UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington D. C. 20549
 
 FORM 10-Q/A
 
 QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the quarterly period ended November 30, 2010
 
 Commission file number 000-23561
 
 PAN AMERICAN GOLDFIELDS LTD.
 (Exact name of small business issuer as specified in its charter)
 
 Delaware

84-1431797(State or other jurisdiction of incorporation)

(IRS Employer Identification Number)Mountain View Center

12303 Airport Way

Suite 200

Broomfield, CO
80021(Address of principal executive offices)
(Zip Code)
 
 Registrant’s telephone number, including area code: (303) 327-1587
 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 þ        No 
  
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 Yes         No 
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company þ
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes          No þ
  
 As of November 30, 2010, the registrant had 54,003,827 shares of common stock issued and outstanding.
 
 
 
 
  
 
 EXPLANATORY NOTE
 
 
 Pan American Goldfields Ltd. Is filing this Amendment No. 1 on Form 10-Q/A (this "Amendment") to its Quarterly Report on Form 10-Q/A for the fiscal period ended November 30, 2010, which was filed with the Securities and Exchange Commission on January 14, 2010 (the "Original Filing"), to file Exhibit 31.1, Exhibit 31.2, Exhibit 32.1 and Exhibit 32.2 - Certifications.
 
 This Amendment No. 1 on Form 10-Q/A does not update other items or disclosures in the Original Filing. This Amendment No. 1 on Form 10-Q/A does not reflect events occurring after the filing of the Original Filing or modify or update those disclosures, including any exhibits to the Original Filing affected by subsequent events. Information not affected by the changes described above is unchanged and reflects the disclosures made at the time of the Original Filing. Accordingly, this Amendment No. 1 on Form 10-Q/A should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing, including any amendments to those filings.
 
 
 PART 1 - FINANCIAL INFORMATION
  ITEM 1. FINANCIAL STATEMENTS
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 
 
 CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (Expressed in U.S. Dollars)
 
 November 30, 2010
 
 
   
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Consolidated Balance Sheets
 (Expressed in U.S. Dollars)
 
 November 30,

2010


February 28,

2010(Unaudited)


(Audited)AssetsCurrentCash and cash equivalents

$
149,129


$
3,377,404Accounts receivable


341,835



137,933Prepaid expenses


164,809



310,953655,773



3,826,290Equipment (note 4)


221,765



242,887Total assets

$
877,538


$
4,069,177LiabilitiesCurrentAccounts payable and accrued liabilities

$
1,722,856


$
2,772,572Loans payable (note 9)


22,312



45,303Promissory notes (note 7)


797,146



775,975Total liabilities


2,542,314



3,593,850Stockholders’ equity (deficiency)Capital stockPreferred stockAuthorized: 20,000,000 shares, $0.01 par value per share (note 10)Issued: nil






-Common stockAuthorized: 200,000,000 shares, $0.01 par value per shareIssued: 54,003,827 (2010 - 53,753,827) (note 11)


30,750,401



30,700,401Additional paid-in capital


15,054,105



14,438,352Stock subscriptions


116,000



166,000Accumulated deficit from prior operations


(2,003,427
)


(2,003,427
)Accumulated deficit during the development stage


(45,832,083
)


(43,055,507
)Accumulated other comprehensive income


250,228



229,508Total stockholders’ equity (deficiency)


(1,664,776
)


475,327Total liabilities and stockholders’ equity (deficiency)

$
877,538


$
4,069,177
 
 Going-concern (note 3)
 Commitments (notes 6 and 14)
 
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
  3
  PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Consolidated Statements of Operations and Accumulated Deficit
 (Unaudited) (Expressed in U.S. Dollars)
 
 Period fromInception ofDevelopmentThree Months Ended


Nine Months Ended


Stage (March 1, 2004)November 30,


November 30,


November 30,


November 30,


To November 302010


2009


2010


2009


2010Net sales

$
247,441


$
130,202


$
623,050


$
522,286


$
1,147,560Cost of goods sold


136,527



99,103



355,679



264,836



630,272Gross margin


110,914



31,099



267,371



257,450



517,288ExpensesGeneral and administrative


576,586



870,171



1,857,904



2,279,498



18,865,820Mineral exploration (note 6)


16,821



96,798



378,211



420,750



9,218,280Impairment of mineral property costs


43,781



167,081



714,455



270,237



17,305,698Operating loss


(526,274
)


(1,102,951
)


(2,683,199
)


(2,713,035
)


(44,872,510
)Other income (expenses)Deposit on equipment written off


-



-



(25,300
)


-



(25,300
)Foreign exchange


4,816



(45,634
)


(73,560
)


(1,061
)


(309,068
)Interest expense


(17,671
)


(269,618
)


(71,064
)


(521,111
)


(5,294,886
)Other income


2,139



162,700



61,417



172,791



254,748Gain on disposal of assets


-



-



15,130



-



15,130Gain on sale of assets


-



1,500,000



-



1,498,830



4,388,374Gain on settlement of debt


-



264,565



-



89,779



11,429Net gain (loss)


(536,990
)


509,062



(2,776,576
)


(1,473,807
)


(45,832,083
)Accumulated deficit, beginning


(45,295,093
)


(43,847,088
)


(43,055,507
)


(41,864,219
)


-Accumulated deficit, ending

$
(45,832,083
)

$
(43,338,026
)

$
(45,832,083
)

$
(43,338,026
)

$
(45,832,083
)Other comprehensive incomeForeign exchange gain (loss) on translation

$
(16,192
)

$
(46,452
)

$
20,720


$
(292,627
)

$
250,228Total comprehensive gain (loss)

$
(553,182
)

$
462,610


$
(2,755,856
)

$
(1,766,434
)

$
(45,581,855
)Total loss per share - basic and diluted

$
(0.01
)

$
0.01


$
(0.05
)

$
(0.04
)

$
-WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK - BASIC


54,003,827



39,604,559



53,942,009



36,711,212



-WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK - DILUTED


54,003,827



42,601,225



53,942,009



36,711,212



-
 
 
 The accompanying notes are an integral part of these consolidated financial statements
  4
  PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Consolidated Statements of Cash Flow
 (Unaudited) (Expressed in U.S. Dollars)
 Period fromInception ofNine Months Ended


Development StageNovember 30,


November 30,


(March 1, 2004)2010


2009


to November 30, 2010CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(2,776,576
)

$
(1,473,807
)

$
(45,832,083
)Adjustments to reconcile net (loss) to net cash flows:Write off of note receivable


-



-



57,500Impairment of mineral property costs


-



-



13,645,000Issuance of shares for consulting services


-



13,500



510,590Issuance of shares for interest costs


-



82,500



82,500Discount on convertible debenture


-



86,191



569,549Deposit on equipment written off


25,300



-



25,300Gain on disposal of assets


(15,130
)


-



(15,130
)Gain on sale of assets


-



(1,500,000
)


(4,389,954
)Gain on settlement of debt


-



(89,779
)


(53,244
)Beneficial conversion feature


-



51,192



4,081,091Stock-based compensation


615,754



873,678



10,758,312Depreciation


38,689



56,339



293,707Net change in operating assets and liabilities:Prepaid expense


227,424



(461,214
)


(166,857
)Accounts receivable


(127,278
)


(48,337
)


(20,431
)Customer deposits


-



-



(44,809
)Notes payable


-



-



109,337Accounts payable and accrued liabilities


(1,182,375
)


231



6,723,601CASH USED IN OPERATING ACTIVITIES


(3,194,192
)


(2,409,506
)


(13,666,021
)INVESTING ACTIVITIESSale of equipment


-



29,437



33,316Purchase of property and equipment


(14,226
)


(23,258
)


(602,473
)CASH PROVIDED (USED) IN INVESTING ACTIVITIES


(14,226
)


6,179



(569,157
)FINANCING ACTIVITIESProceeds from loans payable


28,500



33,750



288,067Proceeds from notes payable


-



507,514



3,162,196Proceeds from convertible debentures


-



1,573,510



7,462,500Proceeds from exercise of options


-



-



78,000Proceeds from exercise of warrants


-



-



3,144,377Repayment of loans payable


(51,599
)


(58,524
)


(258,801
)Repayment of notes payable


(44,674
)


-



(586,620
)Repayment of convertible debentures


-



(1,300,000
)


(2,051,047
)Stock subscriptions


-



1,816,000



291,258Issuance of common stock


-



75,000



2,756,994CASH PROVIDED (USED) BY FINANCING ACTIVITIES


(67,773
)


2,647,250



14,286,924Net change in cash


(3,276,191
)


243,923



51,746Effect of foreign currency translation on cash


47,916



17,234



75,306Cash and cash equivalents, beginning


3,377,404



38,704



22,077CASH AND CASH EQUIVALENTS, ENDING

$
149,129


$
299,861


$
149,129
 Supplemental cash flow information (note 15)
 The accompanying notes are an integral part of these consolidated financial statements.
  5
  PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 1.
Basis of presentation
  Pan American Goldfields Ltd. (formerly Mexoro Minerals, Ltd and Sunburst Acquisitions IV, Inc.) ("Panam" or the “Company”) was incorporated in the state of Delaware on March 23, 2010 and on July 2, 2010 it changed its name to Pan American Goldfields Ltd. pursuant to an agreement and plan of merger between the Company and Mexoro Minerals Ltd. The Company was formed to seek out and acquire business opportunities. Between 1997 and 2003, the Company was engaged in two business acquisitions and one business opportunity, none of which generated a significant profit or created sustainable business. All were sold or discontinued. Currently, the main focus of the Company’s operations is in Mexico.
  The Company had previously been pursuing various business opportunities and, effective March 1, 2004, the Company changed its operations to mineral exploration. On February 12, 2009, the Company entered into a joint venture through a definitive agreement for development of its Cieneguita project with Minera Rio Tinto, S.A. de C.V. (“MRT”), a private company duly incorporated pursuant to the laws of Mexico, which is controlled by the chairman of the Company. The purpose of the joint venture is to put the Cieneguita property into production. Pursuant to the agreement, MRT is to provide the necessary working capital to begin and maintain mining operations at Cieneguita, which are estimated to be $3,000,000. MRT plans to spend 100% of the money to earn 74% of the net cash flow from production (notes 5 and 6). The Company will receive 20% of the net cash flows from production. Accordingly, the Company is considered to be a development stage company.
  On May 25, 2004, the Company completed a “Share Exchange Agreement” with Sierra Minerals and Mining, Inc. (“Sierra Minerals”), a Nevada corporation, which caused Sierra Minerals to become a wholly-owned subsidiary of the Company. Sierra Minerals held certain rights to properties in Mexico that the Company now owns or has an option to acquire. Through Sierra Minerals, the Company entered into a joint venture agreement with MRT. In August 2005, the Company cancelled the joint venture agreement in order to directly pursue mineral exploration opportunities through a wholly-owned Mexican subsidiary, Sunburst Mining de Mexico S.A. de C.V. (“Sunburst de Mexico”). On August 25, 2005, the Company, Sunburst de Mexico and MRT entered into agreements providing Sunburst de Mexico the right to explore and exploit certain properties in Mexico. In December 2005, the Company and Sunburst de Mexico entered into a new agreement with MRT (the “New Agreement”) (note 6). On January 20, 2006, Sierra Minerals was dissolved.
  The accompanying unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended November 30, 2010 are not necessarily indicative of the results that may be expected for the year ending February 28, 2011. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended February 28, 2010.
   6
  PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 2.
SIGNIFICANT ACCOUNTING POLICIES
  (a)
Recent accounting pronouncements
 
