
      $199,500 (2007 - $480,000).
 
 iv)
              On
      December 6, 2007 the Company closed a private placement of 312,500 units
      at $0.64 per unit for a total offering price of $200,000.  Each
      unit consisted of one common share and two non-transferable share purchase
      warrants, designated Class A and Class B.  Each warrant entitles
      the subscriber to purchase one common share of the Company for a period of
      five years from the vesting date at a price of $0.70 per share for the
      Class A warrants and $0.74 per share for the Class B
      warrants.  The Class A warrants are exercisable commencing
      December 6, 2007 and the Class B warrants are exercisable commencing
      February 6, 2008.  Values of $72,660 and $127,340 were assigned
      to the common shares and warrants, respectively, based on their relative
      fair values at the closing date.
 
 b)
              Stock
      Options
 
 In March
2004, the Board of Directors adopted the American Goldfields Inc.’s 2004 Stock
Option Plan (the 2004 Plan) reserving 5,000,000 common shares for grant to
employees, directors and consultants.  Because additional stock
options are expected to be granted in future periods, the following stock-based
compensation expenses are not representative of the effects on reported
financial results for future periods.
 
  59
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  6.
              COMMON
      STOCK - Continued
  b)
              Stock
      Options - continued
  During
the year ended January 31, 2008, the Company granted 300,000 (2007 – 200,000)
options under the 2004 plan.  These options were valued using the
Black-Scholes option pricing model with the following assumptions:
 2008
              
              2007Dividend
      yield
              
              0%
              
              0%Volatility
              
              126%
              
              139%Risk-free
      interest rate
              
              4.61%
              
              4.4%Expected
      life
              
              10
      years
              
              10
      years
  The
weighted average fair value of options granted for the year ended January 31,
2008 was $0.63 (January 31, 2007 - $0.98).  As a result of the recognition of stock-based
compensation, the following amounts have been included in the Statements of
Operations:
 2008
                  
                  
                  2007Mineral
      property acquisition and exploration expenditures
                  
                  $
                  187,800
                  
                  
                  $
                  -Consulting
                  
                  
                  -
                  
                  
                  
                  195,600$
                  187,800
                  
                  
                  $
                  195,600
 Activity under the 2004 Plan is summarized as
follows:
 Options
      Outstanding
              
              
              Weighted
      Average Exercise PriceBalance,
      January 31, 2006
              
              
              1,225,000
              
              
              $
              1.08Options
      granted
              
              
              200,000
              
              
              $
              1.00Options
      cancelled
              
              
              (100,000
              )
              
              $
              1.20Options
      exercised
              
              
              (400,000
              )
              
              $
              1.20Balance,
      January 31, 2007
              
              
              925,000
              
              
              $
              1.00Options
      granted
              
              
              300,000
              
              
              $
              0.65Options
      exercised
              
              
              (375,000
              )
              
              $
              0.53Balance,
      January 31, 2008
              
              
              850,000
              
              
              $
              1.09
 The
following table summarizes information concerning outstanding and exercisable
common stock options under the 2004 Plan at January 31, 2008:
 Range
      of Exercise Prices
              
              
              Options
      Outstanding
              
              
              Remaining
      Contractual Life
                (in
      years)
              
              
              Number
      of Options Currently Exercisable
              
              
              Weighted
      Average Exercise Price$
              0.06
              
              
              
              50,000
              
              
              
              6.17
              
              
              
              50,000
              
              
              $
              0.06$
              1,00
              
              
              
              200,000
              
              
              
              8.42
              
              
              
              200,000
              
              
              $
              1.00$
              1.20
              
              
              
              600,000
              
              
              
              7.75
              
              
              
              600,000
              
              
              $
              1.20850,000
              
              
              
              7.81
              
              
              
              850,000
              
              
              $
              1.09
 The
aggregate intrinsic value of stock options outstanding and exercisable at
January 31, 2008 is $30,500.  All options granted by the Company under
the 2004 plan have vested immediately.  As a result, there is no
unrecognized compensation expense for unvested options at period end for any of
the periods shown.  The intrinsic value of stock options exercised
during the year ended January 31, 2008 was $92,250.
  60
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  6.
              COMMON
      STOCK - Continued
 
 c)      Warrants
 
 Warrants
      OutstandingBalance,
      January 31, 2006 and 2007
              
              
              1,210,800Warrants
      granted
              
              
              625,000Balance,
      January 31, 2008
              
              
              1,835,800
  The
following table lists the common share warrants outstanding at January 31,
2008.  Each warrant is exchangeable for one common share.
 
