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, 2009
 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.)
 
 5836 South
Pecos Road
 Las Vegas, Nevada
89120
 (Address
of principal executive offices)
 
 800-942-2201
 (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):
 
  1
  Large
accelerated filer  ̈
Accelerated filer  ̈
 Non-accelerated
filer  ̈ (Do not
check if a smaller reporting company) Smaller Reporting Company x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈ 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, 2008 was approximately $1,703,430.
 
 The number
of shares of the issuer’s common stock issued and outstanding as of April 29,
2009 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
                          31Item
      4
                          Submission
      of Matters to a Vote of Security Holders
                          32PART
      IIItem
      5
                          Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                          32Item
      6
                          Selected
      Financial Data
                          34Item
      7
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                          35Item
      7A
                          Quantitative
      and Qualitative Disclosures About Market Risk.
                          37Item
      8
                          Financial
      Statements and Supplementary Data.
                          37Item
      9
                          Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                          60Item
      9A
                          Controls
      and Procedures
                          60Item
      9B
                          Other
      Information
                          60PART
      IIIItem
      10
                          Directors,
      Executive Officers and Corporate Governance
                          61Item
      11
                          Executive
      Compensation
                          63Item
      12
                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                          65Item
      13
                          Certain
      Relationships and Related Transactions, and Director
      Independence
                          66Item
      14
                          Principal
      Accountant Fees and Services
                          70PART
      IVItem
      15
                          Exhibits,
      Financial Statement Schedules
                          71SIGNATURES
                          
                          72
   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.
 
 On May 30,
2008, the Company entered into an Assignment and Assumption Agreement (the
“Agreement”) with Patriot Gold Corp., a Nevada corporation (“Patriot”), to
assign the exclusive option to an undivided right, title and interest in the
Imperial Property to Patriot. Pursuant to the Agreement, Patriot assumed the
rights, and agreed to perform all of the duties and obligations, of the Company
arising under the Imperial Property Option Agreement.
 
 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.
 
  4
  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.
 
 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.
 
  5
  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.
 
 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.
 
 On
September 12, 2008, Mr. Neal resigned from his positions as President, Chief
Executive Officer, Secretary, Treasurer, and Director of the
Company.
 
 On
September 12, 2008, the Board of Directors of the Company appointed Richard Kern
as President, Chief Executive Officer, Secretary, and Treasurer 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.
 
  6
  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.
 
 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. Kern, our sole officer.
Our sole officer and three directors (one of which is Mr. Kern) 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.
 
  7
  Patents
and Trademarks
 
 We do not
own any patents or trademarks.
 
 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 our
sole Officer is also an Officer and 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 and on September
12, 2008 he was appointed the Company’s President, Chief Executive Officer,
Secretary, and Treasurer of the Company. 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 properties we have optioned in Nevada
contain 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 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.
 
 7.
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
  8.
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.
 9.
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.
 
 10.
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.
 
 11.
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.
 
 12.
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. Kern,
our sole officer, provides his management services to a number of companies.
Because we are in the early stages of our business, Mr. Kern will not be
spending all of his time working for the Company. Mr. Kern expects to expend
approximately one day per week on our business. Later, if the demands of our
business require the full business time of Mr. Kern, he is prepared to adjust
his timetable to devote more time to our business. However, it still may not be
possible for Mr. Kern to devote sufficient time to the management of our
business, as and when needed, especially if the demands of Mr. Kern’s other
interests increase. Competing demands on Mr. Kern’s time may lead to a
divergence between his interests and the interests of other
shareholders.
 
  10
  Risks
Related To Legal Uncertainty and Regulations
 
 13.
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 5836 South Pecos Road, Las Vegas,
Nevada at a cost of approximately $100 per month. This rental is on a
month-to-month basis.
 
 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. On April 21,
2009 MinQuest granted the Company a one year extension on its Gilman property
obligations. The result is that the final property option payment of $15,000 and
the property expenditure requirement of $175,000 due May 15, 2009 are now due
May 15, 2010. All other terms and commitments of the original agreement remain
unchanged.
  12
   To January
31, 2009, 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 2008, 2007,
2006 and 2005. In addition the Company has incurred approximately $154,000 in
exploration expenditures on the property. At January 31, 2009 the Company had a
shortfall in property expenditures of approximately $121,000. As a result of the
extension granted by MinQuest, this amount is now due to be incurred by May 15,
2010. 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 currently
consists of 61 contiguous, unpatented mineral claims 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 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 2009.
  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 $277,000 in
exploration expenditures on the property.
 
  15
  On May 30,
2008, the Company entered into an Assignment and Assumption Agreement (the
“Agreement”) with Patriot Gold Corp., a Nevada corporation (“Patriot”), to
assign the exclusive option to an undivided right, title and interest in the
Imperial Property to Patriot. Pursuant to the Agreement, Patriot assumed the
rights, and agreed to perform all of the duties and obligations, of the Company
arising under the Imperial Property Option Agreement. Simultaneous with the
execution and delivery of the Agreement, the Company received $250,000 from
Patriot, which amount represents the full payment and satisfaction for the
assignment by the Company to Patriot of the Imperial Property Option Agreement
and all rights and obligations with respect thereto. Included in the assignment
were, without limitation, all sums incurred by the Company in connection with
the Imperial Property, specifically (i) the refunding of the reclamation bond
previously paid by the Company to the Bureau of Land Management in Nevada in the
amount of $13,255; (ii) the approximately $277,000 of expenditures incurred by
the Company prior to the Agreement; and (iii) the $120,000 paid to MinQuest Inc.
by the Company as option payments under the Imperial Property Option
Agreement.
 
 HERCULES
PROPERTY
 
 
 
 Map of
Hercules Property located in western Nevada.
  16
   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. On April 21, 2009
MinQuest granted the Company a one year extension on its Hercules property
obligations. The result is that the $20,000 property option payments due
annually on November 25, 2008 through 2014 inclusive are now due on November 25,
2009 through 2015 inclusive. The annual property expenditure requirements of
$500,000 required to be incurred annually by November 25, 2009 through 2014
respectively are now due to be incurred by November 25, 2010 through November
25, 2015.
 
 To January
31, 2009, 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 $792,200 in exploration
expenditures on the property. At January 31, 2009 the Company had a shortfall in
property expenditures of approximately $257,800. As a result of the extension
granted by MinQuest, this amount is now due to be incurred by November 25, 2009.
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.
 
  17
  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.
 