 (i)
In May 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-19, Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have a material effect on the financial position, results of operations or cash flows of the Company.
  (ii)
In April 2010, the FASB issued ASU 2010-17, Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.
  (iii)
In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-02, “Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary”. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset de-recognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The adoption of this pronouncement did not impact the Company’s results of operations or financial condition.
  (iv)
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. This amendment was effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s results of operations or financial condition or related disclosures.
  (v)
In September 2009, the FASB issued Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements - a consensus of the FASB Emerging Issues Task Force” (ASU 2009-13). It updates the existing multiple-element revenue arrangements guidance currently included under ASC 605-25, which originated primarily from the guidance in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF 00-21). The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. The Company is currently assessing the future impact of this new accounting update to its financial statements.
   7
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 2.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  (a)
Recent accounting pronouncements (continued)
 
 (vi)
In September 2009, the FASB issued ASC 105, formerly FASB Statement No. 168, the FASB Accounting Standards Codification (“ASC” or “Codification”) and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”), a replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 establishes the Codification as the single source of authoritative GAAP in the United States, other than rules and interpretive releases issued by the Securities and Exchange Commission (“SEC”). The Codification is a reorganization of current GAAP into a topical format that eliminates the current GAAP hierarchy and establishes instead two levels of guidance - authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature that is not included in the Codification will become non-authoritative. The FASB’s primary goal in developing the Codification is to simplify user access to all authoritative GAAP by providing all the authoritative literature related to a particular accounting topic in one place. The Codification was effective for interim and annual periods ending after September 15, 2009. As the Codification was not intended to change or alter existing GAAP and it did not have a material impact on the Company’s financial statements.
  (vii)
Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, “Fair Value Measurements and Disclosures (Topic 820)” (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, “Fair Value Measurements and Disclosures - Overall”, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.
  (viii)
Effective June 30, 2009, the Company adopted three accounting standard updates which were intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. They also provide additional guidelines for estimating fair value in accordance with fair value accounting. The first update, as codified in ASC 820-10-65, provides additional guidelines for estimating fair value in accordance with fair value accounting. The second accounting update, as codified in ASC 320-10-65, changes accounting requirements for other-than-temporary-impairment (“OTTI”) for debt securities by replacing the current requirement that a holder have the positive intent and ability to hold an impaired security to recovery in order to conclude an impairment was temporary with a requirement that an entity conclude it does not intend to sell an impaired security and it will not be required to sell the security before the recovery of its amortized cost basis. The third accounting update, as codified in ASC 825-10-65, increases the frequency of fair value disclosures. These updates were effective for fiscal years and interim periods ended after June 15, 2009. The adoption of these accounting updates did not have a material impact on the Company’s financial statements.
   8
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 2.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  (a)
Recent accounting pronouncements (continued)
 
 (ix)
Effective June 30, 2009, the Company adopted a new accounting standard for subsequent events, as codified in ASC 855-10. The update modifies the names of the two types of subsequent events either as recognized subsequent events (previously referred to in practice as Type I subsequent events) or non-recognized subsequent events (previously referred to in practice as Type II subsequent events). In addition, the standard modifies the definition of subsequent events to refer to events or transactions that occur after the balance sheet date, but before the financial statements are issued (for public entities) or available to be issued (for nonpublic entities). The update did not result in any significant changes in the practice of subsequent event disclosures, and therefore the adoption did not have a material impact on the Company’s financial statements.
  (x)
Effective January 1, 2009, the Company adopted an accounting standard update regarding the determination of the useful life of intangible assets. As codified in ASC 350-30-35, this update amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under intangibles accounting. It also requires a consistent approach between the useful life of a recognized intangible asset under prior business combination accounting and the period of expected cash flows used to measure the fair value of an asset under the new business combinations accounting (as currently codified under ASC 850). The update also requires enhanced disclosures when an intangible asset’s expected future cash flows are affected by an entity’s intent and/or ability to renew or extend the arrangement. The adoption did not have a material impact on the Company’s financial statements.
  (xi)
Effective January 1, 2009, the Company adopted a new accounting standard update regarding business combinations. As codified under ASC 805, this update requires an entity to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred; that restructuring costs generally be expensed in periods subsequent to the acquisition date; and that changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period be recognized as a component of provision for taxes. The adoption did not have a material impact on the Company’s financial statements.
  b)           Accounting estimates
  The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingencies at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results may differ from those estimates.
  
   9
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 3.
GOING CONCERN
  The accompanying financial statements have been prepared on a going concern basis. The Company has a history of operating losses and will need to raise additional capital to fund its planned operations. As at November 30, 2010, the Company had a cumulative loss, during its development period, of $45,832,083 (February 28, 2010 - $43,055,507). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
  The Company intends to reduce its cumulative loss through the attainment of profitable operations from its investment in a Mexican mining venture (note 6). In addition, the Company has conducted private placements of convertible debt and common stock (note 11), which have generated a portion of the initial cash requirements for its planned Mexican mining ventures (note 6).
  In February 2009, the Company signed a definitive agreement with MRT which was amended in December 2009, to provide funding of up to $8,000,000 to the Company to initiate production at its Cieneguita property, complete a feasibility study, as well to continue the exploration of its properties (note 6).
  In July 2009, the Company signed a definitive agreement to sell its Guazapares project located in southwest Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount Gold and Silver Corp. (“Paramount”) for a total consideration of up to $5,300,000. The purchase price is to be paid in two stages. The first payment of $3,700,000 was released from escrow in February 2010, as the transfer of the 12 claims to Paramount was completed. An additional payment of $1,600,000 is due if, within 36 months following execution of the letter of agreement (July 10, 2009), either (i) Paramount Gold de Mexico SA de C.V. is sold by Paramount, either through a stock sale or a sale of substantially all of its assets, or (ii) Paramount’s San Miguel project is put into commercial production.
  In September 2009, the Company entered into private placement subscription agreements, as thereafter amended, with certain U.S. accredited investors and certain non-U.S. investors for 12,500,000 unregistered shares of common stock with 100% warrant coverage at a purchase price of $0.20 per unit. The warrants have an exercise price of $0.30 per share with a two-year term and will not be exercisable until 12 months after their date of issuance. The Company received aggregate gross proceeds, prior to any expenses, from the private placement of $2,500,000.
  4.
EQUIPMENT
  November 30, 2010
February 28, 2010Cost

Accumulated Depreciation

Net Book
Net BookValue
ValueSoftware
$
23,946

$
17,732

$
6,214
$
6,357Machinery

288,229


106,410


181,819

198,850Vehicles

93,163


70,874


22,289

22,998Computers

28,939


27,611


1,328

3,557Office equipment

16,892


6,777


10,115

11,125$
451,169

$
229,404

$
221,765
$
242,887
 
   10
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 5.
JOINT VENTURE WITH MRT
  On February 12, 2009, the Company entered into a joint venture through a definitive agreement for development of its Cieneguita project with MRT. The purpose of the joint venture is to put Cieneguita property into production. As per the agreement, MRT is to provide the necessary working capital to begin and maintain mining operations estimated to be $3,000,000. MRT will spend 100% of the funds in exchange for a 75% interest in the net cash flow from production. The agreement was amended in December 2009 for MRT to earn a 74% interest in the net cash flow from production (note 6). The agreement limits the mining of the mineralized material that is available from the surface to a depth of 15 meters or approximately 10% of the mineralized material found as of the date of the definitive agreement. The Company incurs no obligations to the joint venture’s creditors as the operations and working capital requirements are controlled by MRT. Accordingly, the Company’s share of income and expenses are reflected in these financial statements under the proportionate consolidation method.
  6.
MINERAL PROPERTIES
  The Company incurred exploration expenses as follows in the nine months ended November 30, 2010:
  Sahuayacan


Cieneguita


Encino Gordo


New Projects


TotalDrilling and sampling

$
66,438


$
-


$
-


$
-


$
66,438Geological, geochemical, geophysics


145,145







5,362



1,265



151,772Land use permits


10,263



7,331



1,638



-



19,232Travel


2,407



8,100



6,074



-



16,581Consulting


7,431



58,527



13,036



-



78,994Equipment


997



3,474



2,132



-



6,603General


8,086



20,779



9,726



-



38,591$
240,767


$
98,211


$
37,968


$
1,265


$
378,211
 
 The Company incurred exploration expenses as follows in the nine months ended November 30, 2009:
  Sahuayacan


