---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2010

or

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to
__________________

Commission file number: 33-139037



Xtra-Gold Resources Corp.(Name of
registrant as specified in its charter)

|                                                                     |                                     
|-------------------------------------------------------------------- | ------------------------------------
|Nevada                                                               | 91-1956240                          
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|360 Bay Street, Suite 301, Toronto, Ontario Canada                   | M5H 2V6                             
|(Address of principal executive offices)                             | (Zip Code)                          
|                                                                     |                                     
|Registrants telephone number, including area code: (416) 366-4227  
|                                                                     |                                     



|                    |                                          
|------------------- | -----------------------------------------
|Title of each class | Name of each exchange on which registered
|None                | Not applicable                           

Securities registered under Section 12(g) of the Act:

None(Title of class)

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

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

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  [X] Yes    
[   ] 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 (§229.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).  [   ] Yes     [   ] No

---

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

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company:

|Large accelerated filer [   ]               | Accelerated filer [   ]      
|------------------------------------------- | -----------------------------
|                                            |                              
|Non-accelerated filer [   ]                 | Smaller reporting company [X]
|(Do not check if smaller reporting company) |                              

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

The aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold or the average bid and asked prices of such common
equity, as of June 30, 2010, was approximately $40,349,021 based on the closing
price of the shares as of that date of $1.18 per share.

As of March 29, 2011, we had 42,986,179 issued and outstanding
shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents of the Registrant are incorporated by
reference in this Report: None

---

TABLE OF CONTENTS

|           |                                                                                                                    | Page
|---------- | ------------------------------------------------------------------------------------------------------------------ | ----
|PART I     |                                                                                                                    |     
|           |                                                                                                                    |     
|Item 1.    | Description of Business                                                                                            | 4   
|Item 1A.   | Risk Factors                                                                                                       | 8   
|Item 1B.   | Unresolved Staff Comments                                                                                          | 15  
|Item 2.    | Properties                                                                                                         | 15  
|Item 3.    | Legal Proceedings                                                                                                  | 47  
|Item 4.    | Removed and reserved                                                                                               | 47  
|           |                                                                                                                    |     
|PART II    |                                                                                                                    |     
|           |                                                                                                                    |     
|Item 5.    | Market for Registrants Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities | 48  
|Item 6.    | Selected Financial Data                                                                                            | 49  
|Item 7.    | Managements Discussion and Analysis of Financial Conditions
      and Results of Operations                       | 49  
|Item 7A.   | Quantitative and Qualitative Disclosures about Market Risk                                                         | 57  
|Item 8.    | Financial Statements and Supplementary Data                                                                        | 57  
|Item 9.    | Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure                         | 57  
|Item 9A.   | Controls and Procedures                                                                                            | 57  
|Item 9B.   | Other Information                                                                                                  | 58  
|           |                                                                                                                    |     
|PART III   |                                                                                                                    |     
|           |                                                                                                                    |     
|Item 10.   | Directors, Executive Officers and Corporate Governance                                                             | 58  
|Item 11.   | Executive Compensation                                                                                             | 64  
|Item 12.   | Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters               | 71  
|Item 13.   | Certain Relationships and Related Transactions, and Director
      Independence                                    | 73  
|Item 14.   | Principal Accounting Fees and Services                                                                             | 74  
|           |                                                                                                                    |     
|PART IV    |                                                                                                                    |     
|           |                                                                                                                    |     
|Item 15.   | Exhibits, Financial Statement Schedules                                                                            | 75  
|           |                                                                                                                    |     
|SIGNATURES | 77                                                                                                                

- 2 -

---

USE OF NAMES

In
this annual report filed on Form 10-K (the Report) the terms,
Xtra-Gold, company, we, and our refers to Xtra-Gold Resources Corp., a
Nevada corporation, and our wholly-owned subsidiaries, Xtra-Gold Exploration
Limited, Xtra Energy Corp., Xtra Oil & Gas Ltd., Xtra Oil & Gas (Ghana)
Limited and our 90% owned subsidiary, Xtra-Gold Mining Limited.

CURRENCY

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS

This
Report, including all exhibits hereto, contains forward-looking statementsand forward-looking information. Forward-looking statements are with
reference to our financial condition, results of operations, business prospects,
plans, objectives, goals, strategies, future events, capital expenditure, and
exploration and development efforts. Words such as anticipates, expects,
intends, plans, forecasts, projects, budgets, believes, seeks,
estimates, could, might, should, and similar expressions identify
forward-looking statements. Although we believe that our plans, intentions and
expectations reflected in these forward-looking statements are reasonable, we
cannot be certain that these plans, intentions or expectations will be achieved.
Actual results, performance or achievements could differ materially from those
contemplated, expressed or implied by the forward-looking statements. These
statements include comments regarding the establishment and estimates of mineral
reserves and mineral resources, production, production commencement dates,
productions costs, cash operating costs per ounce, total cash costs per ounce,
grade, processing capacity, potential mine life, feasibility studies,
development costs, capital and operating expenditures, exploration, the closing
of certain transactions including acquisitions and offerings. All statements,
other than statements of historical facts, included in this Report, our other
filings with the SEC and Canadian securities commissions and in news releases
and public statements made by our officers, directors or representatives of our
company, that address activities, events or developments that we expect or
anticipate will or may occur in the future are forward-looking statements and
forward-looking information.

The
  following, in addition to the factors described elsewhere in this Report under
  Risk Factors, are among the factors that could cause actual results
  to differ materially from the forward-looking statements:

- unexpected changes in business and economic conditions;
- significant increases or decreases in gold prices;
- changes in interest rates and currency exchange rates;
- unanticipated grade changes;
- changes in metallurgy;
- access and availability of materials, equipment, supplies, labor and
  supervision, power and water;
- determination of mineral resources and mineral reserves;
- availability of drill rigs; changes in project parameters;
- costs and timing of development of new mineral reserves; results of current
  and future exploration activities;
- results of pending and future feasibility studies; joint venture
  relationships;
- political or economic instability, either globally or in the countries in
  which we operate;
- local and community impacts and issues;
- timing of receipt of government approvals; accidents and labor disputes;
  environmental costs and risks; and
- competitive factors, including competition for property acquisitions; and
  availability of capital at reasonable rates or at all.

- 3 -

---

With
respect to any forward-looking statement that includes a statement of its
underlying assumptions or bases, we believe such assumptions or bases to be
reasonable and have formed them in good faith, assumed facts or bases almost
always vary from actual results, and the differences between assumed facts or
bases and actual results can be material depending on the circumstances. When,
in any forward-looking statement, we express an expectation or belief as to
future results, that expectation or belief is expressed in good faith and is
believed to have a reasonable basis, but there can be no assurance that the
stated expectation or belief will result or be achieved or accomplished. All
subsequent written and oral forward-looking statements attributable to us, or
anyone acting on our behalf, are expressly qualified in their entirety by the
cautionary statements. Except for our ongoing obligations to disclose material
information under the Federal securities laws, we do not undertake any
obligations to publicly release any revisions to any forward-looking statements
to reflect events or circumstances after the date of this Report or to reflect
unanticipated events that may occur. These forward-looking statements speak only
as of the date of this Report and you should not rely on these statements
without also considering the risks and uncertainties associated with these
statements and our business.

PART I

**Item
1.**          BUSINESS

Description of Business

We
are engaged in the exploration of gold properties exclusively in the Republic of
Ghana (Ghana), West Africa. Exploration means we are engaged in the
search for mineral deposits or reserves which could be economically and legally
extracted or produced and typically includes the review of existing data, grid
establishment, geological mapping, geophysical surveying, trenching and pitting
to test the areas of anomalous soil samples and reverse circulation and/or
diamond drilling to test targets followed by infill drilling, if successful, to
define a resource and, perhaps ultimately, a reserve.

Our
interests in our projects (collectively, the Projectsand individually,
the Project), are held by our Ghanaian subsidiaries, through mining
leases and prospecting licenses granted by the Government of the Republic of
Ghana (the Government of Ghana) for leased or licensed or areas
respectively located within and upon concessions in Ghana. A concession is a
grant of a tract of land made by a government or other controlling authority in
exchange for an agreement that the land will be used for a specific purpose. We
have the following six (6) Projects all of which are in the exploration stage.

- Kibi Project.Our Kibi Project is located on the Apapam Concession,
  in the Kibi Greenstone Belt (the Kibi Gold Belt) located in Ghana.
  The Kibi Gold Belt means a greenstone belt, as defined in all the geological
  publications in Ghana, and is one of the four main greenstone belts located in
  Ghana. Our interest in the Apapam Concession is secured by a mining lease (the
  Apapam Mining Lease). Our Kibi Project is the only material project
  of our company and is in the exploration stage. This Project consists of an
  over 5.5 kilometer (km) long mineralized trend delineated from
  gold-in-soil anomalies, geophysical interpretations, trenching and drilling
  along the northwest margin of the Apapam Concession. Our companys exploration
  efforts from January 1 to December 31, 2010, being the fiscal year for which
  this Report is being filed (the Fiscal Year), have been focused on
  our Kibi Project. During the Fiscal Year, we: (i) completed a phase III drill
  program (the Phase III Drill Program) (see Kibi Project  Phase III
  Drill Program for the results of this program); (ii) engaged SEMS Exploration
  Services (SEMS) to prepare an independent technical report (the
  43-101 Report) consistent with the Canadian Securities Administrators
  National Instrument 43-101  Standards of Disclosure for Mineral Projects,
  Form 43- 101F1  Technical Report and Companion Policy 43-101 CP (NI
  43-101); (iii) engaged Canadian-based Geotech Airborne Limited
  (Geotech) in connection with an integrated helicopter-borne
  geophysical survey being flow over the Apapam Concession and our four (4)
  other concessions located in the Kibi Gold Belt (see Description of
  Properties  VTEM Survey); (iv) negotiated with independent Ghanaian contract
  miners and operators in connection with recovery of placer gold operations on
  fixed payment terms to our company (see Description of Properties  Recovery
  of Placer Gold); and (v) engaged SRK Consulting (Canada) Inc. (SRK)
  to conduct a detailed structural study of our Kibi Gold Belt located on this
  Project (see Kibi Project  Detailed Structural Study of the Kibi Project).
  As at the date of this Report, we: (i) commenced a diamond drilling program in
  January 2011 (the 2011 Drill Program) (see The Kibi Project  2011
  Drill Program); and (ii) completed the VTEM Survey (defined herein) (see
  Description of Properties - VTEM Survey). During the next 12 months, we
  plan to continue our 2011 Drill Program. See Kibi Project  Prior Exploration
  by Xtra-Gold for exploration activities conducted by our company during the
  two (2) years preceding the Fiscal Year.

- 4 -

---

- Kwabeng Project.Our Kwabeng Project is located on the Kwabeng
  Concession, in the Kibi Gold Belt. Our interest in the Kwabeng Concession is
  secured by a mining lease (the Kwabeng Mining Lease). During the
  Fiscal Year, we did not conduct any exploration activities on this Project
  except for the VTEM Survey. As of the date of this Report, we have not planned
  for any exploration activities during the next 12 months, however, we may
  consider doing so at a later date. See Kwabeng Project  2008 to 2010
  Exploration Programs for exploration activities conducted by our company
  during the two (2) years preceding the Fiscal Year.
- Pameng Project.Our Pameng Project is located on the Pameng
  Concession, in the Kibi Gold Belt. Our interest in the Pameng Concession is
  secured by a mining lease (the Pameng Mining Lease). This Project is
  in the exploration stage. During the Fiscal Year, we did not conduct any
  exploration activities on this Project except for the VTEM Survey. In
  addition, during the Fiscal Year, we negotiated with independent Ghanaian
  contract miners and operators in connection with their recovery of placer gold
  at the Pameng Concession on fixed payment terms to our company (see
  Description of Properties  Recovery of Placer Gold). As at the date of this
  Report, we have not planned for any exploration activities during the next 12
  months, however, we may consider doing so at a later date. See Pameng Project
   2008 to 2010 Exploration Programs for exploration activities conducted by
  our company during the two (2) years preceding the Fiscal Year.
- Banso Project.Our Banso Project is located on the Banso Concession,
  in the Kibi Gold Belt. Our interest in the Banso Concession is secured by a
  mining lease (the Banso Mining Lease). This Project is in the
  exploration stage. During the Fiscal Year, we did not conduct any exploration
  activities on this Project except for the VTEM Survey. In addition, during the
  Fiscal Year, we entered into a letter of intent in July 2010 (the 2010
  LOI) with Verbina Resources Inc. (Verbina), a mineral resource
  company listed on the TSX Venture Exchange (the TSXV), whereby
  Verbina can earn up to a 55% interest in our 90% interest in the Banso Mining
  Lease. As at the date of this Report: (i) we entered into a subsequent letter
  of intent/option agreement in January 2011 (the 2011 LOI) with
  Verbina. We have not planned for any additional exploration activities during
  the next 12 months, however, we may consider doing so at a later date. See
  Banso Project  2008 to 2010 Exploration Programs for exploration activities
  conducted by our company during the two (2) years preceding the Fiscal Year.
- Muoso Project.Our Muoso Project is located on the Muoso Concession,
  in the Kibi Gold Belt. Our interest in the Muoso Concession is secured by a
  mining lease (the Muoso Mining Lease). This Project is in the
  exploration stage. During the Fiscal Year, we: (i) conducted a trenching
  program totaling 546 linear-meters on this Project from December 1, 2009 to
  February 20, 2010 (see Muoso Project - 2009 and 2010 Trenching Programs for
  the results of these programs); and (ii) entered into the 2010 LOI with
  Verbina whereby Verbina can earn up to a 55% interest in our 90% interest in
  the Muoso Mining Lease. During the Fiscal Year, we did not conduct any other
  exploration activities on this Project except for the VTEM Survey. As at the
  date of this Report: (i) we entered into the 2011 LOI with Verbina. We have
  not planned for any additional exploration activities during the next 12
  months, however, we may consider doing so at a later date. See Muoso Project
   2008 to 2010 Exploration Programs for exploration activities conducted by
  our company during the two (2) years preceding the Fiscal Year.The mining
  lease areas for the above-noted five (5) Projects total approximately 226
  square kilometers (sq km) and are located at the northern extremity
  of the Kibi Gold Belt.
- Edum Banso Project.Our Edum Banso Project is located on the Edum
  Banso Concession, in the Western Region of Ghana. We have an option to acquire
  the interest in this Project which is held by a prospecting license. This
  Project is in the exploration stage. During the Fiscal Year, we did not
  conduct any exploration activities on this Project. As at the date of this
  Report, we have not planned for any additional exploration activities during
  the next 12 months, however, we may consider doing so at a later date. See
  Edum Banso Project  2008 to 2010 Exploration Programs for exploration
  activities conducted by our company during the two (2) years preceding the
  Fiscal Year.
- Oil and Gas Interest.In April 2008, our company purchased through
  our wholly-owned subsidiary, Xtra Oil & Gas Ltd., an 18.9% participating
  interest in a petroleum and natural gas lease located in Alberta, Canada.
  During the Fiscal Year, our company sold our 18.9% participating interest for
  $40,000.As of the date of this Report, we:
- have received gross cash proceeds of CAD$10,925,001 (US$10,753,149) from an
  initial public offering (IPO) completed in Canada during the Fiscal
  Year in November 2010;

- 5 -

---

- have received net cash proceeds of $6,843,965 derived from the recovery of
  gold of the mineralized material at our Kwabeng Project (2007 to 2009);
- have received net cash proceeds of $1,227,394 derived from payments made to
  us by independent Ghanaian contract miners in connection with their recovery
  of placer gold from the mineralized material at our Pameng and Apapam
  Concessions during the Fiscal Year;
- have achieved losses since inception;
- have minimal operations, and
- currently rely upon the sale of our securities to fund our operations.

Our
companys strategic plan is, with respect to our gold projects: (i) to focus our
efforts and dedicate our financial resources toward the potential to drill out a
resource and, perhaps ultimately, a reserve of the Kibi Gold Discovery located
on our Kibi Project; (ii) to either option out to other operators or perform our
own exploration, with a view towards defining a resource and perhaps ultimately,
a reserve on our other Projects; and (iii) to acquire further interests in gold
mineralized projects that fall within the criteria of providing a geological
basis for development of drilling initiatives that can enhance shareholder value
by demonstrating the potential to define reserves.

As
part of our current business strategy, our company plans to continue engaging
technical personnel under contract where possible as our management believes
that this strategy, at its current level of development, provides the best
services available in the circumstances, leads to lower overall costs, and
provides the best flexibility for our companys business operations.

Our
company anticipates that our ongoing efforts will continue to be focused on the
exploration and development of our Kibi Project and completing acquisitions in
strategic areas.

In
October 2008, our company temporarily suspended our operations at our Kwabeng
Project while our management considered a more economic and efficient manner in
which to extract and process the placer gold recovered from the mineralized
material at this Project. As at the date of this Report, our company has not
planned to resume operations at our Kwabeng Project. During the next 12 months,
we plan to (i) enter into negotiations to contract out the recovery of placer
gold operations at this Project, as noted above; (ii) advance the development of
our Kibi Project located on the Apapam Concession by carrying out further
drilling; and (iii) acquire further interests in mineral projects by way of
acquisition or joint venture participation.

Our
company anticipates that, over the next 12 months, we will spend an aggregate of
approximately $6,000,000 comprised of (i) a minimum of$5,000,000 for
exploration expenses in connection with our 2011 Drill Program on our Kibi
Project located on the Apapam Concession to identify a potential resource; and
(ii) approximately $1,000,000 for general and administrative expenses (which
includes approximately $500,000 in non-cash expenses).

Our
company has historically relied on equity and debt financings to finance its
ongoing operations. Existing working capital, possible debt instruments,
anticipated warrant exercises, further private placements and anticipated cash
flow are expected to be adequate to fund our companys operations over the next
year. During the future years, subsequent to 2011, we require additional capital
to implement our plan of operations. We anticipate that these funds primarily
will be raised through equity and debt financing or from other available sources
of financing. If we raise additional funds through the issuance of equity or
convertible debt securities, it may result in the dilution in the equity
ownership of investors in our common stock. There can be no assurance that
additional financing will be available upon acceptable terms, if at all. If
adequate funds are not available or are not available on acceptable terms, we
may be unable to take advantage of prospective new opportunities or
acquisitions, which could significantly and materially restrict our operations,
or we may be forced to discontinue our current projects.

In
the future years, subsequent to 2011, should our company be required to raise
additional funds through the issuance of equity or convertible debt securities,
this may result in the dilution in the equity ownership of stockholders in our
common stock. There can be no assurance that additional financing will be
available upon acceptable terms, if at all. If adequate funds are not available
or are not available on acceptable terms, our company may be unable to take
advantage of prospective new opportunities or acquisitions, which could
significantly and materially restrict our operations, or our company may be
forced to discontinue our current projects.

At
December 31, 2010, we had working capital of approximately $9,833,381, comprised
of current assets of $10,350,617 less current liabilities of $517,236. Our
current assets were comprised of $10,096,122 in cash and cash equivalents,
$129,141 in trading securities and $125,354 in receivables and other assets.

- 6 -

---

Corporate History

Xtra-Gold
Resources Corp. (weor our company) was incorporated under the
laws of the State of Nevada on September 1, 1998 under the name Silverwing
Systems Corporation (Silverwing) with an authorized capital consisting
of 25,000,000 shares of common stock at a par value of $.001 per share. From the
incorporation of Silverwing until March 14, 1999, we were inactive. Thereafter
until June 1999, we were involved in the negotiation and closing of the
acquisition of a business opportunity described below.

On
June 23, 1999, we acquired all of the issued and outstanding shares of Advertain
On-Line Canada, Inc. (Advertain) from the sole shareholder of Advertain
in exchange for 1,550,000 shares of common stock (24% of our then issued and
outstanding shares of common stock). At the time of the acquisition, Advertain
was in the business of creating and developing computer software for an Internet
web site called Advertain.com and maintaining and operating the said web site.
The primary purpose of the web site was to collect and distribute entertaining
advertising on the Internet. This transaction resulted in the formation of our
being a holding company for Advertain, our then only wholly-owned subsidiary.
Since our only business activities was the business activities of Advertain, the
president of Advertain joined our then current management as president of our
company. On August 19, 1999, we changed our name to Advertain On-Line Inc. to
better describe our intended business.

From
the date of the acquisition of Advertain on June 23, 1999 to December 31, 2000,
our principal business activities were the continuation of the business
activities of Advertain. We continued to fund the activities of Advertain
through December 31, 2000.

After
December 31, 2000 we continued to use our best efforts to fund Advertain. Since
we were unable to complete further funding, it was decided, on May 21, 2001, to
abandon our interest in Advertain and enter into a plan to dispose of Advertain
and reorganize our company for a future acquisition. On May 21, 2001, our then
president, who was also president of Advertain, resigned since we determined to
dispose of Advertain, and our former president, who was a director at the time,
was appointed president. On June 15, 2001, we sold the shares we owned in
Advertain back to the former sole shareholder and president of Advertain. On
June 18, 2001, we consolidated our outstanding common shares on a basis of 20
for 1, adopted a new business plan to develop and operate laser eye correction
(lasik surgery) clinics, and changed our name to RetinaPharma International,
Inc. (RetinaPharma) to better describe our new intended business plan,
which was ultimately never developed for lack of capital. No change of
management occurred between May 21, 2001, when our former president rejoined our
company as described above, and October 31, 2003 when we acquired our
subsidiary, XGRI, as described below.

From
June 18, 2001 to October 31, 2003, we were inactive except for searching for a
business opportunity to acquire. During this period our principal shareholders
made capital contributions as needed to pay certain debts and fund our minimal
activities, which consisted of locating a business opportunity. In addition, on
July 22, 2002, we consolidated our outstanding common shares on a basis of 5 for
1. In the fall of 2002, through the referral to our former president by our
current president, we commenced discussions for the acquisition of XGRI, as
described below.

On
October 31, 2003, we acquired all of the issued and outstanding shares of
Xtra-Gold Resources, Inc., a Florida corporation (XGRI) from the
shareholders of XGRI, all of which were unaffiliated third parties, in exchange
for 10,070,000 shares of common stock (approximately 80% of our then issued and
outstanding shares of our common stock). This transaction resulted in a change
of control of our company and the formation of our being a holding company for
XGRI, our then only wholly-owned subsidiary. As a result of this change in
control, the president and directors of XGRI were appointed as our new
management, and management immediately prior to this acquisition resigned.
Subsequently, on November 22, 2003, we executed a 5 for 1 forward stock split.
On December 16, 2003, we changed our name to Xtra-Gold Resources Corp. and
increased the number of shares of common stock we are authorized to issue to
250,000,000 shares effective December 19, 2003. We undertook this name change to
better describe our intended business. As a condition for the acquisition of XG
Mining in December 2004, two former officers and directors of our company agreed
to return 47,000,000 of the original shares of common stock issued in connection
with the acquisition of XGRI for cancellation and these shares were subsequently
cancelled in May 2005.

XGRI
was incorporated on October 24, 2003 and its only operations prior to the share
exchange was the issuance of 10,070,000 shares to its two founders in exchange
for an option to develop a mining property located in Switzerland and the sale
of 50,000 shares of its common stock to pay certain expenses.

On
October 20, 2005, we amended the name of XGRI to Xtra Energy Corp. (Xtra
Energy). On October 20, 2005, we incorporated our wholly-owned subsidiary,
Xtra Oil & Gas Ltd. (XOG), an Alberta, Canada corporation, and on
March 2, 2006, we incorporated our wholly-owned subsidiary, Xtra Oil & Gas
(Ghana) Limited (XOG Ghana), an Accra, Ghana corporation for the business purpose set forth hereunder. On April 7, 1998, our
wholly-owned subsidiary Xtra-Gold Exploration Limited (XGEL), a Ghana
corporation, was formed. On June 7, 1989, our 90% owned subsidiary, Xtra-Gold
Mining Limited (XG Mining), a Ghana corporation, was formed.

- 7 -

---

On
October 20, 2005, we amended the name of XGRI to Xtra Energy Corp. (Xtra
Energy). On October 20, 2005, we incorporated our wholly-owned subsidiary,
Xtra Oil & Gas Ltd. (XOG), an Alberta, Canada corporation, and on
March 2, 2006, we incorporated our wholly-owned subsidiary, Xtra Oil & Gas
(Ghana) Limited (XOG Ghana), an Accra, Ghana corporation for the
business purpose set forth hereunder. On April 7, 1998, our wholly-owned
subsidiary Xtra-Gold Exploration Limited (XGEL), a Ghana corporation,
was formed. On June 7, 1989, our 90% owned subsidiary, Xtra-Gold Mining Limited
(XG Mining), a Ghana corporation, was formed.

Location

As
at the date of this Report, our corporate office is located at 360 Bay Street,
Suite 301, Toronto, Ontario, Canada, M5H 2V6, and our telephone number there is
(416) 366-4227. We use this office as our mailing address, to maintain our
corporate records and to perform limited administrative functions. We maintain a
technical and administrative office at our field camp (the Field Camp)
located at 2 Masalakye Street, in the town of Kwabeng, Ghana.

Employees

As
at the date of this Report, our company has no salaried employees. Our President
and Chief Executive Officer (CEO) provides our company with his
consulting services and devotes approximately 60% of his time to our company.
Our Chief Financial Officer (CFO) provides our company with his
consulting services and devotes approximately 20% of his time to our company.
Our Vice-President, Exploration provides our company with his consulting
services and devotes approximately 90% of his time in consulting services to our
company. We further engage the consulting services of our Vice-President, Ghana
Operations for our Ghanaian subsidiaries, who devotes a variable percentage of
his time to our company on an as needed basis. We also engage the consulting
services of our Secretary and Treasurer with respect to corporate and
administrative services, who devotes a variable percentage of his time to our
company on an as needed basis.

Other Pertinent Information

Our
  fiscal year end is December 31.

**Item
1A.**          RISK
FACTORS

OUR COMPANY IS CURRENTLY IN THE EXPLORATION STAGE WITH RESPECT
TO ALL OUR PROJECTS. THE CHANCE OF EVER REACHING THE PRODUCTION STAGE AT OUR
PROJECTS IS UNCERTAIN. OUR COMPANY CANNOT PREDICT WHETHER WE WILL SUCCESSFULLY
EFFECTUATE OUR COMPANYS CURRENT BUSINESS PLAN. YOU ARE ENCOURAGED TO CAREFULLY
ANALYZE THE RISKS AND MERITS OF AN INVESTMENT IN OUR COMMON STOCK AND SHOULD
TAKE INTO CONSIDERATION WHEN MAKING SUCH ANALYSIS, AMONG OTHERS, THE RISK
FACTORS DISCUSSED BELOW IN ADDITION TO THE OTHER INFORMATION CONTAINED IN OR
INCLUDED BY REFERENCE IN THIS ANNUAL REPORT ON FORM 10-K.

IF OUR COMPANY DOES NOT OBTAIN NEW FINANCINGS, IN FUTURE YEARS,
COMMENCING FROM 2012, THE AMOUNT OF FUNDS AVAILABLE TO OUR COMPANY TO PURSUE ANY
FURTHER EXPLORATION ACTIVITIES AT OUR PROJECTS WILL BE REDUCED AND OUR COMPANYS
PLAN OF OPERATIONS MAY BE ADVERSELY AFFECTED.

Our
company has relied on recent private placement financings and an initial public
offering (IPO) completed in Canada in November 2010 in order to fund
our exploration programs, including our drilling programs at the Kibi Project.
In future years, commencing from 2012,our company will continue to
require additional financing to complete our plan of operations to carry out any
further exploration activities on our Projects. Any impairment in our companys
ability to raise additional funds through financings would reduce the available
funds for such exploration activities, with the result that our companys plan
of operations may be adversely affected.

- 8 -

---

SUBSTANTIAL ADDITIONAL CAPITAL MAY BE REQUIRED IN FUTURE YEARS
COMMENCING FROM 2012 TO CONTINUE EXPLORATION ACTIVITIES AT ALL OF OUR PROJECTS.
IF OUR COMPANY CANNOT RAISE ADDITIONAL CAPITAL AS NEEDED, OUR ABILITY TO EXECUTE
OUR BUSINESS PLAN AND FUND OUR ONGOING OPERATIONS WILL BE IN JEOPARDY.

In
future years, subsequent to 2011, our company may need to explore various
financing alternatives to meet our projected costs and expenses. Our company
cannot assure our stockholders that we will be able to obtain the necessary
financing for our Projects on favorable terms or at all. Additionally, if the
actual costs to execute our companys business plan are significantly higher
than expected, our company may not have sufficient funds to cover these costs
and we may not be able to obtain other sources of financing. The failure to
obtain all necessary financing would prevent our company from executing our
business plan and would impede our companys ability to sustain operations or
become profitable, and our company could be forced to cease our operations.

IN CONNECTION WITH FUTURE STOCK OFFERINGS, THE VALUE OF OUR
COMPANYS COMMON STOCK MAY BECOME DILUTED AS MORE COMMON STOCK IS ISSUED AND
OUTSTANDING.

Our
company may undertake in the future additional offerings of common stock or of
securities convertible into common stock. The increase in the number of common
stock issued and outstanding and the possibility of sales of such common stock
may depress the price of our common stock. In addition, as a result of such
additional common stock, the voting power of our companys existing stockholders
will be diluted.

OUR COMPANY WILL CONTINUE TO INCUR OPERATING LOSSES AND THERE
IS NO GUARANTEE THAT WE WILL ACHIEVE OPERATING PROFITS.

Our
company has incurred operating losses on an annual basis for a number of years,
primarily arising out of the costs related to continued exploration and
development of mineral resource properties, including costs written off on
properties no longer being pursued by our company. As of December, 2010, our
company had an accumulated deficit during the exploration stage of $12,307,337.
It is anticipated that our company will continue to experience operating losses
for fiscal 2011 and until our company discovers economically mineable
mineralized material and successfully develops a mine. There can be no assurance
that our company will ever achieve significant revenues or profitable
operations.

THE PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE
AND POSSIBLY ILLIQUID, WHICH COULD CAUSE THE VALUE OF INVESTMENTS TO DECLINE.

The
market price of our common stock may be highly volatile and possibly illiquid.
Our stockholders may not be able to resell their common stock following periods
of volatility because of the markets adverse reaction to volatility. Factors
that could cause such volatility may include, among other things:

- actual or anticipated fluctuations in our quarterly operating results;
- large purchases or sales of our common stock;
- additions or departures of key personnel;
- investor perception of our Companys business prospects;
- conditions or trends in other industry related companies;
- changes in the market valuations of publicly traded companies in general
  and other industry-related companies; and
- world-wide political, economic and financial conditions.

OUR COMPANYS PROJECTS ARE IN THE EXPLORATION STAGE AND MAY NOT
RESULT IN THE DISCOVERY OF COMMERCIAL BODIES OF MINERALIZATION WHICH WOULD
RESULT IN OUR COMPANY DISCONTINUING THAT PROJECT. SUBSTANTIAL EXPENDITURES ARE
REQUIRED TO DETERMINE IF A PROJECT HAS ECONOMICALLY MINEABLE MINERALIZED
MATERIAL.

Our
companys Projects are all in the exploration stage. Mineral exploration
involves a high degree of risk and few properties which are explored are
developed into producing mines. The exploration efforts of our company on our
Projects may not result in the discovery of commercial bodies of mineralization which would
require our company to discontinue that Project. Substantial expenditures are
required to determine if a Project has economically mineable mineralized
material. It could take several years to establish proven and probable mineral
resources or reserves. Due to these uncertainties, there can be no assurance
that current and future exploration programs will result in the discovery of
mineral resources or reserves.

- 9 -

---

OUR COMPANY CURRENTLY DEPENDS SIGNIFICANTLY ON A LIMITED NUMBER
OF PROJECTS.

Our
companys activities are currently focused on our Kibi Project. Our company will
as a consequence be exposed to some heightened degree of risk due to the lack of
property diversification. Adverse changes or developments affecting our Kibi
Project would have a material and adverse effect on our companys business,
financial condition, results of operations and prospects.

OUR COMPANY MAY FAIL TO ACHIEVE AND MAINTAIN THE ADEQUACY OF
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
AS PER THE REQUIREMENTS OF THE SARBANES-OXLEY ACT WHICH COULD MATERIALLY
ADVERSELY AFFECT OUR FINANCIAL CONDITION.

Our
company has documented our internal control procedures and tested key controls
during the Fiscal Year, in order to determine our company's compliance with the
requirements of Section 404 of the Sarbanes-Oxley Act (Sarbanes-Oxley).
Sarbanes-Oxley requires an annual assessment by management of the effectiveness
of our companys internal control over financial reporting. Our management
concluded that our companys internal control over financial reporting was
operating effectively at December 31, 2010.

During
2010, our company addressed our lack of experience in the application of U.S.
GAAP through hiring a Chief Financial Officer with experience in U.S. GAAP and
through quarterly reviews of the financial statements by our company's auditor.
Since these changes occurred during the Fiscal Year, we cannot conclude that the
system of internal control was effective for the period in 2010 before the
changes were made.

Our
company believes that the system of internal controls was operating effectively
at December 31, 2010. However, as a small reporting company, our auditor was not
retained to audit the system of internal controls and express an opinion as to
their effectiveness. Without independent verification of the adequacy of
internal controls, our company is not in a position to conclude that the system
of internal controls in place at December 31, 2010 met the requirements of
Sarbanes-Oxley.

Our
company may fail to achieve and maintain the adequacy of our internal control
over financial reporting, as such, standards are modified, supplemented, or
amended from time to time, our company may not be able to ensure that it can
conclude on an ongoing basis that we have effective internal controls over
financial reporting in accordance with Sarbanes-Oxley. Our companys failure to
satisfy the requirements of Sarbanes-Oxley on an ongoing, timely basis could
result in the loss of investor confidence in the reliability of our financial
statements, which in turn could harm our companys business and negatively
impact the trading price of our common stock. In addition, any failure to
implement required new or improved controls, or difficulties encountered in
their implementation, could harm our companys operating results or cause us to
fail to meet our reporting obligations.

OUR COMPANY IS SUBJECT TO FACTORS BEYOND OUR CONTROL WHICH MAY
IMPACT OUR COMPANYS TITLE IN OUR PROJECTS.

Although
our company has obtained title opinions with respect to all of our Projects and
has taken other reasonable measures to ensure proper title to these Projects,
there is no guarantee that title to any of our Projects will not be challenged
or impugned. Third parties may have valid claims underlying portions of our
companys interests. Our Projects may be subject to prior unregistered liens,
agreements, transfers or claims and title may be affected by, among other
things, undetected defects. In addition, our company may be unable to operate
our Projects as permitted or to enforce its rights with respect to our Projects.

OUR COMPANYS ACTIVITIES ARE AND WILL BE SUBJECT TO COMPLEX
LAWS, SIGNIFICANT GOVERNMENT REGULATIONS AND ACCOUNTING STANDARDS THAT MAY DELAY
OR PREVENT OPERATIONS AT OUR PROJECTS AND CAN ADVERSELY AFFECT OUR CMPANYS
OPERATING COSTS, THE TIMING OF THE OUR COMPANYS OPERATIONS, ABILITY TO OPERATE
AND FINANCIAL RESULTS.

Business,
exploration activities and any future development activities and mining
operations are and will be subject to extensive Ghanaian, United States,
Canadian and other foreign, federal, state, territorial and local laws and
regulations and also exploration, development, production, exports, taxes, labor
standards, waste disposal, protection of the environment, reclamation, historic
and cultural resource preservation, mine safety and occupational health,
reporting and other matters, as well as accounting standards. Compliance with
these laws, regulations and standards or the imposition of new such requirements
could adversely affect the Companys operating and future development costs, the
timing of our companys operations, ability to operate and financial results.
These laws and regulations governing various matters include:

- 10 -

---

- environmental protection;
- management of natural resources;
- exploration, development of mines, production and post-closure reclamation;
- export and import controls and restrictions;
- price controls;
- taxation;
- labor standards and occupational health and safety, including mine safety;
- historic and cultural preservation; and
- generally accepted accounting principles.

The costs associated with compliance with these laws and
regulations may be substantial and possible future laws and regulations, or more
stringent enforcement of current laws and regulations by governmental
authorities, could cause additional expense, capital expenditures, restrictions
on or suspensions of our companys operations and delays in the development of
our Projects. These laws and regulations may allow governmental authorities and
private parties to bring lawsuits based upon damages to property and injury to
persons resulting from the environmental, health and safety impacts of our
companys past and current operations, and could lead to the imposition of
substantial fines, penalties or other civil or criminal sanctions. In addition,
our companys failure to comply strictly with applicable laws, regulations and
local practices relating to permitting applications or reporting requirements
could result in loss, reduction or expropriation of entitlements, or the
imposition of additional local or foreign parties as joint venture partners. Any
such loss, reduction, expropriation or imposition of partners could have a
materially adverse effect on our companys operations or business.

OUR COMPANY MAY NOT BE ABLE TO OBTAIN, RENEW OR CONTINUE TO
COMPLY WITH ALL OF THE PERMITS NECESSARY TO DEVELOP EACH OF OUR PROJECTS WHICH
WOULD FORCE OUR COMPANY TO DISCONTINUE DEVELOPMENT, IF ANY, ON THAT PROJECT.

Pursuant
to Ghanaian law, in the event that our company discovers economically mineable
mineralized material, we must obtain various approvals, licenses or permits
pertaining to environmental protection and use of water resources in connection
with the development, if any, of our Projects. In addition to requiring permits
for the development of our mineral concessions where our Projects are located,
our company may need to obtain other permits and approvals during the life of
our Projects. Obtaining, renewing and continuing to comply with the necessary
governmental permits and approvals can be a complex and time-consuming process.
The failure to obtain or renew the necessary permits or licenses or continue to
meet their requirements could delay future development and could increase the
costs related to such activities.

THE DEVELOPMENT OF ALL OF OUR COMPANYS PROJECTS MAY BE DELAYED
DUE TO DELAYS IN RECEIVING REGULATORY PERMITS AND APPROVALS, WHICH COULD IMPEDE
OUR COMPANYS ABILITY TO DEVELOP OUR PROJECTS WHICH, ABSENT RAISING ADDITIONAL
CAPITAL, COULD CAUSE IT TO CURTAIL OR DISCONTINUE DEVELOPMENT, IF ANY.

In
the event that our company discovers economically mineable mineralized material,
our company may experience delays in developing our Projects. The timing of
development at our Projects depends on many factors, some of which are beyond
our control, including:

- taxation;
- the timely issuance of permits; and
- the acquisition of surface land and easement rights required to develop and
  operate our Projects, (in particular, our company is required to acquire
  surface land through expropriation in connection with our mineral
  concessions).

These delays could increase development costs of our Projects,
affect our companys economic viability, or prevent our company from completing
the development of our Projects.

- 11 -

---

OUR COMPANYS ACTIVITIES ARE SUBJECT TO ENVIRONMENTAL LAWS AND
REGULATIONS THAT MAY INCREASE OUR COMPANYS COSTS OF DOING BUSINESS AND MAY
RESTRICT OUR OPERATIONS.

All
of our companys exploration activities in Ghana are subject to regulation by
governmental agencies under various environmental laws. To the extent our
company conducts exploration activities or undertakes new exploration or future
mining activities in other foreign countries, our company will also be subject
to environmental laws and regulations in those jurisdictions. These laws address
emissions into the air, discharges into water, management of waste, management
of hazardous substances, protection of natural resources, antiquities and
endangered species, and reclamation of lands disturbed by mining operations.
Environmental legislation in many countries is evolving and the trend has been
towards stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and increasing responsibility for companies and their officers, directors and
employees. Compliance with environmental laws and regulations may require
significant capital outlays and may cause material changes or delays in our
companys intended activities. Our company cannot assure our stockholders that
future changes in environmental regulations will not adversely affect our
companys business, and it is possible that future changes in these laws or
regulations could have a significant adverse impact on some portion of our
companys business, causing our company to re-evaluate those activities at that
time.

In
addition, our company may be exposed to potential environmental impacts during
any full scale mining operation. At such time of commencement of full scale
mining, if ever, our company plans to negotiate posting of a reclamation bond to
quantify the reclamation costs. Our company anticipates that the dollar amount
of reserves established for exposure to environmental liabilities will be
$220,000, as to $150,000 for our Kwabeng Project and $70,000 for our Pameng
Project, as estimated by the Environmental Protection Agency of Ghana (the
EPA), however, our company is currently unable to predict the ultimate
cost of compliance or the extent of liability risks.

OUR COMPANY IS NOT ABLE TO PREDICT THE REMEDIATION COSTS FOR
POTENTIAL ENVIRONMENTAL LIABILITIES.

The
costs of remediation may exceed the provision that our company has made for such
remediation by a material amount. Whenever a previously unrecognized remediation
liability becomes known, or a previously estimated cost is increased, the amount
of that liability or additional cost could adversely affect the Companys
exploration activities and its financial condition.

THERE MAY BE INSTANCES WHERE CERTAIN EVENTS OCCUR THAT OUR
COMPANY IS NOT INSURED AGAINST.

Our
company maintains insurance policies to protect itself against certain risks
related to its operations. This insurance is maintained in amounts that the
Company believes to be reasonable depending upon the circumstances surrounding
each identified risk. However, the Company may elect not to have insurance for
certain risks because of the high premiums associated with insuring those risks
or for various other reasons; in other cases, insurance may not be available for
certain risks. Some concern always exists with respect to investments in parts
of the world where civil unrest, war, nationalist movements, political violence
or economic crisis are possible. These countries may also pose heightened risks
of expropriation of assets, business interruption, increased taxation and a
unilateral modification of concessions and contracts. Our company does not
maintain insurance policies against political risk. Occurrence of events for
which our company is not insured could adversely affect our companys
exploration activities and its financial condition.

OUR COMPANY IS SUBJECT TO THE POTENTIAL OF LEGAL CLAIMS AND THE
ASSOCIATED COSTS OF DEFENSE AND SETTLEMENT.

Our
company is subject to litigation risks. All industries, including the mining
industry, are subject to legal claims, with and without merit. Defense and
settlement costs of legal claims can be substantial, even with respect to claims
that have no merit. Due to the inherent uncertainty of the litigation process,
the resolution of any particular legal proceeding to which our company is or may
become subject could have a material effect on its financial position, results
of operations or our companys project development operations.

OUR COMPANY IS SUBJECT TO FLUCTUATIONS IN CURRENCY EXCHANGE
RATES, WHICH COULD MATERIALLY ADVERSELY AFFECT OUR FINANCIAL POSITION.

Our
companys primary currency for operations is the United States dollar and, to a
lesser extent, the Cedi, the Ghanaian currency. Our company maintains most of
its working capital in United States dollars. Our company converts its United
States funds to foreign currencies as certain payment obligations become due.
Accordingly, our company is subject to fluctuations in the rates of currency
exchange between the United States dollar and these foreign currencies and these
fluctuations, which are beyond our control, could materially affect our
companys financial position and results of operations. A significant portion of
the operating costs of our Projects are in Cedi. Our company obtains services and
materials and supplies from providers in West Africa. The costs of goods and
services could increase or decrease due to changes in the value of the United
States dollar or the Cedi or other currencies. Consequently, exploration and
development of our Projects could be more costly than anticipated.

- 12 -

---

OUR COMPANYS BUSINESS IS IMPACTED BY ANY INSTABILITY AND
FLUCTUATIONS IN GLOBAL FINANCIAL SYSTEMS.

The
recent credit crisis and related instability in the global financial system,
although somewhat abated, has had, and may continue to have, an impact on our
companys business and our companys financial condition. Our company may face
significant challenges if conditions in the financial markets do not continue to
improve. Our companys ability to access the capital markets may be severely
restricted at a time when our company wishes or needs to access such markets,
which could have a materially adverse impact on our companys flexibility to
react to changing economic and business conditions or carry on our operations.

OUR COMPANY IS SUBJECT TO THE EFFECTS THAT HISTORICALLY HIGH
INFLATION RATE MAY HAVE ON ITS RESULTS.

Our
companys mineral properties are located in Ghana, which has historically
experienced relatively high rates of inflation. High inflation rates in Ghana
could cause the prices of materials obtained within Ghana to be slightly higher.
As our company maintains our funds in US and/or Canadian currency, the effect
due to Ghanaian currency fluctuations is minimal.

THE GOVERNMENT OF GHANA HAS THE RIGHT TO INCREASE ITS CURRENT
OWNERSHIP INTEREST OF 10% IN OUR COMPANYS SUBSIDIARY, XG MINING, THROUGH WHICH
OUR COMPANY HOLDS, AMONG OTHER THINGS, ITS INTEREST IN OUR KIBI PROJECT AND OUR
OTHER PROJECTS, FOR A CONSIDERATION AGREED UPON BY THE PARTIES OR BY ARBITRATION
AND HAS A RIGHT OF PRE-EMPTION TO PURCHASE ALL MINERALS PRODUCED BY XG MINING.
IF THE GOVERNMENT OF GHANA WERE TO EXERCISE ANY OF ITS RIGHTS, OUR COMPANYS
RESULTS OF OPERATIONS IN FUTURE PERIODS COULD BE ADVERSELY IMPACTED.