 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.
 
  18
  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.
 
 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.
 
  19
  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.
 
 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
 
  20
  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.
 
 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.
 
  21
  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.
 
 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.
 
  22
  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.
 
 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.
 
  23
  CORTEZ
PROPERTY
 
 
 
 Map of the
Cortez Properties located in western Nevada.
 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. On April 21, 2009
MinQuest granted the Company a one year extension on its Cortez property
obligations. The result is that the $75,000 property option payments due on
February 26, 2009 is now due February 26, 2010 and the $250,000 due on February
26, 2010 is now due February 26, 2011. The annual property expenditure
requirement of $300,000 required to be incurred by February 26, 2009 is now due
to be incurred by February 26, 2010 and the $250,000 due February 26, 2010 is
now due to be incurred by February 26, 2011.
 
  24
   To January
31, 2009, the Company had made the initial option payment of $65,000 due on
signing as well as the $50,000, $40,000 and the $30,000 option payments due in
February of 2008, 2007, and 2006 respectively. In addition the Company has
incurred approximately $242,900 in exploration expenditures on the property. At
January 31, 2009 the Company had a shortfall in property expenditures of
approximately $207,100. As a result of the extension granted by MinQuest, this
amount is now due to be incurred by February 26, 2010. 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.
 
 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.
 
  25
  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.
 
 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.
 
  26
  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 May or June 2009 but the Company has not yet made its
determination on its 2009 exploration programs.
 
  27
  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.
 
  28
  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.
  29
  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. Because of other commitments the 2007 program has not been conducted.
The Company’s current plan is to do the work in the summer of 2009.
 
 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.
 
  30
  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.
 
 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.
 
 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. To date, based on an evaluation of the previous work undertaken
on the Cortez Property and based upon recommendations from MinQuest, the Company
has elected to conduct exploration programs on the Bankop and Crescent Fault
portions of the Property in order to meet the Company’s exploration expenditure
commitments under the Cortez Property Option Agreement. As a result, the Company
has not undertaken any significant exploration on the Bullion Mountain
claims.
 
 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.
 
  31
  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, 2009.
 
 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.OB”. 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, 2009 and 2008.
 
 Financial Quarter
                      Bid Information*Fiscal Year Ended January
    31,
                      Quarter
                      High Bid
                      Low Bid2009
                      Fourth
      Quarter
                      $0.105
                      $0.07Third
      Quarter
                      $0.11
                      $0.06Second
      Quarter
                      $0.36
                      $0.08First
      Quarter
                      $0.74
                      $0.352008
                      Fourth
      Quarter
                      $1.23
                      $0.46Third
      Quarter
                      $0.61
                      $0.35Second
      Quarter
                      $1.10
                      $0.51First
      Quarter
                      $1.74
                      $0.70
 
 *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 29, 2009, we had 47 (forty-seven) 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.
 
  32
  Dividend
Policy
 
 As of
April 29, 2009, 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.
 
 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, 2009 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
                            2,373,300(1)
                            $1.51
                            1,800,000Total
                            2,373,300
                            $1.51
                            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 1,523,300 common stock purchase warrants.
 
  33
  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 29, 2009, 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:
 
 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
 
 Smaller
reporting companies are not required to provide the information required by this
item.
 
  34
  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.
 
 Plan
of Operations
 
 Our
business plan is to proceed with the exploration of the Gilman, Hercules and
Cortez Properties to determine whether there are commercially exploitable
reserves of gold and silver or other metals. We had cash of $75,128 and working
capital of $27,955 as of January 31, 2009. 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 one day 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, 2009
 
 We did not
earn any revenues during the fiscal year ended January 31, 2009 or 2008. 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.
 
  35
  For the
year ended January 31, 2009 we had a net loss of $32,507 compared to a net loss
of $955,613 for the prior year, a decrease of $923,106. Our loss for 2009 has
decreased substantially over 2008 primarily due to a reduction in mineral claim
payments and exploration expenditures to $198,537 in 2009 from $860,227 in 2008,
a decrease of $661,690. The decrease was due to lower exploration costs,
stock-based compensation, and option payments. The decrease in exploration
expenditures was largely due to lower exploration expenses being incurred in
2009 compared to 2008. In 2009, the Company’s most significant mineral claim
payments and exploration expenditures related to the final costs of the drilling
program and assay and lab analysis costs for the Hercules Property. 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. There was no stock-based compensation in 2009
while in 2008, $187,800 was recognized. In 2008, the stock-based compensation
related to geology consultants and as a result has been recognized as an
exploration expense. The balance of the mineral claim payments and exploration
expenditures was a result of the Company making option payments totaling $85,000
in 2009 compared to $95,000 in 2008. During 2009 the Company made option
payments under the Hercules $20,000 (2008 - $20,000), Imperial $nil (2008 -
$20,000), Gilman $15,000 (2008 - $15,000), and the Cortez $50,000 (2008 -
$40,000) property option agreements. There was no Imperial option payment in
2009 as the Company assigned its rights under the property option agreement to
Patriot Gold Corp. for $250,000. The Company recognized $13,255 as a refund of
the reclamation bond and recorded a gain of $236,745. There was no such gain in
2008.
 
 General
and administrative expenses were slightly lower in 2009 compared to 2008. Office
and sundry as well as professional fees decreased in 2009. Office and sundry
decreased to $28,669 in 2009 from $39,138 in 2008 while professional fees were
reduced to $23,912 in 2009 from $39,480 in 2008. The reduction in both items was
due to an overall reduction in the Company’s activity in 2009 compared to
2008.
 
 Liquidity
and Capital Resources
 
 We had
cash of $75,128 and working capital of $27,955 as of January 31, 2009. We
anticipate that we will incur over the next twelve months:
 
 ·
              $110,000
      in connection with property payments under the Company’s three option
      agreements.
 
 ·
              $1,600,000
      in property exploration expenses in order to meet the requirements of the
      Company’s property option
agreements;
 
 ·
              $54,000
      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, 2009 was $186,561
compared to $704,014 during the year ended January 31, 2008. The decreased cash
used in operations was primarily due to a decrease in the net loss in 2009
($34,507) compared to 2008 ($955,613). Also, in 2009 there was an outflow from
the reduction in accounts payable and accrued liabilities of $175,948 compared
to an inflow of $84,388 in 2008. In addition, in 2009 there was an inflow from
the recovery of prepaid expenses of $21,894 compared to an outflow of $21,089 in
2008.
 