 Quantity
              Exercise
                Price
              Exercise
                Period403,600
              $
      1.50
              November
      4, 2005 to November 4, 2010403,600
              $
      2.00
              May
      4, 2006 to May 4, 2011403,600
              $
      2.50
              November
      4, 2006 to November 4, 2011312,500
              $
      0.70
              December
      6, 2007 to December 6, 2012312,500
              $
      0.74
              February
      6, 2008 to February 6, 20131,835,800
 
 
 7.
              RELATED
      PARTY TRANSACTIONS
  a)
              Operations
  On May
26, 2004, Mr. Richard Kern joined the Company’s Board of
Directors.  Mr. Kern is also the President of MinQuest Inc.
(“MinQuest”).  The Company has optioned all of its mineral property
interests from MinQuest.  Further, the Imperial and Cortez Property
option agreements require the Company to use MinQuest as the primary contractor
for exploration activity undertaken on the property.  All exploration
work undertaken on any of the Company’s properties will be at the direction and
discretion of the Company.
  For the
year ended January 31, 2008, the Company paid MinQuest a total of $95,000
(January 31, 2007 - $85,000) related to property option payments for the
Imperial ($20,000), Hercules ($20,000), Cortez ($40,000) and Gilman ($15,000)
Properties.  Included in the net loss for the twelve months ended
January 31, 2008 is an amount of $7,500 (January 31, 2007 - $12,100) with
respect to fees paid to Mr. Kern for geological services rendered to the
Company.
  b)
              Share
      Redemption
  On July
12, 2006 the Company and its President entered into an Agreement, pursuant to
which the Company acquired 3,000,000 common shares of the Company’s stock owned
by the President for a purchase price of $0.01 per share.   The
payment of the $30,000 purchase price was made in April 2007.
  61
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2008 AND 2007
 (Stated
in U.S. Dollars)
  8.
              INCOME
      TAXES
  Deferred
tax assets of the Company are as follows:
  2008
              
              
              2007Loss
      carry-forwards
              
              $
              728,000
              
              
              $
              463,000Less:  Valuation
      allowance
              
              
              (728,000
              )
              
              
              (463,000
              )Deferred
      tax asset recognized
              
              $
              -
              
              
              $
              -
  A
valuation allowance has been recorded to reduce the net benefit recorded in the
financial statements related to these deferred tax assets.  The
valuation allowance is deemed necessary as a result of the uncertainty
associated with the ultimate realization of these deferred tax
assets.
   The
provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate of 34% (2007 – 34%) to net loss for the
year.  The sources and tax effect of the differences are as
follows:
 2008
              
              
              2007Computed
      “expected” tax benefit
              
              $
              325,000
              
              
              $
              235,000Permanent
      differences
              
              
              (64,000
              )
              
              
              (67,000
              )Change
      in Valuation Allowance
              
              
              (261,000
              )
              
              
              (168,000
              )Income
      tax provision
              
              $
              -
              
              
              $
              -
  As at
January 31, 2008 the Company has net operating loss carry-forwards of
approximately $2,140,000 (2007 - $1,372,000), which expire between 2017 and
2028.
 
 
 9.
              SUBSEQUENT
      EVENT
  Subsequent
to January 31, 2008 the Company received $218,750 in total proceeds from the
exercise of 312,500 common share purchase warrants.


62




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





We have
had no disagreements with our independent auditors on accounting or financial
disclosures.





ITEM
9A.                      CONTROLS
AND PROCEDURES.





Evaluation of Disclosure Controls and
Procedures





The
Company’s principal executive and principal financial officers believe that the
Company’s disclosure controls and procedures, as defined in Securities Exchange
Act Rules 13a-15(e) or 15(d)-15(e), are effective. This conclusion was
based on an evaluation of these controls and procedures as of January 31,
2008





Changes
in Internal Control Over Financial Reporting





There
have been no changes over financial reporting in our internal control over
financial reporting that occurred during the period ended January 31, 2008 that
materially affected, or that are reasonably likely to materially affect, our
internal control over financial reporting.