The
Government of Ghana currently has a 10% free carried interest in XG Mining, one
of our Ghanaian subsidiaries that holds all of the mining leases securing our
interest in all of the concessions where our Projects are located, except for
our Edum Banso Project. The Government of Ghana also has: (a) the right to
acquire an additional interest in XG Mining for a price to be determined by
agreement or arbitration; (b) the right to acquire a special share (as defined
in the Minerals and Mining Act, 2006 (Act 703), as amended by the Minerals and
Mining Act, 2010 (Act 794) (the Mining Act (Ghana)) in XG Mining at any
time for such consideration as the Government of Ghana and XG Mining might
agree; and (c) a right of pre-emption to purchase all minerals raised, won or
obtained in Ghana. While our company is not aware of the Government of Ghana
having ever exercised such right of preemption, our company cannot assure our
stockholders that the Government of Ghana would not seek to exercise one or more
of these rights which, if exercised, could have an adverse affect on our
companys results of operations in future periods. If the Government of Ghana
should exercise its right to either acquire the additional interest in XG Mining
or its right to acquire the special share, any profit that might otherwise be
reported from XG Minings operations would be proportionally reduced in the same
percentage as the minority interest attributable to the Government of Ghana in
that subsidiary would be increased. If the Government of Ghana should exercise
its right to purchase all gold and other minerals produced by XG Mining, the
price it would pay may be lower than the price our company could sell the gold
or other minerals for in transactions with third parties and it could result in
a reduction in any revenues our company might otherwise report from XG Minings
operations.

OUR COMPANY CURRENTLY RELIES ON THE CONTINUED SERVICES OF KEY
EXECUTIVES, INCLUDING THE DIRECTORS OF OUR COMPANY AND A SMALL NUMBER OF HIGHLY
SKILLED AND EXPERIENCED EXECUTIVES AND PERSONNEL. THE LOSS OF THEIR SERVICES MAY
DELAY OUR COMPANYS EXPLORATION ACTIVITIES OR ADVERSELY AFFECT OUR BUSINESS AND
FUTURE OPERATIONS.

Due
to the relatively small size of our company, the loss of these persons or our
company's inability to attract and retain additional highly skilled employees
may lead to our company having to delay our exploration activities or adversely
affect our business and future operations.

OUR COMPANY MAY EXPERIENCE DIFFICULTY IN ENGAGING THE SERVICES
OF QUALIFIED PERSONNEL IN CONNECTION WITH OUR TECHNICAL OPERATIONS AT OUR
PROJECTS.

In
the event of the loss of any of our companys key technical personnel at any of
our Projects, our company may have difficulty finding qualified replacements.
Our companys inability to hire and retain the services of qualified persons for
these positions in a timely manner could impede our companys exploration
activities at any of our Projects which would have a material adverse effect on
our companys ability to conduct business.

- 13 -

---

OUR COMPANY IS SUBJECT TO CHANGES IN POLITICAL STABILITY IN
WEST AFRICA.

Our
company conducts exploration and development activities in Ghana, West Africa.
Our companys Projects in Ghana may be subject to the effects of political
changes, war and civil conflict, changes in government policy, lack of law
enforcement and labor unrest and the creation of new laws. These changes (which
may include new or modified taxes or other government levies as well as other
legislation) may impact the profitability and viability of our properties. The
effect of unrest and instability on political, social or economic conditions in
Ghana could result in the impairment of exploration, development and mining
operations. Any such changes are beyond the control of our company and may
adversely affect our business.

In
addition, local tribal authorities in West Africa exercise significant influence
with respect to local land use, land labor and local security. From time to
time, the Government of Ghana has intervened in the export of mineral
concentrates in response to concerns about the validity of export rights and
payment of duties. No assurances can be given that the co-operation of such
authorities, if sought by our company, will be obtained, and if obtained,
maintained.

The
Government of Ghana also recently announced that it will be engaging companies
to address the issue of dividend payment, exemptions and the mining sector
fiscal regime, generally. As a result of these discussions, the Government of
Ghana could amend the Mining Act (Ghana) or other regulations resulting in a
material adverse impact on our company including increases in operating costs,
capital expenditures or abandonment or delays in development of mining
properties.

THE MINING INDUSTRY IS A COMPETITIVE INDUSTRY AND OUR COMPANY
MAY COMPETE WITH LARGER, MORE ESTABLISHED COMPETITORS FOR GOLD ACQUISITION
OPPORTUNITIES.

Significant
and increasing competition exists for the limited number of gold acquisition
opportunities available. As a result of this competition, some of which is with
large established mining companies with substantial capabilities and greater
financial and technical resources than our company, our company may be unable to
acquire additional attractive mining properties on terms we consider acceptable.

THE MARKETABILITY OF OUR COMPANYS MINERALS MAY BE INFLUENCED
BY VARIOUS INDUSTRY CONDITIONS.

The
marketability of minerals, if any, which may be acquired or discovered by our
company, will be affected by numerous factors beyond the control of our company.
These factors include market fluctuations, the proximity and capacity of mineral
markets and processing equipment and government regulations, including
regulations relating to prices, taxes, royalties, land tenure and environmental
protection. The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may result in our company not receiving an
adequate return on invested capital. The probability of our company not
receiving an adequate return on invested capital will be, to a significant
extent, dependent upon the market price for gold. Gold prices fluctuate
dramatically and are affected by numerous industry factors, such as interest
rates, exchange rates, inflation or deflation, fluctuation in the value of the
United States dollar and foreign currencies, global and regional supply and
demand for precious metals, forward selling by producers, central bank sales and
purchases of gold, production and cost levels in major gold producing regions
and the political and economic conditions of major gold, copper or other
mineral-producing countries throughout the world. Moreover, gold prices are also
affected by macro-economic factors such as expectations for inflation, interest
rates, currency exchange rates and global or regional political and economic
situations. The current demand for, and supply of, gold affects gold prices, but
not necessarily in the same manner as current demand and supply affect the
prices of other commodities. The potential supply of gold consists of new gold
mine production plus existing stocks of bullion and fabricated gold held by
governments, financial institutions, industrial organizations and individuals.
Since mine production in any single year constitutes a very small portion of the
total potential supply of gold, normal variations in current production do not
necessarily have a significant effect on the supply of gold or its price.

IT MAY BE DIFFICULT FOR STOCKHOLDERS TO ENFORCE ANY JUDGMENT
OBTAINED IN THE UNITED STATES AGAINST US OR OUR OFFICERS OR DIRECTORS, WHICH MAY
LIMIT THE REMEDIES OTHERWISE AVAILABLE TO OUR STOCKHOLDERS.

The
majority of our directors and officers are residents of countries other than the
United States and all or a substantial portion of such persons assets are
located outside the United States. As a result, it may be difficult or
impossible for our stockholders to:

- effect service of process on our directors or officers, or
- enforce any United States judgment they receive against us or our officers
  or directors in a foreign court, or

- 14 -

---

including judgments predicated upon the securities laws of the
United States or any state thereof. In addition, there is uncertainty as to
whether foreign courts would be competent to hear original actions brought in
such foreign court against us or such persons predicated upon the securities
laws of the United States or any state thereof. Consequently, you may be
effectively prevented from pursuing remedies under U.S. federal securities laws
against us or our officers and directors. The foregoing risks also apply to
those experts identified in this Report that are not residents of the United
States.

OUR COMMON STOCK IS CURRENTLY QUOTED ON THE OTC BULLETIN BOARD
(OTCBB) AND TRADING IN THE SHARES IS LIMITED. BECAUSE OUR STOCK
CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED ON THE OTCBB, OUR STOCK IS
CONSIDERED A PENNY STOCK WHICH CAN LIMIT OR MAKE TRADING AND LIQUIDITY IN OUR
STOCK MORE DIFFICULT TO EFFECTUATE.

The
SEC has adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exemptions. Such exemptions include an equity security listed on a
national securities exchange or quoted on NASDAQ and an equity security issued
by an issuer that has net tangible assets of at least $2,000,000, if such issuer
has been in continuous operation for more than three (3) years. Unless such an
exemption is available, the regulations require the delivery of a disclosure
document to the investor explaining the penny stock market and the risks
associated therewith prior to any transaction involving a penny stock. In
addition, as long as the common stock is not listed on a national securities
exchange or at any time that the company has less that $2,000,000 in net
tangible assets, trading in the common stock is covered by Rule 15g-9 under the
Securities Exchange Act of 1934, as amended (the Exchange Act), for
non-exchange listed securities. Under that rule, broker-dealers who recommend
such securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchasers written agreement to a transaction prior
to sale. Securities are exempt from this rule if the market price is at least
$5.00 per share. To the extent that we do not meet the exemptions under the
Penny Stock Rule, there will be reduced liquidity in the market.

Item
1B.         **UNRESOLVED
STAFF COMMENTS**

None.

**Item
2.**          PROPERTIES

Real Property

Except
for the land upon which our Field Camp is located, we do not own any real
property. We also own the mineral rights on our Projects located in the Kibi
Gold Belt. All of our exploration activities are currently conducted at project
sites located in Ghana. Mining leases or prospecting licenses to which we are a
party, granting us the right to operate at our Kibi, Kwabeng, Pameng, Banso,
Muoso and Edum Banso Projects, are described elsewhere in this Report.

We
currently conduct limited administrative activities from our corporate office
located at Suite 301, 360 Bay Street, Toronto, Ontario, Canada, M5H 2V6, where
we have leased 1,163 square feet for a 66 month term commencing on May 1, 2007,
at approximately $3,874 (CAD$3,868) per month.

As
of the date of this Report, our technical and administrative activities are
conducted at our Field Camp located in Kwabeng, Ghana. We do not pay any rent as
we own our Field Camp.

- 15 -

---

Map of Properties and Operations

The
map below shows the locations of our Kibi, Kwabeng, Pameng, Banso, Muoso and
Edum Banso Projects all of which are described in further detail in this Report.

Location of Xtra-Gold Concessions

- 16 -

---



Xtra-Gold Concessions Located in the Kibi Gold Belt

- 17 -

---

Description of Properties

Except
for our Kibi Project, each of our other mineral exploration projects; namely our
Kwabeng, Project, our Pameng Project, our Banso Project, our Muoso Project and
our Edum Banso Project are currently at an early stage of evaluation. As at the
date of this Report, no mineralized material or reserve estimates have been made
at any of our Projects. As of the date of this Report, except for the 2011 Drill
Program at our Kibi Project located on theKibi Gold Belt, there are no
exploration activities currently being conducted on our other Projects or have
any such activities been planned for the next 12 months, however, we may
consider doing so at a later date. Prior to the commencement of the Fiscal Year
covered by this Report, we had completed preliminary lode gold exploration
programs at our Kibi, Banso, Muoso and Edum Banso Projects and their respective
results are noted hereunder.

Three
concessions totaling 118.92 sq km; namely our Kibi Project, which is located to
the south of our Kwabeng and Pameng Projects, and our Kwabeng Project and our
Pameng Project, are contiguous to our Banso and Muoso Projects.

Title to Properties

We
hold 30-year mining leases expiring on July 26, 2019 on our Kwabeng and Pameng
Concessions (see Kwabeng Project  Kwabeng Mining Lease and Pameng Project 
Pameng Mining Lease), a 7-year mining lease on our Apapam Concession expiring
on December 17, 2015 (see Kibi Project  Apapam Mining Lease), a 14-year
mining lease on our Banso Concession (see Banso Project  Banso Mining Lease
and a 13-year mining lease on our Muoso Concession (see Muoso Project  Muoso
Mining Lease). Our interest in our Edum Banso Project is held through an option
agreement (see Edum Banso Project  Option Agreement for Prospecting License).

VTEM Survey

As
of the date of this Report, an airborne Versatile Time-domain Electromagnetic
(VTEM), Magnetic and Radiometric survey (the VTEM Survey) was
completed by our company on the above-noted Projects and encompassed
approximately 4,000 line-kilometers at 200 meter (m) line spacing, with
approximately 490 line-kilometers of detail 100 m line spacing coverage over the
core Kibi Project mining lease area. The VTEM system is renowned for its
superior penetration depth of greater than 400 m, low base frequency for
enhanced penetration in conductive ground cover and high spatial resolution
which permits the spotting of drill targets directly off the airborne anomalies.
The primary purpose of the VTEM Survey was to delineate auriferous graphic or
sulphidic shears but resistivity-depth data may also help further define and/or
identify the granitoid bodies hosting the Kibi Project mineralization In
addition to helping map lithological contacts, including the gold prospective
granitoid bodies, the aeromagnetic survey will permit the detection of
low-magnetic domains possibly reflecting demagnetization resulting from intense
gold-related hydrothermal alteration. The radiometric survey may also help
further define and/or identify the gold-hosting granitoid bodies. The VTEM will
be incorporated into the geological compilation within the next few months upon
reception of the final survey interpretation data from Geotech. This integrated
survey, in combination with previous soil geochemistry and reconnaissance
geology surveys will help further define the extent and regional controls of the
gold-bearing structures discovered to date by scout trenching on the Ankaase
Gold Trend, located on the Muoso Concession, and Banso Area No. 3 gold-in-soil
anomalies; with the objective of guiding follow-up trenching designed to outline
high priority, cost effective drill targets.

Recovery of Placer Gold

In
2007 and 2008, we recovered and sold placer gold from our Kwabeng Project. We
did not recover any placer gold during 2009. During the Fiscal Year, in July
2010, we entered into (a) agreements with independent Ghanaian contract miners
to recover placer gold and produce the mineralized material from our Kibi and
Pameng Projects; (b) an agreement with Ravenclaw Mining Limited
(Ravenclaw), a Swiss company, to assist in overseeing the contract
miners to (i) limit our involvement in the recovery of placer gold operations;
and (ii) enable our company to focus on the 2011 Drill Program and any other
exploration activities we may conduct during 2011. Our General Manager of XG
Mining received compensation from Ravenclaw for assisting Ravenclaw in
fulfilling its contract with our company (see Item 11  Executive Compensation 
Summary Compensation Table and Item 13 Certain Relationships and Related
Transactions, and Director Independence  Consulting Agreement with Principal
Shareholder for further details.

Kibi Project

Overview

Our
Kibi Project (also referred to as the Apapam Concession) is comprised
of 33.65 sq kmand our companys interest in the Apapam Concession is
secured by the Apapam Mining Lease controlled by Xtra-Gold, as to a 90%
interest; with the remaining 10% interest held by the Government of Ghana (see Kibi Project
 Apapam Mining Lease). Our Kibi Project is our companys flagship project and
is the only material project of our company.

- 18 -

---

Our
  Kibi Project land position also encompasses two (2) land staking applications:
  (i) a reconnaissance license contiguous to the southwest extremity of our Kibi
  Project covering an area of 7.0 sq km (700 ha) (the Akim Apapam Concession);
  and, (ii) a ground extension along the northwest boundary of the Kibi Project
  covering an area of 1.42 sq km (142 ha) (the Apapam Concession Extension).
  The Akim Apapam Concession was made to provide a buffer area. Our company has
  not conducted any exploration on the Akim Apapam Concession and there is no
  current knowledge of past exploration activity or lode gold on this ground.
  The Apapam Concession Extension was made to cover certain trench and drill gold
  intercepts. The applications for the Akim Apapam Concession and the Apapam Concession
  Extension were submitted by the Company to Mincom on January 15, 2008 and, as
  at the date of this Report, approval of these applications is still pending
  and there is no assurance that either of them will be granted.

The
Apapam Concession contains two (2) small scale mining (SSM) licenses,
comprising approximately 0.1012 sq km (10.12 ha) located within the northwest
portion of the concession which were granted to third parties prior to our
companys application for the Apapam Concession. None of the in situ, lode gold
mineralization occurrences described in the 43-101 Report are located within
and/or proximal to these third party SSM licenses, and there is no current
knowledge of any lode gold occurrences being present on these parcels. No
information is available on past and/or current alluvial gold mining activity on
these SSM licenses.

Location and Access

Our
Kibi Project lies within the Kibi-Winneba area in the Eastern Region of Ghana
and is located on the eastern flank of the Atewa Range along the headwaters of
the Birim River in the immediate vicinity of the district capital of Kibi,
approximately 75 km NNW of the nations capital city of Accra. Access to our
Kibi Project is by driving northwest from Accra on the paved Accra-Kumasi Trunk
Road which is the main national highway for approximately 90 km until the town
of Kibi, marked by a road sign, is reached. One would make a left hand turn at
the Kibi sign and drive southwest for approximately 5 km to arrive at our Apapam
concession. A tarred road emanating from the Accra-Kumasi Trunk Road
approximately 15 km northeast of Kibi dissects the north-central and
south-eastern portions of our concession, while the tarred road servicing the
town of Apapam provides access to the concessions south-western extremity. Our
Kibi Project is located approximately 20 km south-southeast from our Field Camp.

The
Kibi-Winneba area is characterized by a narrow sequence of Birimian
metavolcanics underlying most of the Atewa Range, which is covered by an
extensive laterite/bauxite capping, and surrounded by a thick package of
Birimian metasediments dominating the flanks and the lower lying areas. Our Kibi
Project covers the Birimian volcanic-sediment contact which we believe
represents a highly favorable environment for the hosting of lode gold deposits
throughout Ghana.

Historic Work

Prior
to the exploration work conducted by our company as noted hereunder, very little
systematic exploration work for bedrock gold deposits has been conducted in the
Kibi area since the 1930s.

Prior
  Exploration by Xtra-Gold

General

All
gold results for the following exploration programs are reported in ppm Au
(part per million gold). The term ppm represents part per million where 1
ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb).

Please
  refer to our annual reports on Form 10-K previously filed with the SEC for any
  exploration activities conducted by us prior to the three years required by
  this Report.

2008 Follow-Up Program

Exploration
work on our Kibi Project located on the Apapam Concession during 2008 was aimed
at advancing the lode gold targets identified within the the Kibi Gold Belt; an
over 5.5 km long, NE-trending, anomalous gold-in-soil trend characterized by
four (4) extensive, higher grade zones ranging from approximately 800 m by
75-300 m to 1,000 m by 100-500 m in area.

An
extensive soil geochemistry survey covering approximately 47 line-kilometers
(1,827 samples) was implemented in early 2008 to further define the extensive
Kibi gold-in-soil trend. The entire Apapam grid was also covered by IP /
Resistivity (62 km) and ground magnetometer (79 km) surveys to help map the
extent of the granitoid bodies spatially associated with the gold occurrences,
and to provide information on the strike extent and attitude of the mineralized
structures.

Our
Kibi Project trenching program encompassed 22 trenches totaling approximately
1,375 linear meters, including: 8 trenches (425 m) on Zone 2 (TKB006-013); and
14 trenches (950 m) on Zone 3 (TAD008-021) of the 5.5 km long Kibi gold-in-soil
trend.

- 19 -

---

A
Phase I scout drilling program (the Phase I Drill Program) encompassing
18 diamond drill holes, ranging from 60 m to 320.5 m in length, and totalling
3,001 linear meters was implemented on the Apapam Concession from August 30 to
October 28, 2008. This reconnaissance drilling was designed to test the depth
continuity of gold mineralization discovered in trenches excavated on Zone 2 and
Zone 1 of our Kibi Project.

This
initial reconnaissance drilling program yielded very encouraging results and
demonstrated that the granitoid-hosted gold mineralization occurrences
intersected along the Kibi gold-in-soil trend offers potential for shallow oxide
mineralization amenable to bulk mining and heap leaching, as well as large
primary gold systems at depth.

At
the time of the above-noted work programs, recommended work to further advance
our Kibi Project included: (a) additional mechanical trenching to further define
the geological / structural nature and extent of the granitoid-host gold
mineralization in Zone 2 and 3; and (b) a 5,000 m combined reverse circulation /
diamond drilling program.

Apapam Grid Expansion

The
Apapam grid was expanded to provide control for detail (100 m) soil sampling
coverage of the gold-in-soil anomalies yielded by the Phase I (2006) work
program and the gold occurrences identified in the 2007 trenching, located at
the northwestern extremity of the Apapam Concession, and for reconnaissance (200
m) soil sampling to follow-up on anomalous gold-in-silt samples identified in
streams at the southwestern extremity of the property. A total of 54.45
line-kilometers of cross-lines and 2.1 km of baselines were established. The
expanded grid now covers the entire northwestern portion of the Apapam
Concession with a total of 78.8 line-kilometers of southeast trending
cross-lines extending along a 6.1 km baseline.

Soil Geochemistry Survey

An
extensive soil geochemistry survey was undertaken on the Apapam Concession to
provide detailed (100 m) soil sampling coverage of the gold-in-soil anomalies
yielded by the Phase I (2006) work program and the gold occurrences identified
in the 2007 trenching, located at the northwestern extremity of the concession,
and for reconnaissance (200 m) soil sampling to follow-up on anomalous
gold-in-silt samples identified in streams at the southwestern extremity of
property during the 2004 Regional Exploration program. A total of 1,827 soil
samples were collected at 25 m intervals along the 46.975 line-kilometers of
cross lines. Including the Phase I (2006) work program, a total of 2,859 soil
samples have been collected on the Apapam grid.

The
anomalous threshold for the soil sample results was set at 0.075 ppm gold based
on past exploration experience on the Apapam Concession. 666 (23%) out of the
2,859 soil samples returned gold values greater than the 0.075 ppm anomalous
threshold, including: 236 (8%) samples over 0.150 ppm; 95 (3.5%) samples over
0.30 ppm; and 61 (2%) samples over 0.5 ppm gold.

The
expanded soil survey outlined an over 5.5 km long, NE-trending, anomalous
gold-in-soil trend (Kibi gold-in-soil trend) characterized by four (4)
extensive, higher grade zones (i.e. Zone 1 to 4) ranging from approximately 800
m by 75-300 m to 1,000 m by 100-500 m in area. This gold-in-soil anomalous trend
(> 0.075 ppm Au) tends to be patchy in nature and/or to pinch-out along its
5.5 km extent. The gold-in-soil anomalies exhibit a good spatial relationship
with the bedrock gold occurrences identified to date in trenches at the
northwestern extremity of the Apapam Concession.

IP / Resistivity and Magnetometer Surveys

An
IP / Resistivity survey covering the entire 5.5 km extent of the Kibi
gold-in-soil trend was conducted to help define drill targets for the Phase I
drill program. The 61.9 line-kilometer IP / Resistivity (Time Domain) survey,
covering the entire extent of the Kibi gold-in-soil trend at 200 m spacing, with
some 100 meter detail sections centred on known gold showings, was conducted
using a Pole-Dipole Array with a dipole length of 50 m and dipole separations of
n = 1 to 6. This survey design should yield an approximate depth of
investigation of about 175 to 200 m at n=6.

The
IP / Resistivity survey helped map the extent of the granitoid bodies spatially
associated with the gold occurrences identified to date by trenching and
drilling, and yielded information on the strike extent and attitude of the
mineralized structures.

A
ground magnetometer survey encompassing 78.8 line-kilometers was also conducted
on the Apapam grid. The magnetometer survey was implemented to help map the
geology of the Kibi gold-in-soil trend area and to assist in the IP /
Resistivity survey interpretation. The geophysical surveys were implemented in
August to September 2008 by Sagax Afrique of Ouagadougou, Burkina Faso.

2008 Kibi Project Trenching Program

The
trenching program at the Kibi Project in 2008 (the 2008 Kibi Project
Trenching Program) encompassed 22 trenches totaling approximately 1,375
linear meters, including 8 trenches (425 m) on Zone 2 (TKB006-013) and 14
trenches (950 m) on Zone 3 (TAD008-021) of the 5.5 km long Kibi gold-in-soil
trend. The 19 hand dug and 3 mechanical trenches, ranging from 20 m to 154 m
in length and from 1.5 m to 4.0 m in depth, were designed to test
the geochemical signature at depth, within the in situ saprolite (oxidized rock)
horizon, of the gold-in-soil anomalies. As at the year ended December 31, 2008,
a total of 35 trenches totaling approximately 2,320 m have been excavated on our
Kibi Project.

- 20 -

---

Trenching
exposed widespread occurrences of classical granitoid-hosted gold mineralization
in Zone 2 and 3. Mineralization is hosted by swarms of granitoid bodies
interpreted to be emplaced along splay structures off an inferred NE-trending
regional structure. The broadly spaced trenching encountered significant
granitoid-hosted gold mineralization, over trench lengths ranging from 10 m to
45 m, spread out over approximately 975 m and 500 m E-W distances in Zone 2 and
3, respectively. In addition several granitoid occurrences yielded lower grade
but still exploration significant anomalous gold values. Significant gold
intercepts from the 2008 Kibi Project Trenching Program, as well as significant
intercepts from the 2007 Zone 2 trenching, are presented in Table 3 below. The
term ppm represents part per million where 1 ppm = 1 gram per tonne (g/t) =
1,000 part per billion (ppb).

A
total of 14 manual trenches totaling approximately 950 linear meters
(TAD008-TAD021) were completed in 2008 on Zone 3 of the Kibi gold-in-soil trend,
located approximately 700 m southwest of the Phase I drilling area on Zone 2. To
date saprolitic occurrences of altered granitoid exhibiting quartz-iron
carbonate veining and oxidized sulphide sites have been encountered in six (6)
trenches on Zone 3.

The
Zone 3 trenching yielded two (2) significant granitoid-hosted gold
mineralization intercepts: 4.93 ppm gold over 45 m, including 10.12 ppm gold
over 12 m; and 1.60 ppm gold over 18 m, including 9.89 ppm gold over 2 m, in
trenches TAD019 and TAD016, respectively. In addition, reconnaissance trenching
of the Zone 3 gold-in-soil anomaly in 2007 yielded an intercept of 1.09 ppm gold
over a 10 m trench length in trench TAD001-TAD004. The remaining three (3)
mineralized granitoid occurrences yielded lower grade but exploration
significant, anomalous gold values.

Table 1: Significant Trench Intersections  Kibi Project
(Length Weighted Average Grades)

Intervals (meters)
      GoldTrench ID
      From
      To
      (1) Trench Length
      (ppm)TKB002
      12.00
      14.00
      2.00
      8.79TKB003
      46.36
      54.10
      7.74
      1.60TKB003
      64.10
      74.55
      10.45
      1.62including
      68.00
      70.25
      2.25
      4.64TKB004
      194.00
      214.00
      20.00
      2.54including
      203.00
      214.00
      11.00 (2)
      4.07TKB005
      60.00
      90.00
      30.00
      2.49including
      61.00
      74.00
      13.00
      5.23including
      69.00
      71.00
      2.00
      14.45TKB006
      58.00
      94.00
      36.00 (3)
      1.46including
      64.00
      81.00
      17.00
      2.20including
      64.00
      65.00
      1.00
      7.90TAD001-004
      -
      -
      10.00
      1.09including
      -
      -
      1.00
      4.95TKB010
      0.00
      42.00
      42.00
      1.29including
      15.00
      28.00
      13.00
      2.26TKB011
      12.00
      27.00
      15.00
      1.26including
      19.00
      25.00
      6.00
      2.41TKB012
      1.00
      5.00
      4.00
      2.51TAD016
      23.00
      41.00
      18.00
      1.60including
      33.00
      35.00
      2.00
      9.89TAD019
      16.00
      61.00
      45.00
      4.93including
      16.00
      46.00
      30.00
      6.23including
      34.00
      46.00
      12.00
      10.12including
      42.00
      44.00
      2.00
      17.00


|(1) | Reported intercepts are trench-lengths; true width of
      mineralization is unknown at this time.                         
|--- | ----------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                             
|(2) | Estimated to represent a true width of ~ 4m due to flat
      lying nature of quartz veining.                               
|    |                                                                                                                             
|(3) | Apparent Width: Estimated to represent a true width of ~
      25 meters based on flat lying nature of the quartz
  veining.

- 21 -

---

Results of Phase I Drill Program

The
Phase I Drill Program on our Kibi Project encompassed 18 diamond drill holes
(NQ2 core), ranging from 60 m to 320.5 m in length, and totaling 3,001 linear
meters. This reconnaissance drilling was designed to test the depth continuity
of gold mineralization discovered in trenches excavated on Zone 2 and Zone 1 of
our Kibi Project; an over 5.5 km long, NE-trending, anomalous gold-in-soil trend
characterized by four (4) extensive, higher grade zones ranging from
approximately 800 m by 75-300 m to 1,000 m by 100-500 m in area. The Phase I
Drill Program was implemented from August 30 to October 28, 2008 by Burwash
Drilling of Cobble Hill, British Columbia, Canada.

This
initial reconnaissance drilling program yielded very encouraging results and
demonstrated that the granitoid-hosted gold mineralization occurrences
intersected along the Kibi gold-in-soil trend offers potential for shallow oxide
mineralization amenable to bulk mining and heap leaching, as well as large
primary gold systems at depth.

The
first 15 holes of the Phase II Drill Program targeted gold mineralization
discovered in four (4) trenches, TKB005, TKB004, TKB006, and TKB009-010, spread
out over an approximately 975 m E-W distance on the Zone 2 gold-in-soil anomaly.
Thirteen (13) out of the 15 holes on Zone 2 yielded significant gold intercepts,
including 10 holes intersecting significant granitoid-hosted gold mineralization
over 7 m to 45 m core lengths. Significant gold intercepts are presented in
Table 4 below. The term ppm represents part per million where 1 ppm = 1 gram
per tonne (g/t) = 1,000 part per billion (ppb).

Mineralized
material consists of altered quartz diorite and tonalite exhibiting quartz-iron
carbonate veining, and disseminated sulphides. Mineralization discovered by
trenching and/or drilling on Zone 2 and Zone 3 appears to be hosted by swarms of
granitoid bodies, ranging from 5.5 m to 79 m in core length, interpreted to be
emplaced along splay structures off an inferred NE-trending regional structure.

Limited
drilling to date traced the granitoid-hosted gold mineralization over a 200 m
strike length and to a vertical depth of 100 m at the Trench TKB004 Zone,
including gold intercepts of: 2.11 ppm gold over 25.4 m; 0.87 ppm gold over 15 m
and 1.28 ppm gold over 33 m; 2.24 ppm gold over 16 m; and 2.78 ppm gold over 15
m in holes KBD08012, KBD08013, KBD08014, and KBD08015, respectively. Similarly,
mineralization at the Trench TKB005 Zone was traced over an approximately 135 m
strike length and to a vertical depth of 76 m in holes KBD08003 and KBD08004 and
KBD08010 and KBD08011, including significant intercepts of 8.49 ppm gold over 12
m and 4.83 ppm gold over 7 m in holes KBD08004 and KBD08010, respectively.

Limited
Zone 1 scout drilling (3 holes) intersected a typical Ashanti style shear zone
setting developed proximal to a metavolcanic-metasediment contact with a
spatially associated granitoid body. Hole KBD08017 yielded intermittent,
exploration significant, anomalous gold values over a 60 m core length,
including encouraging intercepts of 1.43 ppm gold over 13.5 m, 1.04 ppm gold
over 6 m, and 1.02 ppm gold over 8 m. In addition, Trench TKB012 excavated on a
gold-in-soil anomaly, located approximately 100 m west of hole KBD08017,
returned a channel sample intercept of 2.51 ppm gold over a 4 m trench length.

Recommended
work to further advance our Project includes: (a) additional mechanical
trenching to further define the geological / structural nature and extent of the
granitoid-host gold mineralization in Zone 2 and 3; and (b) a 5,000 m combined
reverse circulation / diamond drilling program. The estimated cost of the
follow-up exploration program is approximately $800,000.

Table 2: Significant Drill Intercepts  Kibi Project (Length
Weighted Average Grades)

Hole ID
      Intervals (meters)
      Gold (ppm)
      Comments(2)From
      To
      (1) Core LengthKBD08001
      107
      108
      1
      8.77KBD08001
      132
      133
      1
      13.65KBD087002
      No significant resultsKBD08003
      22.5
      35
      12.5
      2.04
      GRDincluding
      22.5
      24
      1.5
      5.51including
      29
      32
      3
      3.65


- 22 -

---

Hole ID
      Intervals (meters)
      Gold (ppm)
      Comments(2)From
      To
      (1) Core LengthKBD08004
      76
      88
      12
      8.49
      GRDincluding
      76
      77
      1
      28.50including
      77
      78
      1
      42.40including
      80
      85
      5
      5.64KBD08005
      22
      39
      17
      1.18
      GRDincluding
      33
      39
      6
      2.04KBD08005
      45
      60
      15
      1.02
      GRDKBD08006
      116
      117
      1
      31.30
      VGKBD08007
      65
      78
      13
      1.02
      GRDincluding
      72
      76
      4
      2.06KBD08008
      15
      60
      45
      1.01
      GRDincluding
      37
      49
      12
      2.01
      VGKBD08009
      No significant resultsKBD08010
      47
      54
      7
      4.83
      GRDKBD08010
      58
      59
      1
      9.58KBD08011
      106
      116
      10
      1.01including
      115
      116
      1
      4.53KBD08012
      46.6
      72
      25.4
      2.11
      GRD, VGincluding
      63
      72
      9
      3.95(including)
      63
      64
      1
      13.60KBD08013
      72
      87
      15
      0.87
      GRDKBD08013
      96
      129
      33
      1.28
      GRDincluding
      98.3
      105
      6.7
      2.40including
      122
      128
      6
      2.70KBD08014
      115
      131
      16
      2.24
      GRDincluding
      116
      126
      10
      3.23
      VGKBD08015
      20
      35
      15
      2.78
      GRDincluding
      27
      34
      7
      5.06(including)
      32
      33
      1
      9.48KBD08015
      42
      45
      3
      2.37
      GRDKBD08015
      63
      64
      1
      16.40
      GRDKBD08016
      No significant resultsKBD08017
      82.5
      96
      13.5
      1.43KBD08017
      115
      121
      6
      1.04KBD08017
      135
      143
      8
      1.02KBD08018
      No significant results


|(1) | Reported intercepts are core-lengths; true width of
      mineralization is unknown at this time.
|--- | -------------------------------------------------------------------------------------------------
|    |                                                                                                  
|(2) | GRD  Granitoid hosted / associated; VG  Visible gold
      noted.                              

Phase II Drill Program

The
Phase II drill program (the Phase II Drill Program) on our Kibi Project
encompassed 50 RC holes, ranging from 40 m to 150 m in length, and totalling
4,715 linear meters including 27 holes for 2,478 m on Zone 2 and 23 holes
totaling 2,237 m on Zone 3. Fifteen initial RC holes targeted the Trench TKB005
and Trench TKB004 gold zones located at the southeast extremity of Zone 2 of the
Kibi Gold Trend; an over 5.5 km long, northeast trending, anomalous gold-in-soil
trend characterized by four extensive higher grade zones ranging from
approximately 800 m by 75 to 300 m to 1,000 m by 100 to 500 m in area. The Phase
II Drill Program was designed to: (i) test the dip and strike extensions of the
four gold target zones identified in Zone 2 during the Phase I Drill Program;
(ii) assess the depth continuity of gold mineralization discovered in trenches
excavated in Zone 3, an approximately 1,000 m by 100 to 500 m gold-in-soil
anomaly located approximately 700 m southwest of the Zone 2 drilling conducted
under the Phase I Drill Program in 2008; and (iii) test IP / Resistivity anomalies
spatially associated with the Kibi gold-in-soil trend. The Phase II Drill
Program was designed to build upon the 2008 Phase I diamond drill results and to
continue to demonstrate that the widespread, classical granitoid-hosted gold
mineralization developed along our Kibi Project offers potential for shallow
oxide mineralization amenable to bulk mining and heap leaching, as well as large
primary gold systems at depth. The Phase II Drill Program was implemented from
July 14, 2009 to September 26, 2009 by BLY Ghana Ltd., a subsidiary of Boart
Longyear.

- 23 -

---

*Drilling
Results from Trenches TKB005 and TKB004 Zones (15 Holes)  Zone 2  Kibi
Project*

Eleven
out of the initial 15 of the 27 RC holes on Zone 2 yielded significant gold
intercepts, with all mineralized intercepts consisting of granitoid-hosted gold
mineralization spanning from one m to 78 m in core length. Mineralization
identified by trenching and drilling on Zone 2 appears to be hosted by a series
of sill-like granitoid bodies hosted within a folded metasediment-metavolcanic
rock sequence. Mineralized material consists of altered quartz diorite and
tonalite exhibiting quartz-iron carbonate veining and disseminated sulphides.
Significant gold intercepts for the Trench TKB005 and TKB004 zones are set forth
in Table 3 hereunder.

As
at September 28, 2009, gold mineralization at the Trench TKB005 zone has been
traced over an approximately 220 m strike length and to a vertical depth of
approximately 75 m. Highlights from the present drilling includes intercepts of
6.29 g/t over 23 m, including 8.55 g/t over 10 m, in hole KBRC09047 and 2.97 g/t
over 18 m, including 6.32 g/t over 8 M in hole KBRC09042. These two holes tested
the central portion of the zone in a scissor pattern designed to better
characterize the lithological and structural controls of the gold mineralization
intersected in diamond drill holes KBD08003 and KBD08004 from the Phase I drill
program. Field and trench mapping indicates that the Trench TKB005 zone
mineralization is hosted by a moderate, easterly dipping granitoid body
exhibiting an extensive, shallow to moderate, westerly dipping, sheeted quartz
vein system. Hole KBD09042 (270° AZ / -50° dip) intersected the host granitoid
sill at approximately right angles from a collar position on the eastern
(hanging wall) flank of the granitoid body. While hole KBRC09047 (090° Az / -55°
dip) was drilled down the dip of the host granitoid sill in order to transect
the westerly dipping, sheeted quartz veining at approximately right angles, with
the hole remaining within the confines of the host granitoid body to a down hole
depth of 23 m.

Table 3: Significant Drill Intercepts  Kibi Project Zone 2
 RC Holes KBRC09042 to KBRC09056

Hole ID
    From (meters)
    To (meters)
    Core Length (1) (meters)
    Gold Grams Per Tonne
      Target ZoneKBRC09042
    19
    37
    18
    2.97
      Trench TKB005including
    23
    31
    8
    6.32(including)
    23
    24
    1
    13.90(including)
    28
    29
    1
    12.70KBRC09043
    23
    34
    11
    2.27
      Trench TKB005including
    25
    29
    4
    5.27KBRC09044
    25
    27
    2
    2.29
      Trench TKB005KBRC09045
    22
    32
    10
    2.48
      Trench TKB005including
    22
    26
    4
    4.05KBRC09046
    41
    54
    13
    1.04
      Trench TKB005including
    41
    44
    3
    2.24KBRC09047
    0
    23
    23
    6.29
      Trench TKB005including
    0
    10
    10
    8.66(including)
    0
    1
    1
    10.90(including)
    1
    2
    1
    11.60(including)
    3
    4
    1
    12.65(including)
    8
    9
    1
    14.30(including)
    9
    10
    1
    13.50including
    13
    14
    1
    11.15


- 24 -

---

Hole ID
      From(meters)
      To(meters)
      Core Length (1)(meters)
      GoldGrams Per Tonne
      Target ZoneKBRC0948
      No Significant Results
      
      
      
      Trench TKB004KBRC09049
      52
      53
      1
      7.53
      Trench TKB004KBRC09049
      63
      65
      2
      3.48KBRC09050
      51
      56
      5
      1.98
      Trench TKB004including
      51
      52
      1
      4.31KBRC09051
      28
      37
      9
      2.69
      Trench TKB005including
      31
      35
      4
      4.09KBRC09052
      No Significant Results
      
      
      Trench TKB005KBRC09053
      No Significant Results
      
      
      Trench TKB004KBRC09054
      No Significant Results
      
      
      Trench TKB004KBRC09055
      4
      82
      78
      1.44
      Trench TKB004including
      22
      35
      13
      3.26(including)
      22
      26
      4
      6.28(including)
      22
      23
      1
      11.15including
      56
      76
      20
      2.27(including)
      72
      75
      3
      4.83KBRC09056
      25
      43
      18
      1.33
      Trench TKB004including
      37
      43
      6
      3.08KBRC09056
      58
      78
      20
      2.01including
      71
      77
      6
      4.29(1)Reported intercepts are core-lengths;
        true width of mineralization is unknown at this time.


Drilling Results from Trenches TKB006 and TKB010 Zones
(12 Holes)  Zone 2  Kibi Project

Seven
out of the 12 remaining drill holes on Zone 2 were designed to better define
gold mineralization at Trench TKB006 and Trench TKB010 zones identified during
the initial scout Phase I Drill Program at the northwest extremity of Zone 2 of
our Kibi Project; one hole targeted a new gold zone exposed in recent trenching
(trenches TKB014E and TKB014F); two holes probed previously untested
gold-in-soil anomalies and two holes tested an IP / Resistivity anomaly
spatially associated with a gold-in-soil anomaly. In addition, a total of 960
linear meters of mechanized trenching (38 trenches) was also conducted on Zone 2
in conjunction with this drill program to better define the surface trace of the
host granitoid bodies, to test strike extension of known mineralization and to
test gold-in-soil anomalies and geophysical targets.

Five
out of the above-noted seven holes targeting the Trench TKB006, TKB010 and
TKB014E-TKB014F zones yielded significant gold intercepts, with all mineralized
intercepts consisting of granitoid-hosted gold mineralization spanning from one
meter to 76 m in core length. As at October 28, 2009, mineralization identified
by trenching and drilling, spread out over an approximately 975 m east-west
distance on the Zone 2 gold-in-soil trend, appears to be hosted by a series of
sill-like granitoid bodies hosted within a folded metasediment-metavolcanic rock
sequence.

Mineralized
material consists of altered quartz diorite and tonalite exhibiting quartz-iron
carbonate veining and disseminated sulphides.

Drilling
highlights include granitoid-hosted gold mineralization intercepts from surface
of 39.0 m grading 9.23 g/t gold uncut (3.54 g/t gold cut) including 10.0 m
grading 33.15 g/t gold uncut (10.95 g/t gold cut) in drill hole KBRC09060 and
76.0 m grading 1.62 g/t gold, including 20.0 m grading 3.36 g/t gold (and
including 5.25 g/t gold over 9.0 m) in hole KBRC09068. Significant gold
intercepts for holes KBRC09057 to KBRC09068 are set forth in Table 4 hereunder.

- 25 -

---

Table 4: Significant Drill Intercepts  Kibi Project  Zone 2
 RC Holes KBRC09057 to KBRC09068

Hole ID
      From (meters)
      To (meters)
      Core Length (1) (meters)
      Gold Grams Per Tonne
      Target ZoneKBRC09057
      Anomalous
      
      
      Trench TKB006KBRC09058
      No Significant Intersection
      
      
      Gold-In-Soil AnomalyKBRC09059
      29
      38
      9
      0.65
      Trench TKB006including
      29
      32
      3
      1.05KBRC09060
      1
      40
      39
      3.54 *
      Trench TKB006including
      4
      28
      24
      5.29 *and including
      4
      14
      10
      10.95 *and including
      6
      7
      1
      10.85and including
      8
      9
      1
      22.60and including
      9
      10
      1
      272.00 (uncut)KBRC09061
      No Significant Intersection
      
      
      Trench TKB006KBRC09062
      9
      13
      4
      4.03
      Trench TKB014E-Fincluding
      9
      10
      1
      9.32KBRC09063
      No Significant Intersection
      
      
      Geophysical TargetKBRC09064
      No Significant Intersection
      
      
      Geophysical TargetKBRC09065
      5
      8
      3
      2.40
      Trench TKB006including
      6
      7
      1
      4.87KBRC09065
      54
      55
      1
      3.98KBRC09066
      No Significant Intersection
      
      
      Gold-In-Soil AnomalyKBRC09067
      14
      19
      5
      1.16
      Trench TKB010including
      15
      16
      1
      3.86KBRC09067
      30
      34
      4
      1.99including
      30
      31
      1
      5.76KBRC09068
      0
      76
      76
      1.62
      Trench TKB010including
      4
      45
      41
      2.15and including
      4
      24
      20
      3.36and including
      4
      13
      9
      5.25and including
      4
      5
      1
      19.50and including)
      41
      42
      1
      10.40(1)    Reported
        intercepts are core-lengths; true width of mineralization is unknown at
        this time.*    
         Gold values cut to 50 grams per tonne (g/t)Note:
      Significant Intercepts
        satisfy following criteria: greater than (>) 5.0 gram gold x meter
        product and >0.5 g/t gold. Anomalous signifies at least
        one intercept >2.0 gram gold x meter product and >0.25 g/t gold.