  36
  Cash from
financing in 2009 related to $218,750 received from the exercise of share
purchase warrants. In 2008 inflows of $200,000 from a private placement and
$199,500 from the exercise of common stock options were partially offset by the
payment of the related party payable of $30,000. Investing activities in 2009
and 2008 related to refundable reclamation deposits paid to the State of Nevada.
In 2009 the Company received a net refund of $13,168 while in 2008 the Company
paid $21,227.
 
 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.
 
 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
 
 Smaller
reporting companies are not required to provide the information required by this
item.
 
 ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 Index to
Consolidated Financial Statements:
 
 1.
              Auditors’
      Reports;
 
 2.
              Audited
      Consolidated Financial Statements for the year ended January 31, 2009,
      including:
 
 a.
              Consolidated
      Balance Sheets as at January 31, 2009 and
2008;
 
 b.
              Consolidated
      Statements of Operations for the years ended January 31, 2009 and 2008 and
      for the period from inception on December 21, 2001 to January 31,
      2009;
 
 c.
              Consolidated
      Statements of Cash Flows for the years ended January 31, 2009 and 2008 and
      for the period from inception on December 21, 2001 to January 31,
      2009;
 
 d.
              Statements
      of Stockholders’ Equity for the years ended January 31, 2009 and 2008 and
      for the period from inception on December 21, 2001 to January 31,
      2009;
 
 e.
              Notes
      to the Consolidated Financial
Statements.
 
  37
 
 ROBISON,
      HILL & CO.
                
                
                
                Certified
      Public AccountantsA
      PROFESSIONAL CORPORATIONBRENT
      M. DAVIES, CPADAVID
      O. SEAL, CPAW.
      DALE WESTENSKOW, CPABARRY
      D. LOVELESS, CPASTEPHEN
      M. HALLEY, CPA
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
 To the
Board of Directors and Stockholders of
 American
Goldfields, Inc. (An Exploration Stage Company)
 We have
audited the accompanying balance sheet of American Goldfields, Inc (an
exploration stage company) as of January 31, 2009, and the related statements of
operations, and cash flows for the year ended January 31, 2009, and the
cumulative since December 21, 2001 (inception) to January 31, 2009, and the
statement of stockholder’s equity since December 21, 2001 (inception) to January
31, 2009. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 We
conducted our audit 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 audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides 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 American Goldfields, Inc (an
exploration stage company) as of January 31, 2009 and the results of its
operations and its cash flows for the year ended January 31, 2009 and the
cumulative since December 21, 2001 (inception) to January 31, 2009, in
conformity with accounting principles generally accepted in the United States of
America.
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations, has no
revenues, 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.
 
 _/s/ ROBISON, HILL &
CO._
 Certified
Public Accountants
 
 Salt Lake
City, Utah
 April 29,
2009
 
 38
  
  
 
 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 the related statements of
operations, cash flows, and stockholders’ (deficiency) equity for the year 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 audit provides 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 the results of its operations and its cash flows for the year ended January
31, 2008 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 & Company
 
 April 28,
2008 Chartered Accountants
  
  39
  AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 BALANCE
SHEETS
 (Stated
in U.S. Dollars)
 
 
 
 JANUARY
      312009
                                                                
                                                                
                                                                2008ASSETSCurrent
      AssetsCash
      and cash equivalents
                                                                
                                                                $
                                                                75,128
                                                                
                                                                
                                                                $
                                                                29,771Prepaid
      expenses
                                                                
                                                                
                                                                894
                                                                
                                                                
                                                                
                                                                22,78876,022
                                                                
                                                                
                                                                
                                                                52,559Reclamation deposits
      (note 4)
                                                                
                                                                
                                                                41,800
                                                                
                                                                
                                                                
                                                                54,968$
                                                                117,822
                                                                
                                                                
                                                                $
                                                                107,527LIABILITIES
      AND STOCKHOLDERS’ (DEFICIENCY) EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued liabilities
                                                                
                                                                $
                                                                48,067
                                                                
                                                                
                                                                $
                                                                224,01548,067
                                                                
                                                                
                                                                
                                                                224,015Stockholders’(deficiency)
      equityPreferred
      Stock100,000,000
      shares authorized with a par value of $0.001 per share, none issued or
      outstanding
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -Common Stock(note
      5)Authorized:600,000,000
      shares with a par value of $0.001 per shareIssued:21,292,878
      shares issued and outstanding at January 31, 2009 (January 31, 2008 –
      20,980,378)
                                                                
                                                                
                                                                21,293
                                                                
                                                                
                                                                
                                                                20,980Additional
      paid-in capital
                                                                
                                                                
                                                                3,137,967
                                                                
                                                                
                                                                
                                                                2,919,530Warrants
                                                                
                                                                
                                                                829,604
                                                                
                                                                
                                                                
                                                                829,604Deficit
      accumulated during the exploration stage
                                                                
                                                                
                                                                (3,919,109
                                                                )
                                                                
                                                                
                                                                (3,886,602
                                                                )Total
      stockholders’ (deficiency) equity
                                                                
                                                                
                                                                69,755
                                                                
                                                                
                                                                
                                                                (116,488
                                                                )$
                                                                117,822
                                                                
                                                                
                                                                $
                                                                107,527
 
 The
accompanying notes are an integral part of these financial
statements.
  40
  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
      312009
                                                        
                                                        
                                                        2008
                                                        
                                                        
                                                        2009ExpensesMineral
      claim payments and exploration expenditures
                                                        
                                                        $
                                                        198,537
                                                        
                                                        
                                                        $
                                                        860,227
                                                        
                                                        
                                                        $
                                                        2,767,872Office
      and sundry
                                                        
                                                        
                                                        28,669
                                                        
                                                        
                                                        
                                                        39,138
                                                        
                                                        
                                                        
                                                        528,087Rent
                                                        
                                                        
                                                        7,321
                                                        
                                                        
                                                        
                                                        4,855
                                                        
                                                        
                                                        
                                                        27,342Professional
      fees
                                                        
                                                        
                                                        23,912
                                                        
                                                        
                                                        
                                                        39,480
                                                        
                                                        
                                                        
                                                        201,588Transfer
      agent fees
                                                        
                                                        
                                                        50
                                                        
                                                        
                                                        
                                                        255
                                                        
                                                        
                                                        
                                                        6,340Amortization
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        500
                                                        
                                                        
                                                        
                                                        18,000Interest
      expense
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,070Directors’
      fees
                                                        