Evaluation of Internal Control Over
Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control system has been designed
to provide reasonable assurance to our management and board of directors
regarding the preparation and fair presentation of our published financial
statements. All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.





Our
management has assessed the effectiveness of our internal controls over
financial reporting as of January 31, 2008. To make this assessment, we
used the criteria for effective internal control over financial reporting
described in Internal Control — Integrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on our assessment, we
believe that, as of January 31, 2008, our internal controls over financial
reporting were effective.





As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our Chief Executive Officer and
the Principal Financial and Accounting Officer, of the design and operation of
our disclosure controls and procedures. Based on this evaluation, our Chief
Executive Officer and Principal Financial and Accounting Officer concluded that
our disclosure controls and procedures are effective.





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





ITEM
9B.                      OTHER
INFORMATION





None





63


PART III





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





Set forth
below is certain information concerning the Company’s executive officers and
directors as of April 28, 2008.





Name
            Position
            Age
            Date
      of
              First
      Election
              Or AppointmentDonald
      Neal
            Director,  President,
      Chief Executive and Operating Officer, Treasurer, and
      Secretary
            57
            February
      5, 2004Jared
      Beebe
            Director
            57
            September
      15, 2006Richard
      Kern
            Director
            61
            May
      26, 2004David
      Gladwell
            Director
            51
            January
      11, 2006





The
following is a brief account of the education and business experience of each
director and executive officer during the past five years:





Donald Neal is a professional
engineer with a background in Projects Engineering Management. In his 30 year
career, Mr. Neal has developed extensive industrial expertise in areas
relating to power plant and refinery engineering and design. He has been
involved in the construction supervision and start-up phases of plants
throughout the world, including the United States, Canada, Europe and Asia. His
experience in industrial project management encompasses a range of capabilities
including field service expertise, performance testing, failure analysis and
pulverized coal firing, milling, feeding and fuel conveying systems.
Mr. Neal is a graduate of the University of Waterloo (Applied Science), and
is a member of the Association of Professional Engineers and Geoscientists of
British Columbia. From 2000 to present, Mr. Neal has worked as an
independent consultant for Mocait’s Development Corp. which is a privately held
corporation. Prior to his present position, Mr. Neal worked as an
Engineering Manager for Utility and Recovery Engineering Ltd.  Mr.
Neal is also the Vice President of Giant Oil & Gas Inc. which is a publicly
traded oil and gas company.





Jared Beebeis an experienced
geologist with an extensive background in mineral
exploration.   In his nearly 20 years of working in the mining
industry, he has worked for a variety of exploration companies in Canada and the
United States.  He is currently a Project Manager in Mexico for Soho
Resources.  Prior to joining his current employer he worked for Globex
Mining in 2006, Scorpio Mining in 2005 and from 1999 to 2004 he worked as a
researcher at the University of Quebec where he studied Geographic Information
Systems.  Mr. Beebe earned a Bachelor of Science degree in Geology
from Metropolitan State College, Denver, Colorado, in 1981.  He is a
member of the Association of Applied Geochemists, the Geological Society of
Nevada, the Ordre du Géologues du Québec, and the Society of Economic
Geologists.





64


Richard Kern is an exploration
geologist with over twenty-five years experience in base and precious metals
exploration in the United States, Central and South America, and Australia.
Mr. Kern worked for Homestake Mining for over thirteen years, where his
positions included Exploration Manager Eastern Australia and District Geologist
Western United States. Mr. Kern directly managed major exploration programs
in diverse locations, including Malaysia, Ecuador, Mexico and the Western U.S.
In Nevada, his team drilled the discovery holes into a 1.6 million ounce gold
deposit which has since gone into production, and a 9 million ounce
gold-equivalent deposit in Australia, also in production. Mr. Kern has
operated as an independent mineral exploration geologist for the last several
years, with a focus on the Western United States. He holds a Bachelor of Science
in Geology (Montana State) and Master of Science in Geology (Idaho
State).