Holes
KBRC09057, KBRC09059 to KBRC09061 and KBRC09065 further tested the Trench TKB006
gold zone situated in the north-central portion of the approximately 1,000 m
long Zone 2 gold-in-soil anomaly. Additional mechanized trenching and geological
mapping during this drilling campaign appears to indicate that the Trench TKB006
Zone is characterized by two, NNW-trending, approximately eight (8) m and 40
mwide, sill-like granitoid bodies lying approximately 25 m apart within a
metasediment rock sequence. Hole KBRC09060 targeting an extensive system of
NE to SE trending quartz veining developed within the wider, eastern granitoid
body returned an intercept from surface of 39.0 m grading 9.23 g/t gold uncut
(3.54 g/t gold cut), including 10.0 m grading 33.15 g/t gold uncut (10.95 g/t
gold cut). Drilling, including initial scout drill hole KBD08005, which returned
intercepts of 1.18 g/t gold over 17.0 m and 1.02 g/t gold over 15.0 m, has
traced the Trench TKB006 gold zone mineralization over an approximately 160 m
strike distance.

- 26 -

---

Hole
KBRC09062, designed to undercut gold mineralization discovered by trenching of a
previously untested gold-in-soil anomaly lying approximately 225 m
west-northwest of the Trench TKB006 zone, yielded a granitoid-hosted gold
mineralization intercept of 4.03 g/t gold over 4.0 m, including one m grading
9.32 g/t gold. The two target trenches positioned end to end on the same soil
geochemical anomaly line both returned significant channel sample intercepts
separated by an approximately 20.5 m distance, including 8.49 g/t gold over a
5.0 m trench-length, including 2.0 m grading 14.85 g/t gold, in trench TKB014E
and 6.86 g/t gold over an 8.0 m trench-length, including 1.0 m grading 22.4 g/t
gold, in trench TKB014F. This new gold zone is considered especially interesting
given the values defined at this early stage and the extent of the untested
gold-in-soil anomalies present along lines 167N to L169N within the
approximately 400 m gap between the Trench TKB006 and TKB010 zones.

Holes
KBRC09067 and KBRC09068 further tested the Trench TKB010 gold zone located at
the north-western extremity of the approximately 1,000 meter long Zone 2
gold-in-soil anomaly. Hole KBRC09068 targeting an extensive system of NE to NW
trending quartz veining exposed in Trench TKB010 returned a granitoid-hosted
gold mineralization intercept from surface of 76.0 m grading 1.62 g/t gold,
including 20.0 m grading 3.36 g/t gold (and including 5.25 g/t gold over 9.0 m).
Drilling and trenching to date, including initial scout drill hole KBD08008,
which returned an intercept of 1.01 g/t gold over 45.0 m (including 2.01 g/t
gold over 12.0 m), have traced the Trench TKB010 gold zone mineralization over
an approximately 150 meter distance along the inner, northern margin of an east
to southeast trending granitoid body.

*Results
  from 23 Scout RC Holes  Zone 3- Kibi Project*

Drilling
highlights for Zone 3 include granitoid-hosted gold mineralization intercepts of
30.0 m grading 3.52 g/t gold, including 14.0 m grading 6.47 g/t gold, from a
down hole depth of 8.0 m in hole KBRC09019; 4.0 m grading 4.86 g/t gold from a
down hole depth of 26 m in hole KBRC09023 and 8.0 m grading 4.95 g/t gold,
including 3.0 m grading 12.89 g/t gold, from surface in hole KBRC09024.
Significant gold intercepts for holes KBRC09019 to KBRC09041 are set forth in
Table 5 hereunder.

Similarly
to Zone 2, all Zone 3 mineralization targets are near surface, remain open in
all directions and offer potential for shallow oxide mineralization amenable to
bulk mining and heap leaching, as well as large primary gold systems at depth.
The limited scout drilling returned several significant gold intercepts over an
approximately 825.0 m E-W distance across Zone 3. Zone 2 and Zone 3 drilling has
traced the granitoid-hosted gold mineralization over an approximately 2,100 m
distance along the NE-trending Kibi Gold Trend.

This
initial Zone 3 scout drilling formed part of the 4,715 meter Phase II RC Drill
Program which included 27 holes for 2,478 m on Zone 2 and 23 holes totaling
2,237 m on Zone 3; an over 5.5 km long, NE-trending, anomalous gold-in-soil
trend characterized by four extensive higher grade zones ranging from
approximately 800 m by 75-300 m to 1,000 m by 100-500 m in area. The present
drilling was designed to undercut surface gold mineralization exposed in
reconnaissance trenches, and to test geophysical Induced Polarization (IP) /
Resistivity and /or gold-in-soil anomalies on Zone 3; an approximately 1,000 m
by 100-500 m, gold-in-soil anomaly located approximately 700 m to the southwest
of the main Zone 2 drilling area.

Table 5: Significant Drill Intercepts  Kibi Project (Zone 3
 RC Holes KBRC09019 to KBRC09041)

Hole ID
    From (meters)
    To (meters)
    Core Length (1)(meters)
    Gold Grams Per Tonne
      Target Zone
      Hole Location (Claim
      Status)KBRC09019
    12
    42
    30
    3.52
      Trench TAD019
      Mining Leaseincluding
    16
    30
    14
    6.47and including
    26
    30
    4
    14.27and including
    16
    17
    1
    15.00and including
    26
    27
    1
    19.10and including
    29
    30
    1
    25.10KBRC09020
    36
    39
    3
    1.01
      Trench TAD007
      Mining LeaseKBRC09020
    58
    60
    2
    4.10


- 27 -

---

Hole ID
      From (meters)
      To (meters)
      Core Length (1)(meters)
      Gold Grams Per Tonne
      Target Zone
      Hole Location (Claim Status)KBRC09021
      5
      14
      9
      0.94
      Trench TAD001-  Trench TAD004
      Staking Application (2)including
      5
      6
      1
      4.92KBRC09021
      30
      36
      6
      0.74KBRC09022
      No Significant Intercept
      
      
      Trench TAD014
      Staking Application (2)KBRC09023
      26
      30
      4
      4.86
      Trench TAD001-  Trench TAD004
      Staking Application (2)KBRC09023
      36
      42
      6
      0.42KBRC09024
      0
      8
      8
      4.95
      Trench TAD001-  Trench TAD004
      Staking Application (2)including
      0
      1
      1
      32.90KBRC09024
      24
      46
      22
      0.29KBRC09024
      73
      74
      1
      3.12KBRC09025
      22
      29
      7
      0.91
      Trench TAD014
      Staking Application (2)KBRC09026
      No Significant Intercept
      
      
      Trench TAD001-  Trench TAD004
      Staking Application (2)KBRC09027
      27
      42
      15
      1.18
      Trench TAD001-  Trench TAD004
      Staking Application (2)including
      34
      37
      3
      4.09KBRC09027
      62
      68
      6
      1.03KBRC09028
      48
      60
      12
      0.25
      Trench TAD001-  Trench TAD004
      Staking Application (2)KBRC09028
      76
      85
      9
      0.52KBRC09029
      5
      35
      30
      0.84
      Trench TAD001-  Trench TAD004
      Staking Application (2)including
      5
      9
      4
      2.00KBRC09029
      70
      75
      5
      0.82KBRC09030
      30
      43
      13
      0.67
      Trench TAD016
      Mining Leaseincluding
      31
      36
      5
      1.21KBRC09030
      59
      70
      11
      0.42including
      68
      70
      2
      1.59KBRC09031
      19
      26
      7
      0.74
      Trench TAD015-  Trench TAD021
      Mining Leaseincluding
      22
      24
      2
      1.63KBRC09032
      126
      146
      20
      0.33
      Trench TAD015-  Trench TAD021
      Mining Leaseincluding
      126
      132
      6
      0.66KBRC09033
      No Significant Intercept
      
      
      Trench TAD016
      Staking Application (2)/ Mining LeaseKBRC09034
      4
      9
      5
      0.54
      Gold-in-Soil Anomaly
      Staking Application (2)/ Mining Lease


- 28 -

---

Hole ID
      From (meters)
      To (meters)
      Core Length (1)(meters)
      Gold Grams Per Tonne
      Target Zone
      Hole Location (Claim Status)KBRC09035
      No Significant Intercept
      
      
      Trench TAD001-  Trench TAD004
      Staking Application (2)KBRC09036
      1
      20
      19
      0.67
      Trench TAD001-  Trench TAD004
      Staking Application (2)including
      5
      13
      8
      1.00KBRC09037
      3
      10
      7
      0.36
      Trench TAD001-  Trench TAD004
      Staking Application (2)KBRC09037
      47
      75
      28
      0.87including
      47
      53
      6
      1.99KBRC09038
      61
      92
      31
      0.57
      Trench TAD001-  Trench TAD004
      Staking Application (2)including
      61
      70
      9
      1.01and including
      62
      63
      1
      3.64KBRC09039
      23
      24
      1
      39.80
      Trench TAD019
      Mining LeaseKBRC09040
      No Significant Intercept
      
      
      Trench TAD007
      Mining LeaseKBRC09041
      No Significant Intercept
      
      
      Trench TAD007
      Mining Lease(1) Reported intercepts are core
        - lengths; true width of mineralization is unknown at this time. 
        (2) Staking Application formally received by the Minerals
        Commission of Ghana on November 19, 2009, and is currently being processed,
        thus securing Xtra-Golds priority staking status but there is no
        absolute assurance that this parcel of ground will be granted to Xtra-Gold.


As
at February 11, 2010, drilling included five holes to test the Trench TAD019 and
TAD007 targets located at the southeastern extremity of the Zone 3 gold-in-soil
anomaly, and 18 holes to assess the Trench TAD001  TAD004, TAD015  TAD021 and
TAD016 targets within the north-central portion of the gold-in-soil anomaly.
Fourteen out of the 23 scout holes returned significant gold intercepts, with an
additional three holes yielding anomalous gold intercepts. (see QA-QC disclosure
section for Significant and Anomalous intercept criteria). All mineralized
intercepts consisted of granitoid-hosted and/or granitoid-associated gold
mineralization, with mineralized material typically consisting of altered quartz
diorite and tonalite exhibiting quartz-iron carbonate veining and disseminated
sulphides.

Hole
KBRC09019 targeting an extensive system of granitoid-hosted, NE-trending,
moderately NW-dipping, sheeted quartz veins discovered in Trench TAD019 returned
a significant mineralized intercept of 30.0 m grading 3.52 g/t gold, including
14.0 m grading 6.47 g/t gold, from a down hole depth of 8.0 m. For reference
purposes, Trench TAD019 yielded a channel sample intercept of 4.93 g/t gold over
45.0 m, including 10.12 g/t gold over 12.0 m. Hole KBRC09039, representing the
second hole of a scissor drill pattern designed to determine the dip attitude of
the host granitoid body, returned an intercept of 39.80 g/t gold over 1.0 m from
a quartz vein in mafic metavolcanic rock along the footwall flank of the
granitoid body. Hole KBRC09020, targeting a zone of anomalous gold values in
Trench TAD007 located approximately 65.0 m to the west of the KBRC09019 collar,
yielded granitoid-hosted mineralization intercepts of 1.01 g/t gold over 3.0 m
and 4.10 g/t gold over 2.0 m.

A
total of 18 holes were drilled within the north-central portion of the Zone 3
gold-in-soil anomaly which is characterized by an approximately 800 meter long
IP Chargeability anomaly exhibiting a spatial relationship with a geophysically
inferred, NE-trending, regional structural trend. Eleven of these holes tested
the north-eastern, Moderate Chargeability / Very High Resistivity portion (200
m) of the IP anomaly exhibiting a coincidental gold-in-soil signature and
anomalous trench results (i.e. Trench TAD001  TAD004 Zone).

The
limited, shallow RC drilling outlined an approximately 135.0 meter wide,
NE-trending, granitoid hosted, structural corridor appearing to encompass at
least five (5) distinct, gold-bearing, sheeted vein zones ranging from 1.0 m to
31.0 m in core length. Eight (8) out of the 11 Trench TAD001  TAD004 Zone holes
returned significant gold intercepts, including seven (7) holes yielding
multiple significant and/or anomalous gold intercepts.

- 29 -

---

The
mineralized structural corridor is characterized by significant gold intercepts
over 1.0 m to 8.0 m core lengths occurring within more extensive, lower grade,
mineralization envelopes attaining 15.0 m to 31.0 m in core length. Holes
KBRC09024 and KBRC0937, intersecting what appears to be the same sheeted vein
zone approximately 35.0 m horizontally apart within the central section of the
structural corridor returned mineralized intercepts of 8.0 m grading 4.95 g/t
gold, including 3.0 m grading 12.89 g/t gold, and 28.0 m grading 0.87 g/t gold,
respectively. Similarly, holes KBRC09023 and KBRC09038, drilled in a scissor
pattern along the northern margin of the structural corridor, yielded 4.0 m
grading 4.86 g/t gold and 31.0 m grading 0.57 g/t gold, respectively from
intercepts located approximately 8.0 m horizontally apart along the same
mineralized structure.

Thirteen
  out of the 18 holes described above were drilled on open ground along the northern
  flank of the Apapam Mining Lease (see Kibi Project  Apapam Mining
  Lease for details of this mining lease), with the drill traces extending
  from approximately 50.0 m to 300.0 m outside the concession boundary, and two
  (2) additional holes straddle the concession boundary. Following the completion
  of a professional land survey, the approximately 1.42 sq km wedge of open ground
  lying between the Apapam Mining Lease and the Atewa Forest Reserve boundary
  was staked by us to cover the mineralization targets identified by the holes
  in question. The staking application was formally received by Mincom on November
  19, 2009 and is currently being processed, thus securing our priority staking
  status, however, as at the date of this Report, the application is still pending
  and there is no absolute assurance that this parcel of ground will be granted
  to our company. Refer to Significant Intercept Table above for claim status
  of individual Zone 3 drill holes.

NI 43-101 Report

In
July 2010, SEMS prepared an independent technical report (the 43-101
Report) consistent with the Canadian Securities Administrators National
Instrument 43-101  Standards of Disclosure for Mineral Projects, Form 43-101F1
 Technical Report and Companion Policy 43-101 CP (NI 43-101) on our
Kibi Project.

Detailed Structural Study of the Kibi Project

In
February 2010, we engaged SRK to conduct a detailed structural study of our Kibi
Project, including (i) conducting field and drill core investigations; (ii)
assisting with the analysis of geological and structural data collected to date;
and (iii) providing insights on the geological and structural controls on the
distribution of the gold mineralization.

Phase III Drill Program

Based
on the results of the 2009 Phase II Drill Program, we commenced and completed
our follow-up Phase III Drill Program on our Kibi Project during the Fiscal Year
to: (i) further test the dip and strike extensions of the gold mineralization
zones identified in the Phase I and Phase II drill programs; and (ii) test IP /
Resistivity anomalies spatially associated with the Kibi gold-in-soil trend. The
Phase III Drill Program was implemented from July 2010 to December 15, 2010 by
Burwash Drilling of Cobble Hill, British Columbia, Canada.

Results of Phase III Drill Program

Drilling
highlights from the South Ridge Granitoid of Zone 2 include surface or near
surface granitoidhosted gold mineralization intercepts of 19.5 m grading 1.52
g/t gold in drill hole #KBDD10085; 25.5 m grading 1.50 g/t gold in hole
#KBDD10086 and 23 m grading 1.74 g/t gold in hole #KBDD10090. Hole #KBDD10091
encountered a 17.0 m intersection grading 2.42 g/t gold as noted in the
following table. These holes yielded significant gold intercepts, with all
mineralized intercepts consisting of granitoid-hosted gold mineralization
spanning from 2 m to 72 m in core length. Drilling and trenching traced an
extensive system of en echelon extension vein arrays across an approximately 440
m distance along the SE-trending South Ridge Granitoid body. Gold mineralization
is associated with quartz-albite-carbonate-sulphide veining developed within a
rock body of quartz diorite to tonalite composition. Additional
trenching/drilling is required to further define the extent and strike length of
the quartz vein arrays, the structural controls of the mineralization and the
contacts of the host granitoid body.

- 30 -

---

Table 6: Kibi Project 
        Zone 2  Significant Drill Intercepts (Phase III Diamond
        Drilling Program)Hole ID
      From (meters)
      To (meters)
      005ACore Length (meters)
      Gold Grams Per Tonne
      Target GranitoidKBDD10085
      3.0
      22.5
      19.5
      1.52
      South Ridge Granitoidincluding
      9.0
      16.5
      7.5
      2.83KBDD10085
      52.0
      59.0
      7.0
      6.18including
      54.0
      55.0
      1.0
      29.50KBDD10085
      106.0
      107.0
      1.0
      6.08KBDD10085
      146.0
      177.0
      31.0
      1.37including
      146.0
      163.0
      17.0
      2.13KBDD10085
      186.0
      195.0
      9.0
      0.57KBDD10085
      232.0
      244.0
      12.0
      0.75KBDD10086
      3.0
      28.5
      25.5
      1.50
      South Ridge Granitoidincluding
      3.0
      22.5
      19.5
      1.91KBDD10086
      58.5
      72.0
      13.5
      1.12KBDD10086
      91.0
      121.0
      30.0
      0.93including
      92.0
      103.0
      11.0
      1.50KBDD10086
      148.0
      158.0
      10.0
      0.88KBDD10086
      168.0
      176.0
      8.0
      1.27KBDD10086
      186.0
      233.0
      47.0
      0.58and including
      215.0
      226.0
      11.0
      0.92KBDD10090
      0
      23
      23
      1.74
      South Ridge Granitoidincluding
      0
      15
      15
      2.50KBDD10090
      49
      69
      20
      0.95including
      59
      69
      10
      1.41KBDD10090
      77
      82
      5
      1.78KBDD10090
      111
      183
      72
      0.93including
      111
      120.5
      9.5
      1.57including
      133
      140
      7
      1.80including
      174
      183
      9
      1.64KBDD10090
      220
      250
      30
      0.73including
      229
      244.5
      15.5
      1.00KBDD10091
      10.5
      122
      17
      2.42
      South Ridge Granitoidincluding
      114
      121
      7
      4.96and including
      118
      119
      1
      16.55Notes:Reported
          intercepts are core - lengths; true width of mineralization is unknown
          at this time.Intercepts
          constrained with a 0.25 g/t gold minimum cut-off grade at top and bottom
          of intercept, with arbitrarily set 30 g/t gold upper cut-off grade applied,
          and maximum of five (5) consecutive metres of internal dilution (less
          than 0.25 g/t gold). All internal intervals above 15 g/t gold indicated.


Ongoing
diamond drilling has significantly expanded known gold mineralization down dip
on the Zone 2 - Central Granitoid at our Kibi Project. Three step-back holes
(685 m) successfully expanded the gold mineralization to a down dip depth of up
to approximately 115 m. Drilling highlights include classical granitoid-hosted
gold mineralization intercepts of 20 m grading 2.43 g/t gold in KBDD10099; 58 m
grading 2.46 g/t gold, including 28 m grading 3.67 g/t gold, in KBDD10101; 27 m
grading 1.98 g/t gold and 25 m grading 1.76 g/t gold in KBDD10103.

- 31 -

---

Table 7: Kibi Project -
        Zone 2  Significant Drill Intercepts (Phase III Diamond
        Drilling Program)Hole ID
      From (meters)
      To (meters)
      Core Length (meters)
      Gold Grams Per Tonne
      Target GranitoidKBDD10099
      141
      161
      20
      2.43
      Central Granitoidincluding
      145
      156
      11
      3.52KBDD10099
      176
      183
      7
      2.53including
      179
      191
      2
      5.21KBDD10101
      112
      170
      58
      2.46 (1)
      Central Granitoidincluding
      112
      130
      18
      2.18including
      142
      170
      28
      3.67(and including)
      143
      166
      23
      4.40(and including)
      144
      159
      15
      5.42(and including)
      144
      150
      6
      10.39(and including)
      144
      145
      1
      29.70KBDD10103
      131
      158
      27
      1.98
      Central Granitoidincluding
      137
      158
      21
      2.51(and including)
      137
      152
      15
      3.23KBDD10103
      180
      205
      25
      1.87including
      180
      199
      19
      2.11Notes:Reported intercepts are core
        - lengths; true width of mineralization is unknown at this time.(1) Intercept encompasses 11.0
        m essentially barren interval (0.03 g/t Au) appearing to reflect a post
        mineralization dyke (130 m  141 m).Unless otherwise indicated intercepts constrained
        with a 0.25 g/t gold minimum cut-off grade at top and bottom of intercept,
        with arbitrarily set 30 g/t gold upper cut-off grade applied, and maximum
        of five (5) consecutive metres of internal dilution (less than 0.25 g/t
        gold). All internal intervals above 15 g/t gold indicated.


The
above-noted drill holes targeted the depth potential of the gold mineralization
along the southeast portion of the Central Granitoid body located at the
south-eastern extremity of the approximately 1,200 m long by 500 m to 800 m wide
Zone 2 gold-in-soil anomaly. All three holes were designed to test the down dip
extension of gold mineralization along an approximately 100 m strike extension
of the host granitoid body; with the drilling centered on a flexure or possible
fold nose imparting a change from a northwesterly trend to an easterly trend to
the moderate, northerly dipping granitoid body. Gold mineralization is
associated with quartz-albite-carbonate-sulphide veining developed within a rock
body of quartz diorite to tonalite composition.

Hole
#KBDD10099 was drilled in a southwest direction on the NW-trending segment of
the granitoid body. It was designed to undercut a mineralized intercept of 27.0
m grading 4.03 g/t gold in hole #KBDD10069 and yielded two significant
mineralization intercepts located approximately 75 m down dip of the #KBDD10069
intercept, including: 20.0 metres grading 2.43 g/t gold from a down hole depth
of 141 m; and 7.0 m grading 2.53 g/t gold from a down hole depth of 176 m.
Significant mineralization was traced over an approximately 115 m down dip
distance from surface on the KBDD10069  KBDD10074  KBDD10099 drill section.

Hole
#KBDD10101, consisting of a south trending borehole designed to test the nose of
the flexure in the granitoid body at depth below an intercept of 25.4 m grading
2.11 g/t gold yielded by scout diamond core hole #KBD08012, returned a wide
mineralized intercept of 58.0 m grading 2.46 g/t gold from a down hole depth of
112 m; approximately 45 m down dip of the #KBD08012 intercept. This 58 m
mineralized intercept encompasses an essentially barren, 11.0 m core-length
interval (130 m -141 m) appearing to reflect the truncation of the
mineralization by a post mineralization dyke; with the mineralized section above
the dyke yielding an intercept of 18.0 m grading 2.18 g/t gold (112 m - 130 m),
and the segment below the dyke returning 28.0 m grading 3.67 g/t gold (142 m -
170 m), including 15 m grading 5.42 g/t gold. Hole #KBDD10103, also consisting
of a south trending borehole collared approximately 50 m to the east of hole
#KBDD10101 along the northern, hanging wall flank of the easterly trending
granitoid body, was designed to undercut intercepts of 15.0 m grading 0.87 g/t
gold and 33 m grading 1.28 g/t yielded by scout diamond core hole #KBD08013. Hole #KBDD10103 returned two significant
mineralization intercepts extending approximately 45 m to 75 m down dip from the
lower #KBD08013 mineralized intercept, including: 27.0 m grading 1.98 g/t gold
from a down hole depth of 131.0 m, including 15.0 m grading 3.23 g/t gold; and
25.0 m grading 1.76 g/t gold from a down hole depth of 180.0 m.

- 32 -

---

Drilling
and trenching traced significant gold mineralization within the southeastern
segment of the Central Granitoid over an approximately 300 m strike extension of
the host granitoid body and down to a maximum down dip distance 115 m. The
mineralization remains open in all directions and drilling to further define the
extent and geological controls of the mineralization is currently ongoing.

Gold Intercept Reporting Criteria

Unless
otherwise indicated, Reported Intercepts represent core-lengths; true width of
mineralization is unknown at this time. Individual sample results were length
weighted to yield average composite interval grades as reported. Significant
Intercepts satisfy following criteria: greater than (>) 5.0 gram gold x
meter product and > 0.5 g/t gold. Anomalous signifies at least one
intercept > 2.0 gram gold x meter product and >0.25 g/t gold.
Intersections are constrained with a 0.25 g/t gold minimum cut-off grade at the
top and bottom of the intercept, with a 50 g/t upper cut-off grade applied, and
a maximum of five consecutive meters of internal dilution (less than 0.25 g/t
gold). All internal intervals yielding above 10 g/t gold are indicated within
the intersection.

Quality-Control Program

We
have implemented a quality-control program to ensure best practice in the
sampling and analysis of the drill core, RC samples and trench channel samples.
Drill core is HQ diameter (63.5 mm) in upper oxidized material (regolith) and NQ
diameter (47.6 mm) in the lower fresh rock portion of the hole. Drill core is
saw cut and half the core is sampled in standard intervals. The remaining half
of core is stored in a secure location. RC samples are taken at one meter
intervals under dry drilling conditions by experienced geologists, with all
samples weighed on site. Trench samples consist of continuous, horizontal
channels collected from a canal excavated along the bottom sidewall of the
trench (~ 0.10 meter above floor). All samples are transported in
security-sealed bags to the ALS Chemex Laboratory (ALS Chemex) in
Kumasi, Ghana. ALS Chemex is an ISO 9001:2000 certified laboratory. A one kg
split of the sample is pulverized to better than 85% passing 75 microns, and
analyzed by industry standard 50 gram fire assay fusion with atomic absorption
spectroscopy (AAS) finish; with gravimetric finish on samples exceeding 10 g/t
gold. Our company inserts a certified reference standard (low to high grade),
analytical blank, and field duplicate sample in every batch of 20 drill core /
RC chip / trench channel samples.Validation parameters are established
in the database to ensure quality control.

Work in Progress

2011 Drill Program

On
January 15, 2011, we commenced our 2011 Drill Program on our Kibi Project. The
drilling was primarily designed to expand known gold mineralization along strike
and at depth within the southeast portion of the Central Granitoid body located
at the south-eastern extremity of the approximately 1,200 m long by 500 m to 800
m wide Zone 2 gold-in-soil anomaly. The drilling yielded widespread visible gold
occurrences distributed over an approximately 250 m strike extension of the host
Granitoid body, and down to a vertical depth of approximately 220 m.

Future Exploration Plans

We
plan to continue our 2011 Drill Program throughout 2011 at an estimated cost of
$5,000,000.

Resources and Reserves

No
ore resources or reserves have been identified on our Kibi Project.

Apapam Mining Lease

XG
Minings interest in the Kibi Project was previously held by a prospecting
license granted by the Government of Ghana on March 29, 2004 covering a licensed
area of 33.65 sq km. Subsequently, in May 2008, XG Mining made an application to
the Government of Ghana to convert the prospecting license to a mining lease.
Our application received parliamentary approval resulting in the Government of
Ghana granting and registering the Apapam Mining Lease to XG Mining on the
following terms and conditions.

- 33 -

---

Our
subsidiary, XG Mining, which is owned by us as to a 90% interest, entered into
the Apapam Mining Lease dated December 18, 2008 (the Apapam Mining
Lease) with the Government of Ghana, who holds a 10% free carried interest
in XG Mining. The Apapam Mining Lease covers an area of 33.65 sq km (the
Apapam Lease Area) and is located in the East Akim District of the
Eastern Region of the Republic of Ghana. The Apapam Mining Lease has a seven (7)
year term expiring on December 17, 2015 and can be renewed for a further 30 year
term in accordance with the Mining Act (Ghana), by making application not less
than six months prior to the expiration of this mining lease. We have been
granted surface and mining rights by the Government of Ghana to work, develop
and produce gold in the Apapam Lease Area (including the processing, storing and
transportation of ore and materials). With respect to the Apapam Mining Lease,
we are: (i) required to pay applicable taxes and annual rental fees to the
Government of Ghana of approximately $15; and (ii) committed to pay a royalty in
each quarter to the Government of Ghana, through the Commissioner of Internal
Revenue, based on the production for that quarter within 30 days from the
quarter end as well as a royalty on all timber felled in accordance with
existing legislation. Under the terms and conditions of the Apapam Mining Lease,
we are required to (i) commence commercial production of gold within two years
from the date of the mining lease; (ii) conduct our operations with due
diligence, efficiency, safety and economy, in accordance with good commercial
mining practices and in a proper and workmanlike manner, observing sound
technical and engineering principles using appropriate modern and effective
equipment, machinery, materials and methods and paying particular regard to the
conservation of resources, reclamation of land and environmental protection
generally; (iii) mine and extract ore in accordance with subparagraph (ii)
herein, utilizing methods which include dredging, quarrying, pitting, trenching,
stoping and shaft sinking in the Apapam Lease Area.

We
are further required to furnish to the Minister of Lands, Forestry and Mines
(MLFM), the Head of the Inspectorate Division of the Minerals Commission
(HIDMC), the Chief Executive of the Minerals Commission (CEMC)
and the Director of Ghana Geological Survey (DGGS) (collectively
referred to as the Government Authorities) technical records (the
Technical Records) which include (i) a report in each quarter not later
than 30 days after the quarter end to the Government Authorities in connection
with quantities of gold won in that quarter, quantities sold, revenue received
and royalties payable; (ii) a report half-yearly not later than 40 days after
the half year end to the Government Authorities summarizing the results of
operations during the half year and Technical Records, which report shall also
contain a description of any geological or geophysical work carried out by our
company in that half year and a plan upon a scale approved by HIDMC showing
dredging areas and mine workings; (iii) a report in each financial year not
later than 60 days after the end of the financial year summarizing the results
of our operations in the Lease Area during that financial year and the Technical
Records, which report shall further contain a description of the proposed
operations for the following year with an estimate of the production and revenue
to be obtained; (iv) a report not later than three months after the expiration
or termination of the Apapam Mining Lease, to the Government Authorities giving
an account of the geology of the Lease Area including the stratigraphic and
structural conditions and a geological map on scale prescribed in the Mining
Regulations; (v) a report to the Government Authorities (except for HIDMC and
DGGS) of any proposed alteration to our regulations, (vi) a report to the
Government Authorities (except for HIDMC and DGGS) on the particulars of any
fresh share issuance or borrowings in excess of an amount equal to the stated
capital of XG Mining; (vii) having regard to items (v) and (vi), these reports
shall be submitted not less than 21 days in advance of the proposed alteration,
issuance or borrowing; (viii) a copy of XG Minings annual financial reports to
the Government Authorities (except for HIDMC and DGGS) including a balance
sheet, profit and loss account and notes thereto certified by a qualified
accountant, who is a member of the Ghana Institute of Chartered Accountants, not
later than 180 days after the financial year end; and (ix) such other reports
and information in connection with our operations to Government Authorities as
they may reasonably require. We are entitled to surrender all of our rights in
respect of any part of the Lease Area not larger in aggregate than 20% of the
Lease Area by providing not less than two months notice to the Government of
Ghana. We may surrender a larger part of the Lease Area by providing not less
than 12 months notice. We have the right to terminate our interest in the
Apapam Mining Lease if the mine can no longer be economically worked, by giving
not less than nine months notice to the Government Authorities, without
prejudice to any obligation or liability incurred prior to such termination. The
Government of Ghana has the right to terminate our interest in the Apapam Mining
Lease if (i) we fail to make payments when due; (ii) contravene or fail to
comply with terms and conditions of the mining lease (however, we have 120 days
to remedy from the notice of such event); (iii) become insolvent or commit an
act of bankruptcy; or (iv) submit false statements to the Government
Authorities.

The
Apapam Mining Lease further provides that XG Mining shall report forthwith to
the Government Authorities in the event it discovers any other mineral deposits
apart from gold and silver in the Lease Area, who in turn will provide XG Mining
with the first option to prospect further and to work the said minerals subject
to satisfactory arrangements between made between XG Mining and the Government
Authorities.

- 34 -

---

Kwabeng Project

Overview

Our
Kwabeng Project (also referred to as the Kwabeng Concession) is
comprised of 44.76 sq km and our companys interest in the Kwabeng Concession is
secured by the Kwabeng Mining Lease controlled by Xtra-Gold, as to a 90%
interest; with the remaining 10% interest held by the Government of Ghana (see
Kwabeng Project  Kwabeng Mining Lease).

Location and Access

The
Kwabeng Concession is located in the East Akim District of the Eastern Region of
the Republic of Ghana, along the western, lower flank and base of the Atewa
Range, approximately 8.5 km north-northwest of our Kibi Project which is located
on the Apapam Concession. The eastern boundary of the Kwabeng Concession is
demarcated by the Atewa Forest Reserve.

Access
to our Kwabeng Project can be gained by driving northwest from the City of Accra
on the Accra-Kumasi Trunk Road, which is the main paved national highway, for
approximately 110 km until arrival at Anyinam. Make a left hand turn at the road
sign that reads Kwabeng in the middle of the Town of Anyinam and drive in a
southwesterly direction approximately 10 km until arrival at a sign reading
Xtra-Gold Mining before reaching the town of Kwabeng.

Historical Work

There
has been very little exploration for lode source gold deposits at our Kwabeng
and Pameng Projects; however, there has been detailed exploration for placer
gold deposits. Our Kibi, Kwabeng and Pameng Projects contain approximately
12,583,000 bank cubic meters (BCM) with an average grade of
0.568 grams of gold/BCM. In addition to the mineralized material, there is
potential to define reserves with further exploration.

The
placer gold deposit currently located at our Kwabeng Concession was mined by the
former owner in the early 1990s for 15 months and produced approximately 16,800
ounces of gold before operations were ceased due to mining difficulties as noted
hereunder. The placer gold is contained in a gravel deposit distributed across
the floor of the river valleys west of the Atewa Range which can easily be
excavated.

Prior Exploration by Xtra-Gold

Please
refer to our annual reports on Form 10-K previously filed with the SEC for any
exploration activities conducted by us prior to the three years required by this
Report.

2008 to 2010 Exploration Programs

Except
for the Bulk Test noted under Recovery and Sale of Placer Gold, no work
program was carried out by our company on the Kwabeng Concession during 2008 and
2009. No significant work was carried out by our company on this concession in
2010.

Future Exploration Plans

As
at the date of this Report, we have not planned for any additional exploration
activities during the next 12 months, however, we may consider doing so at a
later date. A work program to further evaluate the Kwabeng Old Mine prospect is
currently under consideration for 2011.

Recovery and Sale of Placer Gold

In
January 2007, we commenced an early stage pre-production mining process whereby
a sample area of ore was processed, the results of which assisted us in
determining the best way and most profitable manner in which to mine the placer
gold to be recovered from the mineralized material at our Kwabeng Project. The
foregoing process was internally referred to by our company as a Bulk Test. We
tested 32,906.70 BCM of mineralized material at our Kwabeng Project that we
processed through our floating placer gold washing processing plant and
recovered 608.50 ounces of placer gold. Following completion of the Bulk Test,
our company made modifications to our Wash Plant. We recovered placer gold from
the mineralized material at our Kwabeng Project since January 19, 2007. In
October 2008, we temporarily suspended our operations at the Kwabeng Project
while management of our company considered a more economic and efficient manner
in which to extract and process the placer gold recovered from the mineralized material at this Project. As at December 31, 2010,
we have sold an aggregate of 8,814.82 ounces of placer gold recovered from the
mineralized material at our Kwabeng Project, however we did not conduct any
recovery of placer gold operations at this Project during the Fiscal Year. We
did not have an exclusive agreement with any company or entity to buy the placer
gold that we recovered.

- 35 -

---

Resumption of Recovery of Placer Gold Operations at our Kwabeng
Project

We
do not plan to resume recovery of placer gold operations at our Kwabeng Project.
As stated elsewhere in this Report, we plan to focus our efforts and our
financial resources primarily on planned exploration activities on our Kibi
Project. In particular, as of the date of this Report, we have been conducting
our 2011 Drill Program at our Kibi Project (see Kibi Project  2011 Drill
Program) since January 15, 2011. With respect to any mineralized material at
our Kwabeng Project, we plan to enter into negotiations with independent
Ghanaian contract miners and operators to assume such operations at this Project
on fixed payment terms to our company. Also, the current gold price
(approximately $1,417 per ounce) is significantly greater compared to the gold
price during the previous mining effort by the former operator of this Project
(approximately $300 per ounce). On the basis of an annual recovery of placer
gold of approximately 360,000 BCM, we anticipate that recovery of placer gold
operations at this Project could be sustained for 20 years, however, this will
depend upon numerous factors including the grade and commercial recoverability
of the mineralized material and the selling gold price at the relevant time.

Former Ownership

In
the early 1990s, the former mining lessee invested approximately $24,000,000 to
open and operate a mine at the Kwabeng concession. The mining operation lasted
for 15 months and 16,800 ounces of gold was produced before the mine was shut
down due to a poor gold price, mining methodology and a lack of funds to
continue mining operations.

Resources and Reserves

No
ore resources or reserves have been identified on our Kibi Project.

Kwabeng Mining Lease

Our
subsidiary, XG Mining, which is owned by us as to a 90% interest, entered into
the Kwabeng Mining Lease on July 26, 1989 with the Government of Ghana, which
holds a 10% interest in XG Mining. The Kwabeng Mining Lease covers an area of
44.76 sq km (the Kwabeng Lease Area). The Kwabeng Mining Lease has a 30
year term expiring on July 26, 2019. We have been granted surface and mining
rights by the Government of Ghana to work, develop and produce gold in the lease
area (including processing, storing and transportation of ore and materials).
With respect to the Kwabeng Mining Lease, we are: (i) required to pay applicable
taxes and annual rental fees of approximately $15 to the Government of Ghana;
and (ii) committed to pay a royalty in each quarter through the Commissioner of
Internal Revenue based on the production for that quarter within 30 days from
the quarter end as well as a royalty on all timber felled in accordance with
existing legislation. Under the terms and conditions of the Kwabeng Mining
Lease, we are required to furnish to the Government Authorities the Technical
Records which include (i) a report in each quarter not later than 30 days after
the quarter end in connection with quantities of gold won, quantities sold,
revenue received and royalties payable for that quarter; (ii) a report
half-yearly not later than 40 days after the half year end to the aforementioned
government authorities summarizing the results of operations in the Kwabeng
Lease Area during the half year and technical records to be maintained by the
company as particularly set forth in the Kwabeng Mining Lease, which report
shall further contain a description for any geological or geophysical work
carried out by the company during that half year and a plan upon a scale
approved by the Head of the Inspectorate Division of the Minerals Commission
showing mine workings and dredging areas; (iii) a report not later than 60 days
after the end of each financial year to the Government Authorities (except for
the DGGS) summarizing the results of our operations in the Kwabeng Lease Area
during that financial year and the Technical Records, which report shall further
contain a description of the proposed operations for the following year with an
estimate of the production and revenue to be obtained; (iv) a report not later
than three months after the expiration or termination of the Kwabeng Mining
Lease, to the Government Authorities, giving an account of the geology of the
Kwabeng Lease Area including the stratigraphic and structural conditions and a
geological map on a scale prescribed in the Mining Regulations; (v) a report to
the Government Authorities (except for HIDMC and DGGS) of any proposed
alteration to its regulations and a report of the particulars of any proposed
transfer of any share of its capital stock representing 1% of more of the total
number of issued and outstanding shares; (vi) a report to the Government
Authorities on the particulars of any fresh share issuance or borrowings in
excess of an amount equal to the stated capital of XG Mining; and (vii) having
regard to items (v) and (vi), these reports shall be submitted not less than 60
days in advance of the proposed alteration, transfer, issue or borrowing; (viii)
a copy of XG Minings annual financial reports including a balance sheet, profit
and loss account and notes thereto certified by a qualified accountant who is a
member of the Ghana Institute of Chartered Accountants not later than 180 days
after the financial year end to the Government Authorities (except for HIDMC and
DGGS); and (ix) such other reports and information in connection with our
operations to the Government Authorities as they may reasonably require. We are
entitled to surrender all or any part of our interest in the Kwabeng Lease Area upon providing proper notice
to the Government of Ghana. We have the right to terminate our interest in the
Kwabeng Mining Lease if the subject mine can no longer be economically worked,
by giving not less than nine months notice to the Government Authorities,
without prejudice to any obligation or liability incurred prior to such
termination. The Government of Ghana has the right to terminate our interest in
the Kwabeng Mining Lease if (i) we fail to make payments when due; (ii)
contravene or fail to comply with terms and conditions of this mining lease
(however, we have three months to remedy from the notice of such event); (iii)
become insolvent or commit an act of bankruptcy; or (iv) submit false statements
to the Government Authorities.

- 36 -

---

The
Kwabeng Mining Lease further provides that XG Mining shall report forthwith to
the Government Authorities in the event we discover any other minerals in the
Kwabeng Lease Area, who in turn will provide XG Mining with the first option to
prospect further and to work the said minerals subject to satisfactory
arrangements made between XG Mining and the Government Authorities.

Ancillary Operations

Field Camp at Kwabeng Project

Our
company possesses our fully operational and well maintained Field Camp comprised
of an administrative office, living quarters and workshop facilities located on
our Kwabeng Concession which is accessible by paved road located approximately
two (2) hours drive from the capital city of Accra. Our Field Camp is the base
of operations for the majority of our administrative activities and all of our
exploration activities. All of our senior staff is accommodated in the Field
Camp with our junior staff located in the surrounding towns and villages. XG
Mining has rehabilitated the Field Camp which included installation of a
communication system for Internet access, electronic mail, telephone and
facsimile service and minor construction repairs. Our Field Camp is within cell
phone coverage and is supplied with electricity from the national power grid,
which lines run along the road accessing our Field Camp.

Fuel and Spare Parts Supply

We
deliver fuel from Accra by tanker and discharge the fuel into and store the fuel
in the fuel tank facility located within our Field Camp. We purchase spare parts
for all of our equipment either locally or from suppliers overseas and store
such parts in the secure spare parts warehouse located at our Field Camp.

Workspace

There
is adequate office space at our Field Camp to accommodate our administrative,
geology, surveying, equipment maintenance and other departments, as well as
their technical support and our laborers.

Equipment Purchases

During
the Fiscal Year, we purchased a bulldozer, an excavator, a Mack truck and a
lowboy trailer to assist us with our exploration activities. During the next 12
months, we plan on purchasing another bulldozer and excavator to assist us with
our exploration activities. In addition, in connection with our exploration
activities at our Projects, we own the equipment necessary to carry out such
activities, except for a drill rig which we plan to rent.

Equipment Maintenance

Any
maintenance of our excavator, or other equipment which we may own, will be
carried out in the workshops located within our Field Camp.

Capital Expenditures

We
do not anticipate any significant capital expenditures in the next 12 months in
connection with recovery of placer gold operations as we have not planned to
conduct such operations during this period. As stated elsewhere in this Report,
we plan to negotiate with independent Ghanaian contract miners and operators to
resume such operations.

Pameng Project

Overview

Our
Pameng Project (also referred to as the Pameng Concession) is comprised
of 40.51 sq km and our companys interest is secured by the Pameng Mining Lease
controlled by Xtra-Gold, as to a 90% interest; with the remaining 10% interest
held by the Government of Ghana (see Pameng Project  Pameng Mining Lease).

- 37 -

---

The
Pameng Concession is located in the East Akim District of the Eastern Region of
Ghana, along the western, lower flank and base of the Atewa Range, approximately
2 km west-northwest of our Kibi Project which is located on the Apapam
Concession. Access to our Pameng Project can be gained by driving northwest from
the City of Accra on the Accra-Kumasi Trunk Road, which is the main paved
national highway, for approximately 125 km until arrival at the village of
Pameng where there is a road sign reading Pameng. Make a left hand turn at the
Pameng sign and drive southwest approximately 2 km to reach our Pameng
Concession. Our Pameng Concession is located approximately 15 km south-southwest
from our Field Camp.

Historical Work

To
the best of our companys knowledge, the Pameng Concession has never been
subjected to modern, systematic exploration for lode gold mineralization.

Prior Exploration by Xtra-Gold

General

Please
refer to our annual reports on Form 10-K previously filed with the SEC for
exploration activities conducted by us prior to the three years required by this
Report.

2008 to 2010 Exploration Programs

No
significant work program was carried out in 2008 through to 2009. Lode gold
exploration efforts to date by our company on our Pameng Project have been
limited to a few reconnaissance geology/prospecting traverses. No significant
lode gold exploration work was conducted in 2010 on this Project.

Future Exploration Plans

As
at the date of this Report, we have not planned for any additional exploration
activities during the next 12 months, however, we may consider doing so at a
later date. A first pass work program including soil geochemistry and scout
trenching is currently under consideration for 2011.

Recovery and Sale of Place Gold

During
the Fiscal Year, we negotiated with independent Ghanaian contract miners and
operators in connection with their recovery of placer gold operations on fixed
payment terms to our company.

Resources and Reserves

No
ore resources or reserves have been identified on our Pameng Project.

Pameng Mining Lease

Our
subsidiary, XG Mining, which is owned by us as to a 90% interest, entered into
the Pameng Mining Lease on July 26, 1989 with the Government of Ghana, which
holds a 10% interest in XG Mining. The Pameng Mining Lease covers an area of
40.51 sq km (the Pameng Lease Area). The Pameng Mining Lease has a 30
year term expiring on July 26, 2019. We have been granted surface and mining
rights by the Government of Ghana to work, develop and produce gold in the lease
area (including processing, storing and transportation of ore and materials).
See Kwabeng Project  Mining Lease for identical terms for the Pameng Mining
Lease, except for the name of the mining lease and the lease area.

