UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  
 FORM
10-Q
 
 [
      X ]
              QUARTERLY
      REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the quarterly period ended:October 31,
2008
 
 [   
      ]
              TRANSITION
      REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from_______to_______
 
 Commission
file number 000-52055
  RED
      METAL RESOURCES LTD.(Exact
      name of small business issuer as specified in its
  charter)
  Nevada
                (State
      or other jurisdiction
                of
      incorporation or organization)
              20-2138504
                (I.R.S.
      Employer
                Identification
      No.)195 Park Avenue,
      Thunder Bay Ontario, Canada P7B 1B9
                (Address
      of principal executive offices) (Zip Code)(807)
      345-5380
                (Issuer’s
      telephone number)
 
 Indicate
by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  [ X ] Yes [   ] No
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filed,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
  Large
      accelerated filer
                o
                
                Accelerated
      filer
                oNon-accelerated
      filer
                o
                (Do
      not check if a smaller reporting company)
                Smaller
      reporting company
                x
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). [   ] Yes [ X ] No
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.  As of December 12, 2008 the
number of shares of the registrant’s classes of common stock outstanding was
58,183,333.
  
  TABLE
OF CONTENTS
  PagePart I - Financial
      InformationItem
      1.
              Financial
      Statements
              1Consolidated
      Balance Sheets – October 31, 2008 (unaudited) and January 31,
      2008
              1Consolidated
      Statements of Operations – For the Nine Months EndedOctober 31,
      2008 and 2007 (unaudited)
              2Consolidated
      Statements of Stockholders’ (Deficit)
      Equity
              3Consolidated
      Statements of Cash Flows – For the Nine Months Ended October 31, 2008and
      2007 (unaudited)
              4Notes
      to Consolidated Financial Statements
              5Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              18Forward
      Looking Statements
              18Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              34Item
      4.
              Controls
      and Procedures
              34Part
      II - Other InformationItem
      1.
              Legal
      Proceedings
              35Item
      1A.
              Risk
      Factors
              35Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              35Item
      3.
              Defaults
      Upon Senior Securities
              35Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              35Item
      5.
              Other
      Information
              35Item
      6.
              Exhibits
              36Signatures
              
              37
  
 Part
I, Item 1.  Financial Statements.
 RED
      METAL RESOURCES LTD.(Formerly
      Red Lake Exploration, Inc.)(AN
      EXPLORATION STAGE COMPANY)CONSOLIDATED
      BALANCE SHEETSOctober
      31,
                
                
                January
      31,2008
                
                
                2008(Unaudited)ASSETSCurrent
      assets:Cash
                
                $
                132,571
                
                
                $
                1,901Prepaid
      expenses and deposits
                
                
                22,966
                
                
                
                -Total
      current assets
                
                
                155,537
                
                
                
                1,901Unproved
      mineral properties
                
                
                756,033
                
                
                
                -Total
      assets
                
                $
                911,570
                
                
                $
                1,901LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable
                
                $
                64,979
                
                
                $
                44,719Accrued
      liabilities
                
                
                1,000
                
                
                
                -Accrued
      professional fees
                
                
                25,617
                
                
                
                32,018Due
      to related parties
                
                
                159,877
                
                
                
                41,237Notes
      payable to related party, including accrued interest
                
                
                484,364
                
                
                
                -Total
      liabilities
                
                
                735,837
                
                
                
                117,974Commitments
      and contingenciesStockholders'
      equity (deficit):Common
      stock, $0.001 par value, authorized 500,000,000,58,183,333
      and 53,183,334 issued and outstandingat
      October 31, 2008 and January 31, 2008, respectively
                
                
                58,183
                
                
                
                53,183Additional
      paid in capital
                
                
                1,415,316
                
                
                
                120,316Deficit
      accumulated during the exploration stage
                
                
                (1,301,615
                )
                
                
                (289,572
                )Accumulated
      other comprehensive income
                
                
                3,849
                
                
                
                -Total
      stockholders'
      equity (deficit)
                
                
                175,733
                
                
                
                (116,073
                )Total
      liabilities and stockholders' equity (deficit)
                
                $
                911,570
                
                
                $
                1,901
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  1
 RED
      METAL RESOURCES LTD.(Formerly
      Red Lake Exploration, Inc.)(AN
      EXPLORATION STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF OPERATIONS(UNAUDITED)FromJanuary
      10,Three
      Months
                  
                  
                  Nine
      Months
                  
                  
                  2005
      (Inception)Ended
      October 31,
                  
                  
                  Ended
      October 31,
                  
                  
                  to October 31,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2008RevenueRoyalties
                  
                  $
                  4,462
                  
                  
                  $
                  -
                  
                  
                  $
                  14,261
                  
                  
                  $
                  -
                  
                  
                  $
                  14,261Operating
      Expenses:Administration
                  
                  
                  16,808
                  
                  
                  
                  -
                  
                  
                  
                  68,172
                  
                  
                  
                  -
                  
                  
                  
                  69,431Advertising
      and promotion
                  
                  
                  34,584
                  
                  
                  
                  2,754
                  
                  
                  
                  107,830
                  
                  
                  
                  2,754
                  
                  
                  
                  112,667Automobile
                  
                  
                  8,746
                  
                  
                  
                  -
                  
                  
                  
                  8,746
                  
                  
                  
                  -
                  
                  
                  
                  8,746Bad
      debts
                  
                  
                  65,731
                  
                  
                  
                  -
                  
                  
                  
                  65,731
                  
                  
                  
                  -
                  
                  
                  
                  65,731Bank
      charges and interest
                  
                  
                  1,269
                  
                  
                  
                  59
                  
                  
                  
                  3,869
                  
                  
                  
                  168
                  
                  
                  
                  4,776Consulting
      fees
                  
                  
                  33,060
                  
                  
                  
                  24,643
                  
                  
                  
                  80,310
                  
                  
                  
                  32,593
                  
                  
                  
                  135,960Donated
      rent
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  750
                  
                  
                  
                  4,750Donated
      service fees
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,500
                  
                  
                  
                  9,500Mineral
      exploration costs
                  
                  
                  77,247
                  
                  
                  
                  4,506
                  
                  
                  
                  438,934
                  
                  
                  
                  17,536
                  
                  
                  
                  507,232Office
                  
                  
                  2,683
                  
                  
                  
                  1,733
                  
                  
                  
                  12,724
                  
                  
                  
                  1,769
                  
                  
                  
                  14,785Professional
      fees
                  
                  
                  55,621
                  
                  
                  
                  11,765
                  
                  
                  
                  112,330
                  
                  
                  
                  36,888
                  
                  
                  
                  204,152Rent
                  
                  
                  8,748
                  
                  
                  
                  -
                  
                  
                  
                  8,748
                  
                  
                  
                  -
                  
                  
                  
                  8,748Regulatory
                  
                  
                  2,549
                  
                  
                  
                  1,501
                  
                  
                  
                  6,804
                  
                  
                  
                  5,660
                  
                  
                  
                  18,474Travel
      and entertainment
                  
                  
                  48,245
                  
                  
                  
                  906
                  
                  
                  
                  83,099
                  
                  
                  
                  28,683
                  
                  
                  
                  112,230Salaries,
      wages and benefits
                  
                  
                  14,713
                  
                  
                  
                  -
                  
                  
                  
                  19,643
                  
                  
                  
                  -
                  
                  
                  
                  19,643Impairment
      loss on mineral property costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,000Foreign
      exchange gains
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  687Total
      operating expenses
                  
                  
                  370,004
                  
                  
                  
                  47,867
                  
                  
                  
                  1,016,940
                  
                  
                  
                  128,301
                  
                  
                  
                  1,306,512Operating
      loss
                  
                  
                  (365,542
                  )
                  
                  
                  (47,867
                  )
                  
                  
                  (1,002,679
                  )
                  
                  
                  (128,301
                  )
                  
                  
                  (1,292,251
                  )Interest
      on notes payable
                  
                  
                  (8,708
                  )
                  
                  
                  -
                  
                  
                  
                  (9,364
                  )
                  
                  
                  -
                  
                  
                  
                  (9,364
                  )Net
      loss for the period
                  
                  $
                  (374,250
                  )
                  
                  $
                  (47,867
                  )
                  
                  $
                  (1,012,043
                  )
                  
                  $
                  (128,301
                  )
                  
                  $
                  (1,301,615
                  )Net
      loss per share - basic and diluted
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.00
                  )
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.00
                  )Weighted
      average number of sharesoutstanding
      - basic and diluted
                  
                  
                  58,183,333
                  
                  
                  
                  53,183,334
                  
                  
                  
                  56,639,538
                  
                  
                  
                  65,526,435
   The
accompanying notes are an integral part of these unaudited consolidated
financial statements
  2


RED
      METAL RESOURCES LTD.(Formerly
      Red Lake Exploration, Inc.)(AN
      EXPLORATION STAGE COMPANY)CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSSFOR
      THE PERIOD FROM JANUARY 10, 2005 (INCEPTION) TO OCTOBER 31,
      2008(UNAUDITED)Common
      Stock Issued
                
                
                
                
                
                AccumulatedAdditional
                
                
                
                
                
                OtherNumber
      of
                
                
                
                
                
                Paid-in
                
                
                Accumulated
                
                
                ComprehensiveShares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                Income
      (Loss)
                
                
                TotalBalance
      at January 10,  2005 (Inception)
                
                
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (825
                )
                
                
                -
                
                
                
                (825
                )Balance
      at January 31, 2005
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (825
                )
                
                
                -
                
                
                
                (825
                )Common
      stock issued for cash
                
                
                77,350,000
                
                
                
                77,350
                
                
                
                (18,100
                )
                
                
                -
                
                
                
                -
                
                
                
                59,250Donated
      services
                
                
                -
                
                
                
                -
                
                
                
                3,000
                
                
                
                -
                
                
                
                -
                
                
                
                3,000Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (12,363
                )
                
                
                
                
                
                
                (12,363
                )Balance
      at January 31, 2006
                
                
                77,350,000
                
                
                