                                                        
                                                        11,182
                                                        
                                                        
                                                        
                                                        11,158
                                                        
                                                        
                                                        
                                                        34,260Consulting
      fees
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        583,027Total
      expenses
                                                        
                                                        
                                                        (269,671
                                                        )
                                                        
                                                        
                                                        (955,613
                                                        )
                                                        
                                                        
                                                        (4,167,586
                                                        )Gain
      on disposal of mineral property (note 3)
                                                        
                                                        
                                                        236,745
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        236,745Interest
      income
                                                        
                                                        
                                                        419
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        11,732Net
      loss for the period
                                                        
                                                        $
                                                        (32,507
                                                        )
                                                        
                                                        $
                                                        (955,613
                                                        )
                                                        
                                                        $
                                                        (3,919,109
                                                        )Basic
      and diluted loss per share
                                                        
                                                        $
                                                        (0.00
                                                        )
                                                        
                                                        $
                                                        (0.05
                                                        )Weighted
      average number of shares outstanding – basic and diluted
                                                        
                                                        
                                                        21,270,190
                                                        
                                                        
                                                        
                                                        20,577,330
 
 
 
 
 
 The
accompanying notes are an integral part of these financial
statements.
  41
  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
      312009
                                
                                
                                2008
                                
                                
                                2009Cash
      provided by (used in):Operating
      activitiesNet
      loss for the period
                                
                                $
                                (32,507
                                )
                                
                                $
                                (955,613
                                )
                                
                                $
                                (3,919,109
                                )Adjustments
      to reconcile net loss to netCash
      flows used in operating activitiesStock-based
      compensation
                                
                                
                                -
                                
                                
                                
                                187,800
                                
                                
                                
                                1,729,000Amortization
                                
                                
                                -
                                
                                
                                
                                500
                                
                                
                                
                                18,000Changes
      in assets and liabilitiesPrepaid
      expenses
                                
                                
                                21,894
                                
                                
                                
                                (21,089
                                )
                                
                                
                                (894
                                )Accounts
      payable and accrued liabilities
                                
                                
                                (175,948
                                )
                                
                                
                                84,388
                                
                                
                                
                                52,610(186,561
                                )
                                
                                
                                (704,014
                                )
                                
                                
                                (2,120,393
                                )Financing
      activitiesProceeds
      from the exercise of stock options
                                
                                
                                -
                                
                                
                                
                                199,500
                                
                                
                                
                                774,000Proceeds
      from the issue of common stock
                                
                                
                                -
                                
                                
                                
                                200,000
                                
                                
                                
                                1,304,571Proceeds
      from the exercise of warrants
                                
                                
                                218,750
                                
                                
                                
                                -
                                
                                
                                
                                218,750Payment
      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
                                )218,750
                                
                                
                                
                                369,500
                                
                                
                                
                                2,237,321Investing
      activityReclamation
      deposits
                                
                                
                                13,168
                                
                                
                                
                                (21,227
                                )
                                
                                
                                (41,800
                                )Increase
      (decrease) in cash and cash equivalents
                                
                                
                                45,357
                                
                                
                                
                                (355,741
                                )
                                
                                
                                75,128Cash
      and cash equivalents, beginning of period
                                
                                
                                29,771
                                
                                
                                
                                385,512
                                
                                
                                
                                -Cash
      and cash equivalents, end of period
                                
                                $
                                75,128
                                
                                
                                $
                                29,771
                                
                                
                                $
                                75,128
 
 SCHEDULE
OF NON-CASH ACTIVITIES
 Cancellation
      of common stock (note 6)
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      30,000Settlement
      of accounts payable by contributionfrom
      a stockholder
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      4,543Web-site
      development costs related tonon-employee
      stock-based compensation
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      18,000
 The
accompanying notes are an integral part of these financial
statements.
  42
  AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 STATEMENT
OF STOCKHOLDERS’ (DEFICIENCY) EQUITY
 
 Period
from Inception, December 21, 2001 to January 31, 2009
 (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 onIncorporation
      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
  43
  AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 STATEMENT
OF STOCKHOLDERS’ (DEFICIENCY) EQUITY
 
 Period
from Inception, December 21, 2001 to January 31, 2009
 (Stated
in U.S. Dollars)
 (Continued)
  COMMON
      STOCKNUMBER
      OF COMMON SHARES
                              
                              
                              PAR
      VALUE
                              
                              
                              ADDITIONAL
      PAID IN CAPITAL
                              
                              
                              WARRANTS
                              
                              
                              DEFICIENCY
      ACCUMULATED DURING THE EXPLORATION
                                TAGE
                              
                              
                              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
                              )Exercise
      of share purchase warrants in February and March 2008
                              
                              
                              312,500
                              
                              
                              
                              313
                              
                              
                              
                              218,437
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              218,750Net
      loss for the year
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (32,507
                              )
                              
                              
                              (32,507
                              )Balance,
      January 31, 2009
                              
                              
                              21,292,878
                              
                              
                              $
                              21,293
                              
                              
                              $
                              3,137,967
                              
                              
                              $
                              829,604
                              
                              
                              $
                              (3,919,109
                              )
                              
                              $
                              69,755
  
 The
accompanying notes are an integral part of these financial
statements.
  44
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (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 loss of
$3,919,109 for the period from December 21, 2001 (inception) to January 31,
2009, 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. 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.
 
  45
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (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, 2009 or 2008, 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.
  
  46
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (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
a 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.
  
  47
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (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, 2009, potential common shares of 2,373,300 (January 31, 2008 – 2,685,800)
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.
  
  48
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (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
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.
 
 FAS 160
 
 In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements – An amendment of ARB No. 51". SFAS 160
requires companies with noncontrolling interests to disclose such interests
clearly as a portion of equity but separate from the parent's equity. The
noncontrolling interest's portion of net income must also be clearly presented
on the Income Statement. SFAS 160 is effective for financial statements issued
for fiscal years beginning after on or after December 15, 2008.
 
 FAS 161
 
 In March
2008, the FASB issued SFAS 161 “Disclosures about Derivative Instruments and
Hedging Activities – an amendment of SFAS 133. This Statement requires enhanced
disclosures about an entity’s derivative and hedging activities and thereby
improves the transparency of financial reporting. This Statement is effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, with early application encouraged. This Statement
encourages, but does not require, comparative disclosures for earlier periods at
initial adoption.
 