Banso Project

Overview

Our
Banso Project (also referred to as the Banso Concession) is comprised
of 55.28 sq kmand, as at the end of the Fiscal Year, our companys
interest was secured by a single prospecting license (the Banso and Muoso
PL) registered to XGEL covering the Banso Concession and the Muoso
Concession. We subsequently converted the Banso and Muoso PL and, in January
2011, XG Mining was granted a mining lease covering the Banso Concession (the
Banso Mining Lease).

Location and Access

The
Banso Concession is located in the East Akim District of the Eastern Region of
Ghana, approximately 11 km south-southeast from our Field Camp.

- 38 -

---

Both
of the Banso Concession and the Muoso Concession lie in the Kibi-Winneba Gold
Belt on the western flanks of the prominent Atewa Range, which is underlain by
Birimian greenstone, phyllites, meta-tuffs, epi-diorite, meta-greywacke and
chert. The valleys, over which this concession isare located, are underlain by
thick sequences of Birimian metasediments. The north-western end of the Atewa
Range is the type-locality for the Birimian metasediments and metavolcanics. The
area where both of our Banso and Muoso Projects are located is one of the oldest
placer gold mining areas of Ghana, dating back many centuries.

Access
to the Banso Concession is gained by driving northwest approximately 136 km from
Accra on the paved Accra-Kumasi Trunk Road.

Historic Work

Historical
exploration and mining has mainly focused on placer gold. Prior to the
acquisition of our interest in the Banso Concession, to the best of our
knowledge and based on mining records in Ghana, there has never been a detailed
documented bedrock exploration program conducted on this concession.

Prior Exploration by Xtra-Gold

General

Please
refer to our annual reports on Form 10-K previously filed with the SEC for
exploration activities conducted by us prior to the three years required by this
Report.

All
gold results for the following exploration programs are reported in ppm Au
(part per million gold). The term ppm represents part per million where 1
ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb).

2008 to 2010 Exploration Programs

Our
Banso Project is at an early stage of evaluation and no mineralized material or
reserve estimates have been made. Prior to the period covered by this Report, we
had completed preliminary lode gold exploration programs including grid
establishment, soil sampling, prospecting/geological mapping, pitting/trenching
and geophysics, aimed at identifying lode gold (hardrock) mineral occurrences at
our Banso Project, the results of which are noted hereunder.

*2008
  Banso Target Follow Up Program*

Exploration
work on the Banso Concession during 2008 was aimed at advancing the lode gold
targets produced by the Phase I (2005) and Phase II (2006) work programs. Work
focused on the further evaluation of the Banso Area 3 and Ankaase gold-in-soil
anomalies located at the southern extremity of the Banso Concession.

The
Banso Concession was subjected to manual trenching and soil geochemistry on an
intermittent basis from late November 2007 to May 2008. All geotechnical field
work such as mapping and sampling was conducted in-house by XGEL personnel. Grid
establishment (line cutting) and manual trench excavation was conducted on a
contract basis by Amofah and Associates of Accra and Andaco Enterprises Limited
of Kwabeng, respectively.

*Banso
  Area 3 Trenching*

Three
hand-dug trenches totaling 138 m were excavated on the Banso Area 3 gold-in-soil
anomaly located at the southeastern extremity of the Banso Concession. Trenches
Nos. TAB001 to TAB003 were excavated in a north-south direction, across the
Phase II (2006) trenching located along the L1400N gold-in-soil anomaly, to test
the subsurface expression of an extensive ENE-trending quartz float train
discovered during prospecting. Trenches TAB002 and TAB003 form a continuous
trench extending over a 112 m length. A total of 69 horizontal channel samples
were collected at two (2) meter intervals, with shorter samples utilized in
areas of geological interest (i.e. quartz veining).

Trenches
TAB002  TAB003 exposed a system of intermittent, ENE-trending, quartz veining
extending over a 80 meter trench-length, including a 10 meter zone encompassing
three parallel quartz veins ranging from 0.25 m to 0.35 m in width, within the
northern portion of TAB002. Two of the quartz veins yielded significant gold
values of 4.64 ppm and 7.67 ppm over true-widths of 0.25 m and 0.28 m,
respectively. The TAB002-TAB003 trench yielded intermittent, anomalous gold
values over its entire 112 meter length. Including exploration significant
intervals of 0.19 ppm gold over 46 m and 0.22 ppm gold over 16 m.

- 39 -

---

*Banso
  Area 3 Soil Sampling*

The
Banso Area 3 gold-in-soil anomaly was covered by a new, detailed (100 m),
north-south oriented, soil geochemistry grid designed to better define the
ENE-trending, gold-bearing quartz vein system discovered in trenches TAB002 and
TAB003. A total of 460 soil samples were collected at 25 meter intervals along
the 12.625 line-kilometers of cross lines. Including the Regional Exploration
(2004) and Phase II (2005) work programs a total of 1,702 soil samples have been
collected on the Banso Area 3 grid.

The
anomalous threshold for the soil sample results was set at 0.05 ppm gold based
on past work experience in the Kibi Gold Belt. 205 (12%) out of the 1,702 soil
samples returned gold values greater than the 0.05 ppm anomalous threshold,
including: 43 (2.5%) samples over 0.25 ppm; 22 (1.3%) samples over 0.50 ppm; and
14 (0.8%) samples over 1.0 ppm gold.

The
combined soil geochemistry surveys outlined three parallel, ENE-trending,
gold-in-soil anomalous trends across a 600 meter distance. The gold-in-soil
anomalies (> 0.05 ppm Au), ranging from 50 meter to 150 meter in width, tend
to be patchy in nature and / or pinch-out along their 600 meter to 1,500 meter
trend-extents. The northernmost anomalous trend exhibits a good correlation with
the quartz vein system identified in trenches TAB002-TAB003.

*2010
  Exploration Program*

No
significant lode gold exploration work was conducted in 2010 on our Banso
Project.

Future Exploration Plans

As
at the date of this Report, we have not planned for any additional exploration
activities during the next 12 months, however, we may consider doing so at a
later date.

Resources and Reserves

No
ore resources or reserves have been identified on our Banso Project.

Banso Mining Lease

Our
companys interest in the Banso Project was previously held by a prospecting
license granted by the Government of Ghana on September 24, 2011 covering a
licensed area of 51.67 sq km. This prospecting license also covered a licensed
area of 55.65 with respect to our companys interest in our Muoso Project (see
Muoso Project  Muoso Mining Lease). Subsequently, in the Fiscal Year, XG
Mining made an application to the Government of Ghana to convert the Banso and
Muoso PL to a mining lease. Our application received parliamentary approval
resulting in the Government of Ghana granting and registering the Banso Mining
Lease to XG Mining on the following terms and conditions.

The
Banso Mining Lease is dated January 6, 2011 and is controlled by Xtra-Gold, as
to a 90% interest; with the remaining 10% interest held by the Government of
Ghana. The Banso Mining Lease covers an area of 51.67 sq km (the Banso Lease
Area). The Banso Mining Lease has a 13 year term expiring on January 5,
2024. We have been granted surface and mining rights by the Government of Ghana
to work, develop and produce gold in the Banso Lease Area (including processing,
storing and transportation of ore and materials). With respect to the Banso
Mining Lease, we are: (i) required to pay applicable taxes and annual rental
fees of approximately (GH¢260.00 (USD$167) to the Government of Ghana; and (ii)
committed to pay a royalty in each quarter through the Commissioner of Internal
Revenue based on the production for that quarter within 30 days from the quarter
end as well as a royalty on all timber felled in accordance with existing
legislation. Under the terms and conditions of the Banso Mining Lease, we are
required to (i) commence commercial production of gold within two (2) years from
the date of this mining lease; (ii) furnish to the Government Authorities, MLFM,
HIDMC and DGGS (i) a report in each quarter not later than 30 days after the
quarter end in connection with quantities of gold won, quantities sold, revenue
received and royalties payable for that quarter; (ii) a report half-yearly not
later than 40 days after the half year end to the Government Authorities
summarizing the results of operations in the Banso Lease Area during the half
year and the Technical Records to be maintained by the company as particularly
set forth in the Banso Mining Leases, which report shall further contain a
description for any geological or geophysical work carried out by the company
during that half year and a plan upon a scale approved by HIDMC showing mine
workings and dredging areas; (iii) a report not later than 60 days after the end
of each financial year to the Government Authorities (except for DGGS)
summarizing the results of our operations in the Banso Lease Area during that
financial year and the Technical Records, which report shall further contain a
description of the proposed operations for the following year with an estimate
of the production and revenue to be obtained; (iv) a report not later than three
months after the expiration or termination of the Banso Mining Lease, to the
Government Authorities, giving an account of the geology of the Banso Lease Area
including the stratigraphic and structural conditions and a geological map on a
scale prescribed in the Mining Regulations; (v) a report to the Government Authorities (except for HIDMC
and DGGS) of any proposed alteration to its regulations and a report of the
particulars of any proposed transfer of any share of its capital stock
representing 1% of more of the total number of issued and outstanding shares;
(vi) a report to the Government Authorities on the particulars of any fresh
share issuance or borrowings in excess of an amount equal to the stated capital
of XG Mining; and (vii) having regard to items (v) and (vi), these reports shall
be submitted not less than 60 days in advance of the proposed alteration,
transfer, issue or borrowing; (viii) a copy of XG Minings annual financial
reports including a balance sheet, profit and loss account and notes thereto
certified by a qualified accountant who is a member of the Ghana Institute of
Chartered Accountants not later than 180 days after the financial year end to
the Government Authorities (except for HIDMC and DGGS); and (ix) such other
reports and information in connection with our operations to the Government
Authorities as they may reasonably require. We are entitled to surrender all or
any part of our interest in the Banso Lease Area upon providing proper notice to
the Government of Ghana. We have the right to terminate our interest in the
Banso Mining Lease if the subject mine can no longer be economically worked, by
giving not less than nine months notice to the Government Authorities, without
prejudice to any obligation or liability incurred prior to such termination. The
Government of Ghana has the right to terminate our interest in the Banso Mining
Lease if (i) we fail to make payments when due; (ii) contravene or fail to
comply with terms and conditions of this mining lease (however, we have three
months to remedy from the notice of such event); (iii) become insolvent or
commit an act of bankruptcy; or (iv) submit false statements to the Government
Authorities.

- 40 -

---

The
Banso Mining Lease further provides that XG Mining shall report forthwith to the
Government Authorities in the event we discover any other minerals in the Banso
Lease Area, who in turn will provide XG Mining with the first option to prospect
further and to work the said minerals subject to satisfactory arrangements made
between XG Mining and the Government Authorities.

Muoso Project

Overview

Location and Access

Our
Muoso Project (also referred to as the Muoso Concession) is comprised
of 55.28 sq km and, as at the end of the Fiscal Year, our companys interest was
secured by the Banso and Muoso PL registered to XGEL covering the Banso and
Muoso Concessions. We subsequently converted the Banso and Muoso PL and, in
January 2011, XG Mining was granted a mining lease covering the Muoso Concession
(the Muoso Mining Lease).

Location and Access

The
Muoso Concession is located in the East Akim District of the Eastern Region of
Ghana, approximately 10 km south-southeast from our Field Camp.

Access
to our Muoso Project is gained by driving northwest approximately 80 km from
Accra on the paved Accra-Kumasi Trunk Road. This highway passes through the
easternmost portion of the Muoso Concession and shares a common boundary with
the Kwabeng Concession. From the town of Osino, one would drive northwest
approximately 5 km to the town of Anyinam, from which an all weather direct road
heads south through the centre of the Muoso Concession and onto the Banso
Concession, approximately 15 km south of the Accra-Kumasi Trunk Road. The town
of Muoso is approximately 10 km from Anyinam. A number of dirt roads, trails and
footpaths offer additional access to this concession.

Historic Work

Historical
exploration and mining has mainly focused on placer gold. Prior to the
acquisition of our interest in the Muoso Concession, to the best of our
knowledge and based on mining records in Ghana, there has never been a detailed
documented bedrock exploration program conducted on this concession.

Prior Exploration by Xtra-Gold

General

Please
refer to our annual reports on Form 10-K previously filed with the SEC for
exploration activities conducted by us prior to the three years required by this
Report.

All
gold results for the following exploration programs are reported in ppm Au
(part per million gold). The term ppm represents part per million where 1
ppm = 1 gram per tonne (g/t) = 1,000 part per billion (ppb).

- 41 -

---

2008 to 2010 Exploration Programs

Our
Muoso Project is at an early stage of evaluation and no mineralized material or
reserve estimates have been made.

*2008
  Muoso Target Follow Up Program*

Exploration
work on the Banso and Muoso Concessions during the 2008 reporting period was
aimed at advancing the lode gold targets produced by the Phase I (2005) and
Phase II (2006) work programs. Work focused on the further evaluation of the
Banso Area 3 and Ankaase gold-in-soil anomalies located at the southern
extremity of the Banso Concession and eastern extremity of the Muoso
Concessions, respectively.

Hand
auger sampling and trenching programs were implemented at the Muoso Concession
on an intermittent basis from February to November, 2008. All geotechnical field
work such as mapping and sampling was conducted in-house by XGEL personnel. Grid
establishment (line cutting) and manual trench excavation was conducted on a
contract basis by Amofah and Associates of Accra and Andaco Enterprises Limited
of Kwabeng, respectively.

*2009
  and 2010 Trenching Program*

From
December 1, 2009 to February 20, 2010, we conducted a 546 linear-meters
trenching program at our Muoso Project. Details of the trenching program are
noted below under Ankaase Trench 2009 Trenching Program.

Ankaase
  Trend Auger Sampling

As
a follow up to the Phase II (2006) soil geochemistry survey, a hand-auger
program was implemented on the Ankaase gold-in-soil anomaly located at the
eastern extremity of the Muoso Concession. The auger sampling was designed to
test the geochemical signature of the gold-in-soil anomalies at depth within the
saprolite horizon in order to better define trenching targets. A total of 99
sites, totaling 371 linear-meters, were augered to an average depth of
approximately 3.75 m (5 m max.). A one (1) m sample was collected from the
saprolite horizon at the bottom of each hole. Auger hole spacing was typically
at 25 m, with some 12.5 meter infilling.

The
anomalous threshold for the auger sample results was set at 0.10 ppm gold based
on past work experience in the Kibi Belt. 21 (21%) out of the 99 auger samples
returned gold values greater than the 0.10 ppm anomalous threshold; including
four samples over 0.5 ppm and a maximum value of 2.46 ppm. The auger sampling
proved to be an efficient trench target definition method.

Ankaase
  Trend 2008 Trenching Program

The
2008 scout trenching program encompassed 19 hand dug trenches, ranging from 8 m
to 236 m in length and from 1.5 m to 3.5 m in depth, and totaling 805 linear
meters. The reconnaissance trenching was designed to test the geochemical
signature at depth, within the in situ saprolite (oxidized rock) horizon, of the
southern half (1.4 km) of the extensive Ankaase Gold Trend; an over 3.5 km long,
NE-trending, anomalous gold-in-soil trend characterized by the widespread
occurrence of auriferous quartz floats.

This
initial reconnaissance trenching program yielded very encouraging results and
confirmed that the extensive Ankaase gold-in-soil trend is spatially associated
with a typical Ashanti style shear zone setting developed proximal to a
Birimian metavolcanic-metasediment contact with associated Belt granitoids.

A
total of 511 horizontal channel samples were collected from a canal excavated
along the bottom sidewall of the trench (~ 0.10m above floor). Samples were
typically 2 m in length, with shorter (1 m) samples utilized in areas of
geological interest (i.e. quartz veining). 85 (17%) out of the 511 channel
samples returned gold values greater than 0.5 ppm, including: 52 (10%) samples
over 1.0 ppm; and 20 (4%) samples over 3.0 ppm gold.

Nine
(9) out of the 19 trenches yielded significant gold intercepts as presented in
Table 8; with an additional seven (7) trenches yielding anomalous, exploration
significant gold values; and three (3) trenches failing to return any anomalous
gold values.

- 42 -

---

Table 8: Significant Trench Specifications  Ankaase Gold
Trend

Trench ID
    From (meters)
    To (meters)
    Trench Length (meters)(1)
    Gold(2) (ppm)TMU001
    17.00
    25.00
    8.00
    2.08including
    17.00
    21.00
    4.00
    3.59TMU002
    42.00
    44.00
    2.00
    13.70TMU004
    4.00
    22.00
    18.00
    1.75including
    19.00
    20.00
    1.00
    9.37TMU004
    47.00
    58.00
    11.00
    1.24including
    48.00
    52.00
    4.00
    2.75TMU005
    0.00
    62.00
    62.00
    0.43including
    2.00
    26.00
    24.00
    0.63TMU008-010
    N/A
    N/A
    24.00
    1.79including
    
    
    1.00
    7.00TMU015
    0.00
    15.00
    15.00
    1.06including
    8.00
    12.00
    4.00
    2.16TMU016
    20.00
    26.00
    6.00
    4.73TMU019
    15.00
    29.00
    14.00
    2.08including
    16.00
    20.00
    4.00
    6.52including
    18.00
    19.00
    1.00
    10.95


|(1) | Reported intercepts are trench-lengths; true width of
      mineralization is unknown at this time.
|--- | ---------------------------------------------------------------------------------------------------
|    |                                                                                                    
|(2) | The term ppm represents part per million where 1 ppm
      = 1 gram per tonne (g/t).           

|Note: | Trenches #TMU003, 011, 012, 013, 014, 017 and 108 yielded
      anomalous, exploration significant gold value. Trenches #TMU006, 007 and
      009 yielded no anomalous gold values.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Trenching
to date has intermittently traced an approximately 150 m to 200 m wide,
NE-trending deformation zone over an approximately 1.4 km strike length. This
structural corridor is characterized by several sub parallel, shear hosted,
gold-bearing quartz vein zones ranging from less than 1 m to approximately 24 m
in trench length; with individual quartz veins ranging from less than 1 cm to
5.5 m in trench length. A granitoid body exhibiting widespread, low grade gold
mineralization (0.43 ppm gold over 62 m) exposed within trench TMU005 at the
southwestern extremity of the Ankaase Gold Trend is also of significant
exploration interest.

Ankaase Trend 2009-2010 Trenching Program

The
  2009-2010 trenching program encompassed 12 hand dug trenches, ranging from 30
  m to 68 m in length and from 1.2 m to 3.5 m in depth, and totaling 546.0 linear
  meters. This trenching program commenced on December 1, 2009 and was completed
  on February 20, 2010. By the end of 2009, five (5) trenches totaling approximately
  208.0 m had been excavated and channel sampled. The reconnaissance follow-up
  trenching was designed to better define the structural controls of the mineralization
  identified during the initial 2008 scout trenching program.

Resources and Reserves

No
ore resources or reserves have been identified on our Muoso Project.

Muoso Mining Lease

Our
companys interest in the Muoso Project was previously held by the Banso and
Muoso PL granted by the Government of Ghana on September 24, 2011 covering a
licensed area of 55.65 sq km with respect to this Project. The Banso and Muoso
PL also covered a licensed area of 51.67 with respect to our companys interest
in our Banso Project (see Banso Project  Banso Mining Lease). Subsequently,
in the Fiscal Year, XG Mining made an application to the Government of Ghana to
convert the Banso and Muoso PL to a mining lease. Our application received
parliamentary approval resulting in the Government of Ghana granting and
registering the Muoso Mining Lease to XG Mining on the following terms and
conditions.

The
Muoso Mining Lease is dated January 6, 2011 and is controlled by Xtra-Gold, as
to a 90% interest; with the remaining 10% interest held by the Government of
Ghana. The Muoso Mining Lease covers an area of 40.51 sq km (the Muoso Lease
Area). The Muoso Mining Lease has a 14 year term expiring on January
5, 2025. We have been granted surface and mining rights by the Government of
Ghana to work, develop and produce gold in the Muoso Lease Area (including
processing, storing and transportation of ore and materials). See Banso Project
 Banso Mining Lease for identical terms for the Muoso Mining Lease, except for
the term of the mining lease, the lease area and the annual rent payable to
Mincom.

- 43 -

---

Edum Banso Project

Our
Edum Banso Project (also referred to as the Edum Banso Concession) is
comprised of 20.60 sq km and lies at the southern extremity of the Ashanti gold
belt in the Western Region of Ghana.

Location and Access

The
Edum Banso Concession lies within the south Ashanti gold belt in the Western
Region of Ghana and is located approximately 235 km west of Accra and 15 km
northwest of Takoradi, the regional capital. The north-western extremity of this
concession falls within the grounds of the Benso Oil Palm Plantation (BOPP).

Access
to this Project is accessible via a secondary road from Apowa on the Takoradi to
Tarkwa highway; with the all-season road dissecting the concession in a
northerly direction through the hamlet of Edum Banso, located in the northern
portion of the property. Our Edum Banso Project is located approximately 200 km
southwest from our Field Camp.

Option Agreement for Prospecting License

Our
wholly-owned subsidiary, XGEL entered into an option agreement dated October 17,
2005 (the Adom Option Agreement) with Adom Mining Ltd. (Adom),
a 100% wholly registered Ghanaian company, who is the registered proprietor of a
prospecting license which Adom entered into with The Government of Ghana on May
8, 1991, covering a licensed area of 20.60 sq km (the Edum Banso Licensed
Area). The current term of the prospecting license expired on December 1,
2010 and a further one year renewal has been approved by Mincom. At the time of
making our application for renewal of the prospecting license, as required by
Mincom, we submitted (i) a comprehensive terminal report, including logs of pits
and assay results; (ii) a detailed financial report; (iii) evidence of annual
ground rent payments; and (iv) an environmental permit from the EPA.

Previously,
Newmont Ghana Limited (Newmont) had entered into an option agreement
with Adom in connection with the Edum Banso Project, however abandoned their
interest.

Under
the terms and conditions of the prospecting license, Adom has the right to
prospect for and prove gold under or in the licensed area including the right to
conduct such geological and geophysical investigations in the licensed area in
order to determine an adequate quantity of geologically proven and mineable
reserve of gold (directly or through agents, contractors or sub-contractors).
Under the prospecting license, the holder has the right to (i) assign or
mortgage its interest in the prospecting license, subject to obtaining the
consent of the Government of Ghana who may impose certain conditions in
connection therewith; (ii) surrender its interest in the prospecting license;
and (iii) renew the term of the prospecting license for a period of two years or
such other renewal period as may be granted in accordance with applicable mining
laws of Ghana.

The
Government of Ghana has the right to terminate the prospecting license in the
event the holder of the prospecting license (i) fails to make payments when due;
(ii) contravenes or fails to comply with terms and conditions of prospecting
license; (iii) becomes insolvent or commits an act of bankruptcy; or (iv)
submits false statements to the Government of Ghana. In any of the foregoing
events, the holder will have 21 days in which to remedy any of these
occurrences. If upon expiration of prospecting license, the holder has fulfilled
its obligations and has established to the Government of Ghana that development
of a mine from ore and reserves established within the licensed area is
economical and financially feasible, the Government of Ghana shall grant the
holder with first option to (i) acquire a license for purposes of mining gold in
the licensed area of the Edum Banso concession; and (ii) participate in mining
project in licensed area, subject to negotiation with the Government of Ghana of
satisfactory terms for such license and participation.

At
the time of execution of the Adom Option Agreement, we paid Adom $5,000 as
consideration for entering into the agreement with us. We are required to pay
Adom additional payments of $5,000 on the anniversary date of the Adom Option
Agreement for each year that we hold an interest in such agreement. The term of
the Adom Option Agreement is for five years. There are no other termination
rights available to Adom. Prior to the expiry of the Adom Option Agreement, Adom
extended the term of this agreement for a further three years expiring on
November 13, 2013.

- 44 -

---

We
are required to make an additional payment of $200,000 to Adom at the time of
commencement of the production of gold in or on the Edum Banso Project;
provided, however in the event less than two million ounces of proven and
probable reserves are discovered in or on the Edum Banso Project, this payment
shall be reduced to $100,000. Under the terms and conditions of the Adom Option
Agreement, Adom has granted XGEL the sole and exclusive right and option to
acquire all of its right, title and interest in the prospecting license, which
option may be exercised by XGEL at any time during the term. Adom has further
granted XGEL the exclusive right of free and unrestricted access to the Edum
Banso Project to explore, develop and, provided XGEL has exercised the option,
to mine, extract, remove and sell any and all ores, minerals, concentrates or
other products from the Edum Banso Project. Upon XGELs written election to
exercise the option, Adom shall forthwith transfer the prospecting license to
XGEL, subject only to a reserved royalty of 2% of the net smelter returns
(NSR) from all ores, minerals or other products mined and removed from
the Edum Banso Project and sold by XGEL. In the event less than two million
ounces of proven and probable reserves are discovered in or on the Adom Project,
the reserved royalty shall be 1% of the NSR. Adom has granted XGEL the exclusive
right and option, exercisable by XGEL at any time to purchase the entirety of
the reserved royalty for the sum of $2,000,000. No payment of the actual NSR
shall be credited toward the reserved royalty purchase price. In the event less
than two million ounces of proven and probable reserves are discovered in or on
the Edum Banso Project, the reserved royalty purchase price shall be $1,000,000.
Pursuant to the terms of an amending agreement entered into between the parties
on October 19, 2006, XGEL has the right, without the prior consent of Adom, to
assign or transfer its rights under the Option Agreement and the option to any
affiliate or third party or to enter into a joint venture in connection
therewith provided that any assignment, transfer or joint venture by XGEL shall
be subject to agreement by the assignee, transferee or joint venture partner to
be bound by the terms of this agreement.

Geology

The
Edum Banso concession is underlain by basic to intermediate metavolcanic rocks,
volcanoclastic rocks, greywackes and phyllites of the Upper Birimian Formation.
These rocks are intruded by Dixcove suite granites in the north, mainly composed
of hornblende granites, granodiorites, and gabbros and diorites in the south.
Similar intrusive granites in Ghana have been proven to host disseminated
sulphide hosted gold mineralization. Two major thrust faults interpreted from
aeromagnetic data run north by northeast through the project area.

Historic Work

The
only gold production on the concession was from local miners working the
auriferous gravels and quartz veins as reported by J.W. Lunn in the 1930s.
Amercosa (formerly AngloAmerican) reportedly worked on the project in the late
1990s, however the results from this work are not published. St. Jude
Resources, a Canadian public mining company, conducted geophysical surveys
including magnetic and induced polarization surveys. The prospective structures
identified in these surveys were followed up by geochemical surveys which
included soil, trench and pit sampling.

Stream
sediment sampling throughout the entire concession area by Newmont Mining in
2003 defined a broad anomalous gold zone approximately 7 km long by 1.5 km wide,
roughly conforming to the regional geological trend. Follow-up soil (1,109
samples) and rock sampling by Newmont in 2004 further constrained this broadly
anomalous area into two distinctive anomalies, while geophysical interpretation
suggests they are coincident with the surface expression of two major
North-South oriented thrust faults.

Prior Exploration by Xtra-Gold

2008 to 2010 Exploration Programs

*Phase
  I Exploration Program*

A
first phase exploration program (the Phase I Work Program) was
implemented on the Edum Banso concession from August 2007 to January 2008 by
Torkornoo & Associates Limited (TAL), at a cost of approximately
$177,000. TAL is a Ghanaian geological consultancy with the principal being a
professional geologist registered with The Australasian Institute of Mining and
Metallurgy (AusIMM).

Based
on the complex structural nature of gold deposits identified to date by Third
Parties within the Hwini-Butre/Benso-Subriso gold district, the Phase I Work
Program encompassed infill soil sampling, reconnaissance geology / prospecting,
hand auger sampling and trenching designed to identify cost-effective drill
targets. The tighter soil geochemical coverage (200m) was implemented to better
define the length-extents and trends of the gold-in-soil anomalies detected by
the historical Newmont soil program (2004). The deep auger components of the
program was proposed to test the geochemical signature of gold-in-soil anomalies
at depth in order to better define trenching and drilling targets. The results
of this program are noted hereunder.

- 45 -

---

Phase
  I fieldwork consisted of the following:

- Grid establishment: 8.4 km baseline, 73.8 km gridlines;
- Soil sampling: 2,703 samples collected, 1,815 samples submitted for gold
  analysis;
- Rock sampling: 68 samples;
- Hand auger sampling: 252 holes / samples;
- Trenching: 6 trenches (319 m), 214 channel samples.

*Soil
  / Rock Sampling; Methodology  Results*

The
first pass of the soil sampling survey was carried out using a classical digging
tool called a soso to a typical depth 0.5 m. Infill sampling in areas of
interest was implemented by shallow auger sampling to a 1.0 meter depth. A total
1,815 soil samples were submitted for gold analysis.

TAL
arbitrarily set the anomalous threshold for the soil sample results at 0.05 ppm
gold based on past work experience in the Hwini-Butre / Benso-Subriso gold
district. 123 out of the 1,815 soil samples (approx. 7%) returned gold values
greater than the 0.05 ppm anomalous threshold. The soil geochemistry survey
outlined a 8.0 km long by approximately 0.6 km wide, gold-in-soil anomalous
trend conforming to the regional NNE structural trend. This gold-in-soil anomaly
(> 0.05 ppm Au) tends to be patchy in nature and / or to pinch-out along its
8.0 km extent. The term ppm represents part per million where 1 ppm = 1 gram
per tonne (g/t) = 1,000 part per billion (ppb). Four areas (i.e. Zone A, B, C
and D) within the defined gold-in-soil anomalous corridor were relative
continuity and / or the favorable geological and structural settings of the
gold-in-soil anomalies.

Zone
A, located to the north of the town of Edum Banso, extends from gridline 14700N
to 15200N (500 m). Zone B, located to the northeast of the hamlet of Edum
Dominase, extends from line 11300N to 12100N (800 m). Zone C is an approximately
200 m by 200 m area located in the east-central portion of the concession. This
zone is characterized by three (3) consecutive, strongly anomalous gold-in-soil
values over a 50 meter distance on Line 11300N. Zone D consists of a NE-trending
zone of discrete gold-in-soil values extending from L8200N to L9900N (1,700 m)
at the south-western extremity of the concession.

Based
on geophysical interpretation, including airborne magnetic and radiometric data,
the Zone C and Zone D gold-in-soil anomalies appear to be spatially associated
with the contact between the Birimian Metavolcanics and the circular Mpohor
Intrusive Complex.

A
total of 68 rock (float) samples were collected during reconnaissance geological
mapping carried out alongside the soil sampling. This rock sampling produced a
single exploration-significant gold value from a float of iron oxide stained
quartz located to the south of the Zone D gold-in-soil anomaly. Similarly to the
Zone C and Zone D anomalies this anomalous quartz float also appears to lie
proximate to the inferred metavolcanic-Mpohor Complex contact.

*Deep
  Auger Sampling; Methodology  Results*

As
a follow up to the soil sampling a deep auger program was implemented on the
four priority areas to test the geochemical signature of the gold-in-soil
anomalies at depth within the saprolite horizon in order to better define
trenching targets. A total of 252 sites were augered to an average depth of
approximately 4.0 m with a one (1) meter sample collected from the saprolite
horizon at the bottom of each hole. Auger hole spacing was typically 25 m, with
some 12.5 meter infilling.

TAL
set the anomalous threshold for the auger sample results at 0.10 ppm gold based
on past work experience in the Hwini-Butre / Benso-Subriso gold district. 19
(7.5%) out of the 252 deep auger samples returned gold values greater than the
0.10 ppm anomalous threshold.

*Manual
  Trenching; Methodology  Results*

The
Zone A and Zone D deep auger anomalies (> 0.10 ppm Au) were further tested by
three (3) trenches totaling 160 m and three (3) trenches totaling 159 m,
respectively. The trenches were manually excavated with pickaxes and shovels to
a vertical depth of 4 m. A total of 214 channel samples were collected from the
sidewall of the six (6) trenches totaling 319 m. Samples consisted of horizontal
channels, typically 1 m or 2 m in length, cut approximately 0.1 m above the
floor of the trench.

- 46 -

---

The
Zone A trenching failed to yield any significant gold results. Trench EBTR005
yielded the only exploration  significant gold results from the Zone D
trenching in the form of a length-weighted average grade of 1.23 ppm gold over a
4 meter trench-length (2 samples). The anomalous section is characterized by
chlorite altered mafic metavolvanic rock hosting fine, iron oxide stained,
quartz stringers.

*Results
  / Recommendations*

Although
the Edum Banso Phase I Work Program only yielded limited exploration-significant
gold results, the spatial association of the Zone C and Zone D gold-in-soil and
deep auger anomalies, the anomalous trench EBTR005 channel samples, and the
auriferous quartz float, with the geophysically interpreted, north-western rim
of the Mpohor Intrusive Complex is of considerable exploration significance.

Economically
significant gold mineralization is known to exist along the south-eastern margin
of the circular Mpohor Complex, approximately 2 km to the south-east of the Edum
Banso Concession. Although published information, geophysical interpretation,
and the results of the present work program indicate that the Edum Banso
Concession shares a similar geological / structural setting as the deposits
located on the south-eastern rim of the Mpohor Complex, it by no means implies
that our Edum Banso Project hosts similar mineral deposits.

Recommended
work to further advance the project includes: (a) additional deep auger sampling
of the Zone C and Zone D gold-in-soil anomalies; (b) continued reconnaissance
geology and rock (float) sampling along the inferred margin of the Mpohor
Complex; and (c) detail structural interpretation of the property area based on
the airborne magnetic and radiometric data. No significant work was carried out
by our company on this concession in 2010. Further exploration activities will
be planned once an ongoing geological, geochemical and geophysical data
compilation has been completed. As at the date of this Report, we have not
planned to conduct any exploration activities on this project during the next 12
months, however, we may consider doing so at a later date.

Future Exploration Plans

As
at the date of this Report, we have not planned for any additional exploration
activities during the next 12 months. Our plan is to negotiate the sale of our
interest in this Project.

Resources and Reserves

No
ore resources or reserves have been identified on our Edum Banso Project.

**Item
3.**          LEGAL
PROCEEDINGS

Our
company or any of our subsidiaries is not a party to, and our property is the
subject of, any material pending legal proceeding, other than ordinary routine
litigation incidental to our business. Our company is also not aware of any such
proceeding being contemplated by a government authority. Our company was party
to a lawsuit for the sum of $121,336 filed in the Ghanaian courts pertaining to
payment for excavation services provided by a subcontractor. We believed the
debt had previously been discharged through the transfer of shares to the
subcontractor in 2008. As at the date of this Report, the lawsuit has been
settled and we agreed to pay $108,000 to the subcontractor in return for the
shares previously issued. Upon payment by our company of $108,000, the shares
were returned to us and cancelled during the Fiscal Year.

**Item
4.**          REMOVED
AND RESERVED

- 47 -

---

PART II

|Item 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
      STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------------

Market information

Our
common stock has traded on the Toronto Stock Exchange (the TSX) under
the trading symbols XTG and XTG.S since November 23, 2010, following the
completion of our IPO in Canada. Bid and ask prices for our common stock are
quoted from broker dealers on the Over-the-Counter Bulletin Board
(OTCBB) under the symbol XTGR.

The
following table sets forth the range of high and low bid prices for our common
stock on the TSX and OTCBB for each full quarterly period within the two most
recent fiscal years and any subsequent interim period for which financial
statements are included, or are required to be included by Article 3 of
Regulation S-X. The quotations reflect inter-dealer prices and do not include
mark-ups or mark-downs or commissions and do not represent actual transactions.

TSX
      OTCBBPERIOD
      HIGH BID
      LOW BID
      HIGH BID
      LOW BIDCAD$
      CAD$
      US$
      US$2010October 1, 2010 through December 31, 2010
        (1)
      $2.55
      $1.90
      $2.51
      $1.50July 1, 2010 through September 30, 2010
      N/A
      N/A
      $1.70
      $1.10April 1, 2010 through June 30, 2010
      N/A
      N/A
      $1.26
      $0.97January 1, 2010 through March 31, 2010
      N/A
      N/A
      $1.28
      $0.91October 1, 2009 through December 31, 2009
      N/A
      N/A
      $1.15
      $0.83July 1, 2009 through September 30, 2009
      N/A
      N/A
      $1.03
      $0.57April 1, 2009 through June 30, 2009
      N/A
      N/A
      $0.76
      $0.39January 1, 2009 through March 31, 2009
      N/A
      N/A
      $0.77
      $0.36


(1)     Common stock commenced trading on
the TSX on November 23, 2010.

The
  last reported closing price of our common stock on the TSX on March 25, 2011
  was CAD$1.91 (USD$1.95) and the last reported sales price of our common stock
  on OTCBB on March 29, 2011 was $1.97.

Holders

As
of March 29, 2011, we have 152 shareholders of record holding 42,986,179 issued
and outstanding Shares having a par value of $0.001 per common share.

Dividends

We
have never declared or paid any cash dividends on our common stock. We intend to
retain future earnings, if any, to finance the expansion of our business, and we
do not anticipate that any cash dividends will be paid in the foreseeable
future. Any future determination to pay dividends will be at the discretion of
our board of directors (our Board) and will depend on our earnings,
capital requirements, expansion plans, financial condition and other relevant
factors. Our retained earnings deficit currently limits our ability to pay
dividends.

Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities

We
have not sold any unregistered equity securities during the period covered by
this Report, other than those previously reported in our quarterly reports on
Form 10-Q or in our current reports on Form 8-K filed with the Securities and
Exchange Commission.

- 48 -

---

**Item
6.**          SELECTED
FINANCIAL DATA

As
a smaller reporting company, we are not required to provide the information
required under this item.

|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITIONS AND RESULTS OF OPERATIONS
|------- | --------------------------------------------------------------------------------------------

The
following discussion and analysis of our consolidated financial conditions and
results of operations for the year ended December 31, 2010 and 2009 should be
read in conjunction with the consolidated financial statements and the related
notes to our consolidated financial statements and other information presented
elsewhere in this Report. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to those discussed below and elsewhere in this Report, particularly in
the item entitled Risk Factors beginning on page 8 of this Report. Our
consolidated audited financial statements are stated in United States Dollars
and are prepared in accordance with United States Generally Accepted Accounting
Principles.

Plan of Operations

We
are a gold exploration company engaged in the exploration of gold properties in
the Republic of Ghana, West Africa. Our mining portfolio currently consists of
246.47 sq km comprised of 33.65 sq km for our Kibi Project, 51.67 sq km for our
Banso Project, 55.28 sq km for our Muoso Project, 44.76 sq km for our Kwabeng
Project, 40.51 sq km for our Pameng Project and 20.60 sq km for our Edum Banso
Project, or 60,969 acres, pursuant to the leased and licensed areas set forth in
our respective mining leases, prospecting licenses and/or option agreement.

Our
strategic plan is, with respect to our mineral projects: (i) to focus our
efforts and dedicate our financial resources toward the potential to drill out a
resource and, perhaps ultimately, a reserve of our Kibi Project located on the
Kibi Gold Belt; (ii) to define a resource and, perhaps ultimately, a reserve on
our other exploration projects; (iii) to enter into negotiations with
independent Ghanaian contract miners and operators to assume our recovery of
gold operations at our Kwabeng Project with a view to these contractors
conducting recovery of placer gold operations for fixed payments to our company;
and (iv) to acquire further interests in gold mineralized projects that fall
within the criteria of providing a geological basis for development of drilling
initiatives that can enhance shareholder value by demonstrating the potential to
define reserves.

As
part of our current business strategy, we plan to continue engaging technical
personnel under contract where possible as our management believes that this
strategy, at its current level of development, provides the best services
available in the circumstances, leads to lower overall costs, and provides the
best flexibility for our business operations.

We
anticipate that our ongoing efforts will continue to be focused on the
exploration and development of our Projects and completing acquisitions in
strategic areas.

In
October 2008, we temporarily suspended our operations at our Kwabeng Project
while our management considered a more economic and efficient manner in which to
extract and process the gold recovered from the mineralized material at this
Project. As at the date of this Report, we have not planned to resume operations
at our Kwabeng Project. During the next 12 months, we plan to (i) enter into
negotiations to contract out the recovery of placer gold operations at this
Project, as noted above; (ii) advance the development of our Kibi Project by
continuing to carry out the 2011 Drill Program; and (iii) acquire further
interests in mineral projects by way of acquisition or joint venture
participation.

We
anticipate that, over the next 12 months, we will spend an aggregate of
approximately $6,000,000comprised of $5,000,000 for exploration expenses
in connection with our 2011 Drill Program of our Kibi Project located on the
Kibi Gold Belt to identify a potential resource and approximately $1,000,000 for
general and administrative expenses (which includes approximately $500,000 in
non-cash expenses).

Our
company has historically relied on equity and debt financings to finance its
ongoing operations. Existing working capital, possible debt instruments,
anticipated warrant exercises, further private placements and anticipated cash
flow are expected to be adequate to fund our companys operations over the next
year. During the future years, subsequent to 2011, we require additional capital to implement our plan of operations. We anticipate that
these funds primarily will be raised through equity and debt financing or from
other available sources of financing. If we raise additional funds through the
issuance of equity or convertible debt securities, it may result in the dilution
in the equity ownership of investors in our common stock. There can be no
assurance that additional financing will be available upon acceptable terms, if
at all. If adequate funds are not available or are not available on acceptable
terms, we may be unable to take advantage of prospective new opportunities or
acquisitions, which could significantly and materially restrict our operations,
or we may be forced to discontinue our current projects.

- 49 -

---

Results of Operations for the Year Ended December 31, 2010
Compared to the Year Ended December 31, 2009

Our
loss for the year ended December 31, 2010 was $2,976,645 as compared to a loss
of $1,038,124 for the year ended December 31, 2009, an increase of $1,938,521.
We incurred expenses of $4,463,116 in the year ended December 31, 2010 as
compared to $2,105,612 in the year ended December 31, 2009, an increase of
$2,357,504. The increase in expenses in the year ended December 31, 2010 can be
primarily attributed to (a) a significant increase in exploration expenditures
in connection our Phase III drill program at our Kibi Project; and (b) increased
administration efforts related to our IPO in Canada. Exploration expenses of
$2,992,932 were incurred for the year ended December 31, 2010 as compared to
$1,080,488 for the year ended December 31, 2009 and were primarily incurred in
connection with drilling expenditures for our Phase III Drill Program at our
Kibi Project, a trenching program at our Muoso Project, permitting costs, fees
for conversion of a prospecting license into two mining leases and license
renewal fees. General and administrative expenses were $1,355,399 as compared to
$957,332 for the year ended December 31, 2009 and can be primarily attributed to
stock-based compensation of $411,507 (2009 - $468,052) expensed with respect to
stock options vested during the period, a significant increase in consulting
fees, regulatory filing fees, marketing costs and travel expenses in connection
with our IPO in Canada.

Other
items totaled a gain of $1,486,471 for the year ended December 31, 2010 compared
to a gain of $1,067,488 for the year ended December 31, 2009. During the year
ended December 31, 2010, our company received net payments of $1,227,394 from
the recovery of placer gold operations by independent Ghanaian contract miners
at our Kibi and Pameng Projects as compared to $10,958 during the year ended
December 31, 2009 which was booked as recovery of gold. Our company had a
foreign exchange gain of $179,124 for the year ended December 31, 2010 (2009 
gain of $303,243) which can be attributed to currency fluctuations.

During
the year ended December 31, 2010, our company recognized a net unrealized loss
on trading securities of $98,290 (compared to a gain of $789,934 in 2009). The
change reflects a significant decrease in the value of our companys resource
company investments, mostly due to liquidation of our companys portfolio.
Trading securities were comprised mostly of investments in common shares and
income trust units of resource companies. Our companys portfolio of marketable
securities is largely Canadian currency denominated. The net unrealized gain can
be attributed to extreme volatility in the public equity markets during the year
ended December 31, 2010. Our companys securities portfolio realized a gain of
$170,422 on the sale of trading securities during the year ended December 31,
2010 compared to a realized loss in 2009 of $172,638. Other income, primarily
derived from dividends and interest earned, decreased in the year ended December
31, 2010 to $34,104 as compared to $138,558 in 2009.

Our
basic and diluted loss per share for the year ended December 31, 2010 was $0.09
compared to $0.03 per share for the year ended December 31, 2009. The weighted
average number of shares outstanding was 35,160,827 at December 31, 2010
compared to 32,101,330 for the year ended December 31, 2009. The increase in the
weighted average number of shares outstanding can be attributed to (i) the
issuance of (a) 8,092,593 shares in connection with our IPO in Canada completed
during fiscal 2010; (b) 1,088,000 shares in connection with two private
placement financings completed during the period; (c) 250,000 shares in
connection with the conversion of the remaining debenture; and (ii) the
repurchase and subsequent cancellation of 80,891 shares in connection with a
debt settlement.

Liquidity and Capital Resources

Historically,
our principal source of funds is our available resources of cash and cash
equivalents and investments, as well as debt and equity financings.

Net
cash provided by financing activities for the year ended December 31, 2010 was
$10,774,804 (2009 - $1,612,710). During the year ended December 31, 2010, we
received gross cash proceeds of CAD$10,925,001 (USD$10,752,713) derived from our
IPO completed in November 2010.