Guazapares


Cieneguita


Encino Gordo


New Projects


TotalDrilling and sampling

$
152


$
-


$
78,369


$
-


$
-


$
78,521Geological, geochemical, geophysics


4,099



44,730



46,630







1,015



96,474Land use permits


3,778



4,849



6,913



2,826



-



18,366Automotive


-



446



-



-



-



446Travel


7,160



217



14,382



-



-



21,759Consulting


25,976



8,199



111,019



-



-



145,194Equipment


2,426



-



2,893



-



-



5,319General


11,461



20,141



22,917



152



-



54,671$
55,052


$
78,582


$
283,123


$
2,978


$
1,015


$
420,750
 Since May 2004, the Company has held interests in gold exploration properties in Mexico.
   11
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 6.
MINERAL PROPERTIES (CONTINUED)
  In August 2005, the Company formed its wholly owned subsidiary, Sunburst de Mexico, which allowed the Company to take title to the properties in the name of Sunburst de Mexico. On August 25, 2005, the Company entered into property agreements with MRT, which provided Sunburst de Mexico options to purchase the mineral concessions of the Cieneguita and Guazapares properties and the right of refusal on three Encino Gordo properties. The Company also entered into an exploration and sale agreement, in October 2006, with Minera Emilio S.A. de C.V. for the mineral concessions of the Sahuayacan property.
  In August 2005, the parties also entered into an operator’s agreement, that gave MRT the sole and exclusive right and authority to manage the Cieneguita property, and a share option agreement which granted MRT the exclusive option to acquire up to 100% of all outstanding shares of Sunburst de Mexico if the Company did not comply with the terms of the property agreements. The operator’s agreement and share option agreement were subsequently cancelled when the Company and Sunburst de Mexico entered into a new contract with MRT as described below under “Encino Gordo”.
  In February 2009, the Company entered into a development agreement with MRT, which was amended in December 2009. Pursuant to the terms of the development agreement, as amended, MRT agreed to invest up to $8,000,000 to put the first phase of the Cieneguita project into production and to complete a feasibility study. The first phase of production is limited to the mining of the mineralized material that is available from the surface to a depth of 15 meters (“First Phase Production”). In exchange, the Company assigned MRT an interest to 74% of the net cash flows from First Phase Production and MRT will earn a 54% ownership interest by spending up to $4,000,000 to take the Cieneguita project through the feasibility stage.
  The material provisions of the property agreements are as follows:
  Cieneguita
  MRT assigned to Sunburst de Mexico, with the permission of the Cieneguita property’s owner, Corporativo Minero, S.A. de C.V. (“Corporativo Minero”), all of MRT’s rights and obligations acquired under a previous agreement (the Cieneguita option agreement), including the exclusive option to acquire the Cieneguita property for a price of $2,000,000. Prior to assigning the Cieneguita property to the Company, MRT had paid $350,000 to Corporativo Minero. As the Cieneguita property was not in production by May 6, 2006, Sunburst de Mexico was required to pay $120,000 to Corporativo Minero to extend the contract. Corporativo Minero agreed to reduce the obligation to $60,000, of which $10,000 was paid in April 2006 and the balance paid on May 6, 2006. The Company made this payment to Corporativo Minero and the contract was extended.
  The Company has the obligation to pay a further $120,000 per year for the next 13 years and the balance of the payments in the 14th year, until the total amount of $2,000,000 is paid. The Company renegotiated the payment due May 6, 2007, to $60,000 payable on November 6, 2007, which was paid, and the balance of $60,000 was paid on December 20, 2007. The Company paid $60,000 on May 12, 2008, of the $120,000 due on May 6, 2008, and the balance was paid in June 2008. The Company paid $30,000 each for a total of $120,000 on May 22, 2009, June 26, 2009, September 4, 2009 and November 20, 2009. In 2010 the Cieneguita project was put into production under the development agreement as described above and the payment terms were changed based on the following formula:
  “If the Cieneguita property is put into production, the Company must pay the Cieneguita owners $20 per ounce of gold produced from the Cieneguita property to the total of $2,000,000 due. In the event that the price of gold is above $400 per ounce, the property payments payable to the Cieneguita owners from production will be increased by $0.10 for each dollar increment over $400 per ounce. The total payment of $2,000,000 does not change with fluctuations in the price of gold. Non-payment of any portion of the $2,000,000 total payment will constitute a default. In such case, the Cieneguita owners will retain ownership of the concessions, but the Company will not incur any additional default penalty.”
  Based on production at Cieneguita, the Company paid $30,000 on May 11, 2010 and $8,621 each for a total of $25,862 on September 7, 2010, October 15, 2010 and November 5, 2010 to the Cieneguita owners. As of November 30, 2010, Corporativo Minero has been paid a total of $885,862 for the Cieneguita property. The Company is not in default on its payments for the Cieneguita property.
  
 
 12
  PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 6.
MINERAL PROPERTIES (CONTINUED)
  On February 12, 2009, the Company entered into a definitive agreement for development of the Cieneguita project with MRT. The definitive agreement covered project financing of up to $9,000,000. The major points of the agreement were as follows:
  (i)
MRT and/or its investors will subscribe for $1,000,000 of a secured convertible debenture at 8% interest (payable in stock or cash). The debenture was convertible into units at $0.60 per unit. Each unit comprised two common shares and one warrant. Each warrant is exercisable at $0.50 per share for a period of three years. The placement will be used for continued exploration of the Company’s properties and general working capital.
 
 (ii)
MRT is to provide the necessary working capital to begin and maintain mining operations estimated to be $3,000,000 used for the purpose of putting the Cieneguita property into production. MRT will spend 100% of the money to earn 75% of the net cash flow from production. The agreement will limit the mining to the mineralized material that is available from surface to a depth of 15 meters or approximately 10% of the mineralized material found to date.
 
 (iii)
MRT will spend up to $5,000,000 to take the Cieneguita property through the feasibility stage. In doing so, MRT will earn a 60% interest in Panam’s rights to the property. After the expenditure of the $5,000,000 all costs will be shared on a ratio of 60% to MRT and 40% to Panam. If the Company elects not to pay its portion of costs after the $5,000,000 has been spent, the Company’s position shall revert to a 25% carried interest on the property.
 
  To generate funding for the Company’s continued operations, the Company issued $1,500,000 of convertible debentures in March 2009, of which an aggregate of $880,000 was issued to Mario Ayub, a director of the Company, and to his affiliated entity, MRT. Pursuant to the terms of the convertible debentures, the holders irrevocably converted the debentures into a 10% ownership interest in the Cieneguita project and a 10% interest in the net cash flow from First Phase Production.
  In December 2009, Mario Ayub and MRT agreed to resell an aggregate 4% ownership interest in the Cieneguita project back to the Company, along with 4% of the net cash flow from First Phase Production, in return for $550,000. In a private transaction not involving the Company, the other holders contributed their remaining 6% ownership interest in the Cieneguita project to a newly formed entity, Marje Minerals SA (“Marje Minerals”).
  The Company amended the development agreement and its agreements with the debenture holders in December 2009. According to the amended development agreement, the ownership interest in the Cieneguita project and the net cash flows from the First Phase Production are held by the Company, MRT and Marje Minerals as follows:
  Holder

Ownership Percentage


Net Cash Flow Interest From First Phase Production


Net Cash Flow Interest Following First Phase ProductionMRT


54
% (1)


74
%


54
% (1)Marje Minerals


6
%


6
%


6
%Panam


40
%


20
%


40
%
 
  (1) To be earned by MRT by spending $4,000,000 to take the Cieneguita project through the feasibility stage.
  Any additional costs for the First Phase Production and the feasibility study for the Cieneguita project, after MRT invests $8,000,000, will be shared by the Company, MRT and Marje Minerals on a pro-rata basis based on their respective ownership percentages in the Cieneguita project.
   13
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 6.
MINERAL PROPERTIES (CONTINUED)
  The major terms of the amended development agreement with MRT and Marje Minerals are as follows:
  (i)
MRT purchased $1,000,000 of secured convertible debentures at 8% interest (payable in stock or cash). The proceeds from this investment were used for continued exploration and development of the Cieneguita project and general working capital. On November 5, 2009, MRT exercised its conversion rights on the debenture and MRT was issued 3,333,333 common shares and a warrant to purchase 1,666,667 shares of common stock at an exercise price of $0.50 per share.
 
 (ii)
MRT agreed to provide the necessary working capital to begin and maintain mining operations, estimated to be $3,000,000, to put the first phase of the Cieneguita project into production. In exchange for these funds, the Company assigned MRT an interest to 74% of the net cash flow from First Phase Production. The agreement limits the mining during First Phase Production to the mineralized material that is available from the surface to a depth of 15 meters.
 
 (iii)
MRT committed to spend up to $4,000,000 to take the Cieneguita project through the feasibility stage. In doing so, the Company assigned MRT a 54% interest in its rights to the Cieneguita project. After the expenditure of the $4,000,000, all costs will be shared on a pro rata ownership basis (i.e. 54% to MRT, 40% to the Company and 6% to Marje Minerals). If any party cannot pay its portion of the costs after the $4,000,000 has been spent, then their ownership position in the Cieneguita project will be reduced by 1% for every $100,000 invested by the other owners. The Company’s ownership interest in the Cieneguita project, however, cannot be reduced below 25%. In addition, the Company has the right to cover Marje Minerals’ pro rata portion of costs if they cannot pay their portion of the costs. In return, we will receive 1% of Marje Minerals’ ownership position in the Cieneguita project for every $100,000 the Company invests on their behalf.
 
 (iv)
The MRT agreement was contingent on the Company repaying its debenture to Paramount. In March 2009, the Company repaid $1,000,000, or approximately two-thirds of the debt, and Paramount released a security interest it had on the Cieneguita project. In October 2009, the Company repaid the remaining amount of the debt and Paramount released its security interests on the Sahuayacan, Guazapares and Encino Gordo properties.
 
 Encino Gordo
  On December 8, 2005, the Company and Sunburst de Mexico entered into a “New Agreement” with MRT to exercise their option under the sale and purchase of the mining concessions agreement, dated August 18, 2005, to obtain two mining concessions in the Encino Gordo region. The New Agreement also provided the Company the option to obtain three additional concessions in the Encino Gordo region.
  The following are additional material terms of the New Agreement:
  
  (a)
The share option agreement with MRT was cancelled;
 
 (b)
The Company granted MRT the option to buy all of the outstanding shares of Sunburst de Mexico for $100 if the Company failed to transfer $1,500,000 to Sunburst de Mexico by April 30, 2006. On April 6, 2006, MRT agreed to waive its option to purchase the shares of Sunburst de Mexico and also waived the Company’s obligation to transfer $1,500,000 to Sunburst de Mexico. The property agreements were modified to change the net smelter return (“NSR”) to a maximum of 2.5% for all properties covered by the agreements. The property agreements contained NSRs ranging from 0.5% to 7%;
 
 (c)
The share option agreement with MRT was cancelled;
  14
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 6.
MINERAL PROPERTIES (CONTINUED)
  (d)
The share option agreement with MRT was cancelled;
 
 (e)
The Company granted MRT the option to buy all of the outstanding shares of Sunburst de Mexico for $100 if the Company failed to transfer $1,500,000 to Sunburst de Mexico by April 30, 2006. On April 6, 2006, MRT agreed to waive its option to purchase the shares of Sunburst de Mexico and also waived the Company’s obligation to transfer $1,500,000 to Sunburst de Mexico. The property agreements were modified to change the net smelter return (“NSR”) to a maximum of 2.5% for all properties covered by the agreements. The property agreements contained NSRs ranging from 0.5% to 7%;
 
 (f)
The Company agreed to issue 2,000,000 shares of the Company’s common stock to MRT within four months of the date of signing of the New Agreement. These shares were issued to MRT and its assignee at the market value of $1.05 per share on February 23, 2006, and $2,100,000 was charged to operations for the year ended February 28, 2006. This issuance fulfilled the Company’s payment obligations under the previous property agreements;
 
 (g)
The Company agreed to issue 1,000,000 additional shares of the Company’s common stock to MRT if and when the Cieneguita Property is put into production and reaches 85% of production capacity over a 90-day period, as defined in the New Agreement; and
 
 (h)
The operator’s agreement with MRT was cancelled.
 
  Sunburst de Mexico purchased two of the Encino Gordo concessions from MRT for a price of 1,000 pesos (approximately US$100), and MRT assigned to Sunburst de Mexico a first right of refusal to acquire three additional Encino Gordo concessions. The total payments to acquire 100% of these three additional concessions were as follows: $10,000 on June 30, 2006 (paid); $25,000 on December 31, 2006 (paid), $50,000 on December 31, 2007 ($20,000 of this payment was made on January 3, 2008 and the balance was paid on February 29, 2008) and $75,000 on December 31, 2008 (the payment was not made and the Company was in default). In August 2009, the Company decided to surrender the Encino Gordo 2 mining concession eliminating any future concession payments on these properties.
  Sahuayacan
  In May 2010, the Company management decided to drop the Sahuayacan properties due to lack of economic thicknesses and grades of gold mineralization encountered in the drilling program eliminating any future concession payments on these properties.
   15
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 7.
PROMISSORY NOTES
  As at November 30, 2010, the Company had $797,146 (February 28, 2010 - $775,975) of promissory notes outstanding, comprising the following:
  (a)
During the year ended February 29, 2008, the Company converted accounts payable of $465,994 (Swiss Franc (“CHF”) 565,000) into promissory notes. The Company had an implied obligation to pay the accounts payable in CHF as the funds to pay the expense came from Swiss investors in CHF. Accordingly, the promissory notes were issued in CHF. The notes consist of one warrant for each CHF 5.00 of notes issued, exercisable at $1.00 each. The principal and interest on the notes became due and payable on April 30, 2008. The Company has not repaid the promissory notes as of November 30, 2010 and is in default. The principal and interest on the notes due and payable as of November 30 was $741,279. The interest rate payable during the default period is 12%.
 