David Gladwell is an
experienced geochemist with an extensive background in mineral exploration
utilizing advanced technologies. After completing his formal geological
education, Dr. Gladwell came to Canada to work as staff geochemist and later
airborne operations geochemist for Barringer Magenta and then Barringer
Research. During this time Dr. Gladwell conducted research on several
significant gold zones including the Kerr Addison deposit in Ontario (later
published) and the Cortez deposit/trend in Nevada. As geochemist at Barringer,
Dr. Gladwell developed a suite of multivariate statistical software tools to
provide interpretation of exploration programs in northern Ontario. In a joint
effort between Barringer and British Petroleum, he also assisted with the
development of a pressurized airborne Flame Ionization Detector (AIRTRACE) which
he used to manage and interpret surveys in the North Sea, the Minches, the Irish
Sea, the English Channel, the Mediterranean offshore of Egypt, the Baltic Sea,
the Gulf Coast, the Beaufort Sea and large tracts of the Northwest Territories.
From 1999 to 2005, Dr. Gladwell worked as a Pastor, in 2006 he was an instructor
at Georgian College and Applegate School in Ontario, Canada, and from 2007 to
present he has been employed as a Senior Geochemist at Klohn Crippen Berger
Ltd.  Dr. Gladwell earned a Bachelor of Science degree in Chemistry
and Geology from the University of Liverpool, and a Ph.D. in Geochemistry from
the Royal School of Mines, London University, UK.





None of
our directors holds any directorships in companies with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act or subject to
the requirements of Section 15(d) of such Act or any company registered as an
investment company under the Investment Company Act of 1940, as
amended.





Our
Directors are appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.





The Board
of Directors has not established an audit committee and does not have an audit
committee financial expert. The Board is of the opinion that an audit committee
is not necessary since the Company’s directors have been performing the
functions of an audit committee.





The Board
has established an Option Committee and a Compensation Committee, each
consisting of Messrs. Neal and Beebe. The Option Committee recommends and
grants options to individuals under the option plans adopted by the company. The
Compensation Committee recommends and grants compensation to individuals who
work for the company.





The Board
does not have a nominating committee, the functions of which are performed by
the Board.





65


Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Exchange Act requires the Company’s executive officers, directors
and persons who beneficially own more than 10% of a registered class of the
Company’s equity securities to file with the Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Such persons are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms they
filed.





We are
not aware of any instances in fiscal year 2008 when an executive officer,
director or owners of more than 10% of the outstanding shares of our common
stock failed to comply with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934.





Code
of Ethics





The
Company has adopted a code of ethics that applies to its principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. For purposes of this Item,
the term code of ethics means written standards that are reasonably designed to
deter wrongdoing and to promote:





·
            honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships;





·
            full,
      fair, accurate, timely, and understandable disclosure in reports and
      documents that the issuer files with, or submits to, the Commission and in
      other public communications made by the issuer; compliance with applicable
      governmental laws, rules and
regulations;





·
            the
      prompt internal reporting of violations of the code to the board of
      directors or another appropriate person or persons;
  and





·
            accountability
      for adherence to the code.





The
Company hereby undertakes to provide to any person without charge, upon request,
a copy of such code of ethics. Such request may be made in writing to the board
of directors at the address of the issuer.





ITEM
11.                      EXECUTIVE
COMPENSATION





Summary
Compensation.





Mr.
Donald Neal has been serving as our Director, President, Chief Executive and
Operating Officer, Treasurer, and Secretary since February 5,
2004.  We had no other officers during the fiscal year ended January
31, 2008.





On July
12, 2006 the Company entered into a Stock Option Agreement with Mr.
Neal.  Pursuant to such agreement, Mr. Neal was issued 200,000
options, each entitling him to purchase one share of common stock at a price of
$1.00 until July 12, 2016.







On July
12, 2006 the Company and Mr. Neal entered into an Agreement, pursuant to which
the Company acquired 3,000,000 common shares of the Company’s stock owned by Mr.
Neal for a purchase price of $0.01 per share.   The payment of
the $30,000 purchase price was made on April 30, 2007.





66


During
the fiscal years ended January 31, 2008 and 2007, Mr. Neal received no other
compensation for his services.





We have
no employment agreements with any of our directors or our sole executive
officer.  We have no pension, health, annuity, bonus, insurance,
equity incentive, non-equity incentive, stock options, profit sharing or similar
benefit plans.