- 50 -

---

Unrealized Gain (Loss) on Trading Securities

Unrealized
gain (loss) on trading securities represents the change in value of securities
as of the end of the financial reporting period. For the year ended December 31,
2010, we recognized an unrealized loss of $98,290 on trading securities, as
compared to an unrealized gain of $789,934 for the year ended December 31, 2009.
The change reflects a significant decrease in the value of our companys
remaining resource company investments. Trading securities were comprised mostly
of investments in common shares and income trust units of resource companies.

Liquidity Discussion

As
of December 31, 2010, our company had working capital equity of $9,833,381,
comprised of current assets of $10,350,617 less current liabilities of $517,236.
Our companys current assets were comprised mostly of $10,096,122 in cash and
cash equivalentsand $129,141 in trading securities, which is based on
our analysis of the ready saleable nature of the securities including an
existing market for the securities, the lack of any restrictions for resale of
the securities and sufficient active volume of trading in the securities.

Our
  company has historically relied on equity and debt financings to finance its
  ongoing operations. Existing working capital, possible debt instruments, anticipated
  warrant exercises, further private placements and anticipated cash flow are
  expected to be adequate to fund our companys operations over the next
  year. Our company has no lines of credit or other bank financing arrangements.
  Generally, our company has financed operations to date through the proceeds
  of the private equity financings and a convertible debt financing. In connection
  with our companys business plan, our management anticipates that our company
  will spend an aggregate of approximately $6,000,000 comprised of $5,000,000
  for exploration expenses in connection with our companys 2011 Drill Program
  on our Kibi Project to identify a potential resource and approximately $1,000,000
  for general and administrative expenses (which includes approximately $500,000
  in non-cash expenses).

Until
our company achieves profitability, we will need to raise additional capital for
our exploration programs subsequent to 2011. Our company intends to finance
these expenses with our cash proceeds and to the extent that our cash proceeds
are not sufficient, then from further sales of our equity securities or debt
securities, or from investment income. Thereafter, our company may need to raise
additional capital to meet long-term operating requirements. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, our company
may not be able to take advantage of prospective new business endeavours or
opportunities or existing agreements and projects which could significantly and
materially restrict our companys business operations.

Our
independent auditors report accompanying our December 31, 2010 and December 31,
2009 consolidated financial statements contains a cautionary paragraph regarding
our continuance of operations. Our consolidated financial statements have been
prepared using the going concern assumption, which contemplates that our company
will realize our assets and satisfy our liabilities and commitments in the
ordinary course of business which includes access to future sources of cash.

Material Commitments

Mineral Property Commitments

Save
and except for fees payable from time to time to (i) the Minerals Commission for
an extension of an expiry date of a prospecting license (current consideration
fee payable is $15,000) or mining lease or annual operating permits; (ii) the
EPA for the issuance of permits prior to the commencement of any work at a
particular concession or the posting of a bond in connection with any mining
operations undertaken by our company; and (iii) a legal obligation associated
with our mineral properties for clean up costs when work programs are completed,
we are committed to expend an aggregate of less than $500 in connection with
annual or ground rent and mining permits to enter upon and gain access to the
following concessions and such other financial commitments arising out of any
approved exploration programs in connection therewith:

| | (i)   | the Apapam concession (Kibi Project);    
| | ----- | -----------------------------------------
| |       |                                          
| | (ii)  | the Kwabeng concession (Kwabeng Project);
| |       |                                          
| | (iii) | the Pameng concession (Pameng Project);  
| |       |                                          
| | (iv)  | the Banso Concession (Banso
Project);    

- 51 -

---

| | (v)  | the Muoso Concession (Muoso Project); and        
| | ---- | -------------------------------------------------
| |      |                                                  
| | (vi) | the Edum Banso Concession (Edum Banso
  Project).

Upon
and following the commencement of gold production at any of our Projects, a
royalty of the net smelter returns is payable quarterly to the Government of
Ghana as prescribed by legislation.

With
  respect to the Edum Banso Project:

| | (a) | $5,000 is payable to Adom Mining Limited (Adom)
      on the anniversary date of the Option Agreement in each year that we hold
      an interest in the agreement;                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                   
| | (b) | $200,000 is payable to Adom when the production of gold
      is commenced (or $100,000 in the event that less than 2 million ounces of
      proven and probable reserves are discovered on our project at this
      concession; and                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                   
| | (c) | an aggregate production royalty of 2% of the net smelter
      returns (NSR) from all ores, minerals and other products mined
      and removed from the project, except if less than 2 million ounces of
      proven and probable reserved are discovered in or at the Project, then the
      royalty shall be 1% of the NSR.

Repayment of Convertible Debentures and Accrued Interest

We
issued Convertible Debentures aggregating the face value of $900,000 in July
2005 under which interest was calculated at 7% per annum. Interest only payments
were payable quarterly on the last days of September, December, March and June
in each year of the term or until such time that the principal was repaid in the
full. The Convertible Debenture holders were entitled, at their option, to
convert, at any time and from time to time, until payment in full of their
respective Convertible Debentures, all or any part of the outstanding principal
amount of the Convertible Debenture, plus the Accrued Interest, into shares (the
Conversion Shares) of our common stock at the conversion price of $1.00
per share (the Conversion Price). Each Convertible Debenture provided
for the automatic conversion of the outstanding principal amount and all accrued
but unpaid interest, into shares of our common stock, at the Conversion Price,
in the event that our common stock traded for 20 consecutive trading days (a)
with a closing bid price of at least $1.50 per share and (b) a cumulative
trading volume during such twenty (20) trading day period of at least 1,000,000
shares.

In
June 2008, we provided notice of the automatic conversion of the Convertible
Debentures and in July 2008 we converted $650,000 of the aggregate principal of
$900,000 of the Convertible Debentures by way of the issuance of 650,000
Conversion Shares. In February 2010 we converted the outstanding principal of
$250,000 owing under one remaining Convertible Debenture by way of the issuance
of 250,000 Conversion Shares.

Purchase of Significant Equipment

During
2010, we purchased a bulldozer and excavator to assist us with our exploration
activities. During the next 12 months, we plan on purchasing another bulldozer
and excavator to assist us with our exploration activities. In addition, in
connection with our exploration activities at our Projects, we own the equipment
necessary to carry out such activities, except for a drill rig which we plan to
rent.

Off Balance Sheet Arrangements

We
  have no off balance sheet arrangements.

Significant Accounting Applications

Application of Critical Accounting Policies

We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our financial statements.

Generally accepted accounting principles

These
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles of the United States of America (US
GAAP).

- 52 -

---

Principles of consolidation

These
consolidated financial statements include the accounts of our company, our
wholly-owned subsidiaries, Xtra Energy (from October 31, 2003), XGEL (from
February 16, 2004), XOG (from October 20, 2005) and XOGG (from March 2, 2006)
and our 90% owned subsidiary, XG Mining (from December 22, 2004). All
significant intercompany accounts and transactions have been eliminated on
consolidation.

Use of 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 disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Cash and cash equivalents

Our
company considers highly liquid investments with original maturities of three
months or less to be cash equivalents. At December 31, 2010 and 2009, cash and
cash equivalents consisted of cash held at financial institutions.

Receivables

No
allowance for doubtful accounts has been provided. Management has evaluated all
receivables and believes they are all collectible.

Recovery of gold

Recovery
of gold and other income is recognized when title and the risks and rewards of
ownership to delivered bullion and commodities pass to the buyer and collection
is reasonably assured.

Trading securities

Our
companys trading securities are reported at fair value, with unrealized gains
and losses included in earnings.

Non-Controlling Interest

Our
consolidated financial statements include the accounts of XG Mining (from
December 22, 2004). All intercompany accounts and transactions have been
eliminated upon consolidation. Our company records a non-controlling interest
which reflects the 10% portion of the earnings (loss) of XG Mining allocable to
the holders of the minority non-controlling interest.

Oil and natural gas properties

During
the year ended December 31, 2010, our company sold its oil and gas interests.
Our company follows the full cost method of accounting for oil and natural gas
operations. Under this method, all costs associated with the acquisition of,
exploration for and development of oil and gas reserves are capitalized in cost
centers on a country-by-country basis. Such costs include property acquisition
costs, geological and geophysical studies, carrying charges on non-producing
properties, costs of drilling productive wells, and overhead expenses directly
related to these activities.

Depletion
is calculated for producing properties by using the unit-of-production method
based on estimated proved reserves, before royalties, as determined by
management of our company or independent consultants. Sales or dispositions of
oil and gas properties are credited to the respective cost centers and a gain or
loss is recognized when all properties in a cost center have been disposed of,
unless such sale or disposition significantly alters the relationship between
capitalized costs and proved reserves of oil and gas attributable to the cost
center. Costs of abandoned properties are accounted for as adjustments of
capitalized costs and written off to expense.

Undeveloped
properties are excluded from the depletion calculation until the quantities of
proved reserves can be determined.

A
ceiling test is applied to the proven properties for each cost center and for
the aggregate of all cost centers by comparing the net capitalized costs to the
estimated future net revenues from production of estimated proved reserves
without discount, plus the costs of unproved properties net of impairment. Any excess
capitalized costs are written off to expense. Further, the ceiling test for the
aggregate of all cost centers is required to include the effects of future
removal and site restoration costs, general and administrative expenses,
financing costs and income taxes. The calculation of future net revenues is
based upon prices, costs and regulations in effect at each year end.

- 53 -

---

Unproved
properties are assessed for impairment on an annual basis by applying factors
that rely on historical experience. In general, our company may write off any
unproved property under one or more of the following conditions:

| | (a) | there are no firm plans for further drilling on the
      unproved property;                                     
| | --- | -----------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                  
| | (b) | negative results were obtained from studies of the
      unproved properties;                                    
| |     |                                                                                                                  
| | (c) | negative results were obtained from studies conducted in
      the vicinity of the unproved property; or         
| |     |                                                                                                                  
| | (d) | the remaining term of the unproved property does not
      allow sufficient time for further studies or
drilling.

Equipment

Equipment
is recorded at cost and is being amortized over its estimated useful lives using
the declining balance method at the following annual rates:

Furniture and equipment
    20%Computer equipment
    30%Vehicles
    30%Mining equipment
    20%


Deferred financing costs

Deferred
financing costs consist of expenses incurred to obtain funds pursuant to the
issuance of the convertible debentures and are being amortized straight-line
over the term of the debentures.

Mineral properties and exploration and development costs

The
costs of acquiring mineral rights are capitalized at the date of acquisition.
After acquisition, various factors can affect the recoverability of the
capitalized costs. If, after review, our management concludes that the carrying
amount of a mineral property is impaired, it will be written down to estimated
fair value. Exploration costs incurred on mineral properties are expensed as
incurred. Development costs incurred on proven and probable reserves will be
capitalized. Upon commencement of production, capitalized costs will be
amortized using the unit-of-production method over the estimated life of the ore
body based on proven and probable reserves (which exclude non-recoverable
reserves and anticipated processing losses). When our company receives an option
payment related to a property, the proceeds of the payment are applied to reduce
the carrying value of the exploration asset.

Long-lived assets

Long-lived
assets held and used by our company are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. For purposes of evaluating the recoverability of long-lived
assets, the recoverability test is performed using undiscounted net cash flows
related to the long-lived assets. If such assets are considered to be impaired,
the impairment recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.

Asset retirement obligations

Our
company records the fair value of an asset retirement obligation as a liability
in the period in which it incurs a legal obligation associated with the
retirement of tangible long-lived assets that result from the acquisition,
construction, development, and/or normal use of the long-lived assets. Our
company also records a corresponding asset which is amortized over the life of
the asset. Subsequent to the initial measurement of the asset retirement
obligation, the obligation is adjusted at the end of each period to reflect the
passage of time (accretion expense) and changes in the estimated future cash
flows underlying the obligation (asset retirement cost).

- 54 -

---

Stock-based compensation

Our
company accounts for share-based compensation under the provisions of ASC 718,
Compensation-Stock Compensation. Under the fair value recognition provisions,
stock-based compensation expense is measured at the grant date for all
stock-based awards to employees and directors and is recognized as an expense
over the requisite service period, which is generally the vesting period. The
Black-Scholes option valuation model is used to calculate fair value.

Our
company accounts for stock compensation arrangements with non-employees in
accordance with ASC 718 which require that such equity instruments are recorded
at their fair value on the measurement date. The measurement of stock-based
compensation is subject to periodic adjustment as the underlying equity
instruments vest. Nonemployee stock-based compensation charges are amortized
over the vesting period on a straight-line basis. For stock options granted to
non-employees, the fair value of the stock options is estimated using a
Black-Scholes valuation model.

Income taxes

Our
company accounts for income taxes under the asset and liability method, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under the asset and liability method the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation allowance is
recognized if it is more likely than not that some portion or all of the
deferred tax asset will not be recognized.

Loss per share

Basic
loss per common share is computed using the weighted average number of common
shares outstanding during the year. To calculate diluted loss per share, our
company uses the treasury stock method and the if converted method. As of
December 31, 2010, there were 2,439,320 warrants (2009  1,610,038); 1,788,000
stock options (2009  972,000) and Nil convertible debentures exercisable into
common shares (2009  250,000) outstanding which have not been included in the
weighted average number of common shares outstanding as these were
anti-dilutive.

Foreign exchange

Our
companys functional currency is the U.S. dollar. Any monetary assets and
liabilities that are in a currency other than the U.S. dollar are translated at
the rate prevailing at year end. Revenue and expenses in a foreign currency are
translated at rates that approximate those in effect at the time of translation.
Gains and losses from translation of foreign currency transactions into U.S.
dollars are included in current results of operations.

Financial instruments

Our
companys financial instruments consist of cash and cash equivalents, trading
securities, receivables, accounts payable and accrued liabilities and
convertible debentures. It is our managements opinion that our company is not
exposed to significant interest, currency or credit risks arising from its
financial instruments. The fair values of these financial instruments
approximate their carrying values unless otherwise noted. Our company has its
cash primarily in government or bank guaranteed deposit certificates or in one
commercial bank in Toronto, Ontario, Canada.

Fair value of financial assets and liabilities

Our
company measures the fair value of financial assets and liabilities based on
GAAP guidance which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. Effective
January 1, 2008, our company adopted the provisions for financial assets and
liabilities, as well as for any other assets and liabilities that are carried at
fair value on a recurring basis. Effective January 1, 2009, our company adopted
the provisions for non-financial assets and liabilities that are required to be
measured at fair value.

Our
company classifies financial assets and liabilities as held-for-trading,
available-for-sale, held-to-maturity, loans and receivables or other financial
liabilities depending on their nature. Financial assets and financial
liabilities are recognized at fair value on their initial recognition, except
for those arising from certain related party transactions which are accounted
for at the transferors carrying amount or exchange amount.

- 55 -

---

Financial
assets and liabilities classified as held-for-trading are measured at fair
value, with gains and losses recognized in net income. Financial assets
classified as held-to-maturity, loans and receivables, and financial liabilities
other than those classified as held-for-trading are measured at amortized cost,
using the effective interest method of amortization. Financial assets classified
as available-for-sale are measured at fair value, with unrealized gains and
losses being recognized as other comprehensive income until realized, or if an
unrealized loss is considered other than temporary, the unrealized loss is
recorded in income.

Financial
instruments, including cash and cash equivalents, accounts payable and accrued
liabilities are carried at cost, which management believes approximates fair
value due to the short term nature of these instruments. Investments in trading
securities are classified as held for trading, with unrealized gains and losses
being recognized in income.

The
following table presents information about the assets that are measured at fair
value on a recurring basis as of December 31, 2010, and indicates the fair value
hierarchy of the valuation techniques our company utilized to determine such
fair value. In general, fair values determined by Level 1 inputs utilize quoted
prices (unadjusted) in active markets for identical assets. Fair values
determined by Level 2 inputs utilize data points that are observable such as
quoted prices, interest rates and yield curves. Fair values determined by Level
3 inputs are unobservable data points for the asset or liability, and included
situations where there is little, if any, market activity for the asset:

|                          |   |              |  |   |               |  |   | Significant |  |   |              | 
|------------------------- | - | ------------ |  | - | ------------- |  | - | ----------- |  | - | ------------ | 
|                          |   |              |  |   | Quoted Prices |  |   | Other       |  |   | Significant  | 
|                          |   |              |  |   | in Active     |  |   | Observable  |  |   | Unobservable | 
|                          |   | December 31, |  |   | Markets       |  |   | Inputs      |  |   | Inputs       | 
|                          |   | 2010         |  |   | (Level 1)     |  |   | (Level 2)   |  |   | (Level 3)    | 
|Assets:                   |   |              |  |   |               |  |   |             |  |   |              | 
|Cash and cash equivalents | $ | 10,096,122   |  | $ | 10,096,122    |  | $ |            |  | $ |             | 
|Restricted cash           |   | 220,000      |  |   | 220,000       |  |   |            |  |   |             | 
|Marketable securities     | $ | 129,141      |  | $ | 129,141       |  | $ |            |  | $ |             | 
|Total                     | $ | 10,445,263   |  | $ | 10,445,263    |  | $ |            |  | $ |             | 

The
fair values of cash and cash equivalents and marketable securities are
determined through market, observable and corroborated sources.

Concentration of credit risk

The
financial instrument which potentially subjects our company to concentration of
credit risk is cash. Our company maintains cash in bank accounts that, at times,
may exceed federally insured limits. As of December 31, 2010 and 2009, our
company has exceeded the federally insured limit. Our company has not
experienced any losses in such accounts and believes it is not exposed to any
significant risks on its cash in bank accounts.

Recent Accounting Pronouncements

In
April 2010, the Financial Accounting Standards Board (FASB) issued ASU
2010-13, Compensation  Stock Compensation (Topic 718), amending ASC 718. ASU
2010-13 clarifies that a share-based payment award with an exercise price
denominated in the currency of a market in which the entity's equity securities
trade should not be classified as a liability if it otherwise qualifies as
equity. ASU 2010-13 also improves GAAP by improving consistency in financial
reporting by eliminating diversity in practice. ASU 2010-13 is effective for
interim and annual reporting periods beginning after December 15, 2010 (January
1, 2011 for our company). Our company is currently evaluating the impact of ASU
2010-09, but does not expect its adoption to have a material impact on our
company's financial reporting and disclosures.

In
December 2010, the FASB issued ASU 2010-29, which contains updated accounting
guidance to clarify the acquisition date that should be used for reporting pro
forma financial information when comparative financial statements are issued.
This update requires that a company should disclose revenue and earnings of the
combined entity as though the business combination(s) that occurred during the
current year had occurred as of the beginning of the comparable prior annual
reporting period only. This update also requires disclosure of the nature and
amount of material, nonrecurring pro forma adjustments. The provisions of this
update, which are to be applied prospectively, are effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2010, with
early adoption permitted. The impact of this update on our company's
consolidated financial statements will depend on the size and nature of future
business combinations.

- 56 -

---

**Item
7A.**        **QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

As
a smaller reporting company, we are not required to provide the information
required under this item.

**Item
8.**          **FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA**

Our
financial statements are contained in pages F-1 through F-30, which appear at
the end of this annual report.

|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------------

There
have been no changes in and disagreements with our accountants on accounting and
financial disclosure from the inception of our company through to the date of
this Report.

**Item
9A.**        CONTROLS AND
PROCEDURES

Disclosure Controls and Procedures

Our
management, including our Chief Executive Officer and our Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures
(as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered
by this Report.

Based
on that evaluation, our management has concluded that as of the end of the
period covered by this Report our disclosure controls and procedures were
effective such that the information required to be disclosed in our Securities
and Exchange Commission reports (i) is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms; and (ii) is
accumulated and communicated to our management to allow timely decisions
regarding required disclosure.

Our
management does not expect that our disclosure controls and procedures or our
internal controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Due to the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within our company have been detected.

Managements Report on Internal Control over Financial
  Reporting

Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Our
internal control over financial reporting includes those policies and procedures
that:

- pertain to the maintenance of records that, in reasonable detail,
  accurately and fairly reflect the transactions and dispositions of our assets;
- provide reasonable assurance that transactions are recorded as necessary to
  permit preparation of financial statements in accordance with generally
  accepted accounting principles, and that our receipts and expenditures are
  being made only in accordance with authorizations of our management and
  directors; and
- provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use or disposition of our assets that could have a
  material effect on the financial statements.

Because
of the inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

- 57 -

---

Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2010. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control-Integrated Framework. Management's
assessment included an evaluation of the design of our internal control over
financial reporting and testing of the operational effectiveness of these
controls. Based on this assessment, our management has concluded that as of
December 31, 2010, our internal control over financial reporting was effective
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles.

Changes in Internal Control over Financial Reportin

During
the fourth quarter of 2010, we hired a Chief Financial Officer. Throughout the
fourth quarter of 2010, our Chief Financial Officer began building the
accounting and finance team and began putting the necessary procedures and
system controls in place to strengthen our internal controls. During the fourth
quarter of 2010, we also hired additional staff which allowed us to more
effectively implement policies and checklists setting forth procedures for
accounting and financial reporting with respect to the requirements and
application of U.S. GAAP and SEC disclosure requirements. These changes
specifically addressed our internal control over inventory management and
implement a greater level of review and oversight over our internal controls
over financial reporting. Other than these changes, there were no changes in our
internal control over financial reporting identified in connection with our
evaluation that occurred during our last fiscal quarter (our fourth fiscal
quarter in the case of our annual report) that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

**Item
9B.**        **OTHER
INFORMATION**

None.

PART III

Item
10.         DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The
following individuals serve as our executive officers and members of our Board:

|Name                 | Age |  | Position                                             
|-------------------- | --- |  | -----------------------------------------------------
|                     |     |  |                                                      
|Paul Zyla            | 66  |  | President, Chief
      Executive Officer and Director
|                     |     |  |                                                      
|John C. Ross         | 52  |  | Chief Financial
      Officer                        
|                     |     |  |                                                      
|Richard W. Grayston  | 66  |  | Chairman of the
      Board and Director             
|                     |     |  |                                                      
|Peter C. Minuk       | 46  |  | Secretary and
      Treasurer and Director           
|                     |     |  |                                                      
|Yves Pierre Clement  | 46  |  | Vice-President,
      Exploration                    
|                     |     |  |                                                      
|Victor Nkansa        | 53  |  | Vice-President,
      Ghana Operations               
|                     |     |  |                                                      
|Robert H. Montgomery | 49  |  | Director                                             
|                     |     |  |                                                      
|Robert J. Casaceli   | 62  |  | Director                                             

Paul Norman Zyla 
  President, Chief Executive Officer and Director

Mr.
Zyla was appointed President and CEO of our company in May 2010 and has been a
director of our company since January 2010. Mr. Zyla has over 25 years of
resource-based public company experience. Since September 1993 to the present,
Mr. Zyla has been a self-employed consultant to the mining industry. Mr. Zyla
was the former President, Chief Executive Officer, Secretary and Treasurer and a
director of the Company from November 2003 to August 2005.

- 58 -

---

Mr.
Zyla graduated from the University of Toronto with a Bachelor of Science degree
in 1966.

As
at the date of this Report, Mr. Zyla devotes approximately 60% of his time in
consulting services to our company. He provides 40% of his time to unrelated
companies. Our company and Mr. Zyla entered into a management consulting
agreement dated September 1, 2010 which has been superseded by a management
consulting agreement effective January 1, 2011 for a one year term expiring on
December 31, 2011 (see Management Consulting Agreements - Management Consulting
Agreement with President and Chief Executive Officer). Mr. Zyla has not entered
into a non-competition and non-disclosure agreement with our company.

During
the prior five years, Mr. Zyla has been an officer and/or director of the
following public companies:

Name of Company
    Position(s) Held
    Term of OfficeVerbina Resources Inc. (1)
    President, Secretary-Treasurer
      and Director
    November 2009 to present


(1)      Verbina
  Resources Inc. is mineral exploration TSXV listed issuer.

John C. RossChief Financial Officer

Mr.
Ross was appointed Chief Financial Officer of our company in July 2010. Mr. Ross
has been involved with resource-based companies for over 20 years in various
roles and capacities. Over the last three years, Mr. Ross has served as Chief
Financial Officer, on a part time basis, to U308 Corp., Tri Origin Exploration
Ltd., Colossus Minerals Inc., Cronus Resources Ltd., and SonnenEnergy Corp.

Mr.
Ross obtained his Chartered Accountant designation from the Institute of
Chartered Accountants of Ontario in 1987, an M.B.A. from the University of
Western Ontario and a B.A. in Economics and Mathematics from the University of
Western Ontario.

As
at the date of this Report, Mr. Ross devotes approximately 20% of his time in
consulting services to our company. He provides 80% of his time to unrelated
companies. Our company and Mr. Ross entered into a management consulting
agreement effective September 1, 2010 for an undefined term (see Management
Consulting Agreements - Management Consulting Agreement with Chief Financial
Officer). Mr. Ross has not entered into a non-competition and non-disclosure
agreement with our company.

During
the prior five years, Mr. Ross has been an officer and/or director of the
following public companies:

Name of Company
    Position(s) Held
    Term of OfficeU308 Corp.(1)
    Chief Financial
      Officer
    June 2010 to
      presentTri Origin Exploration Ltd. (2)
    Chief Financial Officer
    January 2010 to January 2011Colossus Minerals Inc. (3)
    Chief Financial
      Officer
    January 2007 to
      September 2009Cronus Resources Inc (4).
    Chief Financial Officer
    September 2007 to March 2010SonnenEnergy Corp. (5)
    Chief Financial
      Officer
    December 2007 to
      September 2008Southampton Ventures Inc. (6)
    Chief Financial Officer
    June 2005 to June 2009


| | (1) | U308 Corp. is mineral exploration TSXV listed
    issuer.                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Tri Origin Exploration Ltd. is mineral exploration TSXV
      listed issuer.                                                                         
| | (3) | Colossus Minerals Inc. is mineral exploration TSX listed
      issuer.                                                                               
| | (4) | Cronus Resources Inc. amalgamated with Continental Gold
      Limited in March 2010 and is an advance-stage gold exploration TSX listed
      issuer.
| | (5) | SonnenEnergy Corp. is a solar and photovoltaic systems
      TSXV listed issuer.                                                                     
| | (6) | Southampton Ventures Inc. was a mineral exploration TSXV
      listed issuer which was acquired by Quetzal Energy Ltd. in June
    2009.             

Richard Walter Grayston
  Chairman and Director

Mr.
Grayston was appointed as Chairman and a director of our company in March 2007.
Since 1985, Mr. Grayston has been a self-employed business consultant with more
than 25 years of experience in financial and economic consulting and public
company

- 59 -

---

management including preparation of valuations, feasibility
studies, capital budgeting, financial reorganizations, profit improvement
studies and business plans and going public and business brokerage during which
time he has provided his consulting services to oil and gas, mineral
exploration, technology, manufacturing, retail and wholesale consumer
businesses.

Mr.
Grayston received a Ph.D. in Finance and Economics from the University of
Chicago in 1971, a MBA from the University of Chicago in 1969, a BA of Commerce
from the University of British Columbia in 1966 and has been a certified general
accountant since 1977.

During
the prior five years, Mr. Grayston has been an officer and/or director of the
following public companies.

| | Name of Company               | Position(s) Held                            | Term of Office              
| | ----------------------------- | ------------------------------------------- | ----------------------------
| | Verbina Resources Inc. (1)    | Director                                    | November 2009 to present    
| |                               |                                             |                             
| | SG Spirit Gold Inc. (2)       | President and Chief Executive
      Officer | October 2009 to present     
| |                               | Interim Chief Financial Officer
      and   | October 2009 to January 2010
| |                               | Director                                    | November 2009 to present    
| |                               | Vice President, Finance                     | August 2008 to December 2009
| |                               | Chief Financial Officer                     | August 2008 to December 2009
| | Ranger Canyon Energy Inc. (3) | Director                                    | May 2008 to present         
| |                               | Chief Executive Officer and                 | October 2008 to present     
| |                               | Chief Financial Officer                     | October 2008 to present     
| | New Cantech Ventures Inc. (4) | Director                                    | January 1991 to May 2008    

| | (1) | Verbina Resources Inc. is a mineral exploration TSXV
      listed issuer.                                        
| | --- | -----------------------------------------------------------------------------------------------------------------
| | (2) | Formerly Ruby Red Resources Inc. is a mineral exploration
      TSXV listed issuer.                              
| | (3) | Ranger Canyon Energy Inc. is a private Alberta, Canada
      oil and gas company seeking listing on the TSXV.    
| | (4) | New Cantech Ventures Inc. is an oil and gas and mineral
      exploration (diamonds and gold) TSXV listed
issuer.

Peter C. Minuk 
  Secretary and Treasurer and Director

Mr.
Minuk was appointed as Vice-President, Finance (VP, Finance) and a
director of our company in March 2007. He resigned as VP, Finance effective
January 31, 2009 and was subsequently appointed Secretary and Treasurer on
August 11, 2009 following the resignation of Kiomi Mori from this office. Mr.
Minuk has more than 22 years of experience in finance and investment as well as
experience in project management, training and developing staff and client
relationships. From February 1, 2009 to May 31, 2009, he provided limited
consulting services to our company. From June 1, 2009 to the present, Mr. Minuk
has been a business analyst consultant for Industry Canada where he is
responsible for reviewing proposals relating to regional development of public
infrastructure projects and provides oversight over 40 projects assigned to him
by the Fed Dev Ontario which is responsible for administering a variety of
government stimulus programs, resources and initiatives for the southern Ontario
region. Prior to joining our company, from 1990 to 2006, Mr. Minuk was employed
by BMO InvestorLine (BMO) in connection with implementing project
management protocols. Mr. Minuk received a Masters Certificate in Project
Management from the Schulich School of Business, York University in 2005. He
obtained his FCSI (Fellow of the Canadian Securities Institute) in 1989 and
completed the Business Administration program from Southern Alberta Institute of
Technology in 1985.

During
the prior five years, Mr. Minuk has not been an officer and/or director of any
other public companies.

Mr.
Minuk devotes approximately 10% of his time in consulting services to our
company. He provides 90% of his time to unrelated companies. There is no
management consulting agreement in force at this time nor has Mr. Minuk entered
into a non-competition and non-disclosure agreement with our company.

Yves Pierre Clement,P. Geo.
  Vice-President, Exploration

Mr.
Clement was appointed Vice-President, Exploration of our company in May 2006.
Mr. Clement has over 21 years experience in the generation, evaluation and
development of a wide variety of mineral resources hosted by a broad spectrum of
geological environments in Canada and South America. Prior to joining our
company, Mr. Clement was senior project geologist for Lake Shore Gold Corp. in
the Timmins lode gold camp from August 2005 to April 2006 and was formerly
exploration manager for Aurora Platinum Corp.s Sudbury operations from August 2000 to
July 2005. Prior to joining Aurora, Mr. Clement was senior project
geologist/exploration manager for Southwestern Resources Corp. where he was
responsible for the generation of precious and base metal exploration
opportunities in Peru and Chile. Mr. Clements experience will allow us to
further maximize the value of our existing portfolio of projects, as well as
allowing us to expand our strategy of growth through strategic acquisitions.

- 60 -

---

During
the prior five years, Mr. Clement has been an officer and/or director of the
following public companies:

| | Name of Company              | Position(s) Held            | Term of Office         
| | ---------------------------- | --------------------------- | -----------------------
| | Ginguro Exploration Inc. (1) | Vice President, Exploration | March 2005 to July 2009

(1)     
Ginguro Exploration Inc. is a gold exploration TSXV listed issuer.

As
of the date of this Report, Mr. Clement devotes approximately 90% of his time in
consulting services to our company. He provides 10% of his time to unrelated
companies. Our company and Mr. Clement entered into a management consulting
agreement on May 1, 2006 for a three year term expiring on May 1, 2009 which
agreement has been renewed from time to time and has been superseded by a
management consulting agreement dated March 1, 2011 for a three year term
expiring on March 1, 2014 (see Management Consulting Agreements - Management
Consulting Agreement with Vice-President, Exploration). Mr. Clement has not
entered into a non-competition and non-disclosure agreement with our company.

Victor Nkansa,CA, BA, Economics, MBA,
Finance
  Vice-President, Ghana Operations

Mr.
Nkansa was appointed as Vice-President, Ghana Operations of our company in
December 2009. Mr. Nkansa has assumed the responsibilities of this position
previously held by Mr. Abudalai, which includes overseeing our operations in
Ghana under the supervision of our President and CEO, Paul Zyla and James
Longshore, who is also the President and General Manager of our Ghanaian
subsidiaries. Mr. Nkansa is also the Secretary and a director of our Ghanaian
subsidiaries. Mr. Nkansa is familiar and experienced with respect to obtaining
mining leases, prospecting and reconnaissance licenses and the government
regulations relating thereto and is knowledgeable in connection with
environmental and forestry issues, immigration and customs affairs. His
experience and background will assist us with respect to acquiring approvals,
prospecting licenses, mining leases and related permits and renewals from the
relevant government authorities in order to advance our operations in Ghana and
acting as our primary government liaison in connection therewith. Mr. Nkansa has
more than 26 years of business experience, the last 12 years of which have been
in the mining industry. Since 2004, he has been the Controller of our Ghanaian
subsidiaries where his responsibilities include the provision of accounting
services and assisting with the facilitation of license renewals with respect to
our property interests.

During
the prior five years, Mr. Nkansa has not been an officer and/or director of any
other public companies.

As
at the date of this Report, Mr. Nkansa devotes a variable amount of his time in
consulting services to our company, as he is currently engaged on an as needed
basis. Our company and Mr. Nkansa entered into a management consulting agreement
on June 1, 2010 for a one year term expiring on June 1, 2011 (see Management
Consulting Agreements - Management Consulting Agreement with Vice-President,
Ghana Operations). Mr. Nkansa has not entered into a non-competition and
non-disclosure agreement with our company.

Robert Hudson Montgomery,CA
  Director

Mr.
Montgomery was appointed as a director of our company in March 2007. Mr.
Montgomery has more than 15 years of experience as a chartered accountant and
auditor. Since May 2010 to the present, he has been a consultant to the Bank of
Montreals TCG and T&O Audit groups. Prior thereto, from September 2009 to
March 2010, he was a consultant to the Royal Bank of Canada, Capital Markets,
Product Finance. Mr. Montgomery was a consultant to CIBC Mellon, Internal Audit
and Corporate Compliance Department (September to November 2008) and a
consultant to Bank of Montreal, Corporate Audit Department (August 2007 to June
2008). Since February 2004 to June 2008, Mr. Montgomery has been a Sarbanes
Oxley contractor to the Canadian Imperial Bank of Commerce (CIBC), from February
2004 to January 2005, the Bank of Montreal (BMO) from January to September 2005,
Dundee Wealth Management, a major Canadian investment dealer from September 2005
to December 2006 where he was responsible for documentation and testing of key
financial and non-financial controls for various lines of business and assisted
in the preparation and transfer of Sarbanes Oxley audit files and supporting
documentation from their project groups to internal and external auditors, and
the Toronto Dominion Bank from May to August 2007. He was not employed during
the periods November 2008 to January 2009, July to September 2008 and January to
May 2007).

- 61 -

---

Mr.
Montgomery assisted in the design of process narrative and control testing
documents, planned and supervised the control testing program at a major
Canadian investment dealer and assisted in the remediation of control gaps and
weaknesses identified during the testing process and as identified by its
external auditors. At CIBC, Mr. Montgomery assisted in the update and
maintenance a database identifying key accounts, linking them to controls
procedures, testing and lines of business and assisted in the remediation of
control gaps and weaknesses identified during the testing process. He obtained
his Chartered Accountant designation from the Institute of Chartered Accountants
of Ontario in 1994 and a BA, Double Major Economics and Geography from the
University of Victoria, Victoria, British Columbia in 1985.

During
the prior five years, Mr. Montgomery has not been an officer and/or director of
any other public companies.

Robert John Casaceli
  Director

Mr.
Casaceli was appointed as a director of our company in June 2010. Mr. Casaceli
is currently a consultant to the mining industry and served as Chief Geologist
for Franco-Nevada Corporation from 2008 to March 2010. Mr. Casaceli has also
served as President and Chief Executive Officer of Franc-Or Resources (now
Crocodile Gold Inc.) from 1996 to 2008. Mr. Casaceli has been involved in the
design, funding and implementation of numerous reconnaissance and advanced-stage
exploration projects and prospect/mine evaluations in over 50 countries.

Mr.
Casaceli received a M.S. in Geology from Oregon State University and a B.A. in
Geology from the University of Colorado.

During
the prior five years, Mr. Casaceli has been an officer and/or director of the
following public companies.

| | Name of Company                    | Position(s) Held                            | Term of Office            
| | ---------------------------------- | ------------------------------------------- | --------------------------
| | Creso Exploration Inc. (1)         | President and Chief Executive
      Officer | July 2010 to
      present
| | Franc-Or Resources Corporation (2) | President and Chief Executive Officer       | 1996 to 2008              

| | (1) | Creso Exploration Inc. is a mineral exploration TSXV
      listed issuer                                                                                         
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Pursuant to a business combination in 2009, Franc-Or
      Resources Corporation is now Crocodile Gold Inc., a gold exploration and
      mining TSX listed issue

There
are no family relationships between any of the executive officers and directors.
Each director currently holds office until he resigns or his successor is
elected at an annual stockholders meeting.

Consultants

One
of our business strategies is to outsource other services as required by our
company from time to time by engaging consultants on an as needed basis or
entering into special purpose contracts with a view to maintaining our overhead
at a reasonable, affordable cost.

Compliance with Section 16(a) of the Exchange Act

We
are not currently subject to Section 16(a) of the Securities Exchange Act of
1934, and, therefore, our directors and executive officers, and persons who own
more than 10% of our common stock are not required to file with the Securities
and Exchange Commission reports disclosing their initial ownership and changes
in their ownership of our common stock.

Corporate Governance Matters
  Audit Committee

While
we are not currently subject to any law, rule or regulation requiring that we
establish or maintain an audit committee, our Board determined it advisable and
in the best interests of our stockholders to establish an audit committee (the
Audit Committee) in November 2009.

Our
Audit Committee assists the Board in fulfilling its oversight responsibility
relating to:

- 62 -

---

- the integrity of our financial statements;
- our compliance with legal and regulatory requirements; and
- the qualifications and independence of our independent registered public
  accountants.

Our
Audit Committee has adopted a written charter pursuant to which the committee
provides: (i) an independent review and oversight of our company's financial
reporting processes, internal controls and independent auditors; (ii) a forum
separate from Management in which auditors and other interested parties can
candidly discuss concerns. By effectively carrying out its functions and
responsibilities, our Audit Committee helps to ensure that: (i) Management
properly develops and adheres to a sound system of internal controls; (ii)
procedures are in place to objectively assess Management's practices and
internal controls; and (iii) the outside auditors, through their own review,
objectively assess our company's financial reporting practices. Our Audit
Committee is directly responsible for the appointment, compensation, retention
and oversight of the work of any registered public accounting firm engaged for
the purpose of preparing or issuing an audit report or performing other audit,
review or attest services for our company.

Our
Audit Committee is composed of three directors; namely Richard Grayston, who is
also Chair of our Audit Committee, Robert Montgomery and Robert Casaceli, all of
whom have been determined by the Board to be independent, as defined in the
Marketplace Rules of the NASDAQ and within the meaning of National Instrument
52-110  Audit Committees adopted by the Canadian Securities Administration.

Board of Directors Independence

Our
Board consists of five members. Although, we are not currently subject to any
law, rule or regulation requiring that all or any portion of our Board include
independent directors, three of our directors are considered to be
independent directors, as defined in the Marketplace Rules of the NASDAQ and
within the meaning of National Instrument 52-110  Audit Committees adopted by
the Canadian Securities Administration.

Audit Committee Financial Expert

Each
of Richard Grayston and Robert Montgomery is an audit committee financial
expert within the meaning of Item 401(h)(1) of Regulation S-K. In general, an
audit committee financial expert is an individual member of the audit
committee who (a) understands generally accepted accounting principles and
financial statements, (b) is able to assess the general application of such
principles in connection with accounting for estimates and accruals, (c) has
experience preparing, auditing, analyzing or evaluating financial statements
comparable to the breadth and complexity of issues that can reasonably be
expected to be raised by the companys financial statements, (d) understands
internal controls over financial reporting (e) understands audit committee
functions, and (f) is an independent director.

Code of Ethics

In
December 2009, we adopted a new and expanded Code of Ethics applicable to our
principal executive officer, principal financial and accounting officers and
persons performing similar functions. A Code of Ethics is a written standard
designed to deter wrongdoing and to promote (a) honest and ethical conduct, (b)
full, fair, accurate, timely and understandable disclosure in regulatory filings
and public statements, (c) compliance with applicable laws, rules and
regulations, (d) the prompt reporting violation of the code;and (e)
accountability for adherence to the Code. A copy of our Code of Ethics was
previously filed as an exhibit to our annual report filed on Form 10-K for the
year ended December 31, 2009. We will provide a copy of our Code of Ethics,
without charge, to any person desiring a copy of the Code of Ethics, by written
request to us at our principal offices.

Nominating and Corporate Governance Committee

We
established a nominating and governance committee in November 2009. The
Nominating and Corporate Governance Committee has adopted a written charter
pursuant to which the committee: (i) recommends the slate of director nominees
for election to our Board; (ii) identifies and recommends candidates to fill
vacancies on our Board; (iii) reviews the composition of Board committees; and
(iv) monitors compliance with, reviews and recommends changes to our various
corporate governance policies and guidelines.

The
committee also prepares and supervises the Boards annual review of director
independence and the Boards annual self-evaluation. The Nominating and
Corporate Governance Committee is composed of three directors, all of whom have
been determined by the Board to be independent, as defined in the Marketplace
Rules of the NASDAQ and and within the meaning of National Instrument 52-110 
Audit Committees adopted by the Canadian Securities Administration.

- 63 -

---

A
majority of the persons serving on our Board must be independent. Thus, the
committee has considered transactions and relationships between each director or
any member of his immediate family and us or our affiliates, including those
reported under Certain Relationships and Related Transactions below. The
committee also reviewed transactions and relationships between directors or
their affiliates and members of our senior management or their affiliates. As a
result of this review, the committee affirmatively determined that each of
Messrs. Grayston, Montgomery and Casaceli are independent.

Nomination of Directors

The
committee considers all qualified candidates for our Board identified by members
of the committee, by other members of the Board, by senior management and by our
stockholders. The committee reviews each candidate including each candidates
independence, skills and expertise based on a variety of factors, including the
persons experience or background in management, finance, regulatory matters and
corporate governance. Further, when identifying nominees to serve as director,
the Nominating and Corporate Governance Committee seeks to create a Board that
is strong in its collective knowledge and has a diversity of skills and
experience with respect to accounting and finance, management and leadership,
vision and strategy, business operations, business judgment, industry knowledge
and corporate governance. In addition, prior to nominating an existing director
for re-election to the Board, the Nominating and Corporate Governance Committee
will consider and review an existing directors Board and committee attendance
and performance, length of Board service, experience, skills and contributions
that the existing director brings to the Board, equity ownership in our company
and independence.

The
committee follows the same process and uses the same criteria for evaluating
candidates proposed by members of the Board, members of senior management and
stockholders. Based on its assessment of each candidate, the committee
recommends candidates to the Board. However, there is no assurance that there
will be any vacancy on the Board at the time of any submission or that the
committee will recommend any candidate for the Board.

Compensation Committee

We
established a compensation committee (the Compensation Committee) in
November 2009. The Compensation Committee has adopted a written charter pursuant
to which the committee is responsible for overseeing our compensation programs
and practices, including our executive compensation plans and incentive
compensation plans. Our Chief Executive Officer provides input to the
Compensation Committee with respect to the individual performance and
compensation recommendations for the other executive officers. Although the
committees charter authorizes the committee to retain an independent
consultant, no third party compensation consultant was engaged for 2010. The
Compensation Committee is composed of three directors; namely Richard Grayston,
Robert Montgomery and Robert Casaceli, all of whom have been determined by the
Board to be independent, as defined in the Marketplace Rules of the NASDAQ and
within the meaning of National Instrument 52-110  Audit Committees adopted by
the Canadian Securities Administration.

Risk Management

We
separate the role of our CEO and the Chairman of our Board. Our management has
approval limits which it must not exceed without Board approval. These approval
limits span hiring, asset purchases and the issuance of shares. Our Board
administers its oversight function through three sub-committees which report to
the full Board, being our Audit Committee, our Corporate Governance Committee
and our Compensation Committee. We are a very small company at this time and
consider five Board members adequate for the purpose of directing its
activities. Our Board self-assesses on an ongoing basis and has the scope to
increase its size if the need is determined.

**Item
11.**        EXECUTIVE
COMPENSATION

Summary Compensation Table

The
following table sets forth information relating to all compensation awarded to,
earned by or paid by us during each of the two fiscal years ended December 31,
2010 and 2009 respectively, to: (a) our chief (principal) executive officer; (b)
each of our executive officers who was awarded, earned or we paid more than
$100,000; and (c) up to two additional individuals for whom disclosure would
have been made in this table but for the fact that the individual was not
serving as an executive officer of our company at December 31, 2010. The value
attributable to any option awards is computed in accordance with ASC 718
(Accounting Standards Codification, Topic 718).