 (b)
$15,000 of the promissory notes accrues interest of 8% per year that has no repayment terms. The interest accrued as of November 30, 2010 is $2,482.
 
 (c)
$10,324 of promissory notes is due to related parties that were to be repaid as part of debt settlement agreements over 12 months. These notes bear no interest (note 14). The Company has not made the monthly payments according to the settlement agreement and is in default.
 
 (d)
$12,049 of promissory notes is due to an associate of a related party that bear no interest and have no repayment terms.
 
 (e)
$16,012 of promissory notes bear no interest and have no repayment terms.
 
 
  16
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 8.
CONVERTIBLE DEBENTURES
  There were no convertible debentures issued, outstanding, repaid or converted for the nine months ended November 30, 2010.
  On May 5, 2008, the Company signed a letter of intent (“LOI”) to enter into a strategic alliance with Paramount. The agreement called for Paramount to invest a minimum of $4,000,000 and maximum of $6,000,000 into the Company, fixed at a price of $0.50 per unit by June 23, 2008. The investment timeline was extended until July 21, 2008, and then to August 5, 2008. On August 6, 2008 Panam terminated the LOI with Paramount as Paramount did not meet the terms of the agreement.
  The Company issued secured convertible debentures to Paramount as follows:
  •
On May 9, 2008, the Company issued $500,000 in convertible debentures to Paramount, with a maturity date of one year, accruing interest at 8% per year payable in arrears and convertible at the option of the holder.
  •
On June 10, 2008, the Company issued $70,000 in convertible debentures to Paramount, with a maturity date of one year, accruing interest at 8% per year payable in arrears and convertible at the option of the holder.
  •
On June 25, 2008, the Company issued $300,000 in convertible debentures to Paramount, with a maturity date of one year, accruing interest at 8% per year payable in arrears and convertible at the option of the holder.
  •
On July 11, 2008, the Company issued $500,000 in convertible debentures to Paramount, with a maturity date of one year, accruing interest at 8% per year payable in arrears and convertible at the option of the holder.
  •
On March 19, 2009, the Company entered into an agreement with Paramount restructuring its payment terms on the three outstanding secured convertible debentures held by Paramount. Under the terms of the agreement, the Company paid Paramount $1,000,000 to cancel two debentures held by them, one issued on May 9, 2008 for $500,000 and another issued on July 11, 2009 for $500,000.
  The Company also amended a debenture issued to Paramount on June 18, 2009 in the face amount of $370,000. The amount of that debenture was increased to $521,047, which, among other things, includes interest accrued on all three debentures to March 31, 2009. The Company was obligated to make a payment on March 31, 2009 on this debenture in the amount of $393,547 and the balance of $127,500 was to be re-paid on April 30, 2009. This remaining amount of $127,500 was interest free as long as the debenture remained in good standing. On March 31, 2009, the Company paid $300,000 of the debenture issued to them on June 18, 2009. As per the agreement, the remaining amount of $221,047 accrued interest at 8% per year payable monthly, in arrears on the 10th day of each month. On July 8, 2009, the Company entered into a definitive agreement with Paramount to sell the Guazapares project. As part of the agreement, Paramount waived the interest charges due on the convertible debenture
  As part of a restructuring fee, the Company issued to Paramount 150,000 shares of common stock. As part of the agreement, Paramount released its security interest on the Company’s Cieneguita properties. The Company also repaid the remaining amount of the amended debenture of $221,047 on October 8, 2009, from the escrow funds for the payment of Guazapares properties. The Company recognized a loss of $196,045 on the liquidation of the debentures with Paramount. Upon receipt of this payment from the Company, Paramount released its security interests in the Company’s assets, including its security interests in the Company’s Sahuayacan, Guazapares and Encino Gordo properties.
   17
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 8.
CONVERTIBLE DEBENTURES (CONTINUED)
  The value assigned to the beneficial conversion feature of the convertible debentures issued to Paramount ($221,047) was $nil. The fair value of the warrants attached to the convertible debentures was estimated to be $48,500. The fair value of the warrants was estimated at the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions:
  2009Expected volatility

110.36%Weighted-average volatility

110.36%Expected dividend rate

-Expected life of warrants in years

3-4Risk-free rate

1.21-1.45%
  The weighted average fair value of the warrants was $0.75 per warrant, while the weighted average stock price on the dates granted was $0.35. Stock-based compensation for these warrants of $48,500 was being amortized over the one year term of the convertible debentures starting on March 19, 2009.
  In March 2009, the Company approved the issuance of $1,500,000 in convertible debentures to four investors, of which $1,300,000 was received in cash and used to liquidate the debentures issued to Paramount (former debenture holders) during the period of May 2008 to July 2008. Additionally, the Company converted $100,000 of accounts payable into the convertible debenture and received $100,000 in cash for the remaining debenture in October 2009. The debenture was due in one year from the date of issuance and accrued interest at 15% per annum, to be paid quarterly in either cash or stock of the Company valued at a 20% discount of the 20 day trading average prior to the date of payment. The holders had several options to convert the debentures. On July 24, 2009, all of the holders of the convertible debentures agreed to irrevocably convert the debentures into a 10% ownership interest in the Company’s Cieneguita mining project. The Company has valued the Cieneguita project at approximately $15,000,000. The 10% ownership interest in the Cieneguita project thus approximates the value of the debentures to be converted.
  As consideration for the debentures, the Company granted a security interest in its Cieneguita properties to these debenture holders, which was released upon conversion.
  On October 12, 2009, the debentures were converted into 10% ownership interest in Cieneguita. The Company recognized a gain on sale of assets in the amount of $1,500,000 for the year ended February 28, 2010.
  During the quarter ended May 31, 2009, the Company issued 273,510 warrants to MRT under a convertible debenture agreement, where one warrant was issued for each $0.60 of convertible debentures issued (note 6). The warrants can be exercised at any time at a price of $0.50 for three years.
  In November 2009, MRT converted $1,000,000 debenture into units of $0.60 each. The Company recognized a loss on extinguishment of debenture of $114,980.
  The value assigned to the beneficial conversion feature of the convertible debentures issued to MRT was $71,866. The fair value of the warrants attached to the convertible debentures was estimated to be $51,800. The fair value was estimated at the date of the grants using the Black-Scholes option pricing model with the following weighted average assumptions:
  2009Expected volatility

108.54-110.36%Weighted-average volatility

108.54-110.36%Expected dividend rate

-Weighted-average expected life of warrants in years

3Risk-free rate

1.36-1.45%
 
 The weighted average fair value of the warrants was $0.19 per warrant, while the weighted average stock price on the dates granted was $0.32.
   18
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 9.
LOANS PAYABLE
  As at November 30, 2010, there were loans payable in the amount of $22,312 (February 28, 2010 - $45,303), which are all current. The loans are repayable in monthly installments of $3,272 (February 28, 2010 - 5,716), including interest of 7.50% per annum.
  10.
PREFERRED STOCK
  The Company is authorized to issue 20,000,000 shares of preferred stock. The Company’s board of directors is authorized to divide the preferred stock into series, and with respect to each series, to determine the preferences and rights and qualifications, limitations or restrictions thereof, including the dividend rights, conversion rights, voting rights, redemption rights and terms, liquidation preferences, sinking fund provisions, and the number of shares constituting the series and the designations of such series. The board of directors could, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting rights of the holders of common stock, which issuance could have certain anti-takeover effects.
  11.
COMMON STOCK
  In May 2010, the Company converted subscription proceeds of $50,000 and issued 250,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expire in two years.
  In December 2009, the Company converted subscription proceeds of $2,275,000 and issued 11,375,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expire in two years.
  In November 2009, the Company received subscription proceeds of $65,000 and issued 325,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in two years.
  In November 2009, MRT converted its $1,000,000 debentures into units of $0.60 each. Each unit comprises two common shares and one warrant. Each warrant is exercisable at $0.50 per share for a period of three years. The Company issued 3,333,333 shares and 1,666,667 warrants to MRT.
  In October 2009, the Company received subscription proceeds of $20,000 and issued 100,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expire in two years.
  In September 2009, the Company received subscription proceeds of $40,000 and issued 200,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expire in two years.
  In July 2009, the Company received subscription proceeds of $100,000 and issued 500,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expire in two years.
  In June 2009, the Company converted $622,500 of debt into subscription proceeds and issued 2,075,000 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.60 of debt. Each unit consists of two shares of the Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.
   19
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 11.
COMMON STOCK (CONTINUED)
  In June 2009, the Company issued 1,000,000 shares of common stock to an officer of the Company as bonus. The Company assigned a value of $0.28 per share for a total of $280,000 to these shares.
  In May 2009, the Company converted $121,258 of stock subscriptions and issued 404,193 common shares. The subscribers have agreed to purchase one unit for each $0.60 of stock subscriptions. Each unit consists of two shares of the Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.
  In May 2009, the Company converted $128,742 of debt into subscription proceeds and issued 429,141 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.60 of debt. Each unit consists of two shares of the Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.
  In May 2009, the Company issued 42,837 shares for $13,500 of investors’ relations services as per the agreement between the two parties.
  In May 2009, the Company converted $250,000 of debt into subscription proceeds and issued 833,334 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.60 of debt. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.
  In April 2009, the Company issued 2,250,000 shares under an escrow agreement as security against convertible debentures issued in the amount of $250,000. In October 2009, the Company defaulted on the terms of the agreement of the convertible debentures and released the shares from escrow in settlement of the convertible debentures.
  In March and April 2009, the Company issued 700,000 shares pursuant to amended convertible debenture agreement and financing arrangements.
  12.
STOCK COMPENSATION PROGRAM
  On March 18, 2009, the board of directors approved the granting of stock options according to the 2009 Nonqualified Stock Option Plan (“2009 Option Plan”) whereby the board is authorized to grant to employees and other related persons stock options to purchase an aggregate of up to 6,000,000 shares of the Company's common stock. Subject to the adoption of the 2009 Option Plan, the options were granted and vest, pursuant to the terms of the 2009 Option Plan, in six equal instalments, with the first instalment vesting at the date of grant, and the balance vesting over 2 1⁄2 years, every six months.
  In the nine months ended November 30, 2010, the Company awarded nil options to purchase common shares (November 30, 2009 - 150,000) and recorded stock-based compensation expense of $413,754 (November 30, 2009 - $800,178) for the options vested during the nine month period. The following weighted average assumptions were used for the Black-Scholes option-pricing model to value stock options granted in 2009:
  2009Expected volatility
110.36%Weighted-average volatility
110.36%Expected dividend rate
-Expected life of options in years
10Risk-free rate
2.95%
 