                77,350
                
                
                
                (15,100
                )
                
                
                (13,188
                )
                
                
                -
                
                
                
                49,062Donated
      services
                
                
                -
                
                
                
                -
                
                
                
                9,000
                
                
                
                -
                
                
                
                -
                
                
                
                9,000Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (43,885
                )
                
                
                
                
                
                
                (43,885
                )Balance
      at January 31, 2007
                
                
                77,350,000
                
                
                
                77,350
                
                
                
                (6,100
                )
                
                
                (57,073
                )
                
                
                -
                
                
                
                14,177Donated
      services
                
                
                -
                
                
                
                -
                
                
                
                2,250
                
                
                
                -
                
                
                
                -
                
                
                
                2,250Return
      of common stock to treasury
                
                
                (24,500,000
                )
                
                
                (24,500
                )
                
                
                24,499
                
                
                
                -
                
                
                
                -
                
                
                
                (1
                )Common
      stock issued for cash
                
                
                333,334
                
                
                
                333
                
                
                
                99,667
                
                
                
                -
                
                
                
                -
                
                
                
                100,000Net
      loss for the nine months ended October 31, 2007
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (128,301
                )
                
                
                -
                
                
                
                (128,301
                )Balance
      at October 31, 2007
                
                
                53,183,334
                
                
                
                53,183
                
                
                
                120,316
                
                
                
                (185,374
                )
                
                
                -
                
                
                
                (11,875
                )Net
      loss for the three months ended January 31, 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (104,198
                )
                
                
                -
                
                
                
                (104,198
                )Balance
      at January 31, 2008
                
                
                53,183,334
                
                
                
                53,183
                
                
                
                120,316
                
                
                
                (289,572
                )
                
                
                -
                
                
                
                (116,073
                )Common
      stock issued for cash
                
                
                4,999,999
                
                
                
                5,000
                
                
                
                1,295,000
                
                
                
                -
                
                
                
                -
                
                
                
                1,300,000Balance
      before net loss and foreign currency exchange gain
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,183,927Net
      loss for the nine months ended October 31, 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,012,043
                )
                
                
                -
                
                
                
                (1,012,043
                )Foreign
      currency exchange gain
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                3,849
                
                
                
                3,849Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,008,194
                )Balance
      at October 31, 2008
                
                
                58,183,333
                
                
                $
                58,183
                
                
                $
                1,415,316
                
                
                $
                (1,301,615
                )
                
                $
                3,849
                
                
                $
                175,733
  On June
15, 2007, the Company declared a forward split of 13 new shares of common stock
for every one share of common stock outstanding. All common stock amounts have
been retroactively adjusted for all periods presented.
   The
accompanying notes are an integral part of these unaudited consolidated
financial statements


3
  RED
      METAL RESOURCES LTD.(Formerly
      Red Lake Exploration, Inc.)(AN
      EXPLORATION STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CASH FLOWS(UNAUDITED)FromJanuary
      10,Nine
      Months
                
                
                2005
      (Inception)Ended
      October 31,
                
                
                to October 31,2008
                
                
                2007
                
                
                2008Cash
      flows from operating activities:Net
      loss
                
                $
                (1,012,043
                )
                
                $
                (128,301
                )
                
                $
                (1,301,615
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Donated
      services and rent
                
                
                -
                
                
                
                2,250
                
                
                
                14,250Impairment
      loss on mineral property costs
                
                
                -
                
                
                
                -
                
                
                
                9,000Changes
      in operating assets and liabilities:Prepaid
      expenses and deposits
                
                
                (22,966
                )
                
                
                -
                
                
                
                (22,966
                )Accounts
      payable
                
                
                20,260
                
                
                
                19,721
                
                
                
                64,980Accrued
      liabilites
                
                
                1,000
                
                
                
                -
                
                
                
                1,000Accrued
      professional fees
                
                
                (6,401
                )
                
                
                3,082
                
                
                
                25,617Due
      to related parties
                
                
                118,640
                
                
                
                1,879
                
                
                
                159,875Accrued
      interest on notes payable to related party
                
                
                9,364
                
                
                
                -
                
                
                
                9,364Net
      cash used in operating activities
                
                
                (892,146
                )
                
                
                (101,369
                )
                
                
                (1,040,495
                )Cash
      flows from investing activities:Acquisition
      of unproved mineral properties
                
                
                (756,033
                )
                
                
                -
                
                
                
                (765,033
                )Net
      cash used in investing activities
                
                
                (756,033
                )
                
                
                -
                
                
                
                (765,033
                )Cash
      flows from financing activities:Cash
      received on issuance of notes payable to related party
                
                
                475,000
                
                
                
                -
                
                
                
                475,000Proceeds
      from issuance of common stock
                
                
                1,300,000
                
                
                
                100,000
                
                
                
                1,459,250Net
      cash provided by financing activities
                
                
                1,775,000
                
                
                
                100,000
                
                
                
                1,934,250Effects
      of foreign currency exchange
                
                
                3,849
                
                
                
                -
                
                
                
                3,849Increase
      (decrease) in cash during the period
                
                
                130,670
                
                
                
                (1,369
                )
                
                
                132,571Cash,
      beginning of period
                
                
                1,901
                
                
                
                15,477
                
                
                
                -Cash,
      end of period
                
                $
                132,571
                
                
                $
                14,108
                
                
                $
                132,571Supplemental
      disclosures:Cash
      paid during the period for:Taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -Interest
                
                $
                -
                
                
                $
                -
                
                
                $
                -Non-cash
      financing transaction:Acquisition
      of 24,500,000 common shares
                
                $
                -
                
                
                $
                -
                
                
                $
                1
   The
accompanying notes are an integral part of these unaudited consolidated
financial statements
  4
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION
  Nature
of Operations
  Red Metal
Resources Ltd. was incorporated on January 10, 2005 under the laws of the state
of Nevada as Red Lake Exploration, Inc. and changed its name to Red Metal
Resources Ltd. on August 27, 2008.  On August 21, 2007, Red Metal
acquired a 99% interest in Minera Polymet Limitada (Polymet), a limited
liability company formed on August 21, 2007 under the laws of the Republic of
Chile. In these notes, the terms “Red Metal”, “Company”, “we”, “us” or “our”
mean Red Metal Resources Ltd. and its subsidiary, Polymet, whose operations are
included in these unaudited consolidated financial statements.
 
 Red Metal
is involved in acquiring and exploring mineral properties in
Chile.  The Company has not determined whether its properties contain
mineral reserves that are economically recoverable.
 
 Exploration
Stage
 
 Red Metal
has not produced any significant revenues from its principal business or
commenced significant operations and is considered an exploration stage company
as defined by SEC Guide 7 with reference to Statement of Financial Accounting
Standard (SFAS) No.7 Accounting and Reporting by
Development Stage Enterprises.
 
 The
Company is in the early exploration stage.  In the exploration stage,
management devotes most of its time to conducting exploratory work and
developing its business.  These unaudited consolidated financial
statements have been prepared on a going-concern basis, which implies the
Company will continue to realize its assets and discharge its liabilities in the
normal course of business.  The Company has never paid any dividends
and is unlikely to pay dividends or generate earnings in the immediate or
foreseeable future.  The Company’s continuation as a going concern and
its ability to emerge from the exploration stage with any planned principal
business activity is dependent upon the continued financial support of its
shareholders and its ability to obtain the necessary equity financing and attain
profitable operations.
 
 Basis
of Presentation
 
 These
unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article 8 of
Regulation S-X.  They do not include all information and notes
required by generally accepted accounting principles for complete financial
statements.  However, except as disclosed herein, there have been no
material changes in the information disclosed in the notes to the consolidated
financial statements included in Red Metal’s annual report on Form 10-KSB for
the year ended January 31, 2008. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included.  Operating results for the three and
nine months ended October 31, 2008 are not necessarily indicative of the results
that may be expected for any other interim period or the entire
year.  For further information, these unaudited consolidated financial
statements and the related notes should be read in conjunction with the
Company’s audited consolidated financial statements for the year ended January
31, 2008 included in the Company’s annual report on Form 10-KSB.
  5
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 
 A summary
of the Company’s significant accounting policies is included in the Company’s
annual report on form 10-KSB for the year ended January 31, 2008. Additional
significant accounting policies that either affect the Company or have been
developed since January 31, 2008 are summarized below.
  Reclassifications
 
 Certain
prior period amounts in the accompanying financial statements have been
reclassified to conform to the current period’s presentation. These
reclassifications had no effect on the results of operations or financial
position for any period presented.
 
 Financial
Instruments
 
 Foreign
Exchange Risk
 
 The
Company is subject to foreign exchange risk for sales and purchases denominated
in foreign currencies. The functional currency for Polymet is the Chilean peso.
Foreign currency risk arises from the fluctuation of foreign exchange rates and
the degree of volatility of these rates relative to the United States
dollar.  The Company does not believe that it has any material risk to
its foreign currency exchange.
 
 Revenue
Recognition
 
 The
Company records revenues and royalties from the sale of minerals when persuasive
evidence of an arrangement exists, the minerals have been delivered to the
customer and the risk of ownership or title has been transferred, and
collectability is reasonably assured.  Interest income is recognized
at the end of each month.
 
 During
the nine months ended October 31, 2008, we received $14,261 in royalty
revenue.   (Notes 4 and 6)
 
 Recent
Accounting Pronouncements
  On
February 1, 2008, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 157 (SFAS 157), Fair Value
Measurements.  SFAS 157 relates to financial assets and
financial liabilities. In February 2008, the Financial Accounting Standards
Board (FASB) issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement
No. 157, which delayed the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on at least an
annual basis, until January 1, 2009 for entities with a calendar year end.
Also in February 2008, the FASB issued FSP No. FAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13, which states that SFAS No. 13, Accounting for Leases (SFAS
13), and other accounting pronouncements that address fair value measurements
for purposes of lease classification or measurement under SFAS 13 are excluded
from the provisions of SFAS 157, except for assets and liabilities related to
leases assumed in a business combination that are required to be measured at
fair value under SFAS No. 141, Business Combinations, (SFAS
141) or SFAS No. 141 (revised 2007), Business Combinations, (SFAS
141(R).
  6
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES,
continued
 
 Recent
Accounting Pronouncements,
continued
 
 SFAS 157
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (GAAP),
and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with limited exceptions.
The adoption of SFAS 157, as it relates to financial assets and financial
liabilities, had no impact on the Company’s financial statements.
 
 SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. This standard is now the single source in GAAP for the
definition of fair value, except for the fair value of leased property as
defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that
distinguishes between (a) market participant assumptions developed based on
market data obtained from independent sources (observable inputs), and
(b) an entity’s own assumptions about market participant assumptions that
are developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of three broad levels,
giving the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy
under SFAS 157 are described below:
  •
                
                Level
      1 - Unadjusted quoted prices in active markets that are accessible at the
      measurement date for identical, unrestricted assets or
      liabilities
  •
                
                Level
      2 - Inputs other than quoted prices included within Level 1 that are
      observable for the asset or liability, either directly or indirectly,
      including quoted prices for similar assets or liabilities in active
      markets; quoted prices for identical or similar assets or liabilities in
      markets that are not active; inputs other than quoted prices that are
      observable for the asset or liability (e.g., interest rates); and inputs
      that are derived principally from or corroborated by observable market
      data by correlation or other means
  •
                
                Level
      3 - Inputs that are both significant to the fair value measurement and
      unobservable
 
 In
February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115. SFAS 159 permits measurement of certain
financial assets and financial liabilities at fair value.  If the fair
value option is elected, the unrealized gains and losses are reported in
earnings at each reporting date.  Generally, the fair value option may
be elected on an instrument-by-instrument basis as long as it is applied to the
instrument in its entirety.  The fair value option election is
irrevocable unless a new election date occurs.  SFAS 159 was effective
for the Company on February 1, 2008. The adoption of SFAS 159 did not have
a material impact on the Company’s consolidated financial statements as the
Company did not elect the fair value option for any of its financial assets or
liabilities.
  7
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES,
continued
 
 Recent
Accounting Pronouncements,
continued
 
 In
June 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities should be deferred and
capitalized. As the related goods are delivered or the services are performed,
or when the goods or services are no longer expected to be provided, the
deferred amounts would be recognized as an expense. This Issue is effective for
financial statements issued for fiscal years beginning after December 15,
2007 and earlier application is not permitted. This consensus is to be applied
prospectively for new contracts entered into on or after the effective
date.  EITF 07-03 was effective for the Company on February 1,
2008.  The pronouncement did not have a material effect on our
consolidated financial statements.
 
 In
March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133
(SFAS 133). This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for the
Company on February 1, 2009.  Early adoption of this provision is
prohibited.  The Company is evaluating the impact adoption of SFAS 161
may have on its consolidated financial statement disclosures.
  In May,
2008, FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP (the GAAP hierarchy). SFAS 162 is effective 60
days following the U.S. Securities and Exchange Commission’s approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The Company is
reviewing the effect, if any, the proposed guidance will have on its
consolidated financial statement disclosures.
  8
 
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
 
 In May,
2008, FASB issued SFAS No. 163, Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No.
60.  Diversity exists in practice in accounting for financial
guarantee insurance contracts by insurance enterprises under FASB Statement No.
60, Accounting and Reporting
by Insurance Enterprises. That diversity results in inconsistencies in
the recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies.
This statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the statement will improve the quality of information provided
to users of financial statements. SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years; disclosure requirements in paragraphs
30(g) and 31 are effective for the first period (including interim periods)
beginning after May 23, 2008. We do not expect the adoption of SFAS 163 to have
a significant impact on our consolidated financial statements.
 
 On May 9,
2008, the FASB issued FASB Staff Position No. APB 14-1 (FSP APB 14-1), Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement)
are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants.  Additionally, FSP
APB 14-1 specifies that issuers of such instruments should separately account
for the liability and equity components in a manner that will reflect the
entity's nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB14-1 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. The Company has not yet evaluated the impact that FSP APB 14-1
will have on its consolidated results of operations or consolidated financial
position.
 
 On June
16, 2008, the FASB issued FASB Staff Position No. EITF 03-6-1 (FSP No. EITF
03-6-1), Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities, to address the question of whether instruments granted in
share-based payment transactions are participating securities prior to vesting.
FSP EITF 03-6-1 indicates that unvested share-based payment awards that contain
rights to dividend payments should be included in earnings per share
calculations. The guidance will be effective for fiscal years beginning after
December 15, 2008. The Company is evaluating the requirements of FSP No. EITF
03-6-1 and the impact that its adoption will have on the consolidated results of
operations or consolidated financial position.
  9
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, continued
 
 Recent
Accounting Pronouncements, continued
 
 In June
2008, the FASB issued EITF Issue 07-5 (EITF 07-5), Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own
Stock.  EITF No. 07-5 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early application is not permitted. Paragraph 11(a)
of SFAS No. 133 Accounting for
Derivatives and Hedging Activities, specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the
Company’s own stock and (b) classified in stockholders’ equity in the statement
of financial position would not be considered a derivative financial instrument.
EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer’s own stock
and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope
exception.  The Company is currently evaluating the impact that
adoption of EITF 07-5 will have on its consolidated financial
statements.
  In June
2008, FASB released a proposed SFAS, Disclosure of Certain Loss
Contingencies, an amendment of FASB Statements No. 5 and 141) (the
proposed Statement),
for a comment period that ended during August 2008. The proposed statement would
(a) expand the population of loss contingencies that are required to be
disclosed, (b) require disclosure of specific quantitative and qualitative
information about those loss contingencies, (c) require a tabular
reconciliation of recognized loss contingencies and (d) provide an
exemption from disclosing certain required information if disclosing that
information would be prejudicial to an entity's position in a dispute. The
proposed statement would be effective for financial statements issued for fiscal
years ending after December 15, 2008, and for interim and annual periods in
subsequent fiscal years. When and if the proposed statement is approved in final
form by FASB, the Company will evaluate whether the adoption of the proposed
statement will have any material impact on its financial position or results of
operations.
  NOTE
3 – GOING CONCERN
 
 These
unaudited consolidated financial statements have been prepared on a
going-concern basis, which implies the Company will continue to realize its
assets and discharge its liabilities in the normal course of business. The
Company has not generated any significant revenues from mineral sales since
inception, has never paid any dividends and is unlikely to pay dividends or
generate significant earnings in the immediate or foreseeable future. The
continuation of the Company as a going concern is dependent upon the continued
financial support of its shareholders, the ability of the Company to obtain
necessary equity financing to continue operations, and the attainment of
profitable operations. The Company’s ability to achieve and maintain
profitability and positive cash flows is dependent upon its ability to locate
profitable mineral properties, generate revenues from mineral production and
control production costs. Based upon its current plans, the Company expects to
incur operating losses in future periods. The Company plans to mitigate these
operating losses through controlling its operating costs.  The Company
plans to obtain sufficient working capital through additional debt or equity
financing and private loans.  At October 31, 2008, the Company had a
working capital deficit of $580,300 and has accumulated losses of $1,301,615
since inception. These factors raise substantial doubt regarding the Company’s
ability to continue as a going concern. There is no assurance that the Company
will be able to generate significant revenues in the future. These unaudited
consolidated financial statements do not give any effect to any adjustments that
would be necessary should the Company be unable to continue as a going concern
and therefore be required to realize its assets and discharge its liabilities in
other than the normal course of business and at amounts different from those
reflected in the accompanying unaudited consolidated financial
statements.
  10
 
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE 4 – RELATED-PARTY
TRANSACTIONS
  The
following amounts were due to related parties at October 31, 2008 and January
31, 2008:
 
  October
      31,
                  2008
                
                
                January
      31,
                  2008Due
      to a company controlled by an officer (a)
                
                $
                927
                
                
                $
                -Due
      to a company controlled by directors (b)
                
                
                158,950
                
                
                
                39,010Due
      to a former president (c)
                
                
                -
                
                
                
                2,227Total
      due to related parties
                
                $
                159,877
                
                
                $
                41,237
  (a)
                During
      the nine months ended October 31, 2008, the Company paid or accrued a
      total of $86,634 in consulting, office, and travel and entertainment costs
      to a company controlled by an
officer.
 
 (b)
                During
      the nine months ended October 31, 2008, the Company paid or accrued a
      total of $289,950 in administration, advertising and promotion, mineral
      exploration, office regulatory and travel and entertainment costs to a
      company controlled by two directors, and paid $17,536 in mineral
      exploration fees to the same
company.
 
 (c)
                During
      the nine months ended October 31, 2008 and 2007, the Company recognized $0
      and $2,250 in services donated by a former
  president.
 