- 64 -

---

SUMMARY COMPENSATION TABLE

|                                                       |           |        |         |            |               | NON-EQUITY       | NONQUALIFIED |                |                
|------------------------------------------------------ | --------- | ------ | ------- | ---------- | ------------- | ---------------- | ------------ | -------------- | ---------------
|                                                       |           |        |         |            |               | INCENTIVE        | DEFERRED     |                |                
|NAME AND                                               |           |        |         | STOCK      | OPTION        | PLAN             | COMPENSATION | ALL OTHER      |                
|PRINCIPAL                                              |           | SALARY | BONUS   | **AWARDS** | AWARDS        | **COMPENSATION** | EARNINGS     | COMPENSATION   | TOTAL          
|POSITION                                               | YEAR      | ($)    | ($)     | ($)        | ($)           | ($)              | ($)          | ($)            | ($)            
|(A)                                                    | (B)       | (C)    | (D)     | (E)        | (F)           | (G)              | (H)          | (I)            | (J)            
|                                                       |           |        |         |            |               |                  |              |                |                
|Paul Zyla CEO (1) (2)                                  | 2010 2009 | 0 0    | 0 0     | 0 0        | 69,956 0      | 0 0              | 0 0          | 6,794 0        | 76,750 0       
|                                                       |           |        |         |            |               |                  |              |                |                
|John C. Ross CFO (1) (3)                               | 2010 2009 | 0 0    | 0 0     | 0 0        | 62,269 0      | 0 0              | 0 0          | 10,225 0       | 72,494 0       
|                                                       |           |        |         |            |               |                  |              |                |                
|James Longshore
      Former CEO, CFO (1) (4)          | 2010 2009 | 0 0    | 0 0     | 0 0        | 43,898 79,637 | 0 0              | 0 0          | 179,811 60,000 | 223,709 139,637
|                                                       |           |        |         |            |               |                  |              |                |                
|Yves Clement
      Vice-President, Exploration (1) (5) | 2010 2009 | 0 0    | 0 5,282 | 0 0        | 0 151,946     | 0 0              | 0 0          | 116,472 74,825 | 116,472 232,053

|(1) | The fair value of these options has been calculated in
      accordance with ASC718 under US GAAP. The grant date fair value does not
      materially differ from that calculated under the CICA Handbook or
      International Financial Reporting Standards. The methodology used to
      calculate the grant date fair value was the Black-Scholes method, with a
      volatility assumption of 94%, an expected life of three years and an
      interest free rate of 2%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2) | Mr. Zyla was appointed as our President and CEO effective
      June 1, 2010. Our company entered into a management consulting agreement
      with Mr. Zyla on September 1, 2010. Subsequent to our fiscal year ended
      December 31, 2010, our company entered into a management consulting
      agreement with Mr. Zyla (see Management Consulting Agreements 
      Management Consulting Agreement with President and Chief Executive
      Officer). Mr. Zyla received the compensation noted above under All Other
      Compensation for the provision of consulting services to our
    company.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3) | Mr. Ross was appointed as our CFO effective July 1, 2010.
      Our company entered into a management consulting agreement with Mr. Ross
      on September 1, 2010 (see Management Consulting Agreements  Management
      Consulting Agreement with Chief Financial Officer). Mr. Ross received the
      compensation noted above under All Other Compensation for the provision
      of consulting services to our company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(4) | Mr. Longshore resigned as our CEO and CFO and as a
      director of our company effective June 1, 2010. Our company previously
      entered into a management consulting agreement with Brokton International
      Ltd. (Brokton), a corporation of which Mr. Longshore is the sole
      officer, director and shareholder from which Mr. Longshore received this
      compensation for the provision of consulting services as the general
      manager of XG Mining and XGEL (see Management Consulting Agreements 
      Management Consulting Agreement with Brokton). With respect to the
      compensation noted above under All Other Compensation, Mr. Longshore
      received (a) $95,000 for the provision of consulting services to our
      company, except for $3,325 which was paid to him for director fees; and
      (b) $81,486 in gold bullion from Ravenclaw (see Item 13  Certain
      Relationships, Related Transactions, and Director Independence 
      Consulting Agreement with Principal Shareholder for further
    details).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(5) | Mr. Clement was appointed as our Vice-President,
      Exploration on May 1, 2006. Our company entered into a management
      consulting agreement with Mr. Clement on March 1, 2006 which expired on
      May 1, 2009 and renewed from time to time. Subsequent to our fiscal year
      ended December 31, 2010, our company entered into a management consulting
      agreement with Mr. Clement (see Management Consulting Agreements 
      Management Consulting Agreement with Vice-President, Exploration). Mr.
      Clement received the compensation noted above under All Other
      Compensation for the provision of consulting services to our
    company.                                                                                                                                                                                                                                                                                                                                                                                            

- 65 -

---

During
the Fiscal Year, our Compensation Committee considered and determined
compensation be paid to Mr. Zyla as noted under Management Consulting
Agreements  Management Consulting Agreement with President and Chief Executive
Officer. In determining the compensation to be paid to Mr. Zyla, our
Compensation Committee considered a number of factors including the scope of his
duties and responsibilities to our company, the time he devotes to our business,
his length of services to our company and industry standards for compensation
paid for similar positions in other comparable reporting companies. Our
Compensation Committee did not consult with any experts or other third parties
in fixing the amount of Mr. Zylas compensation.

During
the Fiscal Year, our Compensation Committee considered and determined
compensation be paid to Mr. Ross as noted under Management Consulting
Agreements  Management Consulting Agreement with Chief Financial Officer. In
determining the compensation to be paid to Mr. Ross, our Compensation Committee
considered a number of factors including the scope of his duties and
responsibilities to our company, the time he devotes to our business, his length
of service to our company and industry standards for compensation paid for
similar positions in other comparable reporting companies. Our Compensation
Committee did not consult with any experts or other third parties in fixing the
amount of Mr. Ross compensation.

During
the Fiscal Year and in 2009, Mr. Longshore did not receive any monetary
compensation in his capacity as our CEO or as our CFO. During the Fiscal Year
and in 2009, he received a compensation package, through Brokton, for providing
his consulting services as general manager to XG Mining and XGEL as noted under
Management Consulting Agreements  Management Consulting Agreement with
Brokton. Mr. Longshore was reimbursed for out-of-pocket expenses incurred on
behalf of our company in connection with carrying out his duties and
responsibilities. The terms of any future compensation to be paid to Mr.
Longshore will be determined by our Compensation Committee. At such time, our
Compensation Committee will consider a number of factors in determining Mr.
Longshores compensation including the scope of his duties and responsibilities
to our company and our subsidiaries, the time he devotes to our business, his
length of service to our company and industry standards for compensation paid
for similar positions in other comparable reporting companies and whether to
consult with any experts or third parties in fixing such compensation.

Subsequent
to the Fiscal Year, our Compensation Committee considered and determined
compensation be paid to Mr. Clement as noted under Management Consulting
Agreements  Management Consulting Agreement with Vice-President, Exploration.
In determining the compensation to be paid to Mr. Clement, our Compensation
Committee considered a number of factors including the scope of his duties and
responsibilities to our company and our subsidiaries, the time he devotes to our
business, his length of service to our company and industry standards for
compensation paid for similar positions in other comparable reporting companies.
Our Compensation Committee did not consult with any experts or other third
parties in fixing the amount of Mr. Clements compensation.

Management Consulting Agreements

During
the Fiscal Year, we entered into management consulting agreements with the
following officers of our company.

Management Consulting Agreement with President and Chief
Executive Officer

We
entered into a management consulting agreement with our President and CEO, Paul
Zyla, dated September 1, 2010 for the provision of his services as our President
and CEO. This agreement is not for a defined term and may be terminated by Mr.
Zyla upon 60 days notice. Our CEO is paid CAD$2,000 (USD$2,060) at the
commencement of each calendar quarter and is reimbursed for certain expenses
incurred in performing his duties to our company. Our CEO provides certain
services to our company including, but not limited to, the stewardship of our
company, overseeing day-to-day managerial functions of our business, reviewing
all business opportunities, reporting to our Board and performing the duties and
responsibilities generally associated with being the most senior executive of a
reporting company. This agreement is superseded by the Zyla Agreement noted
hereunder.

Subsequent
to the period covered by this Report, our company entered into a management
consulting agreement with our President and CEO, Paul Zyla, effective January 1,
2011 (the Zyla Agreement) for a term of one (1) year which will expire
on December 31, 2011. Our CEO is paid CAD$3,000 (USD$3,090) per month to provide
the services set forth in the preceding paragraph and is reimbursed for certain
expenses incurred in performing his duties to our company. There is no provision
for a payment to be made to our CEO in the event of early termination of the
Zyla Agreement, without cause.

Management Consulting Agreement with Brokton

We
entered into a management consulting agreement on January 3, 2009 with Brokton
to provide the consulting services of our Chief Executive Officer at the time,
James Longshore, as general manager for XG Mining and XGEL for a one year term
which expired on December 31, 2009. Brokton was paid $5,000 per month
for providing Mr. Longshores services. Brokton was reimbursed for certain
expenses incurred by Mr. Longshore in performing his duties to our Ghanaian
subsidiaries. This agreement is superseded by the Brokton Agreement noted
hereunder.

- 66 -

---

During
the period covered by this Report, our company entered into a management
consulting agreement effective January 1, 2010 with Brokton (the Brokton
Agreement) to provide the consulting services of James Longshore, as
general manager for XG Mining and XGEL for a one year term which expired on
December 31, 2010. Brokton was paid $10,000 per month for providing Mr.
Longshores services. Brokton was reimbursed for certain expenses incurred by
Mr. Longshore in performing his duties to our Ghanaian subsidiaries. Either
Brokton or our company may terminate the Brokton Agreement, without reason or
cause, by providing one months written notice in advance of such termination.
This agreement provides for a payment of one month of consulting fees to Brokton
in lieu of notice being provided by our company. The Brokton Agreement was
renewed on November 30, 2010 for a further one year term commencing on January
1, 2011 and expiring on December 31, 2011.

Management Consulting Agreement with Chief Financial Officer

We
entered into a management consulting agreement with our CFO, John Ross,
effective September 1, 2010 (the Ross Agreement) for the provision of
his services as CFO of our company. This agreement is not for a defined term.
Our CFO is paid CAD$500 (USD$515) per day and is reimbursed for certain expenses
incurred in performing his duties to our company. Our CFO provides certain
accounting services to our company including, but not limited to, financial and
general management duties, accounting, financial and reporting control and
regulatory reporting duties. Our company may give written notice to our CFO of
our intention to terminate the Ross Agreement on the date therein specified in
the notice which shall in any event be a date at least 15 and not more than 30
days after giving of such notice. Our CFO may terminate the Ross Agreement at
any time upon providing our company with 60 days notice. There is no provision
for a payment to be made to our CFO in the event of early termination of the
Ross Agreement, without cause.

Management Consulting Agreement with Vice-President, Exploration

We
entered into a management consulting agreement with our Vice-President,
Exploration (VPE), Yves Clement, on May 1, 2006 for a term of 36 months
which expired on May 1, 2009. Prior to the expiration of this agreement, we
negotiated terms for renewal of this agreement for a further one (1) year term
with our VPE. Pursuant to this agreement, our VPE is paid approximately
CAD$10,000 (USD$10,300) per month and is reimbursed for certain expenses
incurred in performing his duties to our company. Our VPE shall be paid
compensation equivalent to 18 months fees, based on the rate of compensation
being paid at the relevant time in the event of (i) termination without cause;
or (ii) a Change of Control. Our VPE provides certain consulting services to our
company including, but not limited to, making project or property site
attendances as may be required from time to time, preparing progress reports
with respect to our mineral exploration projects, conducting due diligence as
may be required from time to time in connection with potential mineral
properties; reviewing geological data and liaising with principal owners of
mineral properties in which our company may wish to acquire an interest, meeting
with government authorities and retaining technical experts, making
recommendations to the Board and its relevant committees with respect to the
acquisition and/or abandonment of mineral exploration properties and preparing
and implementing, subject to Board approval, plans for the operation of our
company including plans for exploration programs, costs of operations and other
expenditures in connection with our mineral projects. This agreement has been
superseded by the Clement Agreement noted hereunder.

Subsequent
to the period covered by this Report, our company entered into a management
consulting agreement with our VPE on March 1, 2011 (the Clement
Agreement) for a term of three (3) years which will expire on March 1,
2014. The Clement Agreement supersedes the May 1, 2006 agreement or any renewal
thereof. Our VPE is paid CAD$12,500 (USD$12,875) per month to provide the
services set forth in the preceding paragraph and is reimbursed for certain
expenses incurred in performing his duties to our company. In the event that our
company terminates the Clement Agreement prior to September 30, 2012 (the
Early Termination), our VPE shall be paid additional remuneration of
CAD$10,000 (USD$10,300) per month for each additional month of Early
Termination. In the event that our company terminates the Clement Agreement on
or after October 1, 2012, then no additional remuneration shall be owed and paid
to the VPE.

Management Consulting Agreement with Vice-President, Ghana
Operations

We
entered into a management consulting agreement with our Vice-President, Ghana
Operations (VGO), Victor Nkansa, on June 1, 2010 (the Nkansa
Agreement) for a term of one (1) year which will expire on June 1, 2011.
Our VGO is paid $2,500 per month by XG Mining to provide his consulting services
on an as needed basis. There is no provision for a payment to be made to our
VGO in the event of early termination of the Nkansa Agreement, without cause.

- 67 -

---

Compensation of Management

The
terms of the foregoing management consulting agreements were determined by our
Compensation Committee and subsequently approved by our Board. As at the date of
this Report, our Compensation Committee has complete authority to determine the
amount of compensation to be paid and the other terms of management
compensation. At the time of entering into the foregoing agreements, our
Compensation Committee did not consult with any consultants or other third
parties in determining the amount of compensation to be paid under the
management consulting agreements.

Outstanding Equity Awards at Fiscal Year End

The
following table sets forth information concerning our grant of options to
purchase shares of our common stock during the fiscal year ended December 31,
2010 to each person named in the Summary Compensation table.

|                |             |                   |                 |            |              |           |                  |             | EQUITY      
|--------------- | ----------- | ----------------- | --------------- | ---------- | ------------ | --------- | ---------------- | ----------- | ------------
|                |             |                   |                 |            |              |           |                  |             | INCENTIVE   
|                |             |                   |                 |            |              |           |                  | EQUITY      | PLAN        
|                |             |                   |                 |            |              |           |                  | INCENTIVE   | **AWARDS**  
|                |             |                   |                 |            |              |           |                  | PLAN        | MARKET OR   
|                |             |                   |                 |            |              |           | MARKET           | **AWARDS**  | PAYOUT      
|                |             |                   | EQUITY          |            |              |           | VALUE            | NUMBER OF   | VALUE OF    
|                |             |                   | INCENTIVE       |            |              |           | OF               | UNEARNED    | **UNEARNED**
|                |             |                   | PLAN            |            |              | NUMBER    | **SHARES**       | **SHARES,** | SHARES,     
|                |             |                   | AWARDS          |            |              | OF SHARES | **OR
    UNITS** | UNITS OR    | UNITS OR    
|                | NUMBER OF   | NUMBER OF         | NUMBER OF       |            |              | OR UNITS  | OF               | OTHER       | OTHER       
|                | SECURITIES  | SECURITIES        | SECURITIES      |            |              | OF STOCK  | **STOCK**        | RIGHTS      | RIGHTS      
|                | UNDERLYING  | **UNDERLYING**    | **UNDERLYING**  |            |              | THAT      | THAT             | THAT        | THAT        
|                | UNEXERCISED | **UNEXERCISED**   | **UNEXERCISED** | **OPTION** |              | HAVE      | HAVE             | HAVE        | HAVE        
|                | OPTIONS     | OPTIONS           | UNEARNED        | EXERCISE   | OPTION       | NOT       | NOT              | NOT         | NOT         
|                | (#)         | (#)               | OPTIONS         | PRICE      | EXPIRATION   | VESTED    | **VESTED**       | VESTED      | VESTED      
|NAME            | EXERCISABLE | **UNEXERCISABLE** | (#)             | ($)        | DATE         | (#)       | ($)              | (#)         | (#)         
|(A)             | (B)         | (C)               | (D)             | (E)        | (F)          | (G)       | (H)              | (I)         | (J)         
|                |             |                   |                 |            |              |           |                  |             |             
|Paul Zyla       | 43,500      | 64,500            | 0               | 1.00       | Jan 1, 2013  | 0         | 0                | 0           | 0           
|                |             |                   |                 |            |              |           |                  |             |             
|John Ross       | 12,500      | 77,500            | 0               | 1.15       | July 1, 2013 | 0         | 0                | 0           | 0           
|                |             |                   |                 |            |              |           |                  |             |             
|James Longshore | 63,000      | 0                 | 0               | 1.00       | May 1, 2013  | 0         | 0                | 0           | 0           
|                |             |                   |                 |            |              |           |                  |             |             
|Yves Clement    | 0           | 0                 | 0               | N/A        | N/A          | 0         | 0                | 0           | 0           

2005 Equity Incentive Compensation Plan

On
June 21, 2005, our Board authorized, approved and adopted, our 2005 Equity
Incentive Compensation Plan. As the Plan was not submitted to our shareholders
for approval and was not approved by our shareholders, we are not permitted to
issue any options qualifying as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended. A total of 3,000,000 shares of our
common stock have been reserved for issuance under the Plan. As at the date of
this Report, we have granted options to purchase an aggregate of 1,989,000
shares of our common stock. During 2010, 108,000 options were cancelled pursuant
to Board approval.

The
purpose of the Plan is to encourage stock ownership by our officers, directors,
key employees and consultants, and to give such persons a greater personal
interest in the success of our business and an added incentive to continue to
advance and contribute to us. Our Board, or a committee of the Board, will
administer the Plan including, without limitation, the selection of the persons
who will be awarded stock grants and granted options, the type of options to be
granted, the number of shares subject to each option and the exercise price.

Plan
options may only be non-qualified options. In addition, the Plan allows for the
inclusion of a reload option provision, which permits an eligible person to pay
the exercise price of the option with shares of common stock owned by the
eligible person and receive a new option to purchase shares of common stock
equal in number to the tendered shares. Furthermore, compensatory stock amounts
may also be issued. The term of each plan option and the manner in which it may
be exercised is determined by our Board or a committee of the Board. All awards
granted under the Plan are made on a case by case basis, and the Board does not
have any policy regarding timing of grants, amount of shares subject to any
option to be granted or the exercise price, except that the Board does consider
and/or approve option grants to incoming officers and directors at the time of
their appointment.

- 68 -

---

Eligibility

Our officers, directors, key employees and
consultants are eligible to receive stock grants and non-qualified options under
the Plan.

Administration

As
of the date of this Report, the Plan is administered by our Compensation
Committee who determines from time to time those of our officers, directors, key
employees and consultants to whom stock grants or plan options are to be
granted, the terms and provisions of the respective option agreements, the time
or times at which such options shall be granted, the dates such Plan options
become exercisable, the number of shares subject to each option, the purchase
price of such shares and the form of payment of such purchase price. All other
questions relating to the administration of the Plan, and the interpretation of
the provisions thereof and of the related option agreements, are resolved by our
Compensation Committee. Our Board approves grants of non-qualified stock options
on recommendation from our Compensation Committee.

Shares Subject to Awards

We
have currently reserved 3,000,000 of our authorized but unissued shares of
common stock for issuance under the Plan, and a maximum of 3,000,000 shares may
be issued, unless the Plan is subsequently amended, subject to adjustment in the
event of certain changes in our capitalization, without further action by our
Board and stockholders, as required. Subject to the limitation on the aggregate
number of shares issuable under the Plan, there is no maximum or minimum number
of shares as to which a stock grant or Plan option may be granted to any person.
Shares used for stock grants and Plan options may be authorized and unissued
shares or shares reacquired by us. Shares covered by Plan options which
terminate unexercised or shares subject to stock awards which are forfeited or
cancelled will again become available for grant as additional options or stock
awards, without decreasing the maximum number of shares issuable under the Plan.

The
Plan provides that, if our outstanding shares are increased, decreased,
exchanged or otherwise adjusted due to a share dividend, forward or reverse
share split, recapitalization, reorganization, merger, consolidation,
combination or exchange of shares, an appropriate and proportionate adjustment
shall be made in the number or kind of shares subject to unexercised options and
in the purchase price per share under such options. Any adjustment, however,
does not change the total purchase price payable for the shares subject to
outstanding options. In the event of our proposed dissolution or liquidation, a
proposed sale of all or substantially all of our assets, a merger or tender
offer for our shares of common stock, the option may be assumed, converted or
replaced by the successor corporation (if any) or may substitute equivalent
awards or provide substantially similar consideration to awardees. In the event
such successor corporation (if any) refuses or otherwise declines to assume or
substitute awards, as provided above, (i) the vesting of any or all Awards
granted pursuant to this Plan will accelerate immediately prior to the effective
date of a transaction described above and (ii) any or all Options granted
pursuant to the Plan will become exercisable in full prior to the consummation
of such event at such time and on such conditions as our Board or an underlying
committee determines. If such Options are not exercised prior to the
consummation of the corporate transaction, they shall terminate at such time as
determined by our Board or an underlying committee.

Terms of Exercise

The
Plan provides that the options granted thereunder shall be exercisable from time
to time in whole or in part, unless otherwise specified by our Board or an
underlying committee.

Exercise Price

The
purchase price for shares subject to options is determined by our Board or an
underlying committee and may be below fair market value on the day of grant. If
the purchase price is paid with consideration other than cash, our Board or an
underlying committee shall determine the fair value of such consideration to us
in monetary terms.

The
per share purchase price of shares issuable upon exercise of a plan option may
be adjusted in the event of certain changes in our capitalization, but no such
adjustment shall change the total purchase price payable upon the exercise in
full of options granted under the Plan.

Manner of Exercise

Plan
options are exercisable by delivery of written notice to us stating the number
of shares with respect to which the option is being exercised, together with
full payment of the purchase price therefor. Payment shall be in cash, checks,
certified or bank cashiers checks, promissory notes secured by the shares
issued through exercise of the related options, shares of common stock or in
such other form or combination of forms which shall be acceptable to our Board
or an underlying committee.

- 69 -

---

Option Period

The
term of each non-qualified stock option is determined and fixed by our Board or
an underlying committee.

Termination

Except
as otherwise expressly provided in the option agreement, all Plan options are
nonassignable and nontransferable, except by will or by the laws of descent and
distribution, and during the lifetime of the optionee, may be exercised only by
such optionee. If an optionee shall die while our employee or within three
months after termination of employment by us because of disability, or
retirement or otherwise, such options may be exercised, to the extent that the
optionee shall have been entitled to do so on the date of death or termination
of employment, by the person or persons to whom the optionees right under the
option pass by will or applicable law, or if no such person has such right, by
his executors or administrators.

In
the event of termination of employment because of death while an employee or
because of disability, an optionees options may be exercised not later than the
expiration date specified in the option or one year after the optionees death,
whichever date is earlier, or in the event of termination of employment because
of retirement or otherwise, not later than the expiration date specified in the
option or three months after the optionees retirement, whichever date is
earlier.

If
an optionees employment by us terminates because of disability and such
optionee has not died within the following three months, the options may be
exercised, to the extent that the optionee shall have been entitled to do so at
the date of the termination of employment, at any time, or from time to time,
but not later than the expiration date specified in the option or one year after
termination of employment, whichever date is earlier.

If
an optionees employment shall terminate for any reason other than death or
disability, such optionee may exercise the options to the same extent that the
options were exercisable on the date of termination, for up to three months
following such termination, or on or before the expiration date of the options,
whichever occurs first. In the event that the optionee was not entitled to
exercise the options at the date of termination or if the optionee does not
exercise such options (which were then exercisable) within the time specified
herein, the options shall terminate.

If
an optionees employment with us is terminated for any reason whatsoever, and
within three months after the date thereof the optionee either (i) accepts
employment with any competitor of, or otherwise engages in competition with us,
or (ii) discloses to anyone outside our company or uses any confidential
information or material of our company in violation of our policies or any
agreement between the optionee and our company, the committee, in its sole
discretion, may terminate any outstanding stock option and may require the
optionee to return to us the economic value of any award that was realized or
obtained by the optionee at any time during the period beginning on that date
that is six months prior to the date the optionees employment with us is
terminated.

Our
Board or our Compensation Committee may, if an optionees employment with us is
terminated for cause, annul any award granted under the Plan to such employee
and, in such event, our Board or our Compensation Committee, in their sole
discretion, may require the optionee to return to us the economic value of any
award that was realized or obtained by an optionee at any time during the period
beginning on that date that is six months prior to the date the optionees
employment with us is terminated.

Modification and Termination of Plan

Our
Board or our Compensation Committee may amend, suspend or terminate the Plan at
any time. However, no such action may prejudice the rights of any holder of a
stock grant or an optionee who has prior thereto been granted options under the
Plan. Any such termination of the Plan shall not affect the validity of any
stock grants or options previously granted thereunder. Unless terminated by our
Board, the Plan shall continue to remain effective until such time as no further
awards may be granted and all awards granted under the Plan are no longer
outstanding.

Compensation of Directors

We
established compensation arrangements for our directors for each individuals
service and expense on our Board in March 2007. Directors fees are paid on a
quarterly basis. As of December 31, 2010, we did not pay fees to directors for
their attendance at Board meetings.

The
following table sets forth information relating to the compensation paid to our
directors for the fiscal year ended December 31, 2010:

- 70 -

---

DIRECTOR COMPENSATION

|                       | FEES    |        |        |                | NON-QUALIFIED |              |       
|---------------------- | ------- | ------ | ------ | -------------- | ------------- | ------------ | ------
|                       | EARNED  |        |        | NON-EQUITY     | DEFERRED      |              |       
|                       | OR PAID | STOCK  | OPTION | INCENTIVE PLAN | COMPENSATION  | ALL OTHER    |       
|                       | IN CASH | AWARDS | AWARDS | COMPENSATION   | EARNNGS       | COMPENSATION | TOTAL 
|NAME                   | ($)     | ($)    | ($)    | ($)            | ($)           | ($)          | ($)   
|(A)                    | (B)     | (C)    | (D)    | (E)            | (F)           | (G)          | (H)   
|                       |         |        |        |                |               |              |       
|                       |         |        |        |                |               |              |       
|Richard Grayston (1)   | 7,764   | 0      | 43,898 | 0              | 0             | 0            | 51,662
|                       |         |        |        |                |               |              |       
|Peter Minuk (1)        | 5,823   | 0      | 29,265 | 0              | 0             | 0            | 35,088
|                       |         |        |        |                |               |              |       
|Robert Montgomery (1)  | 5,823   | 0      | 29,265 | 0              | 0             | 0            | 35,088
|                       |         |        |        |                |               |              |       
|Robert Casaceli (1)(2) | 3,000   | 0      | 70,207 |                |               | 10,522       | 83,729

|(1) | The fair value of these options has been calculated in
      accordance with ASC718 under US GAAP. The grant date fair value does not
      materially differ from that calculated under the CICA Handbook or
      International Financial Reporting Standards. The methodology used to
      calculate the grant date fair value was the Black-Scholes method, with a
      volatility assumption of 94%, an expected life of three years and an
      interest free rate of 2%.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(2) | Mr. Casaceli was appointed as a director on May 31,
      2010.                                                                                                                                                                                                                                                                                                                                                                                                                   

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


At
March 29, 2011, we had 42,986,179 shares of common stock issued and outstanding.
The following table sets forth information known to us as of March 29, 2011
relating to the beneficial ownership of shares of our common stock by:

- each person who is known by us to be the beneficial owner of more than 5%
  of our outstanding common stock;
- each director;
- each named executive officer; and
- all named executive officers and directors as a group.

Unless
otherwise indicated, the business address of each person listed is in care of
our Field Camp located at 2 Masalakye Street, Kwabeng, Ghana. The percentages in
the table have been calculated on the basis of treating as outstanding for a
particular person, all shares of our common stock outstanding on that date and
all shares of our common stock issuable to that holder in the event of exercise
of outstanding options, warrants, rights or conversion privileges owned by that
person at that date which are exercisable within 60 days of that date. Except as
otherwise indicated, the persons listed below have sole voting and investment
power with respect to all shares of our common stock owned by them, except to
the extent that power may be shared with a spouse.

AMOUNT AND NATURE
      PERCENTAGENAME OF BENEFICIAL
        OWNER
      OF
        BENEFICIAL OWNERSHIP
      OF CLASSPaul Zyla
      478,500
      shares
      (1)
      1.11%John C. Ross
      25,000
      shares
      (2)
      0.06 %Richard W. Grayston
      260,000
      shares
      (3)
      0.60%Yves P. Clement
      334,000
      shares
      (4)
      0.78%Peter C. Minuk
      170,000
      shares
      (5)
      0.40%Victor Nkansa
      13,000
      shares
      (6)
      0.03%Robert H. Montgomery
      150,000
      shares
      (7)
      0.30%Robert J. Casaceli
      36,000
      shares
      (8)
      0.035%Officers and Directors as a Group (8 persons)
      1,466,500
      shares
      (1) to (8)
      3.41%5% StockholdersBrokton International Ltd.
      2,725,000
      shares
      (9)
      6.34%Mark T. McGinnis
      2,979,445
      shares
      (10)
      6.93%


- 71 -

---

|(1)  | Consists of (a) 405,000 shares of common stock; (b)
      57,000 shares which can be acquired upon the exercise of options to
      purchase shares that have vested and are currently exercisable; (c) 7,500
      shares which can acquired upon the exercise of warrants which are
      currently exercisable into common stock; and (d) 9,000 shares which shall
      become issuable upon options that shall vest and be exercisable within 60
      days following the date of this Report; namely April 1 and May 1, 2011.
      Does not include 42,000 shares issuable upon the exercise of options that
      have not yet vested and will vest monthly as to 4,500 in each
  month.                           
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(2)  | Consists of (a) 20,000 shares which can be acquired upon
      the exercise of options to purchase shares that have vested and are
      currently exercisable; and (b) 5,000 shares which shall become issuable
      upon options that shall vest and be exercisable within 60 days following
      the date of this Report; namely April 1 and May 1, 2011. Does not include
      65,000 shares issuable upon the exercise of options that have not yet
      vested and will vest monthly as to 2,500 in each month.                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(3)  | Consists of (a) 35,000 shares of common stock; and (b)
      225,000 shares which can be acquired upon the exercise of options to
      purchase shares that have vested and are currently exercisable within 60
      days of the date of this Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(4)  | Consists of (a) 324,000 shares which can be acquired upon
      the exercise of options to purchase shares that have vested and are
      currently exercisable within 60 days of the date of this Report; and (b)
      10,000 shares which shall become issuable upon options that shall vest and
      be exercisable within 60 days following the date of this Report; namely
      April 1 and May 1, 2011. Does not include 90,000 shares issuable upon the
      exercise of options that have not yet vested and will vest monthly as to
      5,000 in each month.                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(5)  | Consists of (a) 20,000 shares of common stock; and (b)
      150,000 shares which can be acquired upon the exercise of options to
      purchase shares that have vested and are currently exercisable within 60
      days of the date of this Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(6)  | Consists of (a) 12,000 shares which can be acquired upon
      the exercise of options to purchase shares that have vested and are
      currently exercisable within 60 days of the date of this Report; and (b)
      1,000 shares which shall become issuable upon options that shall vest and
      be exercisable within 60 days following the date of this Report; namely
      April 1 and May 1, 2011. Does not include (a) 11,000 shares issuable upon
      the exercise of options that have not yet vested and will vest monthly as
      to 500 in each month; (b) 3,000 shares issuable upon the exercise of
      options that have not yet vested and will vest on March 1, 2014.                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(7)  | Consists of 150,000 shares which can be acquired upon the
      exercise of options to purchase shares that have vested and are currently
      exercisable within 60 days of the date of this Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(8)  | Consists of (a) 30,000 shares which can be acquired upon
      the exercise of options to purchase shares that have vested and are
      currently exercisable; and (b) 6,000 shares which shall become issuable
      upon options that shall vest and be exercisable within 60 days following
      the date of this Report; namely April 1 and May 1, 2011. Does not include
      72,000 shares issuable upon the exercise of options that have not yet
      vested and will vest monthly as to 3,000 in each month.                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(9)  | Consists of (a) 2,000,000 shares which are owned by
      Brokton International Ltd. (Brokton); (b) 500,000 shares which
      are owned by Sausilito Ltd.; and (c) 225,000 shares which can be acquired
      upon the exercise of options to purchase shares that have vested and are
      currently exercisable within 60 days of the date of this Report. Brokton
      is a Turks & Caicos Islands corporation, whose sole beneficial owner
      is James Longshore. Sausilito Ltd. is a Turks & Caicos Islands
      corporation, whose sole beneficial owner is James Longshore. Mr. Longshore
      exercises sole investment, voting and disposition powers over the shares
      included in the above table.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(10) | Consists of (a) 2,115,816 shares of common stock held by
      Mark McGinnis; and (b) 257,337 warrants which are exercisable into common
      stock within 60 days from the date of this Report; and (c) 606,292 shares
      of common stock held by his spouse of which an aggregate of 7,100 shares
      of common stock is held in trust for her children.                                                                                                                                                                                                                                                                                                                                                           

Securities Authorized for Issuance Under Equity Compensation
Plans

The
following table sets forth information relating to our outstanding equity
compensation plans as of December 31, 2010:

- 72 -

---

NUMBER OF
    WEIGHTEDSECURITIES TO BE
    AVERAGE EXERCISE
    NUMBER OF SECURITIESISSUED UPON
    PRICE OF
    REMAINING AVAILABLE FOREXERCISE OF
    OUTSTANDING
    FUTURE ISSUANCE UNDEROUTSTANDING
    OPTIONS,
    EQUITY COMPENSATION PLANSOPTIONS, WARRANTS
    WARRANTS AND
    (INCUDING SECURITIESAND RIGHTS
    RIGHTS
    REFLECTED IN COLUMN (A)(A)
    (B)
    (C)Equity Compensation Plans Approved by
      Security Holders
    N/A
    N/A
    N/AEquity Compensation Plans Not Approved by Security
      Holders2005 Equity Incentive Compensation Plan (1)
    1,788,000
    $0.88
    1,112,000TOTAL
    1,788,000
    $0.88
    1,112,000


|(1) | As of December 31, 2010, 100,000 options have been
      exercised under the 2005 Equity Incentive Compensation Plan by our former
      Project Manager, Operations.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

A
description of our 2005 Equity Incentive Compensation Plan is contained in this
Report under Part III, Item 11 -Executive Compensation - Stock Option Plans.

Item 13.        
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

Consulting Agreement with Principal Shareholder

From
February 1, 2004 through February 1, 2006, we were a party to a consulting
agreement with Brokton, a company which, as of the date of this Report, owns
6.34% of our common stock and is one of only two shareholders that owns more
than 5% of our issued and outstanding shares of common stock. Under the terms of
this agreement, we engaged Brokton as a consultant to advise our Management with
respect to hiring additional qualified management, providing support with
respect to operational matters and government compliance in Ghana, mergers and
acquisitions and financial advisory. James Longshore, our former President and a
former director of our company, is the President of Brokton and exercises sole
investment, voting and disposition powers over the shares of Brokton. Mr.
Longshore is a director of our wholly-owned subsidiaries, XGEL and XOG Ghana
(since April 2006) and Chief Operating Officer (since February 2007) and General
Manager (since June 2006) and a director of XG Mining (since June 2006) and
Chief Operating Officer (since February 2007) and General Manager (since June
2006) and a director and officer of Xtra Energy (since March 2007). From
February 2004 to February 2006, we paid Brokton an aggregate of $53,176 for its
consulting services and reimbursed Brokton for expenses incurred by Brokton on
behalf of our company.

On
January 3, 2009, we were a party to a consulting agreement with Brokton, whereby
we engaged Brokton as a consultant to provide the consulting services of Mr.
Longshore as General Manager of our subsidiaries, XG Mining and XGEL, for a one
year term ending on December 31, 2009. During the term of this agreement, we
paid Brokton an aggregate of $60,000 and reimbursed Brokton for expenses
incurred by Brokton on behalf of our company and our subsidiaries.

On
  June 1, 2010, we entered into a consulting agreement with Brokton (the Brokton
  Agreement) for the continued consulting services of Mr. Longshore
  as General Manager of our subsidiaries, XG Mining and XGEL, for a one year term
  ending on December 31, 2010. During the term of the Brokton Agreement, we paid
  Brokton an aggregate of $95,000 and reimbursed Brokton for expenses incurred
  by Brokton on behalf of our company and our subsidiaries. On November 30, 2010,
  the Brokton Agreement was renewed for a further one year term effective January
  1, 2011 and ending on December 31, 2011.

During
the Fiscal Year, Mr. Longshore also received compensation of $81,486 in gold
bullion, the cash value of which was determined on the day of sale and shipment
of the gold out of Ghana, from Ravenclaw for assisting Ravenclaw in fulfilling
its agreement with our company. Ravenclaw entered into an agreement dated July
1, 2010 (the Ravenclaw Agreement) with our company for a term of one
(1) year whereby Ravenclaw will receive a maximum payment of 2% gross overriding
royalty (GOR) on all placer gold produced by the independent Ghanaian
contract miners who carry out recovery of placer gold operations at our Kibi and
Pameng Projects. Ravenclaw is not entitled to receive the GOR until our company
receives its 10% GOR on all placer gold produced from the contract miners.
Ravenclaw has to the option to take their payment in cash or kind. The Ravenclaw
Agreement is renewable on an annual basis.

- 73 -

---

Director Independence

As
our common stock is currently traded on the OTCBB, we are not subject to the
rules of any national securities exchange which requires that a majority of a
listed companys directors and specified committees of its board of directors
meet independence standards prescribed by such rules. For the purpose of
preparing the disclosures in this Report on Form 10-K with respect to director
independence, we have used the definition of independent director within the
meaning of National Instrument 52-110  Audit Committees adopted by the Canadian
Securities Administration and as set forth in the Marketplace Rules of the
NASDAQ, which defines an independent director generally as being a person,
other than an executive officer or employee of the company or any other
individual having a relationship which, in the opinion of the companys board of
directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director.

Consistent
with these standards, our Board has determined that Richard Grayston, Robert
Montgomery and Robert Casaceli are independent.

Item
14.         PRINCIPAL
ACCOUNTING FEES AND SERVICES

Davidson
& Company LLP is our principal accountant for our audit of annual financial
statements and review of the financial statements included in this Report and
served as our independent registered public accounting firm for 2010 and 2009.
The following table shows the fees that were billed for the audit and other
services provided by such firm for 2010 and 2009.

2010
    
    
    2009Audit Fees
    $
    70,000
    
    $
    60,000Audit-Related Fees
    
    11,000
    
    
    15,485Tax Fees
    
    0
    
    
    0All Other Fees (1)
    
    40,750
    
    
    0Total
    $
    121,750
    
    $
    75,485


(1)      Fees
paid in connection with our IPO in Canada in November 2010.

Audit Fees

This
category includes the audit of our annual financial statements, review of
financial statements included in this Report and services that are normally
provided by the independent auditors in connection with their engagements for
those fiscal years. This category also includes advice on audit and accounting
matters that arose during, or as a result of, the audit or the review of our
interim financial statements.

Audit-Related Fees

This
category consists of assurance and related services by the independent auditors
that are reasonably related to the performance of the audit or review of our
financial statements and are not reported above under Audit Fees. The services
for the fees disclosed under this category include consultation regarding our
correspondence with the SEC and other accounting consulting.

Tax Fees

This
category consists of professional services rendered by our independent auditors
for tax compliance and tax advice. The services for the fees disclosed under
this category include tax return preparation and technical tax advice.

All Other Fees

This
  category consists of fees for other miscellaneous items.

Our
Audit Committee has adopted a procedure for pre-approval of all fees charged by
our independent auditors. Under the procedure, the Audit Committee approves the
engagement letter with respect to audit, tax and review services. Other fees are
subject to pre-approval by our Audit Committee. The audit and tax fees paid to
the auditors with respect to 2010 were pre-approved by our Audit Committee.