The
following table sets forth information concerning the compensation paid or
earned during the fiscal years ended January 31, 2008 and 2007 for services
rendered to our Company in all capacities by the following persons: (i) all
individuals who served as the principal executive officer or acting in a similar
capacity during the fiscal year ended January 31, 2008, regardless of
compensation level; (ii) all individuals who served as officers
at January 31, 2008 and whose total compensation during the fiscal year ended
January 31, 2008 exceeded $100,000; and (iii) up to two additional individuals
who served as officers during the fiscal year ended January 31, 2008 and whose
total compensation during the fiscal year ended January 31, 2008 exceeded
$100,000, regardless of whether they were serving as officers at the end of such
fiscal year.





SUMMARY
      COMPENSATION TABLEName
      and principal position
                (a)
              Year
                (b)
              Salary
      ($)
                (c)
              Bonus
      ($)
                (d)
              Stock
      Awards ($)
                (e)
              Option
      Awards ($)
                (f)
              Non-Equity
      Incentive Plan Compensation ($)
                (g)
              Nonqualified
      Deferred Compensation Earnings ($)
                (h)
              All
      Other Compensation ($)
                (i)
              Total
      ($)
                (j)Donald
      Neal(1)
              2008
              0
              0
              0
              0
              0
              0
              0
              02007
              0
              0
              0
              $195,600
      (2)
              0
              0
              0
              $195,600
      (2)





(1) Mr.
Donald Neal has been serving as our Director, President, Chief Executive and
Operating Officer, Treasurer, and Secretary since February 5, 2004.





(2)
Represents the fair value of 200,000 common stock purchase options granted to
Mr. Neal on July 12, 2006.  Each such stock option entitles him to
purchase one share of common stock at a price of $1.00 until July 12,
2016.  The value of such stock options was based on the following
assumptions: dividend yield of 0%, volatility of 139%, risk-free interest rate
of 4.4%, and an expected life of 10 years.





Outstanding
Equity Awards





On July
12, 2006 the Company entered into a Stock Option Agreement with Mr.
Neal.  Pursuant to such agreement, Mr. Neal was issued 200,000
options, each entitling him to purchase one share of common stock at a price of
$1.00 until July 12, 2016.





The table
set forth below presents certain information concerning unexercised options,
stock that has not vested, and equity incentive plan awards for each named
executive officer above outstanding as of January 31, 2008.


67





OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-ENDOPTION
      AWARDS
              STOCK
      AWARDSName
                (a)
              Number
      of Securities Underlying Unexercised Options
                (#)
                Exercisable
                (b)
              Number
      of Securities Underlying Unexercised Options
                (#)
                Unexercisable
                (c)
              Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options
                (#)
                (d)
              Option
      Exercise Price
                ($)
                (e)
              Option
      Expiration
                Date
                (f)
              Number
      of Shares or Units of Stock That Have Not Vested
                (#)
                (g)
              Market
      Value of Shares or Units of Stock That Have Not Vested
                ($)
                (h)
              Equity
      Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
      That Have Not Vested
                (#)
                (i)
              Equity
      Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
      Other Rights That Have Not Vested
                (#)
                (j)Donald
      Neal
              200,000
              0
              0
              1.00
              7/12/2016
              0
              0
              0
              0





Compensation
of Directors





Except as
disclosed above under the section entitled “Summary Compensation,” our directors
did not receive any compensation during the fiscal year ended January 31,
2008.





ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT





The
following table sets forth certain information concerning the number of shares
of our common stock owned beneficially as of April 28, 2008 by: (i) each person
(including any group) known to us to own more than five percent (5%) of any
class of our voting securities, (ii) each of our directors, and (iii) officers
and directors as a group. Information relating to beneficial ownership of common
stock by our principal stockholders and management is based upon information
furnished by each person using “beneficial ownership” concepts under the rules
of the Securities and Exchange Commission. Under these rules, a person is deemed
to be a beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or direct the voting of the security, or
investment power, which includes the power to vote or direct the voting of the
security. The person is also deemed to be a beneficial owner of any security of
which that person has a right to acquire beneficial ownership within 60
days.





Under the
Securities and Exchange Commission rules, more than one person may be deemed to
be a beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which he or she may not have any pecuniary
beneficial interest.





The
percentages below are calculated based on 21,292,878 shares of common stock
issued and outstanding.