 On August
1, 2007, the Company issued 333,334 units at $0.30 per unit in a private
placement of securities for cash of $100,000 to a relative of the
president.  (Notes 7 and 8)
 
 On April
21, 2008, the Company issued 40,000 units at $0.25 per unit in a private
placement of securities for cash of $10,000 to a director.  (Notes 7
and 8)
 
 On April
21, 2008, the Company issued 2,000,000 units at $0.25 per unit in a private
placement of securities for cash of $500,000 to a relative of the
president.  (Notes 7 and 8)
 
 On May
14, 2008, the Company issued 333,333 units at $0.30 per unit in a private
placement of securities for cash of $100,000 to a relative of the
president.  (Notes 7 and 8)
  NOTE
5 – NOTES PAYABLE TO RELATED PARTY, INCLUDING ACCRUED INTEREST
  October
      31,

                    2008
                  
                  
                  January
      31,

                    2008Notes
      payable, on demand, unsecured, bearing interest at 8%per
      annum, compounded monthly
                  
                  $
                  475,000
                  
                  
                  $
                  -Accrued
      interest
                  
                  
                  9,364
                  
                  
                  
                  -Notes
      payable to related party, including accrued interest
                  
                  $
                  484,364
                  
                  
                  $
                  -
 11
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE
6 – UNPROVED MINERAL PROPERTIES
   October 31,
                  2008
                
                
                January
      31,
                  2008Acquisition
      costs
                
                $
                756,033
                
                
                $
                -Total
      acquisition costs
                
                $
                756,033
                
                
                $
                -
 
 Farellon
Alto Uno al Ocho Mineral Property
 
 On
September 25, 2007, Polymet entered into an agreement with a related company to
acquire by assignment the option to purchase the Farellon Alto Uno al Ocho
mineral property located in the Sierra Pan de Azucar, Province of Huasco, III
Region of Atacama in Chile. The Farellon Alto Uno al Ocho property consists of
66 hectares.  On April 25, 2008, we exercised the option to acquire
the right to purchase the Farellon Alto Uno al Ocho mining holding by paying
$250,000 to the optionor.  On April 25, 2008 we paid $300,000 to the
vendor to acquire title to the property. The mineral property is subject to a
1.5% royalty on the net sales of minerals extracted from the property to a total
of $600,000.  The royalty payments are due monthly once exploitation
begins, and are subject to minimum payments of $1,000 per month.  The
Company has no obligation to pay the royalty if it does not commence
exploitation.  (Notes 4 and 9)
 
 Cecil
Mineral Properties
  On
September 9, 2008, Polymet paid $20,000 to acquire the Cecil mineral properties
located in Asentamiento Minero designated Quebrada Carrizal Alto, Comuna of
Freirina, Provincia of Huasco, III Region of Atacama, Chile.  The
Cecil properties cover 730 hectares consisting of 500 hectares of exploration
claims and 230 hectares of titled mining properties near the Farellon
property.
 
 Camila
Mineral Properties
  On
February 1, 2008, Polymet entered into an option agreement with a related
company to acquire an option to purchase the Camila, Camila Dos, Camila Tres and
Camila Cuatro mineral properties, located in Quebrada Jilguero, Commune of
Vallenar, Province of Huasco, III Region of Atacama in Chile. The Camila mineral
properties consist of four mining holdings that cover a total area of 777
hectares.  Under the terms of the agreement, we paid $5,000 on
February 1, 2008 and $50,000 on May 23, 2008, and agreed to pay $50,000 by
December 1, 2008 to exercise the option.  If we exercise the option,
we are required to pay $50,000 by December 7, 2008 and $100,000 by June 7, 2009
to the owners of the properties to keep the option in good standing.  The
Company can exercise the option and purchase the properties by paying $200,000
to the owners by December 7, 2009 and a royalty equal to 6% of the net sale of
minerals extracted from the properties to a total of $1,000,000.  The
full $1,000,000 or unpaid portion is due and payable by December 7,
2011.  (Notes 4, 9, and 10)
  12
  RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE
6 – UNPROVED MINERAL PROPERTIES, continued
  Santa
Rosa Mineral Properties
  On
February 1, 2008, Polymet entered into an option agreement with a related
company to acquire an option to purchase the Santa Rosa Uno Al Seis and Porfiada
Uno Al Diez mineral properties, located in Sierra Cordon El Tomate, Quebrada de
Agua Grande, Commune of Freirina, Province of Huasco, III Region of Atacama in
Chile. The Santa Rosa mineral properties consist of two mineral holdings of
50 and 60 hectares each (110 hectares).  Under the terms of the agreement
we paid $9,500 on February 1, 2008, $8,500 per month from March 5, 2008 to July
5, 2008 and $50,000 on August 5, 2008, to exercise the option.  Since
we exercised the option, we are required to pay $7,500 per month from August 20,
2008 to August 20, 2009 and $10,000 per month from September 20, 2009 to June
20, 2011 to the owners of the properties to exercise the property purchase
option. At October 31, 2008 we had made all of the required option payments to
property owners.  (Notes 4 and 9)
 
 If we
exercise the option to purchase the mineral properties, we must pay the owners
of the properties the greater of a royalty equal to 1.5% of the net sale of
minerals extracted from the properties or a minimum of $1,000 per month once
exploitation begins, until the total purchase price of $600,000 has been
paid.  A related company conducted exploitation work from October 2007
to October 27, 2008 and paid $13,000 on account of the royalty, leaving $587,000
owing as of October 31, 2008.  (Note 9)
 
 This same
related company paid us a royalty equal to 5% of the net proceeds it received
from the processor. During the nine months ended October 31, 2008, we
received $14,261 in royalties from the related company’s sale of minerals
extracted from the Santa Rosa properties.  (Notes 2 and
4)
 
 Jova
Exploration Concessions
 
 On
September 28, 2008, Polymet staked and registered the Jova 1-13 exploration
concessions at a cost of $3,976.  The Jova 1-13 consists of 13
exploration concessions of 200 hectares each (2,600 hectares).  The
exploration concessions are located in Sierra Cordon El Tomate, Quebrada de Agua
Grande, Commune of Freirina, Province of Huasco, III Region of Atacama in
Chile.  The exploration claims surround the Santa Rosa mineral
properties to the north, south, east and west.  (Note 10)
 
 Costa
Rica Exploration Concessions
 
 On
October 16, 2008, Polymet staked and registered the Costa Rica Dos and Costa
Rica Tres exploration concessions at a cost of $1,164.  The Costa Rica
exploration concessions consist of two properties of 300 hectares each (600
hectares).  The exploration concessions are located in Cerro La Noria,
Province of Copiapo, III Region of Atacama in Chile.
 
 See Notes
9 and 10 for additional mineral property acquisitions.
  13
 
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE
7 – COMMON STOCK
  On August
27, 2008, our authorized common stock increased from 75,000,000 shares to
500,000,000 shares with a par value of $0.001 per share.
 
 On May
14, 2008, the Company issued 999,999 units at $0.30 per unit in a private
placement for cash of $300,000.  Each unit consists of one share of
common stock and one warrant entitling the holder to purchase one share of
common stock for $0.50.   (Notes 4 and 8)
 
 On April
21, 2008, the Company issued 4,000,000 units at $0.25 per unit in a private
placement for cash of $1,000,000.  Each unit consists of one share of
common stock and one warrant entitling the holder to purchase one share of
common stock for $0.35.  (Notes 4 and 8)
 
 On August
1, 2007, the Company issued 333,334 units at $0.30 per unit in a private
placement for cash of $100,000. Each unit consists of one common share and 1⁄2 of
one warrant (a total of 166,667 warrants).  (Notes 4 and
8)
 
 On June
20, 2007 the Company acquired 24,500,000 shares of its own common stock
from its former president for consideration of $1.  The Company
cancelled these shares.
  On June
15, 2007, the Company declared a forward stock split of 13 shares for every one
share of common stock.   All issued shares were retroactively
adjusted for all periods presented.
  On
January 31, 2006, the Company issued 10,850,000 shares of common stock (adjusted
to reflect the forward split) at $0.0035714 per share for proceeds of
$38,750.
  On
October 28, 2005, the Company issued 24,500,000 shares of common stock (adjusted
to reflect the forward split) at $0.0007143 per share for proceeds of
$17,500.
  On
October 3, 2005, the Company issued 42,000,000 shares of common stock (adjusted
to reflect the forward split) to its president at $0.00007143 per share for
proceeds of $3,000.
 
 NOTE
      8 – WARRANTS
 
 On May
14, 2008, the Company issued 999,999 share purchase warrants which entitle the
holder to purchase up to 999,999 shares of the Company’s common stock at $0.50
per share.  The warrants have a term of two years and will expire on
May 14, 2010.  The warrants are required to be exercised if, at any
time after November 14, 2008, the Company’s shares trade at $0.80 per share for
30 consecutive days. At October 31, 2008 none of these warrants had been
exercised. (Notes 4 and 7)
  On April
21, 2008, the Company issued 4,000,000 share purchase warrants which entitle the
holder to purchase up to 4,000,000 shares of the Company’s common stock at $0.35
per share. The warrants have a term of two years and will expire on April 21,
2010.   At October 31, 2008 none of these warrants had been
exercised. (Notes 4 and 7)
 
 On August
1, 2007, the Company issued 333,334 share purchase warrants which entitle the
holder to purchase up to 166,667 shares of the Company’s common stock at $0.50
per share.  Two warrants entitle the holder to purchase one share of
common stock for $0.50. The warrants have a two-year term and will expire on
August 1, 2009.  At October 31, 2008 none of these warrants had been
exercised.  (Notes 4 and 7)
  14
 
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE 8 – WARRANTS,
continued
 
 All of
the Company’s warrants were issued in units that included shares of common
stock.  When the units were issued, the Company allocated 25% of the
proceeds of the issuance to the estimated fair value of the
warrants.  The Company considers the fair value amount to be
reasonable and has consistently allocated this percentage of the proceeds to
estimate the fair value of the warrants.
  Warrants
Outstanding
 
 At
October 31, 2008, the following share purchase warrants were
outstanding:
 
 Number
      of
                  Shares
                
                Exercise
      Price
                  Per
      Share
                
                Expiry
                  Date166,667
                
                $
                0.50
                
                August
      13, 20094,000,000
                
                $
                0.35
                
                April
      21, 2010999,999
                
                $
                0.50
                
                May
      14, 20105,166,666
 
 NOTE
9 – COMMITMENTS
 
 Financing
 
 On May 2,
2008, the Company entered into a letter agreement with a brokerage house whereby
the brokerage house agreed to privately place up to $6,000,000 of units of the
Company’s common stock and common stock purchase warrants.  The
Company has agreed to pay the brokerage house a commission equal to 9% of the
total financing and issue warrants equal to 10% of the total number of units
issued.  The Company paid a non-refundable work fee of $25,000 which
will be deducted from the commission.  The contract is effective until
May 19, 2009.
 
 Investor
Relations
 
 On
October 21, 2008, the Company entered into a letter agreement with an
independent investor relations specialist who agreed to manage our investor
relations program.  The Company has agreed to pay him a monthly flat
fee of $4,500. The letter agreement can be terminated without cause by either
party at any time.
 