- 74 -

---

PART IV

Item
15.         EXHIBITS,
FINANCIAL STATEMENT SCHEDULES

|Exhibit No. | Description of Document                                                                                                                                                                                                                       
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                                                               
|2.1         | Stock Exchange
        Agreement dated October 31, 2003, by and between Xtra-Gold Resources Corp.
        and the former shareholders of Xtra Energy Corp. (formerly Xtra-Gold Resources,
        Inc.) (1)                                   
|3.1         | Articles of Incorporation of
        Silverwing Systems Corporation filed on September 1, 1998 (1)                                                                                                                                            
|3.2         | Articles of
        Amendment filed on August 19, 1999 to change our name to Advertain On-Line
        Inc. (1)                                                                                                                               
|3.3         | Articles of Amendment filed
        June 18, 2001 to change our name to RetinaPharma International, Inc. (1)                                                                                                                                  
|3.4         | Articles of
        Amendment filed on October 8, 2001 to increase our capital stock from
        25,000,000 to 100,000,000 shares (1)                                                                                                        
|3.5         | Articles of Amendment filed
        December 16, 2003 to change our name to Xtra-Gold Resources Corp. and
        to increase our capital stock from 100,000,000 to 250,000,000 shares (1)                                                    
|3.6         | By-laws (1)                                                                                                                                                                                                                                   
|4.1         | Form
        of common stock purchase warrant (1)                                                                                                                                                                                             
|4.2         | Form of convertible
        debenture (1)                                                                                                                                                                                                     
|10.1        | 2005 Equity Compensation Plan
        (1)                                                                                                                                                                                                     
|10.2        | Memorandum of
        Agreement dated October 28, 2003, by and between Xtra Energy Corp. (formerly
        Xtra-Gold Resources, Inc.) and Ranger Canyon Energy Inc. (formerly CaribGold
        Minerals, Inc.) (1)                           
|10.3        | Agreement dated February 16,
        2004 by and between Xtra-Gold Resources Corp. and Akrokeri-Ashanti Gold
        Mines Inc. (1)                                                                                                           
|10.4        | Share Purchase
        Agreement dated December 22, 2004 between Xtra-Gold Resources Corp. and
        2058168 Ontario Inc., the trustee for the former note holders of Akrokeri-Ashanti
        Gold Mines Inc. (1)                          
|10.5        | Share Purchase Agreement dated
        December 22, 2004 among Xtra-Gold Resources Corp., 2058168 Ontario Inc.,
        the trustee for the former debenture holders of Akrokeri-Ashanti Gold
        Mines Inc. and 2060768 Ontario Corp. (1)
|10.6        | Stock option
        agreement dated April 21, 2006 with Kiomi Mori, as optionee (1)                                                                                                                                                          
|10.7        | Stock option agreement dated
        May 1, 2006 with Yves Clement, as optionee (1)                                                                                                                                                           
|10.8        | Stock option
        agreement dated May 1, 2006 with Alhaji Abudulai, as optionee (1)                                                                                                                                                        
|10.9        | Stock option agreement dated
        August 1, 2006 with John Douglas Mills, as optionee (1)                                                                                                                                                  
|10.10       | Management consulting
        agreement dated May 1, 2006 with Yves Clement (1)                                                                                                                                                               
|10.11       | Management consulting agreement
        dated July 1, 2006 with Rebecca Kiomi Mori (1)                                                                                                                                                        
|10.12       | Management consulting
        agreement dated November 1, 2006 with Alhaji Nantogma Abudulai (1)                                                                                                                                              
|10.13       | Mining lease with respect to
        the Kwabeng concession (1)                                                                                                                                                                               
|10.14       | Mining lease
        with respect to the Pameng concession (1)                                                                                                                                                                                
|10.15       | Prospecting license with respect
        to the Banso and Muoso concessions (1)                                                                                                                                                               
|10.16       | Prospecting
        license with respect to the Apapam concession (1)                                                                                                                                                                         
|10.17       | Prospecting license with respect
        to the Edum Banso concession (1)                                                                                                                                                                     
|10.18       | Option Agreement
        dated October 17, 2005 between Xtra-Gold Exploration Limited and Adom
        Mining Limited (1)                                                                                                                     
|10.19       | Consulting agreement dated January
        17, 2006 between Xtra-Gold Mining Limited and Bio Consult Limited (1)                                                                                                                              
|10.20       | Purchase and
        Sale Agreement dated September 1, 2006 between Xtra Oil & Gas Ltd.
        and TriStar Oil & Gas Partnership (1)                                                                                                         
|10.21       | Amending Agreement dated October
        19, 2006 between Xtra-Gold Exploration and Adom Mining Limited (1)                                                                                                                                   
|10.22       | Stock option
        agreement dated March 5, 2007 with Richard W. Grayston, as optionee (1)                                                                                                                                                  
|10.23       | Stock option agreement dated
        March 5, 2007 with Peter Minuk, as optionee (1)                                                                                                                                                          
|10.24       | Stock option
        agreement dated March 12, 2007 with Robert H. Montgomery, as optionee
        (1)                                                                                                                                        
|10.25       | Stock option agreement dated
        March 12, 2007 with Brokton International Ltd., as optionee (1)                                                                                                                                          
|10.26       | Stock option
        agreement dated March 12, 2007 with John Douglas Mills, as optionee (1)                                                                                                                                                  
|10.27       | Consulting agreement dated March
        20, 2007 with JD Mining Ltd. (1)                                                                                                                                                                     
|10.28       | Lease with 360
        Bay Street Limited dated March 29, 2007 (1)                                                                                                                                                                            
|10.29       | Termination agreement dated
        January 31, 2008 with JD Mining Ltd. and John Douglas Mills (1)                                                                                                                                           
|10.30       | Mining lease
        with respect to the Apapam Concession (2)                                                                                                                                                                                
|10.31       | Management consulting agreement
        dated January 3, 2009 with Brokton International Ltd. (3)                                                                                                                                             
|10.32       | Stock
        option agreement dated January 15, 2010 with Radical Capital Ltd. *                                                                                                                                                             
|10.33       | Stock
        option agreement dated January 25, 2010 with Paul Zyla *                                                                                                                                                                        
|10.34       | Form of stock
        option agreement dated February 1, 2010 with Robert Casaceli *                                                                                                                                                          
|10.35       | Stock
        option agreement dated February 1, 2010 with David Bell *                                                                                                                                                                       
|10.36       | Amendment
        to option agreement dated June 1, 2010 with Paul Zyla *                                                                                                                                                                     
|10.37       | Consulting
        agreement dated June 1, 2010 with Brokton International Ltd. *                                                                                                                                                             

- 75 -

---

|Exhibit No. | Description of Document                                                                                                                   
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                           
|10.38       | Consulting
        agreement dated June 1, 2010 with Victor Nkansa *                                                                      
|10.39       | Stock
        option agreement dated June 1, 2010 with Richard W. Grayston, as optionee
        *                                         
|10.40       | Stock
        option agreement dated June 1, 2010 with Peter Minuk, as optionee *                                                         
|10.41       | Stock
        option agreement dated June 1, 2010 with Robert H. Montgomery, as optionee
        *                                        
|10.42       | Stock
        option agreement dated June 1, 2010 with Brokton International Ltd., as
        optionee *                                  
|10.43       | Stock
        option agreement dated June 1, 2010 with Windward Global Trading Inc.,
        as optionee *                                
|10.44       | Stock
        option agreement dated June 1, 2010 with Laura Stein, as optionee *                                                         
|10.45       | Stock
        option agreement dated June 1, 2010 with Victor Nkansa, as optionee *                                                       
|10.46       | Stock
        option agreement dated July 1, 2010 with John C. Ross, as optionee *                                                        
|10.47       | Agreement
        dated July 1, 2010 with Ravenclaw Mining Limited *                                                                      
|10.48       | Letter
        of intent dated July 21, 2010 with Verbina Resources Inc. *                                                                
|10.49       | Amendment
        to stock option agreement dated August 4, 2010 with Radical Capital Ltd.
        *                                      
|10.50       | Management
        consulting agreement dated September 1, 2010 with Paul Zyla *                                                          
|10.51       | Management
        consulting agreement dated September 1, 2010 with John Ross *                                                          
|10.52       | Amending
        agreement (undated) between Xtra-Gold Exploration and Adom Mining Limited
        *                                      
|10.53       | Escrow
        agreement dated November 22, 2010 with Olympia Transfer Services Inc.
        and Paul Zyla *                              
|10.54       | Renewal
        agreement dated November 30, 2010 with Brokton International Ltd. *                                                       
|10.55       | Letter
        of intent dated January 21, 2011 with Verbina Resources Inc. *                                                             
|10.56       | Management
        consulting agreement dated January 27, 2011 with Paul Zyla *                                                           
|10.57       | Form
        of stock option agreement dated February 15, 2011 with Denis Laviolette,
        as optionee *                               
|10.58       | Form
        of management consulting agreement dated March 1, 2011 with Yves Clement*                                                    
|10.59       | Form
        of stock option agreement dated March 1, 2011 with Yves Clement, as optionee
        *                                       
|10.60       | Form
        of stock option agreement dated March 1, 2011 with Victor Nkansa, as optionee
        *                                      
|10.61       | Form
        of stock option agreement dated March 1, 2011 with Michael Dwumfuor, as
        optionee *                                   
|10.62       | Form
        of stock option agreement dated March 1, 2011 with Philip Schandorf, as
        optionee *                                   
|10.63       | Mining
        lease with respect to the Banso Concession *                                                                               
|10.64       | Mining
        lease with respect to the Muoso Concession *                                                                               
|14          | Code of Ethics
        (3)                                                                                                                
|21          | Subsidiaries
        of the Company *                                                                                                     
|31.1        | Certification
        of principal executive officer, as adopted pursuant to Section 302 of
        the Sarbanes-Oxley Act of 2002 *      
|31.2        | Certification
        of principal financial officer, as adopted pursuant to Section 302 of
        the Sarbanes-Oxley Act of 2002 *      
|32.1        | Certification
        of principal executive officer, pursuant to 18 U.S.C. 1350 (Section 906
        of the Sarbanes-Oxley Act of 2002) *
|32.2        | Certification
        of principal financial officer, pursuant to 18 U.S.C. 1350 (Section 906
        of the Sarbanes-Oxley Act of 2002) *

*        Filed
herewith

|(1) | Incorporated by reference to the registration statement
      on Form SB-2 on Form S-1, SEC File No. 333-139037     
|--- | --------------------------------------------------------------------------------------------------------------------
|(2) | Incorporated by reference to the companys 10-K annual
      report filed on March 27, 2009, SEC File No. 333-139037
|(3) | Incorporated by reference to the companys 10-K annual
      report filed on March 31, 2010, SEC File No.
333-139037

- 76 -

---

SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, we have duly caused this Report to be signed on our behalf by the
undersigned, thereunto duly authorized.

|Date:      March 30, 2011 | XTRA-GOLD RESOURCES CORP.
|------------------------- | -------------------------
|                          | (Registrant)             
|                          |                          
|                          | By                       
|                          |                          
|                          |                          
|                          |                          
|                          |                          
|                          | By                       
|                          |                          
|                          |                          
|                          |                          

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

|Signature                      |  | Title                                              | Date          
|------------------------------ |  | -------------------------------------------------- | --------------
|/s/ Paul Zyla                  |  | President and Chief Executive
      Officer        | March 30, 2011
|**Paul Zyla**                  |  | (principal executive officer) and
      Director   |               
|                               |  |                                                    |               
|/s/
      John C. Ross         |  | Chief Financial
      Officer (principal financial | March 30, 2011
|**John C. Ross**               |  | officer)                                           |               
|                               |  |                                                    |               
|/s/
      Richard W. Grayston  |  | Chairman and
      Director                        | March 30, 2011
|Richard W. Grayston            |  |                                                    |               
|                               |  |                                                    |               
|/s/ Peter C. Minuk             |  | Director                                           | March 30, 2011
|Peter C. Minuk                 |  |                                                    |               
|                               |  |                                                    |               
|/s/ Robert H.
      Montgomery |  | Director                                           | March 30, 2011
|Robert H. Montgomery           |  |                                                    |               
|                               |  |                                                    |               
|/s/ Robert J.
      Casaceli   |  | Director                                           | March 30, 2011
|Robert J. Casaceli             |  |                                                    |               

- 77 -

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company)

CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S.
Dollars)

DECEMBER 31, 2010

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Xtra-Gold
Resources Corp. and subsidiaries (an Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of
Xtra-Gold Resources Corp. and subsidiaries (an Exploration Stage Company) as at
December 31, 2010 and 2009 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended and for
the period from the beginning of the exploration stage on January 1, 2003 to
December 31, 2010. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as at December 31, 2010 and 2009 and the results of its operations and
its cash flows for the years then ended and for the period from the beginning of
the exploration stage on January 1, 2003 to December 31, 2010 in conformity with
generally accepted accounting principles in the United States of America.

|                  | DAVIDSON & COMPANY LLP
|----------------- | ------------------------
|Vancouver, Canada | Chartered Accountants   
|March 29, 2011    |                         



F-2

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED BALANCE SHEETS(Expressed in U.S. Dollars)
AS AT DECEMBER 31

|                                                                                                     |   | 2010        |   |   | 2009       |  
|---------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|ASSETS                                                                                               |   |             |   |   |            |  
|Current                                                                                              |   |             |   |   |            |  
|Cash and cash
      equivalents                                                                      | $ | 10,096,122  |   | $ | 622,670    |  
|Investment in trading securities, at fair value (cost of
      $78,318 (2009 - $1,636,628)) (Note 4) |   | 129,141     |   |   | 1,781,594  |  
|Receivables and
      other assets                                                                   |   | 125,354     |   |   | 46,462     |  
|Deposit for equipment (Note 5)                                                                       |   |            |   |   | 151,506    |  
|                                                                                                     |   |             |   |   |            |  
|Total current assets                                                                                 |   | 10,350,617  |   |   | 2,602,232  |  
|Restricted cash(Note 10)                                                                             |   | 220,000     |   |   |           |  
|Equipment(Note 5)                                                                                    |   | 735,426     |   |   | 244,508    |  
|Deferred financing costs(Note 6)                                                                     |   |            |   |   | 1,283      |  
|Oil and gas investment(Note 7)                                                                       |   |            |   |   | 40,000     |  
|Mineral properties(Note 8)                                                                           |   | 1,713,862   |   |   | 1,662,564  |  
|                                                                                                     |   |             |   |   |            |  
|TOTAL ASSETS                                                                                         | $ | 13,019,905  |   | $ | 4,550,587  |  
|                                                                                                     |   |             |   |   |            |  
|LIABILITIES AND STOCKHOLDERS
      EQUITY                                                           |   |             |   |   |            |  
|Current                                                                                              |   |             |   |   |            |  
|Accounts payable
      and accrued liabilities                                                       | $ | 517,236     |   | $ | 233,073    |  
|Convertible debentures (Note 9)                                                                      |   |            |   |   | 250,000    |  
|                                                                                                     |   |             |   |   |            |  
|Total current liabilities                                                                            |   | 517,236     |   |   | 483,073    |  
|                                                                                                     |   |             |   |   |            |  
|Asset retirement obligation(Note 10)                                                                 |   | 155,395     |   |   | 71,906     |  
|                                                                                                     |   |             |   |   |            |  
|Total liabilities                                                                                    |   | 672,631     |   |   | 554,979    |  
|                                                                                                     |   |             |   |   |            |  
|Stockholders equity                                                                                 |   |             |   |   |            |  
|Capital stock
      (Note 11)                                                                        |   |             |   |   |            |  
|Authorized                                                                                           |   |             |   |   |            |  
|250,000,000
      common shares with a par value of $0.001                                           |   |             |   |   |            |  
|Issued and outstanding                                                                               |   |             |   |   |            |  
|42,961,179
      common shares (2009  33,231,477 common shares)                                     |   | 42,961      |   |   | 33,231     |  
|Additional paid in capital                                                                           |   | 26,089,803  |   |   | 14,771,222 |  
|Deficit                                                                                              |   | (1,427,764  | ) |   | (1,427,764 | )
|Deficit accumulated during the
      exploration stage                                               |   | (12,321,365 | ) |   | (9,304,452 | )
|                                                                                                     |   |             |   |   |            |  
|Total Xtra-Gold Resources
      Corp. stockholders equity                                           |   | 12,383,635  |   |   | 4,072,237  |  
|Non-controlling
      interest                                                                       |   | (36,361     | ) |   | (76,629    | )
|                                                                                                     |   |             |   |   |            |  
|Total
      stockholders equity                                                                     |   | 12,347,274  |   |   | 3,995,608  |  
|                                                                                                     |   |             |   |   |            |  
|TOTAL LIABILITIES AND
      STOCKHOLDERS EQUITY                                                     | $ | 13,019,905  |   | $ | 4,550,587  |  

History and organization of the Company(Note 1)
Contingency and commitments(Note 16) Subsequent events
(Note 17)

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

F-3

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company)CONSOLIDATED STATEMENTS OF OPERATIONS(Expressed
in U.S. Dollars)

|                                                                                  |   | Cumulative       |            |   |              |            |   |              |  
|--------------------------------------------------------------------------------- | - | ---------------- | ---------- | - | ------------ | ---------- | - | ------------ | -
|                                                                                  |   | amounts from     |            |   |              |            |   |              |  
|                                                                                  |   | the beginning of |            |   |              |            |   |              |  
|                                                                                  |   | the exploration  |            |   |              |            |   |              |  
|                                                                                  |   | stage on         |            |   | Year         |            |   | Year         |  
|                                                                                  |   | January 1, 2003  |            |   | Ended        |            |   | Ended        |  
|                                                                                  |   | to December 31,  |            |   | December 31, |            |   | December 31, |  
|                                                                                  |   | 2010             |            |   | 2010         |            |   | 2009         |  
|                                                                                  |   |                  |            |   |              |            |   |              |  
|EXPENSES                                                                          |   |                  |            |   |              |            |   |              |  
|Amortization                                                                      | $ | 300,430          |            | $ | 114,785      |            | $ | 67,792       |  
|Exploration                                                                       |   | 15,037,343       |            |   | 2,992,932    |            |   | 1,080,488    |  
|General and administrative                                                        |   | 6,330,433        |            |   | 1,355,399    |            |   | 957,332      |  
|Write-off of
      mineral property                                               |   | 26,000           |            |   |             |            |   |             |  
|                                                                                  |   |                  |            |   |              |            |   |              |  
|LOSS BEFORE OTHER ITEMS                                                           |   | (21,694,206      | )          |   | (4,463,116   | )          |   | (2,105,612   | )
|                                                                                  |   |                  |            |   |              |            |   |              |  
|OTHER ITEMS                                                                       |   |                  |            |   |              |            |   |              |  
|Foreign exchange gain                                                             |   | 550,652          |            |   | 179,124      |            |   | 303,243      |  
|Interest expense                                                                  |   | (241,936         | )          |   | (1,283       | )          |   | (2,567       | )
|Realized gains (losses) on sales
      of trading securities                      |   | 194,002          |            |   | 170,422      |            |   | (172,638     | )
|Net unrealized
      gain (loss) on trading securities                            |   | (164,863         | )          |   | (98,290      | )          |   | 789,934      |  
|Other income                                                                      |   | 856,836          |            |   | 34,104       |            |   | 138,558      |  
|Recovery of gold                                                                  |   | 8,070,359        |            |   | 1,227,394    |            |   | 10,958       |  
|Gain on disposal of property                                                      |   | 96,430           |            |   |             |            |   |             |  
|Write-off of
      investment in trading securities                               |   | (25,000          | )          |   | (25,000      | )          |   |              |  
|                                                                                  |   |                  |            |   |              |            |   |              |  
|                                                                                  |   | 9,336,480        |            |   | 1,486,471    |            |   | 1,067,488    |  
|                                                                                  |   |                  |            |   |              |            |   |              |  
|Consolidated loss for the
      period                                            |   | (12,357,726      | )          |   | (2,976,645   | )          |   | (1,038,124   | )
|                                                                                  |   |                  |            |   |              |            |   |              |  
|Net (income) loss attributable to
      non-controlling interest                  |   | 36,361           |            |   | (40,268      | )          |   | 76,629       |  
|                                                                                  |   |                  |            |   |              |            |   |              |  
|Net loss attributable to
      Xtra-Gold Resources Corp.                          | $ | (12,321,365      | )          | $ | (3,016,913   | )          | $ | (961,495     | )
|                                                                                  |   |                  |            |   |              |            |   |              |  
|Basic and diluted loss attributable to
      common shareholders per common share |   |                  |            | $ | (0.09        | )          | $ | (0.03        | )
|                                                                                  |   |                  |            |   |              |            |   |              |  
|Basic and diluted
      weighted average number of common shares outstanding      |   |                  | 35,160,827 |   |              | 32,101,330 |  

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

F-4

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in U.S.
Dollars)

|                                                                |   | Cumulative       |   |   |              |   |   |              |  
|--------------------------------------------------------------- | - | ---------------- | - | - | ------------ | - | - | ------------ | -
|                                                                |   | amounts from     |   |   |              |   |   |              |  
|                                                                |   | the beginning of |   |   |              |   |   |              |  
|                                                                |   | the exploration  |   |   |              |   |   |              |  
|                                                                |   | stage on         |   |   | Year         |   |   | Year         |  
|                                                                |   | January 1, 2003  |   |   | Ended        |   |   | Ended        |  
|                                                                |   | to December 31,  |   |   | December 31, |   |   | December 31, |  
|                                                                |   | 2010             |   |   | 2010         |   |   | 2009         |  
|                                                                |   |                  |   |   |              |   |   |              |  
|CASH FLOWS FROM OPERATING
      ACTIVITIES                      |   |                  |   |   |              |   |   |              |  
|Loss for the period                                             | $ | (12,357,726      | ) | $ | (2,976,645   | ) | $ | (1,038,124   | )
|Items not
      affecting cash:                                 |   |                  |   |   |              |   |   |              |  
|Amortization                                                    |   | 300,430          |   |   | 114,785      |   |   | 67,792       |  
|Amortization of deferred financing costs                        |   | 46,202           |   |   | 1,283        |   |   | 2,567        |  
|Accretion of asset
      retirement obligation                  |   | 24,262           |   |   | 7,191        |   |   | 6,537        |  
|Shares issued for services                                      |   | 202,365          |   |   |             |   |   |             |  
|Stock-based
      compensation                                  |   | 1,478,689        |   |   | 411,507      |   |   | 468,052      |  
|Unrealized foreign exchange (gain)                              |   | (467,009         | ) |   | (37,220      | ) |   | (247,155     | )
|Realized (gain)
      losses on sale of trading securities      |   | (194,002         | ) |   | (170,422     | ) |   | 172,638      |  
|Purchase of trading securities                                  |   | (11,564,690      | ) |   |             |   |   | (778,387     | )
|Proceeds on sale
      of trading securities                    |   | 11,916,697       |   |   | 1,746,805    |   |   | 1,331,626    |  
|Unrealized (gain) loss on trading securities                    |   | 164,863          |   |   | 98,290       |   |   | (789,934     | )
|Gain on disposal
      of property                              |   | (95,342          | ) |   |             |   |   |             |  
|Write-off of mineral property                                   |   | 26,000           |   |   |             |   |   |             |  
|Expenses paid by
      stockholders                             |   | 2,700            |   |   |             |   |   |             |  
|Write-off of investment in trading securities                   |   | 25,000           |   |   | 25,000       |   |   |              |  
|                                                                |   |                  |   |   |              |   |   |              |  
|Changes in
      non-cash working capital items:                |   |                  |   |   |              |   |   |              |  
|(Increase)
      decrease in receivables and other              |   | (116,979         | ) |   | (78,892      | ) |   | 46,480       |  
|Increase (decrease) in accounts payable and accrued liabilities |   | 506,544          |   |   | 284,163      |   |   | (302,199     | )
|Increase in due to
      related party                          |   | 50,000           |   |   |             |   |   |             |  
|                                                                |   |                  |   |   |              |   |   |              |  
|Net cash used in operating
      activities                     |   | (10,051,996      | ) |   | (574,155     | ) |   | (1,060,107   | )
|                                                                |   |                  |   |   |              |   |   |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES                            |   |                  |   |   |              |   |   |              |  
|Proceeds from
      issuance of convertible debentures          |   | 900,000          |   |   |             |   |   |             |  
|Deferred financing costs                                        |   | (46,202          | ) |   |             |   |   |             |  
|Repurchase of
      capital stock                               |   | (165,000         | ) |   | (108,000     | ) |   | (50,000      | )
|Issuance of capital stock, net
      of financing costs         |   | 20,617,236       |   |   | 10,774,804   |   |   | 1,612,710    |  
|                                                                |   |                  |   |   |              |   |   |              |  
|Net cash provided by financing
      activities                 |   | 21,306,034       |   |   | 10,666,804   |   |   | 1,562,710    |  

- continued -

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

F-5

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in U.S.
Dollars)

|                                                                  |   | Cumulative       |   |   |              |   |   |              |  
|----------------------------------------------------------------- | - | ---------------- | - | - | ------------ | - | - | ------------ | -
|                                                                  |   | amounts from     |   |   |              |   |   |              |  
|                                                                  |   | the beginning of |   |   |              |   |   |              |  
|                                                                  |   | the exploration  |   |   |              |   |   |              |  
|                                                                  |   | stage on         |   |   | Year         |   |   | Year         |  
|                                                                  |   | January 1, 2003  |   |   | Ended        |   |   | Ended        |  
|                                                                  |   | to December 31,  |   |   | December 31, |   |   | December 31, |  
|                                                                  |   | 2010             |   |   | 2010         |   |   | 2009         |  
|                                                                  |   |                  |   |   |              |   |   |              |  
|Continued                                                         |   |                  |   |   |              |   |   |              |  
|                                                                  |   |                  |   |   |              |   |   |              |  
|CASH FLOWS FROM INVESTING
      ACTIVITIES                        |   |                  |   |   |              |   |   |              |  
|Acquisition of equipment                                          |   | (888,173         | ) |   | (454,197     | ) |   |             |  
|Deposit on
      equipment                                        |   | (151,506         | ) |   |             |   |   | (151,506     | )
|Restricted cash                                                   |   | (220,000         | ) |   | (220,000     | ) |   |             |  
|Oil and gas
      property expenditures                           |   | (250,137         | ) |   |             |   |   |             |  
|Acquisition of cash on purchase
      of subsidiary               |   | 11,510           |   |   |             |   |   |             |  
|Acquisition of
      subsidiary                                   |   | (25,000          | ) |   |             |   |   |             |  
|Option payment received                                           |   | 25,000           |   |   | 25,000       |   |   |             |  
|Proceeds on
      disposal of assets                              |   | 340,390          |   |   | 30,000       |   |   |             |  
|Net cash used in investing
      activities                       |   | (1,157,916       | ) |   | (619,197     | ) |   | (151,506     | )
|                                                                  |   |                  |   |   |              |   |   |              |  
|Change in cash and cash equivalents during the
      period       |   | 10,096,122       |   |   | 9,473,452    |   |   | 351,097      |  
|                                                                  |   |                  |   |   |              |   |   |              |  
|Cash and cash equivalents, beginning of the
      period          |   |                 |   |   | 622,670      |   |   | 271,573      |  
|                                                                  |   |                  |   |   |              |   |   |              |  
|Cash and cash equivalents, end of the period                      | $ | 10,096,122       |   | $ | 10,096,122   |   | $ | 622,670      |  
|                                                                  |   |                  |   |   |              |   |   |              |  
|Supplemental disclosure with respect to cash
      flows(Note 13) |   |                  |   |   |              |   |   |              |  

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

F-6

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Expressed in
U.S. Dollars)

|                                                                              |  | Common Stock |  |   |        |  |   |            |   |   |            |   |   | Deficit     |  |   |             |  
|----------------------------------------------------------------------------- |  | ------------ |  | - | ------ |  | - | ---------- | - | - | ---------- | - | - | ----------- |  | - | ----------- | -
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   | Accumulated |  
|                                                                              |  |              |  |   |        |  |   | Additional |   |   |            |   |   | Non-        |  |   | During the  |  
|                                                                              |  | Number       |  |   |        |  |   | Paid in    |   |   |            |   |   | Controlling |  |   | Exploration |  
|                                                                              |  | of Shares    |  |   | Amount |  |   | Capital    |   |   | Deficit    |   |   | Interest    |  |   | Stage       |  
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   |             |  
|Balance, December 31, 2002                                                    |  | 12,364,085   |  | $ | 12,364 |  | $ | 1,412,842  |   | $ | (1,427,764 | ) | $ |            |  | $ |            |  
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   |             |  
|Paid on behalf of the Company                                                 |  |             |  |   |       |  |   | 5,258      |   |   |           |   |   |            |  |   |            |  
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   |             |  
|October 31, 2003, issuance of stock for
      acquisition of subsidiary       |  | 50,350,000   |  |   | 50,350 |  |   | (50,350    | ) |   |           |   |   |            |  |   |            |  
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   |             |  
|Loss for the year                                                             |  |             |  |   |       |  |   |           |   |   |           |   |   |            |  |   | (2,700      | )
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   |             |  
|Balance, December 31, 2003                                                    |  | 62,714,085   |  |   | 62,714 |  |   | 1,367,750  |   |   | (1,427,764 | ) |   |            |  |   | (2,700      | )
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   |             |  
|March, 2004 - private placement at $0.35
      per share                      |  | 2,000,000    |  |   | 2,000  |  |   | 698,000    |   |   |           |   |   |            |  |   |            |  
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   |             |  
|May, 2004 - private placement at $0.35 per
      share                        |  | 2,129,400    |  |   | 2,129  |  |   | 743,161    |   |   |           |   |   |            |  |   |            |  
|                                                                              |  |              |  |   |        |  |   |            |   |   |            |   |   |             |  |   |             |  
|December, 2004 - acquisition of subsidiary
      via issuance of common stock |  | 2,698,350    |  |   | 2,699  |  |   | 1,616,311  |   |   |           |   |   |            |  |   |            |  

- continued -

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

F-7

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Expressed in
U.S. Dollars)

|                                                            |  | Common Stock |   |  |         |   |  |            |   |  |            |   |  | Deficit     |  |  |             |  
|----------------------------------------------------------- |  | ------------ | - |  | ------- | - |  | ---------- | - |  | ---------- | - |  | ----------- |  |  | ----------- | -
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  | Accumulated |  
|                                                            |  |              |   |  |         |   |  | Additional |   |  |            |   |  | Non-        |  |  | During the  |  
|                                                            |  | Number       |   |  |         |   |  | Paid in    |   |  |            |   |  | Controlling |  |  | Exploration |  
|                                                            |  | of Shares    |   |  | Amount  |   |  | Capital    |   |  | Deficit    |   |  | Interest    |  |  | Stage       |  
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|Continued                                                   |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|Share issuance costs                                        |  |             |   |  |        |   |  | (76,298    | ) |  |           |   |  |            |  |  |            |  
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|Loss for the year                                           |  |             |   |  |        |   |  |           |   |  |           |   |  |            |  |  | (398,533    | )
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|Balance, December 31, 2004                                  |  | 69,541,835   |   |  | 69,542  |   |  | 4,348,924  |   |  | (1,427,764 | ) |  |            |  |  | (401,233    | )
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|May, 2005  cancellation of shares                          |  | (47,000,000  | ) |  | (47,000 | ) |  | 47,000     |   |  |           |   |  |            |  |  |            |  
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|June 2005  for services                                    |  | 10,000       |   |  | 10      |   |  | 5,490      |   |  |           |   |  |            |  |  |            |  
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|June, 2005  private placement at $0.55 per
      share     |  | 536,218      |   |  | 536     |   |  | 294,384    |   |  |           |   |  |            |  |  |            |  
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|August, 2005  private placement at $0.55
      per share   |  | 300,000      |   |  | 300     |   |  | 164,700    |   |  |           |   |  |            |  |  |            |  
|                                                            |  |              |   |  |         |   |  |            |   |  |            |   |  |             |  |  |             |  
|November, 2005  private placement at $0.55
      per share |  | 1,549,354    |   |  | 1,550   |   |  | 850,595    |   |  |           |   |  |            |  |  |            |  

- continued -

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

F-8

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Expressed in
U.S. Dollars)

|                                                                        |  | Common Stock |  |  |        |  |  |            |   |  |            |   |  | Deficit     |  |  |             |  
|----------------------------------------------------------------------- |  | ------------ |  |  | ------ |  |  | ---------- | - |  | ---------- | - |  | ----------- |  |  | ----------- | -
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  | Accumulated |  
|                                                                        |  |              |  |  |        |  |  | Additional |   |  |            |   |  | Non-        |  |  | During the  |  
|                                                                        |  | Number       |  |  |        |  |  | Paid in    |   |  |            |   |  | Controlling |  |  | Exploration |  
|                                                                        |  | of Shares    |  |  | Amount |  |  | Capital    |   |  | Deficit    |   |  | Interest    |  |  | Stage       |  
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Continued                                                               |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Share issuance costs                                                    |  |             |  |  |       |  |  | (130,714   | ) |  |           |   |  |            |  |  |            |  
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Stock-based compensation                                                |  |             |  |  |       |  |  | 41,022     |   |  |           |   |  |            |  |  |            |  
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Loss for the year                                                       |  |             |  |  |       |  |  |           |   |  |           |   |  |            |  |  | (272,572    | )
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Balance, December 31, 2005                                              |  | 24,937,407   |  |  | 24,938 |  |  | 5,621,401  |   |  | (1,427,764 | ) |  |            |  |  | (673,805    | )
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|February, 2006  conversion of promissory
      note at $0.55 per share |  | 90,909       |  |  | 91     |  |  | 49,909     |   |  |           |   |  |            |  |  |            |  
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|March, 2006  exercise of warrants at $0.75
      per share             |  | 108,500      |  |  | 108    |  |  | 81,267     |   |  |           |   |  |            |  |  |            |  
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|March, 2006 - private placement at $0.70
      per share                |  | 792,029      |  |  | 792    |  |  | 553,628    |   |  |           |   |  |            |  |  |            |  
|                                                                        |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|April, 2006  exercise of warrants at $0.75
      per share             |  | 177,200      |  |  | 177    |  |  | 132,723    |   |  |           |   |  |            |  |  |            |  

- continued -

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

F-9

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Expressed in
U.S. Dollars)

|                                                        |  | Common Stock |   |  |        |   |  |            |   |  |            |   |  | Deficit     |  |  |             |  
|------------------------------------------------------- |  | ------------ | - |  | ------ | - |  | ---------- | - |  | ---------- | - |  | ----------- |  |  | ----------- | -
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  | Accumulated |  
|                                                        |  |              |   |  |        |   |  | Additional |   |  |            |   |  | Non-        |  |  | During the  |  
|                                                        |  | Number       |   |  |        |   |  | Paid in    |   |  |            |   |  | Controlling |  |  | Exploration |  
|                                                        |  | of Shares    |   |  | Amount |   |  | Capital    |   |  | Deficit    |   |  | Interest    |  |  | Stage       |  
|Continued                                               |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|June, 2006  cancellation of shares                     |  | (10,000      | ) |  | (10    | ) |  | (6,990     | ) |  |           |   |  |            |  |  |            |  
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|June, 2006  private placement at $0.90 per share       |  | 578,112      |   |  | 578    |   |  | 519,722    |   |  |           |   |  |            |  |  |            |  
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|July, 2006  private placement at $0.90 per
      share |  | 1,132,000    |   |  | 1,132  |   |  | 1,017,668  |   |  |           |   |  |            |  |  |            |  
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|October, 2006  private placement at $1.10 per share    |  | 282,000      |   |  | 282    |   |  | 309,918    |   |  |           |   |  |            |  |  |            |  
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|Share issuance costs                                    |  |             |   |  |       |   |  | (240,616   | ) |  |           |   |  |            |  |  |            |  
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|Stock-based compensation                                |  |             |   |  |       |   |  | 206,041    |   |  |           |   |  |            |  |  |            |  
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|Loss for the year                                       |  |             |   |  |       |   |  |           |   |  |           |   |  |            |  |  | (2,562,992  | )
|                                                        |  |              |   |  |        |   |  |            |   |  |            |   |  |             |  |  |             |  
|Balance, December 31, 2006                              |  | 28,088,157   |   |  | 28,088 |   |  | 8,244,671  |   |  | (1,427,764 | ) |  |            |  |  | (3,236,797  | )

- continued -

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

F-10

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Expressed in
U.S. Dollars)

|                                                          |  | Common Stock |  |  |        |  |  |            |   |  |            |   |  | Deficit     |  |  |             |  
|--------------------------------------------------------- |  | ------------ |  |  | ------ |  |  | ---------- | - |  | ---------- | - |  | ----------- |  |  | ----------- | -
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  | Accumulated |  
|                                                          |  |              |  |  |        |  |  | Additional |   |  |            |   |  | Non-        |  |  | During the  |  
|                                                          |  | Number       |  |  |        |  |  | Paid in    |   |  |            |   |  | Controlling |  |  | Exploration |  
|                                                          |  | of Shares    |  |  | Amount |  |  | Capital    |   |  | Deficit    |   |  | Interest    |  |  | Stage       |  
|Continued                                                 |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|October, 2007  Private placement at $1.35
      per unit |  | 668,202      |  |  | 668    |  |  | 901,405    |   |  |           |   |  |            |  |  |            |  
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Share issuance costs                                      |  |             |  |  |       |  |  | (89,533    | ) |  |           |   |  |            |  |  |            |  
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Stock-based compensation                                  |  |             |  |  |       |  |  | 195,623    |   |  |           |   |  |            |  |  |            |  
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Loss for the year                                         |  |             |  |  |       |  |  |           |   |  |           |   |  |            |  |  | (1,874,757  | )
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Balance, December 31, 2007                                |  | 28,756,359   |  |  | 28,756 |  |  | 9,252,166  |   |  | (1,427,764 | ) |  |            |  |  | (5,111,554  | )
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|February, 2008  Private placement at $1.50 per unit      |  | 1,062,000    |  |  | 1,062  |  |  | 1,591,938  |   |  |           |   |  |            |  |  |            |  
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|May, 2008  Exercise of options at $0.75
      per share  |  | 100,000      |  |  | 100    |  |  | 74,900     |   |  |           |   |  |            |  |  |            |  
|                                                          |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|June, 2008  Conversion of debentures at $1.00 per share  |  | 650,000      |  |  | 650    |  |  | 649,350    |   |  |           |   |  |            |  |  |            |  

- continued -

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

F-11

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Expressed in
U.S. Dollars)

|                                                           |  | Common Stock |  |  |        |  |  |            |   |  |            |   |  | Deficit     |  |  |             |  
|---------------------------------------------------------- |  | ------------ |  |  | ------ |  |  | ---------- | - |  | ---------- | - |  | ----------- |  |  | ----------- | -
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  | Accumulated |  
|                                                           |  |              |  |  |        |  |  | Additional |   |  |            |   |  | Non-        |  |  | During the  |  
|                                                           |  | Number       |  |  |        |  |  | Paid in    |   |  |            |   |  | Controlling |  |  | Exploration |  
|                                                           |  | of Shares    |  |  | Amount |  |  | Capital    |   |  | Deficit    |   |  | Interest    |  |  | Stage       |  
|Continued                                                  |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|July, 2008  Exercise of warrants at $1.50
      per share |  | 631,000      |  |  | 631    |  |  | 945,869    |   |  |           |   |  |            |  |  |            |  
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|December, 2008  For services at $1.50 per share           |  | 131,243      |  |  | 132    |  |  | 196,733    |   |  |           |   |  |            |  |  |            |  
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Share issuance costs                                       |  |             |  |  |       |  |  | (125,040   | ) |  |           |   |  |            |  |  |            |  
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Stock-based compensation                                   |  |             |  |  |       |  |  | 156,444    |   |  |           |   |  |            |  |  |            |  
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Loss for the year                                          |  |             |  |  |       |  |  |           |   |  |           |   |  |            |  |  | (3,231,403  | )
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|Balance, December 31, 2008                                 |  | 31,330,602   |  |  | 31,331 |  |  | 12,742,360 |   |  | (1,427,764 | ) |  |            |  |  | (8,342,957  | )
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|April, 2009  Private placement at $0.70
      per unit    |  | 710,000      |  |  | 710    |  |  | 496,290    |   |  |           |   |  |            |  |  |            |  
|                                                           |  |              |  |  |        |  |  |            |   |  |            |   |  |             |  |  |             |  
|May, 2009  Private placement at $0.70 per unit            |  | 308,000      |  |  | 308    |  |  | 215,292    |   |  |           |   |  |            |  |  |            |  

- continued -

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

F-12

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Expressed in
U.S. Dollars)

|                                                                           |  | Common Stock |   |   |        |   |   |            |   |   |            |   |   | Deficit     |   |   |             |  
|-------------------------------------------------------------------------- |  | ------------ | - | - | ------ | - | - | ---------- | - | - | ---------- | - | - | ----------- | - | - | ----------- | -
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   | Accumulated |  
|                                                                           |  |              |   |   |        |   |   | Additional |   |   |            |   |   | Non-        |   |   | During the  |  
|                                                                           |  | Number       |   |   |        |   |   | Paid in    |   |   |            |   |   | Controlling |   |   | Exploration |  
|                                                                           |  | of Shares    |   |   | Amount |   |   | Capital    |   |   | Deficit    |   |   | Interest    |   |   | Stage       |  
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|Continued                                                                  |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|May, 2009  Repurchase and cancellation of
      shares at $0.25 per share |  | (200,000     | ) |   | (200   | ) |   | (49,800    | ) |   |           |   |   |            |   |   |            |  
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|August, 2009  Private placement at $0.80
      per unit                   |  | 376,875      |   |   | 376    |   |   | 301,124    |   |   |           |   |   |            |   |   |            |  
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|December, 2009  Private placement at $1.00
      per unit                 |  | 706,000      |   |   | 706    |   |   | 705,294    |   |   |           |   |   |            |   |   |            |  
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|Share issuance costs                                                       |  |             |   |   |       |   |   | (107,390   | ) |   |           |   |   |            |   |   |            |  
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|Stock-based compensation                                                   |  |             |   |   |       |   |   | 468,052    |   |   |           |   |   |            |   |   |            |  
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|Loss for the year                                                          |  |             |   |   |       |   |   |           |   |   |           |   |   | (76,629     | ) |   | (961,495    | )
|                                                                           |  |              |   |   |        |   |   |            |   |   |            |   |   |             |   |   |             |  
|Balance, December 31, 2009                                                 |  | 33,231,477   |   | $ | 33,231 |   | $ | 14,771,222 |   | $ | (1,427,764 | ) | $ | (76,629     | ) | $ | (9,304,452  | )

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

F-13

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(Expressed in U.S. Dollars)

|                                                                                |  | Common Stock |   |   |        |   |   |            |   |   |            |   |   | Deficit     |     |  |             |  
|------------------------------------------------------------------------------- |  | ------------ | - | - | ------ | - | - | ---------- | - | - | ---------- | - | - | ----------- | --- |  | ----------- | -
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  | Accumulated |  
|                                                                                |  |              |   |   |        |   |   | Additional |   |   |            |   |   | Non-        |     |  | During the  |  
|                                                                                |  | Number       |   |   |        |   |   | Paid in    |   |   |            |   |   | Controlling |     |  | Exploration |  
|                                                                                |  | of Shares    |   |   | Amount |   |   | Capital    |   |   | Deficit    |   |   | Interest    |     |  | Stage       |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|Continued                                                                       |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|February, 2010  Conversion of debenture at
      $1.00 per share               |  | 250,000      |   |   | 250    |   |   | 249,750    |   |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|March, 2010  Repurchase and cancellation
      of shares at $1.33 per share    |  | (80,891      | ) |   | (80    | ) |   | (107,920   | ) |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|April, 2010  Private placement at $1.00
      per unit                         |  | 838,000      |   |   | 838    |   |   | 837,162    |   |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|June, 2010  Private placement at $1.00 per
      unit                          |  | 250,000      |   |   | 250    |   |   | 249,750    |   |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|August, 2010  Conversion of warrants at
      $1.00 per share                  |  | 360,000      |   |   | 360    |   |   | 359,640    |   |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|November, 2010  Initial public offering at
      CAD$1.35 (USD$1.33) per share |  | 8,092,593    |   |   | 8,092  |   |   | 10,744,621 |   |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|December, 2010  Conversion of warrants at $1.50 per share                      |  | 20,000       |   |   | 20     |   |   | 29,980     |   |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|Share issuance costs                                                            |  |             |   |   |       |   |   | (1,455,909 | ) |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|Stock-based compensation                                                        |  |             |   |   |       |   |   | 411,507    |   |   |           |   |   |            |     |  |            |  
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|Loss (income) for the year                                                      |  |             |   |   |       |   |   |           |   |   |           |   |   | 40,268      |     |  | (3,016,913  | )
|                                                                                |  |              |   |   |        |   |   |            |   |   |            |   |   |             |     |  |             |  
|Balance, December 31, 2010                                                      |  | 42,961,179   |   | $ | 42,961 |   | $ | 26,089,803 |   | $ | (1,427,764 | ) | $ | (36,361     | ) $ |  | (12,321,365 | )

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

F-14

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|1. | HISTORY AND ORGANIZATION OF THE COMPANY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Silverwing Systems Corporation (the Company), a Nevada
      corporation, was incorporated on September 1, 1998. On June 23, 1999, the
      Company completed the acquisition of Advertain On-Line Canada Inc.
      (Advertain Canada), a Canadian company operating in Vancouver, British
      Columbia, Canada. The Company changed its name to Advertain On-Line Inc.
      (Advertain) on August 19, 1999. Advertain Canadas business was the
      operation of a web site, Advertain.com, whose primary purpose was to
      distribute entertainment advertising on the Internet.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In May 2001, the Company, being unable to continue its
      funding of Advertain Canadas operations, decided to abandon its interest
      in Advertain Canada. On June 15, 2001, the Company sold its investment in
      Advertain Canada back to Advertain Canadas original shareholder. On June
      18, 2001, the Company changed its name from Advertain to RetinaPharma
      International, Inc. (RetinaPharma) and became inactive.                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In 2003, the Company became a resource exploration
      company. On October 31, 2003, the Company acquired 100% of the issued and
      outstanding common stock of Xtra-Gold Resources, Inc. (XGRI). XGRI was
      incorporated in Florida on October 24, 2003. On December 19, 2003, the
      Company changed its name from RetinaPharma to Xtra-Gold Resources Corp.                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In 2004, the Company acquired 100% of the issued and
      outstanding capital stock of Canadiana Gold Resources Limited
      (Canadiana) and 90% of the issued and outstanding capital stock of
      Goldenrae Mining Company Limited (Goldenrae). Both companies are
      incorporated in Ghana and the remaining 10% of the issued and outstanding
      capital stock of Goldenrae is held by the Government of Ghana.                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On October 20, 2005, XGRI changed its name to Xtra Energy
      Corp. (Xtra Energy).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On October 20, 2005, the Company incorporated Xtra Oil
      & Gas Ltd. (XOG) in Alberta, Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On December 21, 2005, Canadiana changed its name to
      Xtra-Gold Exploration Limited (XG Exploration).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On January 13, 2006, Goldenrae changed its name to
      Xtra-Gold Mining Limited (XG Mining).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On March 2, 2006, the Company incorporated Xtra Oil &
      Gas (Ghana) Limited (XOGG) in Ghana.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | CONTINUANCE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Company is in the exploration stage with respect to
      its resource properties, incurred a loss of $3,016,913 for the year ended
      December 31, 2010 and has accumulated a deficit during the exploration
      stage of $12,321,365. The ability of the Company to continue as a going
      concern is dependent on the Companys ability to raise additional capital
      and implement its business plan. The financial statements do not include
      any adjustments that might be necessary if the Company is unable to
      continue as a going concern.                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Management of the Company (Management) is of the
      opinion that sufficient financing will be obtained from external financing
      and further share issuances to meet the Companys obligations. At December
      31, 2010, the Company has working capital of $9,833,381, which is
      sufficient to fund operations for a period greater than twelve months.                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Generally accepted accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These consolidated financial statements have been
      prepared in conformity with generally accepted accounting principles of
      the United States of America (US GAAP).                                                                                                                                                                                                                                                                                                                                                                                                                     

F-15

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|3. | SIGNIFICANT ACCOUNTING POLICIES(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Principles of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These consolidated financial statements include the
      accounts of the Company, its wholly owned subsidiaries, Xtra Energy (from
      October 31, 2003), XG Exploration (from February 16, 2004), XOG (from
      October 20, 2005) and XOGG (from March 2, 2006) and its 90% owned
      subsidiary, XG Mining (from December 22, 2004). All significant
      intercompany accounts and transactions have been eliminated on
      consolidation.                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Use of 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
      disclosure of contingent assets and liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates. The amounts which involve significant estimates include asset
      retirement obligations and stock-based compensation.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company considers highly liquid investments with
      original maturities of three months or less to be cash equivalents. At
      December 31, 2010 and 2009, cash and cash equivalents consisted of cash
      held at financial institutions.                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | No allowance for doubtful accounts has been provided.
      Management has evaluated all receivables and believes they are all
      collectible.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Recovery of gold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Recovery of gold and other income is recognized when
      title and the risks and rewards of ownership to delivered bullion and
      commodities pass to the buyer and collection is reasonably assured.                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Trading securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Companys trading securities are reported at fair
      value, with unrealized gains and losses included in earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Non-Controlling Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The consolidated financial statements include the
      accounts of XG Mining (from December 22, 2004). All intercompany accounts
      and transactions have been eliminated upon consolidation. The Company
      records a non-controlling interest which reflects the 10% portion of the
      earnings (loss) of XG Mining allocable to the holders of the minority
      interest.                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Oil and natural gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company follows the full cost method of accounting
      for oil and natural gas operations. Under this method, all costs
      associated with the acquisition of, exploration for and development of oil
      and gas reserves are capitalized in cost centers on a country-by-country
      basis. Such costs include property acquisition costs, geological and
      geophysical studies, carrying charges on non-producing properties, costs
      of drilling productive wells, and overhead expenses directly related to
      these activities.                             