68


Name of Beneficial Owner
                Title Of Class
                Amount and Nature of Beneficial
      Ownership
                Percent of ClassDonald
      Neal
                  200-4170
      Still Creek Drive,
                  Burnaby,
      B.C., Canada, V5C 6C6
                Common
                200,000(1)
                1.0%Jared
      Beebe
                  200-4170
      Still Creek Drive,
                  Burnaby,
      B.C., Canada, V5C 6C6
                NA
                0
                0Richard
      Kern
                  200-4170
      Still Creek Drive,
                  Burnaby,
      B.C., Canada, V5C 6C6
                NA
                0
                0David
      Gladwell
                  200-4170
      Still Creek Drive,
                  Burnaby,
      B.C., Canada, V5C 6C6
                NA
                0
                0All
      directors and executive officers as a group (4 persons)
                Common
                200,000(1)
                1.0%





(1)
Includes 200,000 stock options granted to Mr. Neal on July 12, 2006, each of
which entitles him to purchase one share of common stock at a price of $1.00
until July 12, 2016.





The
persons or entities named in this table, based upon the information they have
provided to us, have sole voting and investment power with respect to all shares
of common stock beneficially owned by them.





ITEM
13.                      CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS





Related
Transactions Involving Richard Kern





Mr. Richard
Kern joined the Board of Directors of the Company on May 26, 2004. Mr. Kern
is also the president of MinQuest. All of the Company’s mineral properties have
been optioned from MinQuest. Such properties are discussed above under Item 2,
“Description of Properties,” and the material terms of the agreements entered
into between our Company and Minquest with respect to such properties are
summarized below.  As a result, MinQuest and Mr. Kern are related
parties to the Company and both MinQuest and Mr. Kern receive substantial
payments from the Company. In addition, the Company has agreed to use
Mr. Kern as the primary contractor on exploration undertaken to date on all
of its properties. The potential exists for conflicts of interest to occur from
time to time that could adversely affect the Company’s ability conduct its
business of exploration. Also, Mr. Kern is the most knowledgeable person
regarding the historical and current state of exploration on the mineral
properties currently optioned by the Company. If Mr. Kern were to terminate
his relationship with the Company, the Company would be adversely affected while
we found a suitable replacement.





69


Gilman
Property  On May 7, 2004, the Company completed the formal
agreement with MinQuest for an option to acquire a 100% interest in the Gilman
Property.  Concurrently, the Company made the first $10,000 option
payment to MinQuest.  The agreement requires certain additional
minimum annual property option payments with a total of $75,000 required to be
paid by May 15, 2009. The agreement also requires minimum annual exploration
expenditures with a grand total of $450,000 in expenditures required to be
incurred on the property by May 15, 2009. The agreement is subject to a 3%
royalty payable to MinQuest with the Company being able to repurchase up to
two-thirds of the royalty for $1,000,000 for each 1% repurchased. The Company is
not required to use MinQuest for exploration undertaken on the Gilman Property.
However, at its discretion, the Company has engaged MinQuest as the principal
contractor for exploration performed to date.  On March 22, 2005, the
Company executed an amendment to the Gilman Property Option Agreement. As a
result of the amendment, the Company’s obligation to incur $50,000 in
exploration expenditures on the Gilman Property by May 2005 was moved to May
2009.  On May 29, 2006 by way of a letter agreement the Company and
MinQuest agreed to adjust the exploration expenditure commitments such that the
amount due to be spent by May 15, 2006 was moved to May 15, 2007.  The
result is that the Company is now required to spend approximately $153,000 by
May 15, 2007.  With agreement from MinQuest, upon completion of the
drill program expected to be completed by the second quarter of 2008, the
Company will have met its exploration obligations to January 31,
2008.  All other terms and commitments of the original agreement
remain unchanged.  To January 31, 2008, the Company had made the
initial option payment of $10,000 due on signing as well as the $15,000 option
payments due in May 2007, 2006 and 2005.  In addition the Company has
incurred approximately $132,000 in exploration expenditures on the
property.