 15
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
   NOTE
9 – COMMITMENTS, continued
 
 Commitments
 
 At
October 31, 2008, the Company had the following contractual obligations under
the Farellon, Camila and Santa Rosa agreements.  (Notes 6 and
10)
 
 Future
      minimum payments
                
                Option
                  payment
                
                
                Partial
      purchase payment
                
                
                Royalty
      payments2009
                
                $
                50,000
                
                
                $
                245,000
                
                
                $
                -2010
                
                
                -
                
                
                
                320,000
                
                
                
                -2011
                
                
                -
                
                
                
                80,000
                
                
                
                -2012
                
                
                -
                
                
                
                -
                
                
                
                1,000,0002013
                
                
                -
                
                
                
                -
                
                
                
                -After
      2013 (a)
                
                
                -
                
                
                
                -
                
                
                
                1,187,000Total
      future minimum payments
                
                $
                50,000
                
                
                $
                645,000
                
                
                $
                2,187,000
 
 (a) These
royalty payments are due only if the Company exploits the
properties.
 
 On
October 10, 2008, Polymet entered into an option agreement with a related
company to purchase the Che Uno and Che Dos mineral properties located near the
Camila property in the Commune of Vallenar. The Che properties consist of 18
mineral properties and cover a total of 78 hectares.  Under the terms
of the agreement we are required to pay $444 to the related company by December
2, 2008 to acquire the option and $20,000 by April 10, 2009 to exercise the
option and acquire the mineral properties.  Once the option is
exercised the Company is required to pay a former owner a royalty equal to 1% of
the net sales of minerals extracted from the property to a maximum of
$100,000.  The royalty payments are due monthly once exploitation begins
and are not subject to minimum payments.   (Notes 4, 6 and
10)
 
 NOTE
10 – SUBSEQUENT EVENTS
 
 Camila
Mineral Properties
 
 On
December 1, 2008, the Company decided not to exercise its option on the Camila
mineral properties and instead management is discussing new terms with the owner
of the Camila mineral properties. (Notes 4, 6 and 9)
 
 Che
Mineral Claims
 
 On
December 1, 2008, the Company paid $444 to a related company and acquired an
option on the Che mineral properties.  (Notes 4 and 9)
  16
 
 RED
METAL RESOURCES LTD.
 (Formerly
Red Lake Exploration, Inc.)
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER
31, 2008
 (UNAUDITED)
 NOTE
10 – SUBSEQUENT EVENTS, continued
 
 Mateo
Exploration Claims
 
 On
November 2, 2008, we staked and registered the Mateo 4-11exploration claims at a
cost of $645. The Mateo 4-11 claims consist of two exploration claims of 200
hectares each and six exploration claims of 300 hectares each (2,200 hectares).
The exploration claims are located in Quebrada Jilguero, Commune of Vallenar,
Province of Huasco, III Region of Atacama in Chile. Under Chile’s mining and
land tenure policies, the Mateo claims are exploration claims (pedimento stage
claims) and can be explored for a period of up to 2 years. After two years, the
Company has the option of beginning the application process to convert them into
exploration concession stage properties. (Note 6)
 
 Jova
Exploration Concessions
 
 On
November 17, 2008, we staked and registered two additional Jova exploration
concessions, the Jova 14 and Jova 15, at a cost of $668. The Jova 14 and 15
exploration concessions consist of 200 and 300 hectares, respectively (500
hectares) and are located in Cerro La Noria, Province of Copiapo, III Region of
Atacama in Chile.   (Note 6)
 
 Auction
Concessions
 On
November 27, 2008 we attended a government auction of mining
concessions.  We acquired sixteen new mining concessions as described
in the following table, by paying the bid price and a six percent commission fee
to the government of Chile.  All of these concessions are located in
the Province of Huasco, III Region of Atacama in Chile. (Note 6)
 
 Cost
                
                
                Size
      inClaim
      name
                
                Pesos
                
                
                USD
                
                
                hectaresCaminada
      1/8
                
                
                646,600
                
                
                $
                975
                
                
                
                40Canas
      1/30
                
                
                1,186,649
                
                
                
                1,789
                
                
                
                200Canas
      I 1/20
                
                
                791,099
                
                
                
                1,193
                
                
                
                200Canas
      II 1/20
                
                
                791,099
                
                
                
                1,193
                
                
                
                300Estrella
      16 1/10
                
                
                395,550
                
                
                
                596
                
                
                
                100Estrella
      17 1/20
                
                
                791,099
                
                
                
                1,193
                
                
                
                200Estrella
      18 1/20
                
                
                791,099
                
                
                
                1,193
                
                
                
                200Estrella
      19 1/10
                
                
                292,706
                
                
                
                441
                
                
                
                37Estrella
      20 1/20
                
                
                791,099
                
                
                
                1,193
                
                
                
                170Estrella
      21 1/20
                
                
                791,099
                
                
                
                1,193
                
                
                
                176Estrella
      22 1/20
                
                
                395,550
                
                
                
                596
                
                
                
                100Estrella
      23 1/20
                
                
                395,550
                
                
                
                596
                
                
                
                100Estrella
      24 1/10
                
                
                791,099
                
                
                
                1,193
                
                
                
                100Estrella
      25 1/10
                
                
                791,099
                
                
                
                1,193
                
                
                
                100Estrella
      26 1/10
                
                
                791,099
                
                
                
                1,193
                
                
                
                100Margarita
      1/14
                
                
                10,600,000
                
                
                
                15,983
                
                
                
                5621,032,496
                
                
                $
                31,713
                
                
                
                2,179
  17
  Part
I, Item 2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
 
 Forward-Looking
Statements
 
 This
Quarterly Report on Form 10-Q filed by Red Metal Resources Ltd. contains
forward-looking statements.  These are statements regarding financial
and operating performance and results and other statements that are not
historical facts.  The words “expect,” “project,” “estimate,”
“believe,” “anticipate,” “intend,” “plan,” “forecast,” and similar expressions
are intended to identify forward-looking statements.  Certain
important risks could cause results to differ materially from those anticipated
by some of the forward-looking statements.  Some, but not all, of
these risks include, among other things:
 
 ·
                  general
      economic conditions, because they may affect our ability to raise
      money,
 ·
                  our
      ability to raise enough money to continue our
  operations,
 ·
                  changes
      in regulatory requirements that adversely affect our
    business,
 ·
                  changes
      in the prices for minerals that adversely affect our
    business,
 ·
                  political
      changes in Chile, which could affect our interests there,
    and
 ·
                  other
      uncertainties, all of which are difficult to predict and many of which are
      beyond our control.
 
 We
caution you not to place undue reliance on these forward-looking statements,
which reflect our management’s view only as of the date of this
report.  We are not obligated to update these statements or publicly
release the results of any revisions to them to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated
events.  You should refer to and carefully review the information in
future documents we file with the Securities and Exchange
Commission.
 
 General
  You
should read this discussion and analysis in conjunction with our interim
unaudited consolidated financial statements and related notes included in this
Form 10-Q and the audited consolidated financial statements and related notes
included in our Annual Report on Form 10-KSB for the fiscal year ended January
31, 2008.  The inclusion of supplementary analytical and related
information may require us to make estimates and assumptions to enable us to
fairly present, in all material respects, our analysis of trends and
expectations with respect to our results of operations and financial position
taken as a whole.  Actual results may vary from the estimates and
assumptions we make.
  On August
22, 2008, our shareholders approved an amendment to our articles of
incorporation to change our name from Red Lake Exploration, Inc. to Red Metal
Resources Ltd. to reflect our shift in focus from the Red Lake area of Ontario,
Canada, to Chile, and to increase our authorized capital from 75 million shares
of common stock to 500 million shares of common stock. The amendment was
effective on August 27, 2008 when it was filed with the Nevada Secretary of
State.
 
 When we
use the words “we”, “us” or “our” in this report, we are referring to Red Metal
Resources Ltd. and its subsidiary, Minera Polymet Limitada, which we sometimes
refer to in this report as “Polymet”.
  18
  Our
principal business is acquiring, exploring and developing mineral properties in
Chile. As of the date of this report we have:
 
 (a)
purchased the Farellon mineral properties,
 (b)
purchased the Cecil exploration concessions,
 (c)
acquired an option to purchase the Santa Rosa mineral properties,
 (d)
staked and registered the Jova exploration concessions,
 (e)
staked and registered  the Costa Rica exploration
concessions,
 (f)
staked and registered the Mateo exploration claims,
 (g)
acquired an option to purchase the Che mineral properties, and
 (h)
elected not to exercise our option to acquire an option to purchase the Camila
mineral properties.
  In this
report, we sometimes collectively refer to these agreements as our “property
agreements”.  We have not determined whether our properties contain
mineral reserves that are economically recoverable.  We have not begun
significant operations and are considered an exploration stage company as
defined by SEC Guide 7 with reference to Statement of Financial Accounting
Standard (SFAS) No.7 Accounting and Reporting by
Development Stage Enterprises.
 
 The
address of our website is www.redmetalresources.com.  Information
included on our website is not a part of this report.
 