F-16

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|3. | SIGNIFICANT ACCOUNTING POLICIES(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Oil and natural gas properties(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Depletion is calculated for producing properties by using
      the unit-of-production method based on estimated proved reserves, before
      royalties, as determined by management of the Company or independent
      consultants. Sales or dispositions of oil and gas properties are credited
      to the respective cost centers and a gain or loss is recognized when all
      properties in a cost center have been disposed of, unless such sale or
      disposition significantly alters the relationship between capitalized
      costs and proved reserves of oil and gas attributable to the cost center.
      Costs of abandoned properties are accounted for as adjustments of
      capitalized costs and written off to expense.                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Undeveloped properties are excluded from the depletion
      calculation until the quantities of proved reserves can be determined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | A ceiling test is applied to the proven properties for
      each cost center and for the aggregate of all cost centers by comparing
      the net capitalized costs to the estimated future net revenues from
      production of estimated proved reserves without discount, plus the costs
      of unproved properties net of impairment. Any excess capitalized costs are
      written off to expense. Further, the ceiling test for the aggregate of all
      cost centers is required to include the effects of future removal and site
      restoration costs, general and administrative expenses, financing costs
      and income taxes. The calculation of future net revenues is based upon
      prices, costs and regulations in effect at each year end.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Unproved properties are assessed for impairment on an
      annual basis by applying factors that rely on historical experience. In
      general, the Company may write off any unproved property under one or more
      of the following conditions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| | (a) | there are no firm plans for further drilling on the unproved property;                                           
| | --- | -----------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                  
| | (b) | negative results were obtained from studies of the unproved
      properties;                                    
| |     |                                                                                                                  
| | (c) | negative results were obtained from studies conducted in the vicinity
      of the unproved property; or         
| |     |                                                                                                                  
| | (d) | the remaining term of the unproved property does not allow sufficient
      time for further studies or drilling.

Equipment

Equipment is recorded at cost and is
being amortized over its estimated useful lives using the declining balance
method at the following annual rates:

| | Furniture and equipment | 20%
| | ----------------------- | ---
| | Computer equipment      | 30%
| | Vehicles                | 30%
| | Mining equipment        | 20%

Deferred financing costs

Deferred financing costs consist of
expenses incurred to obtain funds pursuant to the issuance of the convertible
debentures and are being amortized straight-line over the term of the
debentures.

F-17

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|3. | SIGNIFICANT ACCOUNTING POLICIES(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Mineral properties and exploration and development
      costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The costs of acquiring mineral rights are capitalized at
      the date of acquisition. After acquisition, various factors can affect the
      recoverability of the capitalized costs. If, after review, management
      concludes that the carrying amount of a mineral property is impaired, it
      will be written down to estimated fair value. Exploration costs incurred
      on mineral properties are expensed as incurred. Development costs incurred
      on proven and probable reserves will be capitalized. Upon commencement of
      production, capitalized costs will be amortized using the
      unit-of-production method over the estimated life of the ore body based on
      proven and probable reserves (which exclude non-recoverable reserves and
      anticipated processing losses). When the Company receives an option
      payment related to a property, the proceeds of the payment are applied to
      reduce the carrying value of the exploration asset.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Long-lived assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Long-lived assets held and used by the Company are
      reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be recoverable. For
      purposes of evaluating the recoverability of long- lived assets, the
      recoverability test is performed using undiscounted net cash flows related
      to the long-lived assets. If such assets are considered to be impaired,
      the impairment recognized is measured by the amount by which the carrying
      amount of the assets exceeds the fair value of the assets. Assets to be
      disposed of are reported at the lower of the carrying amount or fair value
      less costs to sell.                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company records the fair value of an asset retirement
      obligation as a liability in the period in which it incurs a legal
      obligation associated with the retirement of tangible long-lived assets
      that result from the acquisition, construction, development, and/or normal
      use of the long-lived assets. The Company also records a corresponding
      asset which is amortized over the life of the asset. Subsequent to the
      initial measurement of the asset retirement obligation, the obligation is
      adjusted at the end of each period to reflect the passage of time
      (accretion expense) and changes in the estimated future cash flows
      underlying the obligation (asset retirement cost).                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company accounts for share-based compensation under
      the provisions of ASC 718, Compensation-Stock Compensation. Under the
      fair value recognition provisions, stock-based compensation expense is
      measured at the grant date for all stock-based awards to employees and
      directors and is recognized as an expense over the requisite service
      period, which is generally the vesting period. The Black-Scholes option
      valuation model is used to calculate fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company accounts for stock compensation arrangements
      with non-employees in accordance with ASC 718 which require that such
      equity instruments are recorded at their fair value on the measurement
      date. The measurement of stock- based compensation is subject to periodic
      adjustment as the underlying equity instruments vest. Nonemployee
      stock-based compensation charges are amortized over the vesting period on
      a straight-line basis. For stock options granted to non- employees, the
      fair value of the stock options is estimated using a Black-Scholes
      valuation model.                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company accounts for income taxes under the asset and
      liability method. Deferred tax assets and liabilities are recognized for
      the future tax consequences attributable to differences between the
      financial statement carrying amounts of existing assets and liabilities
      and their respective tax bases. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable income in
      the years in which those temporary differences are expected to be
      recovered or settled. Under the asset and liability method the effect on
      deferred tax assets and liabilities of a change in tax rates is recognized
      in income in the period that includes the enactment date. A valuation
      allowance is recognized if it is more likely than not that some portion or
      all of the deferred tax asset will not be recognized.                                                                           

F-18

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|3. | SIGNIFICANT ACCOUNTING POLICIES(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Basic loss per common share is computed using the
      weighted average number of common shares outstanding during the year. To
      calculate diluted loss per share, the Company uses the treasury stock
      method and the if converted method. As of December 31, 2010, there were
      2,439,320 warrants (2009  1,610,038); 1,788,000 stock options (2009 
      972,000) and Nil convertible debentures exercisable into common shares
      (2009  250,000) outstanding which have not been included in the weighted
      average number of common shares outstanding as these were anti-dilutive.                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Foreign exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Companys functional currency is the U.S. dollar. Any
      monetary assets and liabilities that are in a currency other than the U.S.
      dollar are translated at the rate prevailing at year end. Revenue and
      expenses in a foreign currency are translated at rates that approximate
      those in effect at the time of translation. Gains and losses from
      translation of foreign currency transactions into U.S. dollars are
      included in current results of operations.                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Companys financial instruments consist of cash and
      cash equivalents, trading securities, receivables, restricted cash,
      accounts payable and accrued liabilities and convertible debentures. It is
      managements opinion that the Company is not exposed to significant
      interest, currency or credit risks arising from its financial instruments.
      The fair values of these financial instruments approximate their carrying
      values unless otherwise noted. The Company has its cash primarily in
      government or bank guaranteed deposit certificates or in one commercial
      bank in Toronto, Ontario, Canada.                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Fair value of financial assets and liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company measures the fair value of financial assets
      and liabilities based on US GAAP guidance which defines fair value,
      establishes a framework for measuring fair value, and expands disclosures
      about fair value measurements. Effective January 1, 2008, the Company
      adopted the provisions for financial assets and liabilities, as well as
      for any other assets and liabilities that are carried at fair value on a
      recurring basis. Effective January 1, 2009, the Company adopted the
      provisions for non-financial assets and liabilities that are required to
      be measured at fair value.                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company classifies financial assets and liabilities
      as held-for-trading, available-for-sale, held-to-maturity, loans and
      receivables or other financial liabilities depending on their nature.
      Financial assets and financial liabilities are recognized at fair value on
      their initial recognition, except for those arising from certain related
      party transactions which are accounted for at the transferors carrying
      amount or exchange amount.                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Financial assets and liabilities classified as
      held-for-trading are measured at fair value, with gains and losses
      recognized in net income (loss). Financial assets classified as
      held-to-maturity, loans and receivables, and financial liabilities other
      than those classified as held-for-trading are measured at amortized cost,
      using the effective interest method of amortization. Financial assets
      classified as available-for-sale are measured at fair value, with
      unrealized gains and losses being recognized as other comprehensive income
      (loss) until realized, or if an unrealized loss is considered other than
      temporary, the unrealized loss is recorded in income (loss).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Financial instruments, including cash and cash
      equivalents, receivables, restricted cash, accounts payable and accrued
      liabilities and convertible debentures are carried at cost, which
      management believes approximates fair value due to the short term nature
      of these instruments. Investments in trading securities are classified as
      held for trading, with unrealized gains and losses being recognized in
      income.                                                                                                                                                                                                                                                                                     

F-19

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|3. | SIGNIFICANT ACCOUNTING POLICIES(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Fair value of financial assets and liabilities(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The following table presents information about the assets
      that are measured at fair value on a recurring basis as of December 31,
      2010, and indicates the fair value hierarchy of the valuation techniques
      the Company utilized to determine such fair value. In general, fair values
      determined by Level 1 inputs utilize quoted prices (unadjusted) in active
      markets for identical assets. Fair values determined by Level 2 inputs
      utilize data points that are observable such as quoted prices, interest
      rates and yield curves. Fair values determined by Level 3 inputs are
      unobservable data points for the asset or liability, and included
      situations where there is little, if any, market activity for the asset:

| |                           |   |              |  |   |               |  |   | Significant |  |   |              | 
| | ------------------------- | - | ------------ |  | - | ------------- |  | - | ----------- |  | - | ------------ | 
| |                           |   |              |  |   | Quoted Prices |  |   | Other       |  |   | Significant  | 
| |                           |   |              |  |   | in Active     |  |   | Observable  |  |   | Unobservable | 
| |                           |   | December 31, |  |   | Markets       |  |   | Inputs      |  |   | Inputs       | 
| |                           |   | 2010         |  |   | (Level 1)     |  |   | (Level 2)   |  |   | (Level 3)    | 
| |                           |   |              |  |   |               |  |   |             |  |   |              | 
| | Assets:                   |   |              |  |   |               |  |   |             |  |   |              | 
| | Cash and cash equivalents | $ | 10,096,122   |  | $ | 10,096,122    |  | $ |            |  | $ |             | 
| | Restricted cash           |   | 220,000      |  |   | 220,000       |  |   |            |  |   |             | 
| | Marketable securities     |   | 129,141      |  |   | 129,141       |  |   |            |  |   |             | 
| | Total                     | $ | 10,445,263   |  | $ | 10,445,263    |  | $ |            |  | $ |             | 

The fair values of cash and cash
equivalents, restricted cash and marketable securities are determined through
market, observable and corroborated sources.

Concentration of credit risk

The financial instrument which
potentially subjects the Company to concentration of credit risk is cash and
cash equivalents and restricted cash. The Company maintains cash in bank
accounts that, at times, may exceed federally insured limits. As of December 31,
2010 and 2009, the Company has exceeded the federally insured limit. The Company
has not experienced any losses in such accounts and believes it is not exposed
to any significant risks on its cash in bank accounts.

Recent accounting
pronouncements

In April 2010, the FASB issued ASU
2010-13, Compensation  Stock Compensation (Topic 718), amending ASC 718. ASU
2010-13 clarifies that a share-based payment award with an exercise price
denominated in the currency of a market in which the entity's equity securities
trade should not be classified as a liability if it otherwise qualifies as
equity. ASU 2010-13 also improves GAAP by improving consistency in financial
reporting by eliminating diversity in practice. ASU 2010-13 is effective for
interim and annual reporting periods beginning after December 15, 2010 (January
1, 2011 for the Company). The Company is currently evaluating the impact of ASU
2010-09, but does not expect its adoption to have a material impact on the
Company's financial reporting and disclosures.

In December 2010, the FASB issued ASU
2010-29, which contains updated accounting guidance to clarify the acquisition
date that should be used for reporting pro forma financial information when
comparative financial statements are issued. This update requires that a company
should disclose revenue and earnings of the combined entity as though the
business combination(s) that occurred during the current year had occurred as of
the beginning of the comparable prior annual reporting period only. This update
also requires disclosure of the nature and amount of material, nonrecurring pro
forma adjustments. The provisions of this update, which are to be applied
prospectively, are effective for business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2010, with early adoption permitted. The impact of this
update on the Company's consolidated financial statements will depend on the
size and nature of future business combinations.

F-20

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|4. | INVESTMENTS IN TRADING SECURITIES
|-- | ---------------------------------

At December 31, 2010, the Company held
investments classified as trading securities, which consisted of various equity
securities. All trading securities are carried at fair value. As of December 31,
2010, the fair value of trading securities was $129,141 (2009  $1,781,594).
During the year ended a bond of $25,000 was written off due to uncertainty
regarding collection.

|5. | EQUIPMENT
|-- | ---------

| |                         |   | December 31, 2010 |  |   | December 31, 2009 | 
| | ----------------------- | - | ----------------- |  | - | ----------------- | 
| |                         |   |                   |  |   | Accumulated       | 
| |                         |   | Cost              |  |   | Amortization      | 
| |                         |   |                   |  |   |                   | 
| | Furniture and equipment | $ | 8,358             |  | $ | 4,179             | 
| | Computer equipment      |   | 20,274            |  |   | 13,844            | 
| | Exploration equipment   |   | 781,126           |  |   | 185,464           | 
| | Vehicles                |   | 155,325           |  |   | 26,170            | 
| |                         | $ | 965,083           |  | $ | 229,657           | 

|   | As of December 31, 2009, the Company had made a deposit of $151,506 to
      acquire mining equipment, which was delivered during the year ended
      December 31, 2010.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                          
|6. | DEFERRED FINANCING COSTS                                                                                                                                                 

| |                            |   | December 31, 2010 |   |   | December 31, 2009 |  
| | -------------------------- | - | ----------------- | - | - | ----------------- | -
| | Balance, beginning of year | $ | 1,283             |   | $ | 3,850             |  
| | Amortization               |   | (1,283            | ) |   | (2,567            | )
| | Balance, end of year       | $ |                  |   | $ | 1,283             |  

|   | During the year ended December 31, 2005, the Company paid
      a finders fee of $45,000 and other expenses of $1,202 relating to a
      convertible debenture financing (Note 9).                                                                                                                                                                                                                                              
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|7. | OIL AND GAS INVESTMENT                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In April 2008, XOG purchased an 18.9% participating
      interest in a petroleum and natural gas lease at an Alberta Crown Land
      sale. The lease has a five year term, but may be held by continuous
      production of petroleum and natural gas commencing prior to the expiry of
      the five year term. During the year ended December 31, 2010, the Company
      sold its 18.9% participating interest for $40,000.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|8. | MINERAL PROPERTIES                                                                                                                                                                                                                                                                                                                                                                                                                

| |                                       |   | December 31, 2010 |   |   | December 31, 2009 | 
| | ------------------------------------- | - | ----------------- | - | - | ----------------- | 
| |                                       |   |                   |   |   |                   | 
| | Acquisition costs                     | $ | 1,607,729         |   | $ | 1,607,729         | 
| | Asset retirement obligation (Note 10) |   | 131,133           |   |   | 54,835            | 
| | Option payment received               |   | (25,000           | ) |   |                  | 
| | Total                                 | $ | 1,713,862         |   | $ | 1,662,564         | 

F-21

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|8. | MINERAL PROPERTIES(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Kibi, Kwabeng and Pameng Projects                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company holds an individual mining lease over the
      lease area of each of the Kibi Project, the Kwabeng Project and the Pameng
      Project, all of which are located in Ghana. Each of these mining leases
      grant the Company mining rights to produce gold in the respective lease
      areas until July 26, 2019 with respect to the Kwabeng and Pameng Projects,
      and until December 17, 2015 with respect to the Kibi Project (formerly
      known as the Apapam Project), the latter of which can be renewed for up to
      a further 30 year term on application and payment of applicable fees to
      the Minerals Commission of Ghana (Mincom). All gold production will be
      subject to a production royalty of the net smelter returns (NSR) payable
      to the Government of Ghana.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Banso and Muoso Projects                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | During the year ended December 31, 2010, the Company made
      an application to Mincom to convert a single prospecting license (PL)
      securing its interest in the Banso and Muoso Projects located in Ghana to
      a mining lease covering the lease area of each of these Projects. This
      application was approved by Mincom who subsequently made recommendation to
      the Minister of Lands, Forestry and Mines to grant an individual mining
      lease for each Project. Subsequent to the year ended December 31, 2010,
      the Government of Ghana granted two mining leases for these Projects dated
      January 6, 2011. These mining leases grant the Company mining rights to
      produce gold in the respective lease areas until January 5, 2025 with
      respect to the Banso Project and until January 5, 2024 with respect to the
      Muoso Project. These mining leases supersede the PL previously granted to
      the Company. Among other things, both mining leases require that the
      Company (i) pay the Government of Ghana a fee of $30,000 in consideration
      of granting of each lease (paid); (ii) pay annual ground rent of GH¢260.00
      (USD$167) for the Banso Project and GH¢280.00 (USD$180) for the Muoso
      Project (paid); and (iii) commence commercial production of gold within
      two years from the date of the mining leases; and (iv) pay a production
      royalty to the Government of Ghana.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company executed a letter of intent with Verbina
      Resources Inc. (Verbina) on July 21, 2010 whereby Verbina can acquire an
      undivided 55% interest in the Companys interest in the mineral rights of
      the Companys Banso and Muoso concessions (Concessions) upon completion
      by Verbina of (i) a cash payment to the Company of $100,000 upon the date
      of execution of a definitive binding agreement to be entered into between
      the parties (the Effective Date); (ii) a cash payment to the Company of
      $200,000 within 90 days of the Effective Date; (iii) the issuance by
      Verbina to the Company of 1,000,000 fully paid and non-assessable common
      shares upon the Effective Date; and (iv) Verbina incurring $4,500,000 in
      exploration expenditures (Expenditures) on the Concessions within five
      years of the Effective Date, as to (A) $500,000 being incurred in the
      first year from the Effective Date; and (B) $1,000,000 being incurred in
      each year thereafter. Verbina shall have the right to accelerate the
      Expenditures at any time.                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company is to be paid a further $50,000 by Verbina on
      the Effective Date whereby Verbina will acquire an immediate 55% interest
      in the alluvial rights to the Concessions, such purchase being subject to
      a definitive agreement to be entered into between the parties on or before
      the Effective Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company entered into a subsequent letter of intent
      with Verbina on January 21, 2011 (the 2011 LOI) which supersedes the
      July 21, 2010 letter of intent noted above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Pursuant to the 2011 LOI, Verbina can acquire a 55% legal
      and beneficial interest in the Companys interest in the mineral rights of
      the Concessions upon the following terms whereby Verbina shall (i) provide
      the Company, by February 28, 2011, with notice of its satisfactory
      completion of due diligence of the Concessions, provided on January 21,
      2011, and receipt of regulatory acceptance by the TSX Venture Exchange of
      the 2011 LOI, received on February 16, 2011 (the Effective Date); (ii)
      make a cash payment to the Company of $425,000 consisting of $100,000 upon
      the Effective Date, which payment is pending, and $325,000 within 90 days
      of the Effective Date; (iii) issue 1,000,000 fully paid and non-assessable
      common shares of Verbina to the Company upon the Effective Date (issued
      subsequent to year end); (iv) incur a total of $4,425,000 in exploration
      expenditures on the Concessions within five (5) years of the Effective
      Date with $500,000 to be                                                                                                                                                                                                                                                                                                                                                                                                               

F-22

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|8. | MINERAL PROPERTIES(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | incurred in the first year from the Effective Date and
      $1,000,000 in each year thereafter, except that in the final year the
      exploration expenditures shall be a minimum of $925,000; and (v) pay to
      the Company $300,000 in connection with a Versatile Time-domain
      Electromagnetic (VTEM), Magnetic and Radiometric survey to be flown over
      the Concessions by the Company, which payment shall be credited toward the
      $500,000 in exploration expenditures referred to above in subparagraph
      (iv).                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | A definitive binding option agreement shall be entered
      into between the Company and Verbina which agreement will require approval
      from the Minister of Lands, Forestry and Mines.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Option agreement on Edum Banso Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | In October, 2005, XG Exploration entered into an option
      agreement (the Option Agreement) with Adom Mining Limited (Adom) to
      acquire 100% of Adoms right, title and interest in and to a prospecting
      license on the Edum Banso concession (the Edum Banso Project) located in
      Ghana. Adom further granted XG Exploration the right to explore, develop,
      mine and sell mineral products from this concession. The renewal date of
      the prospecting license expired on December 1, 2010 and Mincom
      subsequently approved a further one year renewal that will commence from
      the date of Mincoms letter confirming the renewal (pending).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The consideration paid for the Option Agreement was
      $15,000 with additional payments of $5,000 to be paid on the anniversary
      date of the Option Agreement in each year during the term which term has
      been extended to November 11, 2013. Upon the commencement of gold
      production, an additional $200,000 is to be paid, unless proven and
      probable reserves are less than 2,000,000 ounces, in which case the
      payment shall be reduced to $100,000.                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Upon successful transfer of title from Adom to XG
      Exploration, a production royalty (the Royalty) of 2% of the net smelter
      returns shall be paid to Adom; provided, however that in the event that
      less than 2,000,000 ounces of proven and probable reserves are discovered,
      then the Royalty shall be 1%. The Royalty can be purchased by XG
      Exploration for $2,000,000; which will be reduced to $1,000,000 if proven
      and probable reserves are less than 2,000,000 ounces.                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Mining lease and prospecting license commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company is committed to expend, from time to time
      fees to Mincom for an extension of an expiry date of a prospecting license
      (currently $15,000 for each occurrence) or a mining lease and the
      Environmental Protection Agency of Ghana (EPA) for processing and
      certificate fees with respect to EPA permits, an aggregate of less than
      $500 in connection with annual ground rent and mining permits to enter
      upon and gain access to the areas covered by the Companys mining leases
      and prospecting licenses.                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|9. | CONVERTIBLE DEBENTURES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | During the year ended December 31, 2005, the Company
      completed a convertible debenture financing for gross proceeds of
      $900,000. The debentures bear interest at 7% per annum, payable quarterly,
      and the principal balance is repayable by June 30, 2010. Debenture holders
      have the option to convert any portion of the outstanding principal into
      common shares at the conversion rate of $1 per share. During the year
      ended December 31, 2008, convertible debentures totaling $650,000 were
      converted into 650,000 common shares. In February 2010, the convertible
      debenture of $250,000 was converted into 250,000 common shares.  

F-23

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|10. | ASSET RETIREMENT OBLIGATION
|--- | ---------------------------

| |                            |   | December 31, 2010 |  |   | December 31, 2009 | 
| | -------------------------- | - | ----------------- |  | - | ----------------- | 
| |                            |   |                   |  |   |                   | 
| | Balance, beginning of year | $ | 71,906            |  | $ | 65,369            | 
| | Increase in obligation     |   | 76,298            |  |   |                  | 
| | Accretion expense          |   | 7,191             |  |   | 6,537             | 
| | Balance, end of year       | $ | 155,395           |  | $ | 71,906            | 

|    | The Company has a legal obligation associated with its
      mineral properties for clean up costs when work programs are completed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The undiscounted amount of cash flows, required over the
      estimated reserve life of the underlying assets, to settle the obligation,
      adjusted for inflation, is estimated at $220,000 (2009 - $150,000). The
      obligation was calculated using a credit- adjusted risk free discount rate
      of 10% and an inflation rate of 2%. It is expected that this obligation
      will be funded from general Company resources at the time the costs are
      incurred. The Company has been required by the Ghanaian government to post
      a bond of US$220,000 which has been recorded in restricted cash.                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|11. | CAPITAL STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Cancellation of shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In May 2005, 47,000,000 common shares owned by two former
      directors were returned to treasury and cancelled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In June 2006, 10,000 common shares were returned to the
      Company in settlement of a dispute and cancelled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In May 2009, 200,000 common shares were repurchased for
      $50,000 and cancelled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In March 2010, 80,891 common shares were repurchased for
      $108,000 and cancelled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Issuance of shares for services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In December 2008, an aggregate of 131,243 common shares
      were issued to three vendors of the Companys subsidiary, XG Mining to
      settle outstanding accounts for services at a value of $1.50 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Private placements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In June 2010, the Company issued 250,000 units at $1.00
      per unit for gross proceeds of $250,000. Each unit consisted of one common
      share and one half of one share purchase warrant. One whole warrant
      enables the holder to acquire an additional common share at a price of
      $1.50 expiring 18 months from the date of issue. The Company also issued
      finders warrants enabling the holders to acquire up to 25,000 common
      shares at the same terms as the unit warrants. The fair value of the
      finders warrants was $15,091 calculated using the Black-Scholes valuation
      method. The assumptions used were 1.5 years of expected life, risk free
      interest rate of 1.82%, volatility of 99.78% and a dividend rate of 0%.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In April 2010, the Company issued 838,000 units at $1.00
      per unit for gross proceeds of $838,000. Each unit consisted of one common
      share and one half of one share purchase warrant. One whole warrant
      enables the holder to acquire an additional common share at a price of
      $1.50 expiring 18 months from the date of issue. The Company also issued
      finders warrants enabling the holders to acquire up to 73,800 common
      shares at the same terms as the unit warrants. The fair value of finders
      warrants was $40,516 calculated using the Black-Scholes valuation method.
      The assumptions used were 1.5 years of expected life, risk free interest
      rate of 2.05%, volatility of 116.59% and a dividend rate of 0%.  

F-24

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|11. | CAPITAL STOCK(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Private placements(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In December 2009, the Company issued 706,000 units at
      $1.00 per unit for gross proceeds of $706,000. Each unit consisted of one
      common share and one half of one share purchase warrant. One whole warrant
      enables the holder to acquire an additional common share at a price of
      $1.50 expiring eighteen months from the date of issue. The Company also
      issued finders warrants enabling the holders to acquire up to 50,600
      common shares at the same terms as the unit warrants. The fair value of
      finders warrants was $20,098 calculated using the Black-Scholes valuation
      method. The assumptions used were 1.5 years of expected life, risk free
      interest rate of 2.05%, volatility of 109% and a dividend rate of 0%                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In August 2009, the Company issued 376,875 units at $0.80
      per unit for gross proceeds of $301,500. Each unit consisted of one common
      share and one half of one share purchase warrant. One whole warrant
      enables the holder to acquire an additional common share at a price of
      $1.00 expiring two year from the date of issue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In April and May 2009, the Company issued 1,018,000 units
      at $0.70 per unit for gross proceeds of $712,600. Each unit consisted of
      one common share and one share purchase warrant enabling the holder to
      acquire an additional common share at a price of $1.00 expiring two years
      from the date of issue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In February 2008, the Company issued 1,062,000 units at
      $1.50 per unit for gross proceeds of $1,593,000. Each unit consisted of
      one common share and one share purchase warrant enabling the holder to
      acquire an additional common share at a price of $2.25 per share expiring
      on July 7, 2009. The Company also issued finders warrants enabling the
      holder to acquire up to 84,960 common shares at the same terms as the unit
      warrants. The fair value of the finders warrants was $15,136 and
      calculated using the Black-Scholes valuation method. The assumptions used
      were 1.5 years of expected life, risk free interest rate of 4.88%,
      volatility of 33% and a dividend rate of 0%.                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In October 2007, the Company issued 668,202 units at
      $1.35 per unit for gross proceeds of $902,073. Each unit consisted of one
      common share and one half of one share purchase warrant. One whole warrant
      enables the holder to acquire an additional common share at a price of
      $1.75 for one year which expiry date was extended to January 13, 2009
      (expired). The Company also issued finders warrants enabling the holder
      to acquire up to 33,410 common shares at the same terms as the unit
      warrants (expired). The fair value of the finders warrants was $2,015 and
      calculated using the Black-Scholes valuation method. The assumptions used
      were 1 year of expected life, risk free interest rate of 4.50%, volatility
      of 36% and a dividend rate of 0%.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In October 2006, the Company issued 282,000 common shares
      at $1.10 per share for gross proceeds of $310,200. For each two shares
      subscribed for, the purchaser received one share purchase warrant which
      enables the holder to acquire an additional common share at a price of
      $1.50 to April 23, 2008 which expiry date was extended to July 13, 2008
      (65,000 exercised; 76,000 expired).                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In July 2006, the Company issued 1,132,000 common shares
      at $0.90 per share for gross proceeds of $1,018,800. For each two shares
      subscribed for, the purchaser received one share purchase warrant which
      enables the holder to acquire an additional common share at a price of
      $1.50 to July 31, 2007 which expiry date was extended to July 13, 2008
      (566,000 exercised).                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In June 2006, the Company issued 578,112 common shares at
      $0.90 per share for gross proceeds of $520,300. For each two shares
      subscribed for, the purchaser received one share purchase warrant which
      enables the holder to acquire an additional common share at a price of
      $1.50 to June 16, 2007 (expired).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In March 2006, the Company issued 792,029 common shares
      at $0.70 per share for gross proceeds of $554,420.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In November 2005, the Company issued 1,549,354 common
      shares at $0.55 per share for gross proceeds of $852,145.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-25

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|11. | CAPITAL STOCK(contd...)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Private placements(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In August 2005, the Company issued 300,000 common shares
      at $0.55 per share for gross proceeds of $165,000. For each two shares
      subscribed for, the purchaser received one share purchase warrant which
      enables the holder to acquire an additional common share at a price of
      $0.75 to August 31, 2006 (expired).                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In June 2005, the Company issued 536,218 common shares at
      $0.55 per share for gross proceeds of $294,920. For each two shares
      subscribed for, the purchaser received one share purchase warrant which
      enables the holder to acquire an additional common share at a price of
      $0.75 to April 30, 2006 (177,200 exercised; 90,910 expired).                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Initial Public Offering                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In November 2010, the Company completed an initial public
      offering in Canada (the IPO) and issued 8,092,593 common shares at
      CAD$1.35 per share (USD$1.33) for gross cash proceeds of CAD$10,925,001
      (USD$10,752,713). The Company also issued 566,482 broker warrants with a
      strike price of CAD$1.35 (US$1.33) per warrant and a two-year term to
      maturity. The Company valued the warrants at $364,248 using the
      Black-Scholes model with a 90% volatility, 0% dividend and 1.5% interest
      rate.                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Escrow Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | A total of (a) 267,500 shares (the Escrow Shares) were
      deposited into escrow at the time of listing of the Companys shares on
      the Toronto Stock Exchange on November 23, 2010 (the Listing Date),
      following completion of the IPO. The Escrow Shares are released from
      escrow as to (a) 1/4 of the Escrow Shares on the Listing Date; (b) 1/3 of
      the remaining Escrow Shares, six months after the Listing Date; (c) 1/2 of
      the remaining Escrow Shares, 12 months after the Listing Date; and (d) the
      remaining Escrow Shares, 18 months after the Listing Date. As of December
      31, 2010 a total of 200,625 Escrow Shares were held in escrow (December
      31, 2009  nil).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Acquisition of subsidiary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Effective December 22, 2004, the Company acquired 90% of
      the outstanding shares of XG Mining in exchange for 2,698,350 shares of
      common stock. In connection with this acquisition, 47,000,000 shares owned
      by two former officers and directors of the Company were returned to
      treasury and cancelled.                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The number of shares reserved for issuance under the
      Companys equity compensation option plan is 3,000,000. The terms and
      conditions of any options granted, including the number and type of
      options, the exercise period, the exercise price and vesting provisions,
      are determined by the Compensation Committee who makes recommendation to
      the board of directors for their approval. The maximum term of options
      granted cannot exceed 10 years.                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | At December 31, 2010, the following stock options were
      outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| | Number of | Exercise | Expiry Date      
| | --------- | -------- | -----------------
| | Options   | Price    |                  
| |           |          |                  
| | 324,000   | $0.70    | May 1, 2013      
| | 540,000   | $0.75    | May 1, 2013      
| | 110,000   | $1.00    | February 12, 2012
| | 108,000   | $1.00    | January 1, 2013  
| | 216,000   | $1.00    | February 1, 2013 
| | 270,000   | $1.00    | May 1, 2013      
| | 130,000   | $1.05    | May 1, 2013      
| | 90,000    | $1.15    | July 1, 2013     

F-26

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|11. | CAPITAL STOCK(contd...)
      Stock options(contd)                                                 
|--- | ------------------------------------------------------------------------------------------------------
|    |                                                                                                       
|    | Stock option transactions and the number of stock options outstanding
      are summarized as follows:

| |                                |  | 2010      |   |   | 2009             | 
| | ------------------------------ |  | --------- | - | - | ---------------- | 
| |                                |  | Number of |   |   | Weighted Average | 
| |                                |  | Options   |   |   | Exercise Price   | 
| | Outstanding, beginning of year |  | 972,000   |   | $ | 0.73             | 
| | Granted                        |  | 924,000   |   |   | 1.02             | 
| | Exercised                      |  |          |   |   |                 | 
| | Cancelled/Expired              |  | (108,000  | ) |   | 0.70             | 
| |                                |  |           |   |   |                  | 
| | Outstanding, end of year       |  | 1,788,000 |   | $ | 0.88             | 
| |                                |  |           |   |   |                  | 
| | Exercisable, end of year       |  | 1,490,000 |   | $ | 0.85             | 

The aggregate intrinsic value for
options vested as of December 31, 2010 is approximately $1,312,200 (2009 -
$272,000) and for total options outstanding is approximately $2,447,200 (2009 -
$284,000).

Stock-based compensation

The fair value of stock options granted
during the year ended December 31, 2010 totaled $594,388 (2009 - $Nil) of which
$411,507 has been included in general and administrative expense for the year.
The remaining $182,881 (2009 - $Nil) will be expensed in future periods. During
the year ended December 31, 2009, the Company extended the life of previously
granted options to May 1, 2013 which resulted in an expense of $468,052 which
was included in general and administrative expenses.

The following assumptions were used for
the Black-Scholes valuation of stock options granted or extended during the
years ended December 31, 2010 and 2009:

| |                         |  | 2010    |  |  | 2009    | 
| | ----------------------- |  | ------- |  |  | ------- | 
| |                         |  |         |  |  |         | 
| | Risk-free interest rate |  | 1.73%   |  |  | 2%      | 
| | Expected life           |  | 3 years |  |  | 4 years | 
| | Annualized volatility   |  | 94.28%  |  |  | 108.16% | 
| | Forfeiture rate         |  | 0%      |  |  | 0%      | 
| | Dividend rate           |  |        |  |  |        | 

The weighted average fair value of
options granted was $0.63 (2009 - $Nil).

Warrants

At December 31, 2010, the following
warrants were outstanding:

| | Number
      of Warrants | Exercise Price | Expiry Date      
| | ------------------------ | -------------- | -----------------
| |                          |                |                  
| | 350,000                  | $1.00          | April 1, 2011    
| | 308,000                  | $1.00          | May 19, 2011     
| | 188,438                  | $1.00          | August 5, 2011   
| | 403,600                  | $1.50          | June 16, 2011    
| | 472,800                  | $1.50          | October 19, 2011 
| | 150,000                  | $1.50          | December 11, 2011
| | 566,482                  | $1.33          | November 23, 2013

F-27

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|11. | CAPITAL STOCK(contd...)                                                                    
|--- | --------------------------------------------------------------------------------------------
|    |                                                                                             
|    | Warrants(contd)                                                                           
|    |                                                                                             
|    | Warrant transactions and the number of warrants outstanding are
      summarized as follows:

| |                                |  | 2010      |   |   | 2009             | 
| | ------------------------------ |  | --------- | - | - | ---------------- | 
| |                                |  | Number of |   |   | Weighted Average | 
| |                                |  | Warrants  |   |   | Exercise Price   | 
| | Outstanding, beginning of year |  | 1,610,038 |   | $ | 1.13             | 
| | Issued                         |  | 1,209,282 |   |   | 1.42             | 
| | Exercised                      |  | (380,000  | ) |   | 1.03             | 
| | Expired                        |  |          |   |   |                 | 
| | Exercisable, end of year       |  | 2,439,320 |   | $ | 1.29             | 

|12. | RELATED PARTY TRANSACTIONS                                                                                                        
|--- | ----------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                   
|    | During the years ended December 31, 2010 and 2009, the Company entered
      into the following transactions with related parties:

| | (a) | Paid or accrued consulting fees of $269,519 (2009 - $160,927) to
      officers of the Company or companies controlled by such officers.                                 
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                          
| | (b) | Paid or accrued directors fees of CAD$23,333 (USD$25,647) (2009 
      CAD$21,000 (USD$18,486)) to directors of the Company or companies
      controlled by directors.
| |     |                                                                                                                                                                          
| | (c) | Granted 636,000 stock options to directors and officers exercisable at
      prices of $1.00 to $1.15 per share.                                                         

|    | The amounts charged to the Company for the services provided have been
      determined by negotiation among the parties. These transactions were in
      the normal course of operations and were measured at the exchange value,
      which represented the amount of consideration established and agreed to by
      the related parties.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                
|13. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS                                                                                                                                                                                                                                                                                             

| |                                  |   | **Cumulative amounts**    |  |   |      |  |   |      | 
| | -------------------------------- | - | ------------------------- |  | - | ---- |  | - | ---- | 
| |                                  |   | **from the beginning of** |  |   |      |  |   |      | 
| |                                  |   | **the exploration stage** |  |   |      |  |   |      | 
| |                                  |   | **on January 1, 2003 to** |  |   |      |  |   |      | 
| |                                  |   | December 31, 2010         |  |   | 2010 |  |   | 2009 | 
| |                                  |   |                           |  |   |      |  |   |      | 
| | Cash paid during the period for: |   |                           |  |   |      |  |   |      | 
| | Interest                         | $ | 187,362                   |  | $ |     |  | $ |     | 
| | Income
      taxes               | $ |                          |  | $ |     |  | $ |     | 

The significant non-cash transactions
during the year ended December 31, 2010 included (a) the issuance of 665,282
finders warrants with a value of $419,855 in connection with a private
placement (Note 11); (b) the conversion of $250,000 of a convertible debenture
into 250,000 common shares; (c) capitalization of $76,298 in mineral properties
related to asset retirement costs.

The significant non-cash transaction
during the year ended December 31, 2009 was the issuance of 50,600 finders
warrants with a value of $20,098 in connection with a private placement (Note
11).

F-28

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|14. | DEFERRED INCOME TAXES                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                   
|    | Income tax benefits attributable to losses from United
      States of America operations was $Nil for the years ended December 31,
      2010 and 2009, and differed from the amounts computed by applying the
      United States of America federal income tax rate of 34% to pretax losses
      from operations as a result of the following:

| |                                                                       |   | 2010       |   |   | 2009       |  
| | --------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                                                       |   |            |   |   |            |  
| | Loss for the year                                                     | $ | (2,976,645 | ) | $ | (1,038,124 | )
| |                                                                       |   |            |   |   |            |  
| | Computed expected tax (benefit)
      expense                       | $ | (1,012,059 | ) | $ | (352,962   | )
| | Non deductible (taxable) items                                        |   | 14,502     |   |   | (130,796   | )
| | Lower effective income tax rate on
      loss of foreign subsidiaries |   | 21,884     |   |   | 68,966     |  
| | Valuation allowance                                                   |   | 975,673    |   |   | 414,792    |  
| |                                                                       |   |            |   |   |            |  
| | Net expected tax (benefit) expense                                    | $ |           |   | $ |           |  

The tax effects of temporary
differences that give rise to significant deferred tax assets and deferred tax
liabilities are presented below:

| |                                                |   | 2010       |   |   | 2009       |  
| | ---------------------------------------------- | - | ---------- | - | - | ---------- | -
| | Deferred tax assets (liabilities):             |   |            |   |   |            |  
| | Trading securities                             | $ | (17,280    | ) | $ | (49,288    | )
| | Mineral
      properties                       |   | (401,932   | ) |   | (401,932   | )
| | Net operating loss
      carryforwards - US    |   | 1,675,192  |   |   | 886,528    |  
| | Net
      operating loss carryforwards - Ghana |   | 781,650    |   |   | 763,504    |  
| | Valuation allowance                            |   | (2,037,630 | ) |   | (1,198,812 | )
| | Total deferred tax assets                      | $ |           |   | $ |           |  

|    | The valuation allowance for deferred tax assets as of
      December 31, 2010 and 2009 was $(2,037,630) and $(1,198,812) respectively.
      In assessing the realizability of deferred tax assets, management
      considers whether it is more likely than not that some portion or all of
      the deferred tax assets will not be realized. The ultimate realization of
      deferred tax assets is dependent upon the generation of future taxable
      income during the periods in which those temporary differences become
      deductible.                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Management considers the scheduled reversal of deferred
      tax liabilities, projected future taxable income, and tax planning
      strategies in assessing the realizability of deferred tax assets. In order
      to fully realize the deferred tax asset attributable to net operating loss
      carryforwards, the Company will need to generate future taxable income of
      approximately $8,000,000 prior to the expiration of the net operating loss
      carryforwards. Of the $8,000,000 of operating loss carryforwards,
      $5,000,000 is attributable to the US, and expires between 2021 and 2030,
      and the balance of $3,000,000 is attributable to Ghana and expires between
      2011 and 2015.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|15. | SEGMENTED INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company has one reportable segment, being the
      exploration and development of resource properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-29

---

XTRA-GOLD RESOURCES CORP. (An Exploration Stage
Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in
U.S. Dollars) DECEMBER 31, 2010

|15. | SEGMENTED INFORMATION(contd)
      Geographic information is as follows:
|--- | --------------------------------------------------------------------------

| |                      |   | 2010      |  |   | 2009      | 
| | -------------------- | - | --------- |  | - | --------- | 
| | Capital assets:      |   |           |  |   |           | 
| | Canada               | $ | 10,609    |  | $ | 94,751    | 
| | Ghana                |   | 2,438,679 |  |   | 1,852,321 | 
| |                      |   |           |  |   |           | 
| | Total capital assets | $ | 2,449,288 |  | $ | 1,947,072 | 

|16. | CONTINGENCY AND COMMITMENTS
|--- | ---------------------------

| | a) | The Company entered into a management consulting
      agreement with the Vice President, Exploration, which extends from March
      1, 2011 to March 1, 2014, whereby the Company will pay CAD$12,500
      (USD$12,875) per month for the three year term for providing the majority
      of his time in consulting services to the Company. In the event of
      termination, without cause, the Company will be required to pay CAD$10,000
      (USD$10,300) for each month of early termination.                                                                                                                                                                                      
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | b) | The Company entered into a renewal of the consulting
      agreement with Brokton International Ltd. (Brokton), a company
      controlled by the General Manager of the Companys Ghana Operations.
      Brokton is to be paid $10,000 per month for fiscal 2011.                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | c) | Effective January 1, 2011, the Company entered into a
      management consulting agreement with the President and Chief Executive
      Officer whereby the Company will pay CAD$3,000 (USD$3,090) per month for
      one year for providing 60% of his time in consulting services to the
      Company.                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | d) | The Company leases 1,163 square feet for its corporate
      office located at Suite 301, 360 Bay Street, Toronto, Ontario. The lease
      has a 66 month term commencing May 1, 2007, at approximately CAD$3,868
      (USD$3,874) per month.                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | e) | The Company was party to a lawsuit for the sum of
      $121,336 filed in the Ghanaian courts pertaining to payment for excavation
      services provided by a subcontractor. No further liability had been
      recorded in connection with the lawsuit because the Company believed the
      debt had previously been discharged through the transfer of shares to the
      subcontractor in 2008. During the year ended December 31, 2010, the
      lawsuit was settled and the Company agreed to pay $108,000 in return for
      the shares previously issued. Upon payment by the Company of $108,000, the
      80,891 shares were returned to the Company and cancelled (Note 11).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | f) | In late 2009, the Government of Ghana announced an
      increase in the gross overriding royalty (GOR) required payable by all
      mining companies in the country from 3% to 5%. The industry standard
      remained at 3% due to stability agreements which were in place with a
      number of companies. From the commencement of gold recovery in July 2011
      to September 2011, the Company paid the GOR at 5% and as of October 2011,
      the Company began to pay the GOR at 3%. As a result of this decision,
      there is a potential liability of $126,500. The Company believes it is
      unlikely that this amount will become payable.                          

|17. | SUBSEQUENT EVENTS
|--- | -----------------

| | a) | Effective January 1, 2011, the Company entered into a
      management consulting agreement with the President and Chief Executive
      Officer whereby the Company will pay CAD$3,000 (USD$3,090) per month for
      one year for providing 60% of his time in consulting services to the
      Company.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                            
| | b) | The Company entered into a subsequent letter of intent
      with Verbina on January 21, 2011 (the 2011 LOI) which supersedes the
      July 21, 2010 letter of intent as disclosed in Note 8.                                                                                                           

F-30

---