Imperial
Property  On June 30, 2004, the Company entered into an
agreement with MinQuest for an option to acquire a 100% interest in the Imperial
Property.  The Company made the first scheduled option payment of
$60,000 upon signing the agreement. The agreement requires certain additional
minimum annual property option payments with a total of $80,000 required to be
paid by July 1, 2008. The agreement also requires minimum annual exploration
expenditures with a grand total of $500,000 in expenditures required to be
incurred on the property by July 1, 2009. The property option agreement is
subject to a 3% royalty payable to MinQuest. The Company is required to use
MinQuest for exploration conducted on the Imperial Property.  To
January 31, 2008, the Company had made the initial option payment of $60,000
upon signing the agreement as well as the $20,000 option payments due in July
2007, 2006 and 2005.  In addition the Company has incurred
approximately $276,000 in exploration expenditures on the property which
satisfies the Company’s expenditure requirements to July 1, 2008.




Hercules
Property  On October 22, 2004, the Company entered into an
agreement with MinQuest for an option to acquire a 100% interest in the Hercules
Property.  Concurrent with the signing of the agreement, the Company
made the first property option payment of $20,000. The agreement requires
certain additional minimum annual property option payments totaling $200,000 and
minimum annual exploration expenditures totaling $4,050,000 to be paid or
incurred by November 25, 2014. The agreement is subject to a 3% royalty payable
to MinQuest with the Company being able to repurchase up to two-thirds of the
royalty for $3,000,000.  On May 29, 2006 by way of a letter agreement,
the Company and MinQuest agreed to adjust the timing of exploration expenditures
such that an aggregate amount of approximately $300,000 was to be spent by
September 1, 2006.  To January 31, 2008, the Company had made the
initial option payment of $20,000 due on signing as well as the $20,000 option
payments due in November 2007, 2006 and 2005.  In addition the Company
has incurred approximately $714,000 in exploration expenditures on the
property.  The Company’s drill program that was completed in March
2007 resulted in the Company satisfying the expenditure requirements to January
31, 2008.





70


Cortez
Property On February 28, 2005, the Company entered into an agreement with
MinQuest for an option to acquire a 100% interest in properties known as the
“Crescent Fault Property,” the “Bankop Property,” and the “Bullion Mountain
Property” (collectively, the “Cortez Property”). Concurrent with the signing of
the agreement, the Company made the first property option payment of $65,000.
The agreement requires certain additional minimum annual property option
payments totaling $445,000 and minimum annual exploration expenditures totaling
$1,150,000 to be paid or incurred by February 15, 2010. The agreement is subject
to a 3% royalty payable to MinQuest. In addition, the Company is required to use
MinQuest for exploration activities undertaken on the properties.  On
May 29, 2006 by way of a letter agreement, the Company and MinQuest agreed to
adjust the timing of exploration expenditures such that an aggregate amount of
approximately $250,000 was to be spent by September 1, 2006.  With
agreement from MinQuest, upon the completion of the drill program planned for
the second quarter of 2008 the Company will have met its exploration
requirements to February 15, 2008.  To January 31, 2008, the Company
had made the initial option payment of $65,000 due on signing as well as the as
the $40,000 option payment due in February 2007 and the $30,000 option payment
due in February 2006.  In addition the Company has incurred
approximately $230,000.





Related
Transactions Involving Greg Crowe





On July
14, 2006 Mr. Greg Crowe resigned as a Director of the Company.  In
connection with his resignation, the Company and Mr. Crowe entered into a
Redemption Agreement, dated July 14, 2006, pursuant to which Mr. Crowe agreed to
sell the 3,000,000 common shares of the Company owned by Mr. Crowe to the
Company at a price of $0.01 per share.  The Company paid Mr. Crowe
$30,000 and returned the shares to treasury for cancellation.





Related
Transactions Involving Donald Neal





On July
12, 2006 the Company granted Donald Neal, our Director, President, Chief
Executive and Operating Officer, Treasurer, and Secretary, 200,000 stock
options, each entitling him to purchase one share of common stock at a price of
$1.00 until July 12, 2016.




On July
12, 2006 the Company and Mr. Neal entered into an Agreement, pursuant to which
the Company acquired 3,000,000 common shares of the Company’s stock owned by Mr.
Neal for a purchase price of $0.01 per share.   The payment of
the $30,000 purchase price was made on April 30, 2007.