 Results
of Operations
 
 Our
operating results for the three and nine months ended October 31, 2008 and 2007
and the changes between those periods in our operating expenses are summarized
in Table 1.
  Table 1: Changes in Operating
Expenses
   Increase
                  
                  
                  
                  
                  
                  
                  
                  
                  Increase(decrease)
                  
                  
                  
                  
                  
                  
                  
                  
                  (decrease)between
      the three
                  
                  
                  
                  
                  
                  
                  
                  
                  between
      the ninemonths
      ended
                  
                  
                  
                  
                  
                  
                  
                  
                  months
      endedThree
      months endedOctober
      31,
                  
                  
                  October
      31,
                  
                  
                  Nine
      months endedOctober
      31,
                  
                  
                  October
      31,2008
                  
                  
                  2007
                  
                  
                  2008
      and 2007
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2008
      and 2007Revenue:Royalties
                  
                  $
                  4,462
                  
                  
                  $
                  -
                  
                  
                  $
                  4,462
                  
                  
                  $
                  14,261
                  
                  
                  $
                  -
                  
                  
                  $
                  14,261Operating
      Expenses:Administration
                  
                  
                  16,808
                  
                  
                  
                  -
                  
                  
                  
                  16,808
                  
                  
                  
                  68,172
                  
                  
                  
                  -
                  
                  
                  
                  68,172Advertising
      and promotion
                  
                  
                  34,584
                  
                  
                  
                  2,754
                  
                  
                  
                  31,830
                  
                  
                  
                  107,830
                  
                  
                  
                  2,754
                  
                  
                  
                  105,076Automobile
                  
                  
                  8,746
                  
                  
                  
                  -
                  
                  
                  
                  8,746
                  
                  
                  
                  8,746
                  
                  
                  
                  -
                  
                  
                  
                  8,746Bad
      debts
                  
                  
                  65,731
                  
                  
                  
                  -
                  
                  
                  
                  65,731
                  
                  
                  
                  65,731
                  
                  
                  
                  -
                  
                  
                  
                  65,731Bank
      charges and interest
                  
                  
                  1,269
                  
                  
                  
                  59
                  
                  
                  
                  1,210
                  
                  
                  
                  3,869
                  
                  
                  
                  168
                  
                  
                  
                  3,701Consulting
      fees
                  
                  
                  33,060
                  
                  
                  
                  24,643
                  
                  
                  
                  8,417
                  
                  
                  
                  80,310
                  
                  
                  
                  32,593
                  
                  
                  
                  47,717Donated
      rent
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  750
                  
                  
                  
                  (750
                  )Donated
      service fees
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,500
                  
                  
                  
                  (1,500
                  )Mineral
      and exploration costs
                  
                  
                  77,247
                  
                  
                  
                  4,506
                  
                  
                  
                  72,741
                  
                  
                  
                  438,934
                  
                  
                  
                  17,536
                  
                  
                  
                  421,398Office
                  
                  
                  2,683
                  
                  
                  
                  1,733
                  
                  
                  
                  950
                  
                  
                  
                  12,724
                  
                  
                  
                  1,769
                  
                  
                  
                  10,955Professional
      fees
                  
                  
                  55,621
                  
                  
                  
                  11,765
                  
                  
                  
                  43,856
                  
                  
                  
                  112,330
                  
                  
                  
                  36,888
                  
                  
                  
                  75,442Rent
                  
                  
                  8,748
                  
                  
                  
                  -
                  
                  
                  
                  8,748
                  
                  
                  
                  8,748
                  
                  
                  
                  -
                  
                  
                  
                  8,748Regulatory
                  
                  
                  2,549
                  
                  
                  
                  1,501
                  
                  
                  
                  1,048
                  
                  
                  
                  6,804
                  
                  
                  
                  5,660
                  
                  
                  
                  1,144Travel
      and entertainment
                  
                  
                  48,245
                  
                  
                  
                  906
                  
                  
                  
                  47,339
                  
                  
                  
                  83,099
                  
                  
                  
                  28,683
                  
                  
                  
                  54,416Salaries,
      wages and benefits
                  
                  
                  14,713
                  
                  
                  
                  -
                  
                  
                  
                  14,713
                  
                  
                  
                  19,643
                  
                  
                  
                  -
                  
                  
                  
                  19,643Total
      operating expenses
                  
                  
                  370,004
                  
                  
                  
                  47,867
                  
                  
                  
                  322,137
                  
                  
                  
                  1,016,940
                  
                  
                  
                  128,301
                  
                  
                  
                  888,639Operating
      loss
                  
                  
                  (365,542
                  )
                  
                  
                  (47,867
                  )
                  
                  
                  317,675
                  
                  
                  
                  (1,002,679
                  )
                  
                  
                  (128,301
                  )
                  
                  
                  874,378Interest
      on notes payable
                  
                  
                  (8,708
                  )
                  
                  
                  -
                  
                  
                  
                  8,708
                  
                  
                  
                  (9,364
                  )
                  
                  
                  -
                  
                  
                  
                  9,364Net
      loss for the period
                  
                  $
                  (374,250
                  )
                  
                  $
                  (47,867
                  )
                  
                  $
                  326,383
                  
                  
                  $
                  (1,012,043
                  )
                  
                  $
                  (128,301
                  )
                  
                  $
                  883,742
  19
  Revenue
 
 Our
revenue for the three months ended October 31, 2008 was $4,462 compared to $0
for the three months ended October 31, 2007.
 
 Our
revenue for the nine months ended October 31, 2008 was $14,261 compared to $0
for the nine months ended October 31, 2007.
 
 All of
the revenue was the result of a 5% royalty from Minera Farellon which had the
right to mine our Santa Rosa properties.  On October 27, 2008, Minera
Farellon ceased mining operations on the Santa Rosa property and stopped paying
the royalty revenue. Due to the nature of our business, we do not expect to have
operating revenue within the next year.
 
 Operating
Expenses
  Our
operating expenses increased by $322,137 or 673% from $47,867 for the three
months ended October 31, 2007 to $370,004, for the three months
ended  October 31, 2008.  This increase was primarily due to
increases of approximately $17,000 in administration costs, $32,000 in
advertising and promotion, $9,000 in automobile costs, $66,000 in bad debts,
$8,000 in consulting fees, $73,000 in mineral exploration costs, $44,000 in
professional fees, $9,000 in rent costs, $47,000 in travel and entertainment
costs, and $15,000 in salaries, wages and benefits.
  Our
operating expenses increased by $888,639 or 693% from $128,301 for the nine
months ended October 31, 2007 to $1,016,940, for the nine months ended October
31, 2008. This increase was primarily due to increases of approximately
$68,000 in administration, $105,000 in advertising  and promotion,
$9,000 in  automobile costs, $66,000 in bad debts, $48,000 in
consulting fees, $421,000 in mineral exploration costs, $11,000 in office costs,
$75,000 in professional fees, $9,000 in rent costs, $54,000 in travel and
entertainment costs,  and $20,000 in salaries, wages and benefits.
These costs were partially offset by decreases in donated services and rent of
approximately $2,000.
 
 The
increase in our operating expenses was primarily due to increases in mineral
exploration programs on our Chilean properties; increases in the costs of
advertising and promotion and the costs associated with raising equity capital;
increases in the costs associated with outsourcing our administration and
accounting services; professional fees due to regulatory compliance; increases
in travel and entertainment costs associated with having our professional
geologists travel to Chile; salaries, wages and benefits due to hiring employees
in Chile; and a write off to bad debts of our uncollectable Chilean value added
tax credits.
  Over the
next twelve months we expect our net loss to increase by approximately $1.5
million primarily due to increases in the costs of outsourcing our
administration and accounting services; having a resident manager, geologist and
employees in Chile; renting our field facilities in Chile; obtaining legal
services as necessary to enforce our rights and discharge our obligations under
the property agreements and to meet our regulatory compliance obligations;
retaining geologists and other contractors to explore our properties; and
raising equity capital.
  Interest
Expense
 
 During
the three months ended October 31, 2008 we accrued $8,708 in interest on our
notes payable to a related party.
  20
 
 During
the nine months ended October 31, 2008 we issued $475,000 in notes payable to
the father of our president and accrued $9,364 in interest on these notes
payable.
 
 Net
Loss
 
 We had a
net loss of $374,250 for the three months ended October 31, 2008 compared to a
net loss of $47,867 for the three months ended October 31, 2007.  The
$326,383 increase in net loss was due primarily to the acquisition and
exploration of our properties in Chile.
 
 We had a
net loss of $1,012,043 for the nine months ended October 31, 2008 compared to a
net loss of $128,301 for the nine months ended October 31, 2007.  The
$883,742 increase in net loss was due primarily to the acquisition and
exploration of our properties in Chile.
 
 Liquidity
and Capital Resources
 
 Going
Concern
 
 The
unaudited consolidated financial statements included in this report have been
prepared on a going concern basis, which implies we will continue to realize our
assets and discharge our liabilities in the normal course of business. We have
not generated any significant revenues from mineral sales since inception, have
never paid any dividends and are unlikely to pay dividends or generate
significant earnings in the immediate or foreseeable future. Our continuation as
a going concern is dependent upon the continued financial support of our
shareholders, our ability to obtain necessary equity financing to continue
operations, and the attainment of profitable operations. Our ability to achieve
and maintain profitability and positive cash flows is dependent upon our ability
to locate profitable mineral properties, generate revenues from mineral
production and control production costs. Based upon our current plans, we expect
to incur operating losses in future periods. We plan to mitigate these operating
losses through controlling our operating costs.  We plan to obtain
sufficient working capital through additional debt or equity financing and
private loans.  At October 31, 2008, we had a working capital deficit
of $580,300 and accumulated losses of $1,301,615 since inception. These factors
raise substantial doubt regarding our ability to continue as a going concern.
There is no assurance that we will be able to generate significant revenues in
the future. Our unaudited consolidated financial statements do not give any
effect to any adjustments that would be necessary should we be unable to
continue as a going concern and therefore be required to realize our assets and
discharge our liabilities in other than the normal course of business and at
amounts different from those reflected in our financial statements.
  At
October 31, 2008, we had a cash balance of $132,571 and negative cash flow from
operations of $892,146.  Since February 1, 2008 we have funded our
operations through the issuance of $475,000 in notes payable and $1,300,000 in
common stock.
 
 Sources
and Uses of Cash
 
 Table 2
summarizes our sources and uses of cash for the nine months ended October 31,
2008 and 2007.
  21
 
 Table
2:  Summary of Sources and Uses of Cash
  October
      31,2008
                  
                  
                  2007Net
      cash provided by financing activities
                  
                  $
                  1,775,000
                  
                  
                  $
                  100,000Net
      cash used in operating activities
                  
                  
                  (892,146
                  )
                  
                  
                  (101,369
                  )Net
      cash used in investing activities
                  
                  
                  (756,033
                  )
                  
                  
                  -Effects
      of foreign currency exchange
                  
                  
                  3,849
                  
                  
                  
                  -Net
      increase (decrease) in cash
                  
                  $
                  130,670
                  
                  
                  $
                  (1,369
                  )
  Net
cash used in operating activities
 
 Net cash
used in operating activities during the nine months ended October 31, 2008 was
$892,146.  We used cash of $22,966 to prepay expenses and deposits,
primarily for advertising and marketing, and reduced our accrued professional
fees by $6,401.  These uses of cash were offset by net increases in
accounts payable of $20,260 and accrued liabilities of $1,000; an increase of
$118,640 in accounts payable to related parties; and $9,364 in accrued interest
on our notes payable to a related party.
 