  49
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  2.
SIGNIFICANT ACCOUNTING POLICIES - Continued
 
 New Accounting
Pronouncements - continued
 
 FAS 162
 
 In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles". SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of non-governmental entities that are presented in
conformity with generally accepted accounting principles in the United States.
It is effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles".
 
 FSP
142-3
 
 In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles". SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of non-governmental entities that are presented in
conformity with generally accepted accounting principles in the United States.
It is effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles".
 
 APB 14-1
 
 In May
2008, FASB issued FASB Staff Position ("FSP") APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 clarifies
that convertible debt instruments that may be settled in cash upon either
mandatory or optional conversion (including partial cash settlement) are not
addressed by paragraph 12 of APB Opinion No. 14, "Accounting for Convertible
Debt and Debt issued with Stock Purchase Warrants." Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity's
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB 14-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years.
 
  50
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  2.
SIGNIFICANT ACCOUNTING POLICIES - Continued
 
 New Accounting
Pronouncements - continued
 
 SFAS 163
 
 FASB has
issued Statement of Financial Accounting Standards ("SFAS") No. 163, “Accounting
for Financial Guarantee Insurance Contracts”. SFAS No. 163 clarifies how SFAS
No. 60, “Accounting and Reporting by Insurance Enterprises”, applies to
financial guarantee insurance contracts issued by insurance enterprises, and
addresses the recognition and measurement of premium revenue and claim
liabilities. It requires expanded disclosures about contracts, and recognition
of claim liability prior to an event of default when there is evidence that
credit deterioration has occurred in an insured financial obligation. It also
requires disclosure about (a) the risk-management activities used by an
insurance enterprise to evaluate credit deterioration in its insured financial
obligations, and (b) the insurance enterprise's surveillance or watch list. The
implementation of SFAS 163 is not expected to have a material impact on the
Company’s financial statements.
   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 61 contiguous, unpatented mineral claims 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. On April
21, 2009 MinQuest granted the Company a one year extension on its Gilman
property obligations. The result is that the final property option payment of
$15,000 and the property expenditure requirement of $175,000 due May 15, 2009
are now due May 15, 2010. All other terms and commitments of the original
agreement remain unchanged.
  
  51
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  3.
MINERAL PROPERTY INTERESTS - Continued
 
 Gilman Property -
continued
 
 To January
31, 2009, 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 2008, 2007, 2006 and
2005. In addition the Company has incurred approximately $154,000 in exploration
expenditures on the property. At January 31, 2009 the Company had a shortfall in
property expenditures of approximately $121,000. As a result of the extension
granted by MinQuest, this amount is now due to be incurred by May 15, 2010. 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.
 
 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 as well as the $20,000 option payments due in July 2007,
2006 and 2005. In addition the Company has incurred approximately $277,000 in
exploration expenditures on the property which satisfied the Company’s
expenditure requirements to July 1, 2007.
 
 On May 30,
2008, the Company entered into an Assignment and Assumption Agreement (the
“Agreement”) with Patriot Gold Corp., a Nevada corporation (“Patriot”), to
assign the exclusive option to an undivided right, title and interest in the
Imperial Property to Patriot. Pursuant
to the Agreement, Patriot assumed the rights, and agreed to perform all of the
duties and obligations, of the Company arising under the Imperial Property
Option Agreement. Simultaneous with the execution and delivery of the Agreement,
the Company received $250,000 from Patriot, which amount represents the full
payment and satisfaction for the assignment by the Company to Patriot of the
Imperial Property Option Agreement and all rights and obligations with respect
thereto. Included in the assignment were, without limitation, all sums incurred
by the Company in connection with the Imperial Property, specifically (i) the
refunding of the reclamation bond previously paid by the Company to the Bureau
of Land Management in Nevada in the amount of $13,255; (ii) the approximately
$277,000 of expenditures incurred by the Company prior to the Agreement; and
(iii) the $120,000 paid to MinQuest Inc. by the Company as option payments under
the Imperial Property Option Agreement.
  52
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  3.
MINERAL PROPERTY INTERESTS - Continued
   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.
On April 21, 2009 MinQuest granted the Company a one year extension on its
Hercules property obligations. The result is that the $20,000 property option
payments due annually on November 25, 2008 through 2014 inclusive are now due on
November 25, 2009 through 2015 inclusive. The annual property expenditure
requirements of $500,000 required to be incurred annually by November 25, 2009
through 2014 respectively are now due to be incurred by November 25, 2010
through November 25, 2015.
 
 To January
31, 2009, 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 $792,200 in exploration
expenditures on the property. At January 31, 2009 the Company had a shortfall in
property expenditures of approximately $257,800. As a result of the extension
granted by MinQuest, this amount is now due to be incurred by November 25,
2009.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.
 
 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. On April 21, 2009 MinQuest granted the Company a one
year extension on its Cortez property obligations. The result is that the
$75,000 property option payments due on February 26, 2009 is now due February
26, 2010 and the $250,000 due on February 26, 2010 is now due February 26,
2011.
  53
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  3. MINERAL
PROPERTY INTERESTS - Continued
  Cortez Property -
continued
  The annual
property expenditure requirement of $300,000 required to be incurred by February
26, 2009 is now due to be incurred by February 26, 2010 and the $250,000 due
February 26, 2010 is now due to be incurred by February 26, 2011.
 
 To January
31, 2009, the Company had made the initial option payment of $65,000 due on
signing as well as the $50,000, $40,000 and the $30,000 option payments due in
February of 2008, 2007, and 2006 respectively.  In addition the
Company has incurred approximately $242,900 in exploration expenditures on the
property.  At January 31, 2009 the Company had a shortfall in property
expenditures of approximately $207,100.  As a result of the extension
granted by MinQuest, this amount is now due to be incurred by February 26,
2010.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
DEPOSITS
  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. 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.
 
 iii)
                  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.
  54
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
 
 5.
COMMON STOCK - Continued
  a)
                  Issued
      Common Shares - continued
 
 iv)
                    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).
 
 v)
                    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.
 
 vi)
                    During
      the year ended January 31, 2009, 312,500 shares were issued pursuant to
      the exercise of common share purchase warrants for total consideration of
      $218,750.
 
 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.
 