 There were no capitalized stock-based compensation costs at November 30, 2010 or November 30, 2009.
   20
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 12.
STOCK COMPENSATION PROGRAM (CONTINUED)
  The summary of option activity under the 2009 Option Plan as of November 30, 2010, and changes during the period then ended, is presented below:
  Weighted


Number of


Weighted-


AggregateAverage


Shares


Average


IntrinsicExercise





Remaining


ValuePrice





ContractualOptions







TermBalance at March 1, 2010

$
0.51



6,560,000Options granted


-



-Options exercised


-



-Options cancelled/forfeited


0.49



(325,000
)Balance at November 30, 2010

$
0.51



6,235,000



7.08


$
77,200Exercisable at November 30, 2010

$
0.55



5,210,833



6.92


$
58,300
 
  The weighted-average grant-date fair value of options granted during the nine months ended November 30, 2010 and November 30, 2009 was $nil and $0.33, respectively.
  A summary of the status of the Company’s nonvested options as of November 30, 2010, and changes during the nine months ended November 30, 2010, is presented below:
  Weighted-averageGrant-DateNon-vested options

Shares


Fair ValueNon-vested at February 28, 2010


2,570,832


$
0.29Granted


-



-Vested


(1,508,332
)


0.28Cancelled/forfeited


(38,333
)


0.16Non-vested at November 30, 2010


1,024,167


$
0.28
  As of November 30, 2010, there was an estimated $217,600 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2007, 2008 and 2009 nonqualified stock option plans. That cost is expected to be recognized over a weighted-average period of approximately 0.71 years.
   21
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 13.
WARRANTS
  As at November 30, 2010, the Company had a total of 27,280,900 (February 28, 2010 - 25,380,900) warrants outstanding to purchase common stock. Each warrant entitles the holder to purchase one share of the Company’s common stock. The Company has reserved 27,280,900 shares of common stock in the event that these warrants are exercised.
  During the nine months ended November 30, 2010, the Company received $nil from warrants exercised.
  The following table summarizes the continuity of the Company’s share purchase warrants:
  Number of

Warrants


Weighted Average Exercise PriceBalance, February 28, 2009


7,102,890


$
1.03Issued


22,887,500



0.38Cancelled/expired


(4,609,490
)


1.11Exercised


-



-Balance, February 28, 2010


25,380,900


$
0.43Issued


3,000,000



0.25Cancelled/expired


(1,100,000
)


037Exercised


-



-November 30, 2010


27,280,900


$
0.41
 
 As at November 30, 2010, the following share purchase warrants were outstanding:
  
 Number of Warrants
Exercise Price

Expiry Date3,000,000
$ 0.25

July 26, 2012166,666
0.30

May 8, 20121,125,000
0.30

July 23, 2011 to November 5, 201111,375,000
0.30

December 30, 2011300,000
0.36

July 23, 2011200,000
0.40

March 24, 2012600,000
0.50

August 15, 20121,454,167
0.50

December 31, 20105,000,000
0.50

December 24, 20121,666,667
0.50

November 5, 2012200,000
0.65

June 30, 20121,793,400
0.75

April 2012 to August, 2013200,000
1.30

June 30, 2012200,000
$ 2.00

June 30, 201227,280,900
  22
 PAN AMERICAN GOLDFIELDS LTD.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 Nine Months Ended November 30, 2010
 (Unaudited) (Expressed in U.S. Dollars)
 14.
RELATED PARTY TRANSACTIONS
  For the nine months ended November 30, 2010, the Company paid or accrued management fees of $302,639 (2009 - $179,080) to certain officers and directors. The Company also paid or accrued $44,500 (2009 - $14,223) to certain officers and directors for travel, office and other related expenses.
  As at November 30, 2010, accounts payable of $366,718 (2009 - $340,578) was owing to officers and a director of the Company and $33,226 (2009 - $16,832) was owing to a company controlled by a director. In addition, promissory notes of $10,324 (2009 - $9,960) were owed to a company controlled by a director (note 7).
  All related party transactions are in the normal course of business at the exchange amount agreed to by each party.
  15.
SUPPLEMENTAL CASH FLOW INFORMATION
  Nine Months

Ended

November 30,

2010


Nine Months

Ended

November 30,

2009


Period From

Inception of

Development

Stage (March 1,

2004) to

November 30,

2010Interest paid

$
-


$
-


$
280,053Common stock issued on conversion of debt


-



872,500



4,193,000Common stock issued on settlement of notes payable


-



1,250,000



3,133,322Common stock issued for interest costs


-



82,500



82,500Common stock issued for financing costs






145,000



145,000Common stock issued for mineral property costs


-



-



580,000Common stock issued for bonuses


-



280,000



512,750Shares issued for services

$
-


$
13,500


$
510,590
 
   23
  ITEM 2.
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Cautionary Statement Regarding Forward-Looking Statements
  Certain statements contained in this Form 10-Q constitute "forward-looking statements". These statements, which may be identified by words such as “plan”, "anticipate", "believe", "estimate", "should", "expect" and similar expressions include the expectations and objectives of us, Pan American Goldfields Ltd., regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in such forward-looking statements. Such risks and uncertainties include those set forth under this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-Q and in our Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). These forward-looking statements represent beliefs and assumptions only as of the date of this report. We undertake no obligation to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. We advise you to carefully review the reports and documents we file from time to time with the SEC, particularly our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K.
 
 Overview
  We are a development stage company and as of the date of this report we have generated only limited revenues from our Cieneguita project and have not yet generated or realized any revenue from our other two exploration projects. As of November 30, 2010, we had $149,129 in our bank account.
 
 In October 2010, we appointed Miguel F. Di Nanno president, replacing George Young effective as of October 15, 2010. Mr. Young remains on our board of directors. Mr. Di Nanno has experience in mining and energy exploration and most recently served as president of Somuncurah S.R.L. and Aupa S.A., both exploration and development firms focused in Argentina. He has also previously served as the chief operating officer of the Grosso Group, an exploration and new mining business development firm and as the representative and country manager in Argentina for Palladon Ventures Ltd., a gold and silver exploration company. He has a degree in Mining Engineering - Ore Dressing from the National University of San Juan.
 
 In July 2010, we appointed Neil Maedel, Randy Buchamer and Gary Parkison to our board of directors. Mr. Maedel is an investment banker specializing in international resource projects; Mr. Buchamer has extensive experience in business administration and finance; and Mr. Parkison is qualified geologist and project manager with expertise in exploration and development of minerals and metals projects. All of the newly appointed directors have technical and financial industry experience base that will assist us with operations and our planned listing on either the Toronto Stock Exchange or the TSX Venture Exchange, consistent with our status as a producing resource company.
 
 In July 2010, we reincorporated from the State of Colorado to the State of Delaware. The reincorporation was effected pursuant to an agreement and plan of merger (the “Merger Agreement”), by and between us and Pan American Goldfields Ltd., a Colorado corporation (formerly Mexoro Minerals Ltd.), with Pan American Goldfields Ltd. being the surviving corporation. Accordingly, the rights of our shareholders are now governed by Delaware General Corporation Law and the certificate of incorporation and bylaws of Pan American Goldfields Ltd. are filed with the State of Delaware.
 
 In May 2010, management decided to drop the Sahuayacan properties due to lack of economic thicknesses and grades of gold mineralization encountered in the drilling program, eliminating any future concession payments on these properties.
 
 In May 2010, Mr. Francisco “Barry” Quiroz and Mr. John Clair resigned from our board of directors. Neither director resigned as a result of a disagreement with us on any matter relating to our operations, policies or practices.
 
 Our continued existence and plans for future growth depend on the receipt of funds from our partner MRT from the ongoing operations at the Cieneguita mine operations. Should there be an interruption in this cash flow it will be necessary to obtain additional capital  to operate either through the issuance of additional debt or equity.
  24
 For the nine months ended November 30, 2010, the joint venture with Minera Rio Tinto (“MRT”), as described further below, had generated net cash flows from the tuning and start-up operations of approximately $496,000 of which $99,000 is attributable to us under the joint venture agreement. The company has received guidance from MRT that we should expect net cash flow of approximately $140,000 per month beginning December rising to more than $200,000 per month by May 2011. Operations are currently at pit #3 where metals contained in the material recovered so far have averaged approximately 1.2 grams per ton Au, 90 grams per to Ag, 0.04% Cu, 0.35% Pb and 0.65% Zn. MRT however initially experienced difficulty in reducing a portion of the mined material to a particle size that would allow for optimum recovery of contained gold, silver and base metals. To achieve the desired grinding - comminution capacity, MRT has recently installed a ball mill which is rated at 750 tons per day and pulverizes the larger material as it is produced. Assuming the relatively soft material, at Cieneguita the ball mill is expected to process approximately 600 tons per day to approximately -70 mesh. To match the flotation capacity with the increased grinding/ball mill capacity, an additional bank of 10 Agitair cells at 48 cubic foot have been added to the previously installed bank of 10 WEMCO flotation cells (two at 100 cubic foot capacity; eight at 50 cubic foot capacity). Both the mill and flotation cells are currently undergoing commissioning and we are confident that the move from a construction and start-up phase to operations is largely complete. Once commissioning is complete we expect the overall production capacity to rise to approximately 700 tons per day on a sustained basis, and that recently improved metal recoveries, which have increased significantly due to the grinding circuit improvements and changes in reagent, will also be maintained. Despite the improvements there remains significant risk to us for this type of extracting of mineralized material because we will not have established reserves at Cieneguita until an independent feasibility study is complete. Consequently, neither can we provide any assurance that the feasibility study will be successful nor can we know if the extraction and processing of mineralized material from the Cieneguita property will result in any cash flows for us. As part of the $8 million joint venture agreement, MRT will fund the development of the Cieneguita mill and operations and a bankable feasibility study. Now that the construction and start-up phase is complete, we anticipate that infill drilling, as part of the bankable feasibility study and exploration drilling to test a potential southern extension of the Cieneguita gold-silver mineralization will begin immediately.
 
 Although this phase of the Cieneguita’s development is funded by our partner MRT, for the 12-month period from December 2010 through January 2012, we need to raise additional capital to pursue our business plan of acquiring, exploring and developing additional high impact mineral properties and to provide a buffer for the possibility that the expected net cash flow currently generated by MRT is interrupted. During this period, we will need to receive from production at the Cieneguita operations a minimum of $1,250,000 for general and administrative costs. As continuous operations have only recently begun we cannot ascertain how reliable this income will be. This does not include any capital needed to pay our accounts payables and to execute our exploration programs as described below.
 
 Plan of Operation
  Summary
  Our business plan is to proceed with the exploration and development of our Mexican mineral properties to determine whether they contain commercially exploitable reserves of gold, silver or other metals.
 