 Net cash
used in operating activities during the nine months ended October 31, 2007 was
$101,369.  We used $128,301 in cash to cover our general and
administrative costs.  This use of cash was funded through net
increases in accounts payable of $19,721; accrued professional fees of $3,082;
and accounts payable to related parties of $1,879.
 
 Net
cash used in investment activities
 
 During
the nine months ended October 31, 2008, we spent $756,033 on the acquisition of
mineral properties, options to acquire mineral properties, and exploration
claims.
 
 We had no
investment activities during the nine months ended October 31,
2007.
 
 Net
cash provided by financing activities
 
 During
the nine months ended October 31, 2008, we received $1,300,000 in cash on the
issuance of 4,999,999 shares of our common stock.
 
 During
the nine months ended October 31, 2008, we received cash of $475,000 on the
issuance of notes payable to a relative of a director.
 
 We had no
financing activities during the nine months ended October 31, 2007.
 
 Mineral
Properties
  On
November 27, 2007 we abandoned our mineral claims in the Red Lake Mining
District, Ontario, Canada.
  22
  In
anticipation of acquiring properties in Chile, on August 21, 2007 we formed
Minera Polymet Limitada, a Chilean limited liability company, to hold our
Chilean mineral property interests.  We have a 99% interest in
Polymet. Polymet had no assets, liabilities or operations when we formed
it.
  On
November 20, 2007, we acquired an option to buy the Farellon mineral properties
covering 66 hectares in the III Region of Chile. On April 25, 2008 we exercised
this option and acquired the property. On February 1, 2008, we acquired options
to purchase the Camila and Santa Rosa mineral properties covering a total of 880
hectares in the III Region of Chile. On August 8, 2008, we exercised our
option to acquire the option to purchase the Santa Rosa property. On December 1,
2008, we elected not to exercise the option to acquire the option to purchase
the Camila property. All of these agreements are with Minera Farellon Limitada,
a company controlled by Kevin Mitchell, a significant shareholder.
 
 On
September 9, 2008, we bought the Cecil mineral properties covering 730 hectares
near the Farellon property. The Cecil properties consist of 500 hectares of
exploration claims and 230 hectares of titled mining claims. On December 1, 2008
we acquired an option to purchase 76 hectares of the Che mineral claims around
the Camila properties. On November 2, 2008, we staked another 2,200 hectares of
exploration claims in the same area. On September 28, 2008 and November 17,
2008, we staked 15 exploration concessions covering 3,100 hectares surrounding
the Santa Rosa property. On October 16, 2008, we staked 600 hectares of the
Costa Rica exploration concessions in Cerro La Noria, Province of Copiapo, III
Region of Atacama. We continue to conduct groundwork on and discuss terms for
the purchase of other properties of interest to us in Chile.
 
 On
November 27, 2008 we attended a government auction of mining
concessions.  We acquired sixteen new mining concessions as described
in Table 3.  In accordance with Chilean laws we paid the outstanding
fiscal tax owed by the property owners, bid against other buyers and paid six
percent commission to the government of Chile. All of these concessions are
located in the Province of Huasco, III Region of Atacama in Chile.
 
 Table
3: Auction Concessions
  Cost
                  
                  
                  Size
      inClaim
      name
                  
                  Pesos
                  
                  
                  USD
                  
                  
                  hectaresCaminada
      1/8
                  
                  
                  646,600
                  
                  
                  $
                  975
                  
                  
                  
                  40Canas
      1/30
                  
                  
                  1,186,649
                  
                  
                  
                  1,789
                  
                  
                  
                  200Canas
      I 1/20
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  200Canas
      II 1/20
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  300Estrella
      16 1/10
                  
                  
                  395,550
                  
                  
                  
                  596
                  
                  
                  
                  100Estrella
      17 1/20
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  200Estrella
      18 1/20
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  200Estrella
      19 1/10
                  
                  
                  292,706
                  
                  
                  
                  441
                  
                  
                  
                  37Estrella
      20 1/20
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  170Estrella
      21 1/20
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  176Estrella
      22 1/20
                  
                  
                  395,550
                  
                  
                  
                  596
                  
                  
                  
                  100Estrella
      23 1/20
                  
                  
                  395,550
                  
                  
                  
                  596
                  
                  
                  
                  100Estrella
      24 1/10
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  100Estrella
      25 1/10
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  100Estrella
      26 1/10
                  
                  
                  791,099
                  
                  
                  
                  1,193
                  
                  
                  
                  100Margarita
      1/14
                  
                  
                  10,600,000
                  
                  
                  
                  15,983
                  
                  
                  
                  5621,032,496
                  
                  
                  $
                  31,713
                  
                  
                  
                  2,179
 
 23
  Over the
next year we plan to concentrate on exploring and developing our properties in
Chile.
  Through
Minera Farellon, we have contracted for the services of Mr. Mitchell, an
experienced manager resident in Chile who has organized our office, reviews
potential properties, and expedites other resources for us. He also acts as the
legal representative for Polymet.
  During
the last twelve months we have conducted groundwork on numerous properties of
interest to us in the III Region of Chile. We have acquired several of these
properties, have options to acquire others, and have staked claims in the same
areas. These properties are described below. We are continuing to compile data
on and review other properties and discuss terms with various
owners.
  Farellon
Mineral Properties
 
 Farellon
Alto Uno al Ocho
  On
September 25, 2007, Minera Farellon agreed to assign to us its option to buy the
mineral concessions Farellon Alto Uno al Ocho located in the Sierra Pan de
Azucar, Province of Huasco, III Region of Atacama in Chile.
 
 We agreed
to pay Minera Farellon $250,000 when the assignment was recorded with the
Conservator of Mines in Freirina, Chile. The assignment was recorded on
November 20, 2007. Minera Farellon granted us an extension for the payment
of $250,000 until April 30, 2008. On April 25, 2008, we paid Minera Farellon
$250,000 to exercise our option and paid the vendor $300,000 to acquire the
property. We owe the vendor a royalty equal to 1.5% of the net sales of minerals
extracted from the property for a total of $600,000.  The royalty
payments are due monthly once exploitation begins, and are subject to a minimum
monthly payment of $1,000.  We can pay any remainder due on the
royalty at any time. We have not begun exploiting the property.
 
 The
Farellon property is located in Chile's III Region in the highly prospective
Candelaria iron-oxide-copper-gold (IOCG) belt, home of the Phelps Dodge
Candelaria Mine.  The Candelaria copper mine has been in production
since 1993 and has reported proven reserves of 283 million tonnes grading 0.64%
copper.  Recent surface sampling on the Farellon property has returned
values of up to 6.7% copper, and ICP analysis of surface samples indicates
mineralogy assemblages consistent with classic IOCG deposits. Historic drilling
on the property intersected sulphide and oxide mineralization to a depth of 150
meters and outlined a 1.7 kilometer strike length. Four significant
intersections are summarized in Table 4.
 Table
4: Farellon Significant Intersections
 Metres
                  
                  
                  Gold
                    (grams/tonne)
                  
                  
                  Copper
                    (%)
                  
                  
                  Cobalt
                    (%)9
                  
                  
                  
                  3.72
                  
                  
                  
                  2.49
                  
                  
                  
                  .063
                  
                  
                  
                  4.17
                  
                  
                  
                  5.29
                  
                  
                  
                  .1110
                  
                  
                  
                  1.53
                  
                  
                  
                  1.31
                  
                  
                  
                  .0420
                  
                  
                  
                  .97
                  
                  
                  
                  1.22
                  
                  
                  
                  .02
 
 24
  Cecil
 
 On
September 9, 2008, we bought the Cecil claims for $20,000. The Cecil claims
cover 730 hectares and consist of 500 hectares of exploration licences and 230
hectares of titled mining claims. The Cecil
claims lie in the same geological district as the Farellon property and are
located 1.7 kilometres north of the Farellon property border in the Asentamiento
Minero designated Quebrada Carrizal Alto, Comuna of Freirina, Provincia of
Huasco, III Region of Atacama, Chile.  The claims cover a 1.8
kilometre strike length of a mineralized vein interpreted to be part of the same
mineralizing system as the Farellon vein. An investigation completed during the
Farellon acquisition uncovered a broad regional sampling program completed in
1996 showing results from the areas covered by the Cecil claims. Results from
the 1996 sampling show copper and gold grades similar to grades returned from
the Farellon vein, with up to 13.5 grams per tonne gold with 1.27% copper and
2.27 grams per tonne gold with 1.68% copper while the cobalt grades are stronger
with samples of up to 0.68% and 0.51% cobalt. All samples are from waste dumps
surrounding historical artisanal mine workings.
 
 Camila
Mineral Properties
  Camila
Breccia
 
 On
February 1, 2008, Minera Farellon granted us an option to acquire its option to
buy the Camila mineral concessions located in the Sector of Quebrada, Commune of
Vallenar, Province of Huasco, III Region of Atacama, Chile. Under the option
agreement, the acquisition price was $455,000 payable in stages on various dates
between February 1, 2008 and December 7, 2009. The option agreement included a
royalty equal to 6% of the net sales of minerals extracted from the property for
a total of $1,000,000 payable monthly once exploitation begins and payable in
full by December 7, 2011. We have not exploited the property. The option was
exercisable on December 1, 2008. We did not exercise the option. We remain
interested in the property and are discussing new terms with the
owner.
  The
Camila property is made up of four mining and exploration concessions totaling
770 hectares. The property is located in the highly prospective Candelaria IOCG
Belt. The Camila property was last explored in the late 1990s by Trilogy Metals,
Inc., formerly Thyssen Mining Exploration Inc., which identified two mineralized
structures with up to 1.12% copper and 7.5 grams per tonne gold from surface
grab samples.
  We began
exploring the Camila property on March 14, 2008. The planned exploration program
consisted of six drill holes totaling approximately 1,000 metres of diamond
drilling on two previously identified mineralized structures to target depth
extents of surface copper mineralization and coincident induced polarization
anomalies identified in the previous geophysics survey.
 