 During the
year ended January 31, 2009, the Company did not grant any stock options while
for the year ended January 31, 2008, 300,000 options were granted under the 2004
plan.  These options were valued using the Black-Scholes option
pricing model with the following assumptions:
  2008Dividend
      yield
                      
                      0%Volatility
                      
                      126%Risk-free
      interest rate
                      
                      4.61%Expected
      life
                      
                      10
      years
 
 The
weighted average fair value of options granted for the year ended January 31,
2009 was $nil (January 31, 2008 - $0.63).  As a result of the recognition of stock-based
compensation, the following amounts have been included in the Statements of
Operations:
  55
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  5. COMMON
STOCK - Continued
  b)
                  Stock
      Options - continued
 
 2009
                          
                          
                          2008Mineral
      property acquisition and exploration expenditures
                          
                          $
                          -
                          
                          
                          $
                          187,800$
                          -
                          
                          
                          $
                          187,800
 
 Activity
under the 2004 Plan is summarized as follows:
 Options
      Outstanding
                        
                        
                        Weighted
      Average Exercise PriceBalance,
      January 31, 2007
                        
                        
                        925,000
                        
                        
                        $
                        1.00Options
      granted
                        
                        
                        300,000
                        
                        
                        $
                        0.65Options
      exercised
                        
                        
                        (375,000
                        )
                        
                        $
                        0.53Balance,
      January 31, 2009 and 2008
                        
                        
                        850,000
                        
                        
                        $
                        1.09
 
 The
following table summarizes information concerning outstanding and exercisable
common stock options under the 2004 Plan at January 31, 2009:
 
 Range
      of Exercise Prices
                    
                    
                    Options
      Outstanding
                    
                    
                    Remaining
      Contractual Life
                      (in
      years)
                    
                    
                    Number
      of Options Currently Exercisable
                    
                    
                    Weighted
      Average Exercise Price$
                    0.06
                    
                    
                    
                    50,000
                    
                    
                    
                    5.17
                    
                    
                    
                    50,000
                    
                    
                    $
                    0.06$
                    1,00
                    
                    
                    
                    200,000
                    
                    
                    
                    7.42
                    
                    
                    
                    200,000
                    
                    
                    $
                    1.00$
                    1.20
                    
                    
                    
                    600,000
                    
                    
                    
                    6.75
                    
                    
                    
                    600,000
                    
                    
                    $
                    1.20850,000
                    
                    
                    
                    
                    
                    
                    
                    850,000
 
 The
aggregate intrinsic value of stock options outstanding as well as those
exercisable at January 31, 2009 is $500 (2008 - $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, 2009 was $nil (2008 - $92,250).
 
 c) Warrants
 
 Warrants
      OutstandingBalance,
      January 31, 2007
                        
                        
                        1,210,800Warrants
      granted
                        
                        
                        625,000Balance,
      January 31, 2008
                        
                        
                        1,835,800Warrants
      exercised
                        
                        
                        (312,500
                        )Balance,
      January 31, 2009
                        
                        
                        1,523,300
  56
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  5.
COMMON STOCK – Continued
  c) Warrants
- continued
  The
following table lists the common share warrants outstanding at January 31,
2009.  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
                  $
      0.74
                  February
      6, 2008 to February 6, 20131,523,300
  6. RELATED
PARTY TRANSACTIONS
  a)
                  Operations
  On May 26,
2004, Mr. Richard Kern joined the Company’s Board of Directors and on September
12, 2008 he was appointed the Company’s President, Chief Executive Officer,
Secretary, and Treasurer.  Mr. Kern is also the President of MinQuest
Inc. (“MinQuest”).  The Company has optioned all of its mineral
property interests from MinQuest.  Further, the 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, 2009, the Company paid MinQuest a total of $65,000
(January 31, 2008 - $95,000) related to property option payments for the Cortez
($50,000) and Gilman ($15,000) Properties.  Included in the net loss
for the twelve months ended January 31, 2009 is an amount of $7,980 (January 31,
2008 - $7,500) 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 former President entered into an Agreement,
pursuant to which the Company acquired 3,000,000 common shares of the Company’s
stock owned by its former President for a purchase price of $0.01 per
share.   The payment of the $30,000 purchase price was made in
April 2007.
  57
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  7. INCOME
TAXES
  Deferred
tax assets of the Company are as follows:
 2009
                      
                      
                      2008Loss
      carry-forwards
                      
                      $
                      738,000
                      
                      
                      $
                      728,000Less:  Valuation
      allowance
                      
                      
                      (738,000
                      )
                      
                      
                      (728,000
                      )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% (2008 – 34%) to net loss for the
year.  The sources and tax effect of the differences are as
follows:
 2009
                      
                      
                      2008Computed
      “expected” tax benefit
                      
                      $
                      11,000
                      
                      
                      $
                      325,000Permanent
      differences
                      
                      
                      (1,000
                      )
                      
                      
                      (64,000
                      )Change
      in Valuation Allowance
                      
                      
                      (10,000
                      )
                      
                      
                      (261,000
                      )Income
      tax provision
                      
                      $
                      -
                      
                      
                      $
                      -
 
 As at
January 31, 2009 the Company has net operating loss carry-forwards of
approximately $2,172,000 (2008 - $2,140,000), which expire between 2022 and
2029.
  8. UNCERTAIN TAX
POSITIONS
 
 Effective
February 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The adoption of the provisions of FIN 48
did not have a material impact on the company’s financial position and results
of operations. At February 1, 2007, the company had no liability for
unrecognized tax benefits and no accrual for the payment of related
interest.
 
 Interest
costs related to unrecognized tax benefits are classified as “Interest expense,
net” in the accompanying statements of operations. Penalties, if any, would be
recognized as a component of “Selling, general and administrative expenses”. The
Company recognized $0 of interest expense related to unrecognized tax benefits
for the year ended January 31, 2009.  In many cases the company’s
uncertain tax positions are related to tax years that remain subject to
examination by relevant tax authorities.
  58
 AMERICAN
GOLDFIELDS INC.
 (An
Exploration Stage Company)
 
 NOTES
TO THE FINANCIAL STATEMENTS
 
 JANUARY
31, 2009 AND 2008
 (Stated
in U.S. Dollars)
  8. UNCERTAIN TAX POSITIONS -
Continued
 
 With few
exceptions, the company is generally no longer subject to U.S. federal, state,
local or non-U.S. income tax examinations by tax authorities for years before
2005. The following describes the open tax years, by major tax jurisdiction, as
of February 1, 2009:
 
 United
      States (a)
                  
                  2005
      – Present
 
 (a) Includes federal as well as state
or similar local jurisdictions, as applicable.
  59
   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
 
 As
required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange
Act”), the Company’s management carried out an evaluation of the effectiveness
of the design and operation of its disclosure controls and procedures as of
January 31, 2009, being the date of the Company’s most recently completed fiscal
year end. This evaluation was carried out under the supervision and with the
participation of our Principal Executive Officer and Principal Financial
Officer, Mr. Richard Kern.
 