 In the event that our exploration and development program finds exploration targets that warrant additional exploration work, including exploration by drilling, we will not have enough cash available to fund an expanded exploration program. If we decide to expand our exploration and development program, we would need to raise additional capital to meet these needs. We currently do not have any sources of additional capital available to us and we may not have any in the future. The failure to raise additional capital would severely curtail our ability to conduct any additional exploration work that might be warranted because of the results of our current exploration program.
 
 In October 2010, we appointed Miguel F. Di Nanno president, replacing George Young effective as of October 15, 2010. Mr. Young remains on our board of directors. Mr. Di Nanno has experience in mining and energy exploration and most recently served as president of Somuncurah S.R.L. and Aupa S.A., both exploration and development firms focused in Argentina. He has also previously served as the chief operating officer of the Grosso Group, an exploration and new mining business development firm and as the representative and country manager in Argentina for Palladon Ventures Ltd., a gold and silver exploration company. He has a degree in Mining Engineering - Ore Dressing from the National University of San Juan.
 
 In July 2010, we appointed Neil Maedel, Randy Buchamer and Gary Parkison to our board of directors. Mr. Maedel is an investment banker specializing in international resource projects; Mr. Buchamer has extensive experience in business administration and finance; and Mr. Parkison is qualified geologist and project manager with expertise in exploration and development of minerals and metals projects. All of the newly appointed directors have technical and financial industry experience base that will assist us with operations and our planned listing on either the Toronto Stock Exchange or the TSX Venture Exchange, consistent with our status as a producing resource company.
  25
 In July 2010, we reincorporated from the State of Colorado to the State of Delaware. The reincorporation was effected pursuant to an agreement and plan of merger (the “Merger Agreement”), by and between us and Pan American Goldfields Ltd., a Colorado corporation (formerly Mexoro Minerals Ltd.), with Pan American Goldfields Ltd. being the surviving corporation. Accordingly, the rights of our shareholders are now governed by Delaware General Corporation Law and the certificate of incorporation and bylaws of Pan American Goldfields Ltd. are filed with the State of Delaware.
 
 In May 2010, management decided to drop the Sahuayacan properties due to lack of economic thicknesses and grades of gold mineralization encountered in the drilling program, eliminating any future concession payments on these properties.
 
 In May 2010, Mr. Francisco “Barry” Quiroz and Mr. John Clair resigned from our board of directors. Neither director resigned as a result of a disagreement with us on any matter relating to our operations, policies or practices.
 
 In September 2009, we entered into private placement subscription agreements, as thereafter amended, with certain U.S. accredited investors and certain non-U.S. investors for the private placement of 12,500,000 unregistered shares of the common stock with 100% warrant coverage at a purchase price of $0.20 per unit. The warrants have an exercise price of $0.30 per share, a two-year term and will not be exercisable until 12 months after their date of issuance. As a result of the sale of all the unregistered shares, we received aggregate gross proceeds, prior to any expenses, of $2,500,000 from the private placement.
 
 In August 2009, we dropped one of our properties in the Encino Gordo concessions, Encino Gordo 2. Management determined that the property payments due to the concession holder were too expensive and we decided to not make the required option payment. There is currently no plan to renegotiate the payments for this property.
 
 In May 2009, we entered into a letter of agreement and in July 2009, we signed the definitive agreement to sell our Guazapares project, located in south western Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount Gold and Silver Corp. (“Paramount”) for a total consideration of up to $5.3 million. The Guazapares project is comprised of 12 claims close to Paramount’s San Miguel discovery. The purchase price is to be paid in two stages, with the first payment of $3.7 million released from escrow in February 2010, as the transfer of the 12 claims to Paramount was completed. An additional payment of $1.6 million is due if, by July 10, 2012, either (i) Paramount sells its Mexican subsidiary or (ii) Guazapares is put into production. The definitive agreement closed in October 2009 and a 5.7% commission was paid on the closing of the sale.
 
 In February 2009, we entered into a development agreement with MRT, which we amended in December 2009. Pursuant to the terms of the development agreement, as amended, MRT has agreed to invest up to $8 million to initiate the first phase of production and to complete a feasibility study on the Cieneguita project. The first phase of production is limited to the mining of the mineralized material that is available from the surface to a depth of 15 meters (“First Phase Production”). In exchange, we assigned MRT a 74%interest of the net cash flows from First Phase Production and a 54% ownership interest in the Cieneguita project.
 
 To fund our continued operations, we issued $1.5 million of convertible debentures in March 2009, of which an aggregate of $880,000 was issued to Mario Ayub, one of our directors, and to his affiliated entity, MRT. Pursuant to the terms of the convertible debentures, the holders irrevocably converted the debentures into a 10% ownership interest in the Cieneguita project and a 10% interest in the net cash flow from First Phase Production. In December 2009, Mario Ayub and MRT agreed to resell an aggregate 4% ownership interest in the Cieneguita project back to us, along with 4% of the net cash flow from First Phase Production, in return for $550,000. In a private transaction not involving us, the other holders contributed their remaining 6% ownership interest in the Cieneguita project to a newly formed entity, Marje Minerals SA (“Marje Minerals”).
 
 As a result of our amended development agreement and our agreements with the debenture holders, the ownership interest in the Cieneguita project and the net cash flows from the First Phase Production are held by us, MRT and Marje Minerals as follows:
 
 Holder

Ownership Percentage

Net Cash Flow Interest From First Phase Production

Net Cash Flow Interest Following First Phase ProductionMRT

54%

74%

54%Marje Minerals

6%

6%

6%Pan American

40%

20%

40%
 
 Any additional costs for the First Phase Production and the feasibility study for the Cieneguita project, after MRT invests $8 million, will be shared by us, MRT and Marje Minerals on a pro-rata basis based on their respective ownership percentages in the Cieneguita project.
  26
 The major terms of the development agreement with MRT and Marje Minerals are as follows:
 
 •
MRT purchased $1 million of secured convertible debentures at 8% interest (payable in stock or cash). The proceeds from this investment were used for continued exploration and development of the Cieneguita project and general working capital. In November 2009, MRT exercised its conversion rights on the debenture and MRT was issued 3,333,333 common shares and a warrant to purchase 1,666,667 shares of common stock at an exercise price of $0.50 per share.
 
 •
MRT agreed to provide the necessary working capital to begin and maintain mining operations, estimated to be $3 million, to put the first phase of the Cieneguita project into production. In exchange for these funds, we assigned MRT an interest to 74% of the net cash flow from First Phase Production. The agreement limits the mining during First Phase Production to the mineralized material that is available from the surface to a depth of 15 meters.
 
 •
MRT committed to spend up to $4 million to take the Cieneguita project through the feasibility stage. In doing so, we assigned MRT a 54% interest in our rights to the Cieneguita project. After the expenditure of the $4 million, all costs will be shared on a pro-rata ownership basis (i.e. 54% to MRT, 40% to us and 6% to Marje Minerals). If any party cannot pay its portion of the costs after the $4 million has been spent, then their ownership position in the Cieneguita project will be reduced by 1% for every $100,000 invested by the other owners. Our ownership interest in the Cieneguita project, however, cannot be reduced below 25%. In addition, we have the right to cover Marje Minerals’ pro rata portion of costs if they cannot pay their portion of the costs. In return, we will receive 1% of Marje Minerals’ ownership position in the Cieneguita project for every $100,000 we invest on their behalf.
 
 •
The MRT agreement was contingent on our repaying a debenture to Paramount. In March 2009, we repaid $1 million, or approximately two-thirds of the debt, and Paramount released a security interest it had on the Cieneguita project. In October 2009, we repaid the remaining amount of the debt, and Paramount released its security interests on the Sahuayacan, Guazapares and Encino Gordo properties.
 
 In September 2009, we hired George Young as our chief operating officer, Salil Dhaumya as our chief financial officer and Manuel Flores as our operations manager. In November 2009, Mr. Young was appointed president upon the resignation of Francisco “Barry” Quiroz. In October 2010, we appointed Miguel F. Di Nanno as President of the Company replacing Mr. Young. Other than these employees and our geologists, all of the employees we hire are contracted from third parties specializing in providing employees for Mexican companies. In using third party contractors we minimize our exposure to Mexican employment law and all liabilities are undertaken by the third party contractors providing the services. We pay a flat rate to the third parties for their services.
 
 In February 2009 we entered into a development agreement with MRT to provide us with immediate funding to initiate production at our Cieneguita property, to complete a feasibility study and to continue the exploration of its properties. The development agreement was amended in December 2009 and calls for project funding of up to $8 million to be spent on First Phase Production and to complete a feasibility study. To date MRT has contributed $1 million in working capital and has spent additional funds on initiating production on the Cieneguita project through the building of a floatation circuit mill.
 
 In the event that we do discover a mineral deposit on one of our properties, of which there is no guarantee, we would need to expend substantial amounts of capital to put such properties into production, if so warranted. The amount of such expenditures is indeterminable at this time as our exploration and development program has not advanced far enough to provide us with results to determine this information.
 
 Such expenditures depend upon the size of the mineralized body, the grade of the mineralized body and the type of mining that is required to extract any minerals that may be found. Regardless, we do not have enough capital available to us to make any such expenditure that would be required to put any mineral property into production, and we therefore would have to raise the additional capital or, if possible, enter into a joint venture for the production phase. If we were to form a joint venture, we cannot assess what our final position in the project would be. We do not have any sources of capital available to us at this time to fund such a project if one should be discovered.
 
 In the event that we should find a mineable reserve, it is management’s intention to contract the mining and milling of any mineralized reserves out to third parties. We do not have any known reserves at this time.
  27
 Exploration Projects - Current Status
  To date the Sierra Madre gold exploration program has been focused on advancing current exploration projects to the next exploration stage. During most of 2008 and 2009, exploration activities were concentrated on four projects: Sahuayacan, Encino Gordo, Guazapares and Cieneguita. However, exploration activities during the nine months ended November 30, 2010 were focused on the Cieneguita project. We dropped the Sahuayacan project due to lack of economic thicknesses and grades of gold mineralization encountered in the drilling program eliminating any future concession payments on these properties. As well, we sold our Guazapares concessions to Paramount in the fiscal year ended February 28, 2010. To date most of the data gathered during our field campaigns and drilling programs is completely compiled and is being evaluated. The next exploration stages for the Cieneguita and Encino Gordo projects are in the planning process.
 
 Over the next 12 months, we intend to explore our two projects to determine whether there are economically attractive concentrations of gold and gold-silver mineralization. We intend to hire additional employees but do not plan to make any purchase of equipment over the next 12 months. At this time, though, the exploration program is only planned for the next 12 months, which we will undertake when the necessary capital has been raised to complete these programs. We do not have any sources of capital identified at this time and no assurance can be given that we will be able to complete the proposed exploration program.
 
 The figure below shows the location of our current two projects.
  
 
 This figure illustrates the location of our projects
 
  28
  To date most of the data gathered during our field campaigns and drilling programs is completely compiled and is being evaluated.
 
 Cieneguita
  During the nine months ended November 30, 2010, we concentrated our exploration activities only on the Cieneguita project, where a drilling program was completed in December 2008.
 