Director
Independence





We are
not subject to listing requirements of any national securities exchange or
national securities association and, as a result, we are not at this time
required to have our board comprised of a majority of “independent
directors.”  We believe that the following directors currently meet
the definition of “independent” as that term is defined in the rules and
regulations of the American Stock Exchange: Jared Beebe; and David
Gladwell.





71


ITEM
14                      PRINCIPAL
ACCOUNTING FEES AND SERVICES





Morgan
& Company has served as the Company’s Principal Accountant since the
Company’s incorporation. Their fees billed to the Company for the fiscal years
ending January 31, 2008 and 2007 are set forth below:





Fiscal
      year ending
                January
      31, 2008
              
              
              Fiscal
      year ending
                January
      31, 2007Audit
      Fees
              
              $
              32,000
              
              
              $
              16,800Audit
      Related Fees
              
              NIL
              
              
              NILTax
      Fees
              
              
              2,000
              
              
              
              2,000All
      Other Fees
              
              NIL
              
              
              NIL





As of
January 31, 2008, the Company did not have a formal, documented pre-approval
policy for the fees of the principal accountant. It is in the process of
adopting such a policy.








72


PART
IV





ITEM
      15.
            EXHIBITS





Exhibit No.
            Description
            Where Found3.1
            Articles
      of Incorporation
            Previously
      filed with the Company’s Form SB-2, filed with the SEC on March 13, 2002,
      as amended on Jun 12, 2002, July 18, 2002, and August 22,
    20023.2
            Bylaws
            Previously
      filed with the Company’s Form SB-2, filed with the SEC on March 13, 2002,
      as amended on Jun 12, 2002, July 18, 2002, and August 22,
    20024.1
            Share
      Certificate
            Previously
      filed with the Company’s Form SB-2, filed with the SEC on March 13, 2002,
      as amended on Jun 12, 2002, July 18, 2002, and August 22,
    200210.1
            Property
      Option Agreement  (relating to the Gilman
    Property)
            Previously
      filed with the Company’s Current Report on Form 8-K, filed with the SEC on
      May 13, 200410.2
            Property
      Option Agreement  (relating to the Imperial
      Property)
            Previously
      filed with the Company’s Current Report on Form 8-K, filed with the SEC on
      July 9, 200410.3
            Property
      Option Agreement  (relating to the Hercules
      Property)
            Previously
      filed with the Company’s Current Report on Form 8-K, filed with the SEC on
      November 1, 200410.4
            Property
      Option Agreement  (relating to the Cortez
      Properties)
            Previously
      filed with the Company’s Current Report on Form 8-K, filed with the SEC on
      March 2, 200510.5
            Stock
      Option Agreement, dated July 12, 2006, between American Goldfields Inc.
      and Donald Neal
            Previously
      filed with the Company’s Current Report on Form 8-K, filed with the SEC on
      July 18, 200610.6
            Buy-Back
      Option Agreement, dated July 12, 2006, between American Goldfields Inc.
      and Donald Neal
            Previously
      filed with the Company’s Current Report on Form 8-K, filed with the SEC on
      July 18, 200610.7
            Redemption
      Agreement dated July 14, 2006, between American Goldfields Inc. and Greg
      Crowe
            Previously
      filed with the Company’s Current Report on Form 8-K, filed with the SEC on
      July 18, 200631.1
            Rule
      13a-14(a)/15d14(a) Certifications
            Attached
      Hereto32.1
            Section
      1350 Certifications
            Attached
      Hereto





73


SIGNATURES





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





AMERICAN
      GOLDFIELDS INC.Dated:
      April 28, 2008
            By:
            /s/ Donald NealName:
            Donald
      NealTitle:
            President,
      Chief Executive and Operating Officer, Secretary and Treasurer, and
      Director (Principal Executive, Financial and Accounting
      Officer)





In
accordance with the Exchange Act, 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/Donald
      Neal
              Donald
      Neal
            Director,
      President, Chief Executive and Operating Officer, Secretary, and Treasurer
      (Principal Executive, Financial, and Accounting Officer)
            April
      28, 2008/s/ Richard
      Kern
              Richard
      Kern
            Director
            April
      28, 2008/s/ Jared
      Beebe
              Jared Beebe
            Director
            April
      28, 2008/s/ David
      Gladwell
              David Gladwell
            Director
            April
      28, 2008