 Changes
in Internal Control Over Financial Reporting
 
 During
the most recently completed fiscal year ended January 31, 2009, the Company
reduced its staff and as a result, a limitation in the segregation of duties
occurred. This weakness has been reported by the Company.
 
 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.
 
 Management
conducted an evaluation of the design and operation of the Company’s internal
control over financial reporting as of January 31, 2009, based on the criteria
set forth in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. This evaluation included
review of the documentation of controls, evaluation of the design effectiveness
of controls, testing of the operating effectiveness of controls and a conclusion
on this evaluation. Based on this evaluation, management concluded that our
internal control over financial reporting was not effective as of January 31,
2009 due to the following material weakness:
 
 ·
              Our
      company’s administration is composed of a small number of administrative
      individuals resulting in a situation where limitations on segregation of
      duties exist. In order to remedy this situation we would need to hire
      additional staff to provide greater segregation of duties. Currently, it
      is not feasible to hire additional staff to obtain optimal segregation of
      duties. Management will reassess this matter in the following year to
      determine whether improvement in segregation of duty is
      feasible.
 
 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
 
  60
  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 29 2009.
 
 Name
              Position
              Age
              Date
      of
                First
      Election
                Or
      AppointmentRichard
      Kern(1)
              Director,
      President, Chief Executive and Operating Officer, Treasurer, and
      Secretary
              61
              May
      26, 2004Jared
      Beebe
              Director
              58
              September
      15, 2006David
      Gladwell
              Director
              52
              January
      11, 2006
 
 (1) On May
26, 2004, Mr. Richard Kern joined the Company’s Board of Directors and on
September 12, 2008 he was appointed the Company’s President, Chief Executive
Officer, Secretary, and Treasurer.
 
 The
following is a brief account of the education and business experience of each
director and executive officer during the past five years:
 
 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).
 
 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 an
independent consulting Project Manager. He previously worked for Soho Resources
from 2007 to 2008, for Globex Mining in 2006, for 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.
 
  61
  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, from 2007 to 2008
he was employed as a Senior Geochemist at Klohn Crippen Berger Ltd. and since
2008 he has held the position of Senior Geochemist with Wardrop Engineering 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. Kern 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.
 
 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 2009 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.
 
  62
  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.
Richard Kern has been serving as our Director since May 26, 2004 and as our
President, Chief Executive and Operating Officer, Treasurer, and Secretary since
September 12, 2008. From February 1, 2008 to September 12, 2008, Mr. Donald Neal
was our President, Chief Executive and Operating Officer, Treasurer, and
Secretary. We had no other officers during the fiscal year ended January 31,
2009.
 
 Mr. Kern
is also the President of MinQuest Inc. (“MinQuest”). The Company has optioned
all of its mineral property interests from MinQuest. Further, the Cortez
Property option agreements require the Company to use MinQuest as the primary
contractor for exploration activity undertaken on the property. While Mr. Kern
does not receive any compensation for serving as a Director or Officer of the
Company, he has been engaged by the Company to undertake exploration activities
on behalf of the Company. 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, 2009, the Company paid MinQuest a total of $65,000
(January 31, 2008 - $95,000) related to property option payments for the Cortez
($50,000) and Gilman ($15,000) Properties. Included in the net loss for the
twelve months ended January 31, 2009 is an amount of $7,980 (January 31, 2008 -
$7,500) with respect to fees paid to Mr. Kern for geological services rendered
to the Company.
 
 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.
 
  63
  The
following table sets forth information concerning the compensation paid or
earned during the fiscal years ended January 31, 2009 and 2008 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, 2009, regardless of
compensation level; (ii) all individuals who served as officers
at January 31, 2009 and whose total compensation during the fiscal year ended
January 31, 2009 exceeded $100,000; and (iii) up to two additional individuals
who served as officers during the fiscal year ended January 31, 2009 and whose
total compensation during the fiscal year ended January 31, 2009 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)Richard
      Kern(1)
                          2009
                          0
                          0
                          0
                          0
                          0
                          0
                          0
                          02008
                          0
                          0
                          0
                          0
                          0
                          0
                          0
                          0Donald
      Neal(2)
                          2009
                          0
                          0
                          0
                          0
                          0
                          0
                          0
                          02008
                          0
                          0
                          0
                          0
                          0
                          0
                          0
                          0
 
  (1) Mr.
Richard Kern has been serving as our Director since May 26, 2004 and as our
President, Chief Executive and Operating Officer, Treasurer, and Secretary since
September 12, 2008. Mr. Kern is also the President of MinQuest. The Company has
optioned all of its mineral property interests from MinQuest. Further, the
Cortez Property option agreements require the Company to use MinQuest as the
primary contractor for exploration activity undertaken on the property. While
Mr. Kern does not receive any compensation for serving as a Director or Officer
of the Company, he has been engaged by the Company to undertake exploration
activities on behalf of the Company. 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, 2009, the Company paid MinQuest a total of
$65,000 (January 31, 2008 - $95,000) related to property option payments for the
Cortez ($50,000) and Gilman ($15,000) Properties. Included in the net loss for
the twelve months ended January 31, 2009 is an amount of $7,980 (January 31,
2008 - $7,500) with respect to fees paid to Mr. Kern for geological services
rendered to the Company.
 
 (2) Mr.
Donald Neal resigned as our Director, President, Chief Executive and Operating
Officer, Treasurer, and Secretary on September 12, 2008.
 
 Outstanding
Equity Awards
 
 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, 2009. None of our
directors or executive officers hold unexercised options or stock that has not
vested, or equity incentive plan awards.
 
  64
  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)Richard
      Kern
                    0
                    0
                    0
                    0
                    0
                    0
                    0
                    0
                    0
                    0
  Compensation
of Directors
 
 Mr. Beebe
and Mr. Gladwell each receive CDN $500 per month for serving as Directors of the
Company. For the fiscal period ending January 31, 2009 a total of $5,591 was
paid to each of Mr. Beebe and Mr. Gladwell.
   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 29, 2009 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.
 