 The main exploration activities for the Cieneguita project are described below:
 
 •
100 diamond drillholes completed for a total of 20,215 meters of drilling.
 •
Broad mineralized intercepts including 111.5 meters with 1.24 g/t Au, 99.6 g/t Ag, 0.45% Pb and 0.73% Zn (C-21) and 94 meters with 1.21 g/t Au, 79.8 g/t Ag, 0.78% Pb and 1.2% Zn (CI-30).
 •
Mineralization at Cieneguita has been traced over 900 meters along strike and still remains open to the southwest and to depth.
 •
Exploration ongoing; infill drilling program has been designed to expand the size of the mineralized material.
 
 We have conducted a series of exploration programs at Cieneguita since March 2007. The drilling exploration program commenced in December 2007 with one drill rig and a second rig was added in July 2008. The drilling was completed in December 2008.
 
 Assay results and an analysis of the drilling and exploration work are compiled and described in our recently filed Technical Report on National Instrument Form NI 43-101 (“NI 43-101”), which was completed following the end of fiscal 2010, and is in compliance with the standards and requirements of Canadian security regulatory authorities. The NI 43-101 report is also available on our website, www.panamgoldfields.com. Two different styles of mineralization have been identified: precious (gold-silver) and base (lead-zinc-silver) metal mineralization, with higher gold-silver grades starting on surface and lead-zinc-silver mineralization intercepted at depth and to the west of the Cieneguita deposit. We interpret the Cieneguita deposit as a diatreme breccia body where disseminated oxide and sulphide mineralization is mainly hosted by quartz-sericite altered diatreme breccias and lapilli tuffs.
 
 The mineralized body is shaped like a funnel which has been flattened laterally, measuring over 900 meters by 300 meters as defined by the drill results. We have completed a cross section‐based geological model and have calculated inferred mineralized material of 15.249 million tons with 2.62 g/t Au equivalent based on assays that were composited using the sum of the dollar values for Au, Ag, Pb and Zn in each drill interval. Three-year trailing average prices used were: gold = $727.22 per ounce, silver = $13.66 per ounce, lead = $1.00 per pound, zinc = $1.36 per pound. A cut-off of $30 was applied and weighted averages calculated for each above-cut-off interval. These intervals were projected between drill holes and between sections to produce resource blocks, which were then compiled using weighted averages to produce a total tonnage and grade with a dollar value per ton.
 
 Mineralization intersected in CI‐34 (46 meters with 4.68 grams per ton gold, 87.67 grams per ton silver, 0.24% lead and 0.22% zinc) and CI‐29 (51 meters with 0.5 grams per ton gold, 55.03 grams per ton silver, 0.34% lead and 0.46% zinc), both collared in the western portion of Cieneguita suggests that mineralization still remains open to west, southwest and to depth in the western part of the Cieneguita deposit. No assurance may be given, though, that additional mineralized material will be found in these areas.
 
 Included in the Technical Report is an updated NI 43-101 compliant resource estimate of 1.1 million measured and indicated gold equivalent ounces and 0.02 million inferred gold equivalent ounces at the Cieneguita project. The estimate includes 20,087,000 measured and indicated tons grading 1.54 g/t gold equivalent and 453,000 inferred tons grading 1.47 g/t gold equivalent.
 
 Cieneguita Deposit In Situ Resource Within Optimized Pit Shell @ 0.8 g/t AuEq Cut-Off
 
 Classification
Tonnes
Au

g/t
Ag

g/t
Cu

%
Pb

%
Zn

%
AuEq

g/t
Au

oz
Ag

oz
AuEq

ozMeasured
3,128,000
0.71
61.8
0.03
0.24
0.29
1.86
71,400
6,215,000
186,600Indicated
16,959,000
0.74
50.0
0.03
0.21
0.25
1.69
403,500
27,262,000
920,900Meas & Ind
20,087,000
0.74
51.8
0.03
0.21
0.26
1.71
474,900
33,477,000
1,107,500Inferred
453,000
0.99
34.2
0.02
0.13
0.17
1.63
14,400
498,000
23,800
 
  29
   This figure is showing the geological units and distribution of the 100 drillholes.
  Current Operations
  Previously reported water supply problems have been largely remedied with the installation of a 5 km line to a second water source. Metal recoveries have been dramatically improved by the addition of a ball mill to further pulverize the mined material, just as changes in reagents used improved the recovery of the free gold particles or gold-bearing minerals in the flotation process. During the period from March 2010 to and including November 2010, $3,098,142 worth of concentrate was sold. The cost of mining and processing was $1,765,916, while other operating expenses, including during the nine months of mill start-up and construction, totaled a further $780,552. Property royalties totaled $55,862 leaving a net operating cash flow for the joint venture of $495,812. Costs continue to decline significantly as efficiencies of scale take effect and operational improvements are made.
 
 According to estimates provided by MRT for the month of December 2010, 340 ounces of gold and 21,797 ounces of silver are expected to be produced and sold, generating a gross revenue under the concentrate sales contract of $1,156,016. The cost of concentrates sold is expected to be approximately $301,000 and operating expenses $123,000 producing a net operating cash flow for the joint venture of $732,000 for December. Sales in January are forecast to be a similar amount, with a ramp up of increased production projected to occur during February through April, increasing to level of approximately 610 ounces of gold and 38,000 ounces of silver per month by May, 2010. It is also projected that costs per ounce produced will decrease with the increase in production.
 
 Because of the favourable mapping, sampling and drilling results in Cieneguita, we initiated a brownfield exploration program aimed at locating additional mineralization within our properties. The exploration process around the main mineralization zone at Cieneguita has identified two areas of porphyry style mineralization 500 meters to south of the current known mineralization. These two areas known as Piedras Blancas and Piedra Amarilla are exhibiting the same size, characteristics, and intensity of alteration-mineralization on surface as encountered at Cieneguita. No assurance, though, may be given that any positive exploration results will come from these similarities.
  30
  
 The brownfield exploration program for the Piedras Blancas area has now been completed. As a result of this mapping and sampling program, we have designed a drilling exploration program consisting initially of 3,000 meters of drilling to test three different targets. As we do not have available capital at this, no assurance may be given that we will initiate this drilling program.
 
 A figure exhibiting main geological and mineralization features on the Piedras Blancas and Piedra Amarilla areas is shown below.
 
 
 
 
 There are no known reserves on the Cieneguita property.
 
 Encino Gordo
  During fiscal 2007, the Company carried out a detailed and property scale mapping and sampling program outlining numerous gold, silver and gold-copper coincident geochemical anomalies. Phase 1 of the exploration program was undertaken in an effort to define the style and characteristics of the mineralization areas indicated by the geochemical anomalies. Within this stage several gold and sulphide mineralization areas including pyrite and chalcopyrite have been identified within an over 500 meters stockwork area and fault-veins structure.
  31
 All information and field evidence gathered during the mapping and sampling process suggest the presence of “porphyry” style alteration and mineralization characterized by the presence of concentric alteration patterns (potassic alteration grading outward to quartz-sericite and propylitic alteration), coincident Cu, Au and Mo geochemical anomalies and a multiple-event of veining. No assurance can be given, though, that we will find such a deposit, if at all.
 
 In August 2009, we dropped one of our concessions in the Encino Gordo Project, Encino Gordo 2. We determined that the payments due to the concession holder were too expensive and it was not in our best interests to keep the concession. There is no current plan to renegotiate the payments for this project.
 
 There are no known reserves on the Encino Gordo Project.
  Proposed 2010/2011 Program: Exploration Projects - Potential and Next Exploration Stage
  Over the next 12 months, we intend to explore our Cieneguita project to determine whether there are economically attractive concentrations of gold and gold-silver mineralization. We do not intend to hire any additional employees or to make any purchase of equipment over the next 12 months, as we intend to rely upon current personnel for the exploration work being conducted. At this time, though, the exploration program is only planned for the next 12 months, which we will undertake when the necessary capital has been raised to complete these programs. We do not have any sources of capital indentified at this time and no assurance can be given that we will be able to complete the proposed exploration program.
 
 The following exploration program, assuming the necessary capital is available, has been planned:
  Cieneguita
  The recent exploration activities in Cieneguita have shown that additional exploration is warranted. Management has made the following determinations to date:
 •
Infill drilling displays continuity of mineralization and overall grades.
 •
Mineralization extends 900 meters along strike, is up to 300 meters wide and is open to the southwest and open to depth.
 
 
 
 Figure is showing main mineralization zones on the Cieneguita project. Areas in red are exhibiting mineralization areas where grades is >1.5 g/t Au
   32
  The known mineralized material on the Cieneguita property combined with the assay results from drilling and the new areas found 500 meters away from Cieneguita are providing the possibility to increase the size of the mineralized material. No assurance may be given, though, that the size of the mineralized zone will increase. Considering the latest results and findings the proposed work program for Cieneguita will include:
 
 •
Completing the infill drilling program by drilling an additional 10,000 meters to expand inferred resources;
 •
Continue conducting metallurgical tests;
 •
Complete feasibility study and;
 •
Commencing exploration drilling program at the Piedras Blancas project.
 
 The proposed exploration budget for the Cieneguita project for the remainder of 2010 will be conducted by MRT. They will be responsible for spending $4,000,000 over the next 36 months to take the property through to feasibility. The feasibility work will also include exploration on the two new areas to the south of the Cieneguita property.
 
 There are no known reserves on the Cieneguita property.
  New Properties-Target Generation and Growth Strategy
  A fundamental component of our business strategy is to advance all of our properties to the drilling stage and implement a strong generative and property acquisition program through a well-established and consistent financial and funding process.
 
 The proposed generative program contemplates four main directions:
 
 1.
A new targets generation program that may create a pipeline of quality properties providing a steady stream of new prospect and/or projects for us to explore, farm-out and/or joint venture.
 2.
A property acquisition program aimed to identify and acquire at low cost (whenever possible) early- to mid-stage properties on selected locations along the main gold-silver belts in Mexico.
 3.
A focus on small- to medium-size gold-silver deposits (minimum deposits containing 500,000 ounces of Au Eq.)
 4.
The new targets generation and property acquisition program may be initially focused on the Sierra Madre belt and Central Mexico. It may be extended further south in Mexico and other countries if conditions and project’s potential warranted.
 
 The proposed exploration program is to be undertaken by our exploration team using in-house knowledge in combination for support and guidance of high-quality consultant with expertise in the region. The new targets generation program is aimed to feed our project pipeline for two “at drilling stage and/or near drilling stage” projects per year. We do not have the necessary working capital at this time to implement this target generation program.
  Phase I - Target Generation
  Objectives
 
 •
Identify two to four target areas (approximately 20 x 30 kilometers) which have the potential to host small- to medium-size gold and/or gold-silver deposits.
 •
Identify one or two specific opportunities with close to drill ready targets. For example, identify old workings or existing mines with good upside potential.
 •
Time frame: six months.
 
 Key Steps and Exploration Tools
  After initial evaluations of potential gold and gold-silver deposits, it has become evident that the acquisition and evaluation of more detailed geological maps and geochemistry with field follow-up is critically important in identifying new areas of mining potential. Careful and selective use of such data may be the most immediate and cost-effective way to focus exploration efforts toward prospective gold-silver areas.
 
 Key steps may include mainly the following activities, among other considerations:
 
 •
Acquiring geological maps 1:250,000 and 1:50,000 (from Servicio Geologico Mexicano);
 •
Generating geological and mineral occurrences base maps;
 •
Identifying key host rocks;
 •
Completing structural interpretation from known geology, TM imagery, and geophysical data (if available);
 •
Integrating mineral occurrences, alteration, lithology and structures;
 •
Completing initial targeting using the above compilation; and
 •
Selecting and prioritizing targets.
  33
  
 
 We do not have the necessary working capital at this time to implement this target generation program.
  RESULTS OF OPERATIONS
  Three and nine months ended November 30, 2010 compared to the three months and nine months ended November 30, 2009.
  In this discussion of the Company’s results of operations and financial condition, amounts, other than per-share amounts, have been rounded to the nearest thousand dollars.
 
 Revenues
  The Company earned its 20% proportionate revenue of $623,000 (2009 - $525,000) from the joint venture with MRT from the gold production during the nine months ended November 30, 2010. Other than the revenue from the joint venture with MRT, we did not have commercial production of any of our properties in the nine months ended November 30, 2010. We cannot provide any assurances that we will continue to earn revenues of any significance from the joint venture with MRT, if ever. We are presently in the exploration stage of our business. 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.
 
 Operating Costs
  We incurred operating costs of $68,000 (2009 - $76,000) and $165,000 (2009 - $134,000) during the three and nine months ended November 30, 2010 as a portion of the operating costs of production at Cieneguita in the joint venture with MRT.
 
 Expenses
  Our operating loss decreased to $526,000 and $2,683,000 for the three and nine months ended November 30, 2010 compared to $1,103,000 and $2,713,000 for the three and nine months ended November 30, 2009, respectively. The general and administrative expenses decreases due to lower legal expenses in the current nine month period offset by higher acquisition costs of Cieneguita property.
 
 General and administrative expenses decreased to $577,000 and $1,858,000 in the three and nine months ended November 30, 2010 compared to $870,000 and $2,279,000 in the three and nine months ended November 30, 2009, respectively. The decrease during the current three and nine month periods is attributable to lower legal fee, consulting fees and stock-based compensation offset by higher management fees. The non-cash stock-based compensation expense amounted to $407,000 and $616,000 in 2010, compared to $546,000 and $874,000 in 2009, for the three and nine months, respectively. The amount for the nine-month period in 2010 had $414,000 of stock-based compensation expense relating to options granted to officers, directors and consultants and $202,000 of stock-based compensation relating to warrants. The amount for the corresponding period in 2009 relates to stock options granted to management and key personnel and compensation relating to warrants for $800,000 and $74,000, respectively.
 
 Accounting and legal fees decreased to $147,000 in the nine months ended November 30, 2010 compared to $338,000 in the nine months ended November 30, 2009. The decrease was primarily attributable to lower legal costs. The Company incurred higher legal fees in 2009 relating to issuance, payment and restructuring of convertible debentures and preparing the registration statement for the new financing.
 
 Mineral exploration in the three months ended November 30, 2010 decreased considerably to $16,900 compared to $97,000 for the three months ended November 30, 2009 and decreased slightly for the nine months ended November 30, 2010 to $378,000 compared to $421,000 for the nine months ended November 30, 2009, as the Company completed a preliminary exploration program on the Sahuayacan property.
 
 Loss
  Our net loss increased to $2,777,000 for the nine months ended November 30, 2010 compared to $1,474,000 for the nine months ended November 30, 2009. The lower
 
 This change in net loss was attributable to absence of gain on sale of assets of $1,500,000 recognized in 2009 relating to the sale of 10% interest in Cieneguita property by converting debt.
 
 We anticipate that we will continue to incur a loss until such time as we can achieve significant revenues from the sale of gold recovered from our Mexican mineral properties, if ever. There is no assurance that we will achieve any significant revenues from the sale of gold.
  34
 LIQUIDITY AND CAPITAL RESOURCES
  Since inception, we have undergone two unsuccessful business combinations, which have caused us to incur significant liabilities and have resulted in the accumulation of a substantial deficit during the exploration stage.
 
 As of November 30, 2010, we had total assets of $878,000, total liabilities of $2,542,000 and a deficit of $45,832,000 accumulated during the development stage.
  Cash and Working Capital
  We had cash and cash equivalents of $149,000 as of November 30, 2010, compared to cash of $3,377,000 at February 28, 2010 and $300,000 at November 30, 2009. We had working capital deficiency of $1,887,000 as of November 30, 2010, compared to a working capital of $232,000 as of February 28, 2010 and working capital deficiency of $2,510,000 as of November 30, 2009.
 
 During the nine months ended November 30, 2010, we did not increase the activities for our exploration program considerably but have continued to incur corporate administrative expenses, for which, we were unable to raise sufficient funds to pay many of our suppliers. Our accounts payable and accrued liabilities decreased from $2,773,000 as of February 28, 2010 to $1,723,000 in the nine months ended November 30, 2010, most of which are being carried forward from fiscal 2010. Of the $1,723,000 accounts payable and accrued liabilities as of November 30, 2010, $714,000 is related to exploration expenses.
 
 We will require additional financing during the current fiscal year according to our planned exploration activities. We are in the process of determining our plan to carry out exploration and administration activities on our Mexican mineral properties in the current fiscal year. We also anticipate spending approximately $1,250,000 during the next 12 months on general and administrative costs. At this time we do not have the necessary capital to initiate the exploration program and to cover general and administrative costs.
 
 We will need to raise additional working capital to maintain basic operations. We plan to raise those funds through the sale of equity or debt. Other than our definitive agreements signed with MRT, we do not have any other sources to raise additional capital for the Company at this time and no assurance may be given that we will be able to find sources to raise additional capital. Failure to raise any additional capital would most likely require us to cease operations and abandon all of our exploration properties.
 
 The amount of working capital could be adversely affected further in the event claims are made against us alleging that certain shares we previously issued pursuant to Form S-8 registration statements constituted an illegal public offering because the company was a “shell company” at the time and, as a result, was not eligible to use Form S-8 for registration of shares under the Securities Act of 1933. In August and October of 2005, the Company issued shares of common stock to an officer of the Company, as compensation for consulting services. The two share issuances were for a combined total of 30,000 shares and each of the share issuances was made pursuant to a registration statement on Form S-8 under the Securities Act of 1933. Although the Company believes these shares were properly issued, a claim could be made that issuance of the shares constituted an illegal public offering because the Company was a “shell company” at the time. Shell companies  [i.e. companies which have no or nominal operations and either (i) no or nominal assets; (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets] are not eligible to use Form S-8 for registration under the Securities Act of 1933. If either of these transactions did violate federal securities laws, subsequent purchasers of the shares may have claims against us for damages or for rescission of their purchase transaction and recovery of the full subscription price paid, together with interest. As of the date of this quarterly report, no one has made or threatened any claim against us alleging violation of the federal securities laws. In the event such claims were successfully asserted, there is no assurance that we would have sufficient funds available to pay and it is likely that we would be required to use funds currently designated as working capital for that purpose. That would substantially reduce the amount of working capital available for other purposes and, in that event, we could be forced to cease or discontinue certain operations and to liquidate certain assets to pay our liabilities, including, but not limited to, rescission claims.
 
 Cash Used in Operating Activities
  Cash used in operating activities increased to $3,194,000 for the nine months ended November 30, 2010 compared to $2,410,000 for the nine months ended November 30, 2009. The cash used in operating activities was primarily for acquisition of interest in Cieneguita property, exploration costs, general and administrative expenses and payment of outstanding payables.
  35
 Cash Used in Investing Activities
  The Company used cash of $14,000 for purchase of equipment for the nine months ended November 30, 2010 compared to cash provided of $6,000 for purchase and sale of equipment for the nine months ended November 30, 2009. The $14,000 was spent on purchase of a vehicle to replace an older vehicle. There are no additional capital expenditures for the current fiscal year anticipated at this time.
 
 Financing Activities
  Cash used in financing activities amounted to $68,000 for the nine months ended November 30, 2010 compared to cash provided by financing activities of $2,647,000 for the nine months ended November 30, 2009. The cash used by financing activities was for repayment of loans and notes payable.
 
 We anticipate continuing to rely on equity sales of our common stock or issuance of debt in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders.
 
 Going Concern
  Our financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern depends upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
 
 We have a history of operating losses and will need to raise additional capital to fund its planned operations. As at November 30, 2010, we had working capital deficiency of $1,887,000 (November 30, 2009- working capital deficiency of $2,510,000) and an accumulated deficit during the exploration stage of $45,832,000 (November 30, 2009 - $43,338,000). These conditions raise substantial doubt about our ability to continue as a going concern.
 
 There is no assurance that our operations will be profitable. We have conducted private placements of convertible debt and common stock, which have generated funds to satisfy all of the initial cash requirements of its planned Mexican mining ventures. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
 
 Off-Balance Sheet Arrangements
  We currently do not have any off-balance sheet arrangements which have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our investors.
  ITEM 3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Not applicable.
  ITEM 4                      CONTROLS AND PROCEDURES
  Evaluation of Disclosure Controls and Procedures
 
 The SEC defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.
 
 As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, to evaluate the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the chief executive officer and chief financial officer have concluded, with reasonable assurance, that the Company’s disclosure controls and procedures were effective as of such date.
  36
 Changes in Internal Control over Financial Reporting
 
 There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 PART II - OTHER INFORMATION
  Other than disclosed herein, all other sections in Part II are inapplicable to us.
  ITEM 1. LEGAL PROCEEDINGS
  Other than as disclosed herein, neither we nor our properties are the subject of any pending legal proceedings and no such proceeding is known to be contemplated by any governmental authority. We are not aware of any legal proceedings in which any of our directors, officers or affiliates, any owner of record or beneficially of more than 5% of any class of our voting securities, or any associate of any such director, officer, affiliate or security holder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.
  ITEM 6. EXHIBITS
  The following exhibits are filed in reference:
 
 Exhibit

Number
Description31.1
Certification of Principal Executive Officer of Pan American Goldfields Ltd. pursuant to Rule 13a-14(a)/15d-14(a).*31.2
Certification of Chief Financial Officer of Pan American Goldfields Ltd. pursuant to Rule 13a-14(a)/15d-14(a).*32.1
Certification of Principal Executive Officer of Pan American Goldfields Ltd. pursuant to 18 U.S.C. Section 1350.*32.2
Certification of Chief Financial Officer of Pan American Goldfields Ltd. pursuant to 18 U.S.C. Section 1350.*
 
 
 *filed herewith
  37
  SIGNATURES
  In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  
 Pan American Goldfields Ltd.
  /S/ Miguel F. Di Nanno
 Name:  Miguel F. Di Nanno
 Title: President
 Date: January 14, 2011
 
 /S/ Salil Dhaumya
 Name:  Salil Dhaumya
 Title: Chief Financial Officer
 Date: January 14, 2011
 38