  65
  The
percentages below are calculated based on 21,292,878 shares of common stock
issued and outstanding.
 
 Name of Beneficial Owner
              Title Of Class
              Amount and Nature of Beneficial
      Ownership
              Percent of ClassRichard
      Kern
                5836
      South Pecos Road
                Las
      Vegas, Nevada, 89120
              Common
              0
              0Jared
      Beebe
                5836
      South Pecos Road
                Las
      Vegas, Nevada, 89120
              NA
              0
              0David
      Gladwell
                5836
      South Pecos Road
                Las
      Vegas, Nevada, 89120
              NA
              0
              0All
      directors and executive officers as a group (3 persons)
              Common
              0
              0
 
 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 has been serving as our Director since May 26, 2004 and as our
President, Chief Executive and Operating Officer, Treasurer, and Secretary since
September 12, 2008. 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.
 
  66
  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. On April 21, 2009
MinQuest granted the Company a one year extension on its Gilman property
obligations. The result is that the final property option payment of $15,000 and
the property expenditure requirement of $175,000 due May 15, 2009 are now due
May 15, 2010. All other terms and commitments of the original agreement remain
unchanged.
 
 To January
31, 2009, 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 2008, 2007, 2006 and
2005. In addition the Company has incurred approximately $154,000 in exploration
expenditures on the property. At January 31, 2009 the Company had a shortfall in
property expenditures of approximately $121,000. As a result of the extension
granted by MinQuest, this amount is now due to be incurred by May 15, 2010. 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.
 
 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 as well as the $20,000 option payments due in July 2007,
2006 and 2005. In addition the Company has incurred approximately $277,000 in
exploration expenditures on the property which satisfied the Company’s
expenditure requirements to July 1, 2007.
 
  67
  On May 30,
2008, the Company entered into an Assignment and Assumption Agreement (the
“Agreement”) with Patriot Gold Corp., a Nevada corporation (“Patriot”), to
assign the exclusive option to an undivided right, title and interest in the
Imperial Property to Patriot. Pursuant to the Agreement, Patriot assumed the
rights, and agreed to perform all of the duties and obligations, of the Company
arising under the Imperial Property Option Agreement. Simultaneous with the
execution and delivery of the Agreement, the Company received $250,000 from
Patriot, which amount represents the full payment and satisfaction for the
assignment by the Company to Patriot of the Imperial Property Option Agreement
and all rights and obligations with respect thereto. Included in the assignment
were, without limitation, all sums incurred by the Company in connection with
the Imperial Property, specifically (i) the refunding of the reclamation bond
previously paid by the Company to the Bureau of Land Management in Nevada in the
amount of $13,255; (ii) the approximately $277,000 of expenditures incurred by
the Company prior to the Agreement; and (iii) the $120,000 paid to MinQuest Inc.
by the Company as option payments under the Imperial Property Option
Agreement.
 
 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. On April 21, 2009 MinQuest granted the Company a one
year extension on its Hercules property obligations. The result is that the
$20,000 property option payments due annually on November 25, 2008 through 2014
inclusive are now due on November 25, 2009 through 2015 inclusive. The annual
property expenditure requirements of $500,000 required to be uncured annually by
November 25, 2009 through 2014 respectively are now due to be incurred by
November 25, 2010 through November 25, 2015.
 
 To January
31, 2009, 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 $792,200 in exploration
expenditures on the property. At January 31, 2009 the Company had a shortfall in
property expenditures of approximately $257,800. As a result of the extension
granted by MinQuest, this amount is now due to be incurred by November 25, 2009.
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.
 
  68
  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. On April 21, 2009
MinQuest granted the Company a one year extension on its Cortez property
obligations. The result is that the $75,000 property option payments due on
February 26, 2009 is now due February 26, 2010 and the $250,000 due on February
26, 2010 is now due February 26, 2011. The annual property expenditure
requirement of $300,000 required to be uncured by February 26, 2009 is now due
to be incurred by February 26, 2010 and the $250,000 due February 26, 2010 is
now due to be incurred by February 26, 2011.
 
 To January
31, 2009, the Company had made the initial option payment of $65,000 due on
signing as well as the $50,000, $40,000 and the $30,000 option payments due in
February of 2008, 2007, and 2006 respectively. In addition the Company has
incurred approximately $242,900 in exploration expenditures on the property. At
January 31, 2009 the Company had a shortfall in property expenditures of
approximately $207,100. As a result of the extension granted by MinQuest, this
amount is now due to be incurred by February 26, 2010. 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.
 
 Related
Party 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
Party Transactions Involving Donald Neal
 
 On July
12, 2006 the Company granted Donald Neal, our former 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.
 
  69
  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.
 
 ITEM
14 PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 Morgan
& Company served as the Company’s Principal Accountant since the Company’s
incorporation until December 1, 2008. Subsequently, Robison, Hill & Co. has
been the Company’s Principal Accountant. Their fees billed to the Company for
the fiscal years ending January 31, 2009 and 2008 are set forth
below:
  Fiscal
      year ending
                          January
      31, 2009
                        
                        
                        Fiscal
      year ending
                          January
      31, 2008Audit
      Fees
                        
                        $
                        20,000
                        
                        
                        $
                        32,800Audit
      Related Fees
                        
                        $NIL
                        
                        
                        $NILTax
      Fees
                        
                        $NIL
                        
                        
                        $
                        2,000All
      Other Fees
                        
                        $NIL
                        
                        
                        $NIL
   As of
January 31, 2009, 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.
 
  70
  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 Richard Kern
              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 Richard Kern
              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, 200610.8
              Assignment
      and Assumption Agreement, dated May 30, 2008, by and between American
      Goldfields Inc. and Patriot Gold Corp.
              Previously
      filed with the Company’s Current Report on Form 8-K, filed with the SEC on
      June 2, 200831.1
              Rule
      13a-14(a)/15d14(a) Certifications
              Attached
      Hereto32.1
              Section
      1350 Certifications
              Attached
      Hereto
 
  71
  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 29, 2009
              By:
      /s/ Richard KernName:
      Richard KernTitle:
      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/Richard
      Kern
                        Richard
      Kern
                      Director,
      President, Chief Executive and Operating Officer, Secretary, and Treasurer
      (Principal Executive, Financial, and Accounting Officer)
                      
                      April
      29, 2009/s/ Jared
      Beebe
                        Jared Beebe
                      Director
                      
                      April
      29, 2009/s/ David Gladwell
                        David Gladwell
                      Director
                      
                      April
      29, 2009