 We
completed four diamond drill holes totaling 939 metres. Two of the holes
targeted the Zorro Vein at depth and two holes tested the nearby Camila Breccia.
Results from the program have been reviewed and several anomalous zones of
copper mineralization were intersected.  Three significant
intersections are summarized in Table 5.
 Table
5: Camila Significant Intersections
 Metres
                  
                  Copper
                    (%)19
                  
                  0.064
                  
                  0.102
                  
                  0.10
 
 25
  Che
Uno and Che Dos
 
 On
October 10, 2008, we signed an option agreement with Minera Farellon to purchase
the mineral properties Che Uno and Dos, located in Sierra La Colorada, Comuna of
Vallenar, province of Huasco, III Region of Atacama, Chile. The Che concessions
cover 76 hectares around the Camila property.  On December 1, 2008 we
paid $444 to acquire the option and agreed to pay $20,000 by April 10, 2009 to
exercise the option and complete the acquisition of the Che Uno and Che Dos
properties.
 
 Minera
Farellon agreed to pay the former owner a royalty equal to 1% of the net
proceeds from the sale of ore to a maximum of $100,000 with no monthly minimum.
We will assume this royalty obligation if we exercise our option and complete
the purchase of the property from Minera Farellon.
 
 Matteo
 
 On
November 2, 2008, we staked and registered with the government eight exploration
claims around the Che properties covering 2,200 hectares. We can explore these
claims for a period of up to two years before making an application to advance
their status to the registered mining property. There is no guarantee we will be
able to convert all of these exploration claims into mining
licenses.
  The
Matteo claims cover a five kilometer strike length of intensely altered
volcanics with siginificant massive sulphide mineralization.  Grab
samples from artisanal mining dumps have returned assays of up to 6.89% copper
and 3.47 g/t gold.
  Santa
Rosa Mineral Properties
 
 Santa
Rosa Uno and Porfiada Uno
 
 On
February 1, 2008, Minera Farellon granted us an option to acquire its option to
buy the Santa Rosa mineral concessions located in Sierra Cordon El Tomate,
Province of Huasco, III Region of Atacama, Chile. We paid $9,500 when we signed
the agreement and agreed to pay $8,500 per month for five months ending July 5,
2008 and $50,000 by August 5, 2008 to exercise the option, for a total exercise
price of $102,000.  We exercised the option with Minera Farellon and
acquired its option to buy the property. Under the option terms, we are required
to pay the vendor a total of $317,500 by June 20, 2011, on monthly terms. If we
make all of these payments, we will acquire the property. In October 2007,
Minera Farellon started exploiting the property and had paid a total royalty of
$10,000 to the vendor by the end of July 2008.
 
 On August
5, 2008, we acquired the option to purchase the property and assumed all
responsibilities for a royalty payment equal to 1.5% of the net sales of
minerals extracted from the property for a total of $590,000. Subsequent to
August 5, 2008, we continued Minera Farellon’s right to continue to mine the
property and pay us a royalty equal to 5% of the net proceeds from the sale of
ore while we were making minimum monthly payments to the vendor. On October 27,
2008, Minera Farellon ceased mining operations on the Santa Rosa and ended all
of our royalty obligations. Our obligation to pay a royalty will resume if we
exercise the option and we begin exploiting the property. The $3,000 minimum
monthly royalty that we paid between August and October 2008 reduced our total
royalty obligation to $587,000.
  26
 
 During
the first three quarters of 2008 Minera Farellon paid us approximately $14,000
on account of the royalty.
  The Santa
Rosa property is made up of two mining and exploration concessions totaling 110
hectares. The property is located in the highly prospective Candelaria IOCG
belt. Recent exploration has identified multiple mineralized structures with
significant alteration indicators of IOCG systems. Minera Farellon was selling
the ore from Santa Rosa to Enami, a Chilean national mining
company.  The ore is returning grades of up to 19.78% copper and 13.9
grams per tonne gold.
 
 We moved
the diamond drill to the Santa Rosa property in June 2008 and have begun
exploring the property. The planned program consists of approximately 1,000
metres of near-surface diamond drilling and is designed to extend to depth the
mineralization that is currently the focus of Minera Farellon’s small-scale,
near-surface mining.
 
 To date
we have completed three diamond drillholes totaling 311 metres.  We
logged the core and sent samples to ALS Chemex’s laboratories in La
Serena.  We have received the lab results which we are currently
processing and evaluating. Due to technical difficulties with the drill, the
drill was removed from the property in early September.
 
 Jova
 
 On
September 28, 2008, we staked and registered with the government 13 exploration
concessions around the Santa Rosa property covering 2,600 hectares. We call
these claims Jova. On November 17, 2008, we added two additional exploration
concessions to the Jova claims. We have the right to explore these claims for
220 days after the registration date and prior to the end of the 220 days have
to a make request to upgrade to the titled mining property status. There is no
guarantee we will be able to convert all of these exploration claims into mining
licenses.
  Costa
Rica Claims
 
 Costa
Rica Dos and Tres
 
 On
October 16, 2008, we staked and registered with the government two exploration
licenses located in Cerro La Noria, Province of Copiapo, III Region of Atacama.
These claims cover 600 hectares with total acquisition costs of $1,164. Very
limited data exist for the claims’ mineralization. We have the right to explore
these claims for 220 days after the registration date and prior to the end of
the 220 days have to make a request to upgrade to the titled mining property
status. There is no guarantee we will be able to convert all of these
exploration claims into mining licenses.
 
 Other
Properties
  While we
intend to concentrate our efforts on exploring and developing the properties
that we have, we are reviewing other interesting properties in the same general
area and discussing terms with various owners.    We have
contracted with geologists to analyze the rock samples, perform due diligence
investigations, evaluate and analyze their findings, and prepare geological
reports. If our initial evaluation results are promising, we intend to acquire
additional Chilean mineral properties.
  27
 
 The
acquisition and exploration of our Chilean mineral claims are subject to our
ability to obtain the necessary funding.   On May 2, 2008, we
entered into a letter agreement with a brokerage house whereby the brokerage
house agreed to privately place up to $6,000,000 of units of our common stock
and common stock purchase warrants.  We have agreed to pay the
brokerage house a commission equal to 9% of the total financing and issue
warrants equal to 10% of the total number of units issued.  We paid a
non-refundable work fee of $25,000 which will be deducted from the
commission.  The contract is effective until May 19,
2009.  The units to be offered will not be registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption from the registration
requirements.  On October 21, 2008, we entered into a letter agreement
with an independent investor relations specialist. We have agreed to pay him a
monthly fee of $4,500 for providing us with an investor relations program that
will provide information about us to institutional and individual investors. The
letter agreement is not subject to fixed terms and can by terminated by either
party.
 
 Chilean
Subsidiary
 
 On August
21, 2007, we formed Minera Polymet Limitada, a limited liability company, under
the laws of the Republic of Chile.  We own a 99% interest in this company,
which holds our Chilean mineral property interests.  The 1% interest
that we don’t own is held for us by a Chilean resident as required by Chilean
law.  He is an experienced manager who has organized an office and
expedites other resources for us.  We have agreed to pay him $2,000
per month to act as the legal representative and manager.
 
 Equity
Financing
 
 To
generate working capital during the last twelve months, we have issued shares
and warrants under Regulation S promulgated under the Securities Act of 1933 as
set out in Table 6.
 Table
6: Equity Financing
 Shares
                  
                  
                  Warrants*Date
      of issue
                  
                  Number
                  
                  
                  Price
                  
                  
                  Proceeds
                  
                  
                  Number
                  
                  
                  Price
                  
                  ExpiryAugust
      1, 2007
                  
                  
                  333,334
                  
                  
                  $
                  0.30
                  
                  
                  $
                  100,000
                  
                  
                  
                  166,667
                  
                  
                  $
                  0.50
                  
                  August
      1, 2009April
      21, 2008
                  
                  
                  4,000,000
                  
                  
                  $
                  0.25
                  
                  
                  
                  1,000,000
                  
                  
                  
                  4,000,000
                  
                  
                  $
                  0.35
                  
                  April
      21, 2010May
      14, 2008
                  
                  
                  999,999
                  
                  
                  $
                  0.30
                  
                  
                  
                  300,000
                  
                  
                  
                  999,999
                  
                  
                  $
                  0.50
                  
                  May
      14, 2010†5,333,333
                  
                  
                  
                  
                  
                  
                  $
                  1,400,000
                  
                  
                  
                  5,166,666
 *The
warrants can be exercised any time before their expiration dates at the exercise
price.
 †These
warrants must be exercised if our stock trades at $0.80 per share for 30
consecutive trading days.
  
 Based on
our operating plan, we anticipate incurring operating losses in the foreseeable
future and will require additional equity capital to support our operations and
develop our business plan.  Our ability to achieve and maintain
profitability and positive cash flow depends upon our ability to locate economic
mineral properties, generate revenue from our mineral production and control
production costs.  Our failure to generate sufficient revenue or raise
sufficient working capital will adversely affect our ability to achieve our
ultimate business objectives.  We cannot assure you that we will be
able to raise additional equity capital, locate economic mineral properties,
generate revenue from our mineral production or control production costs in the
future.  These factors raise substantial doubt about our ability to
continue as a going concern.  The consolidated financial statements
included in this report do not give effect to any adjustments that would be
necessary should we be unable to continue as a going concern and be required to
liquidate our assets and discharge our liabilities in other than the normal
course of business and at amounts different from those reflected in our
consolidated financial statements.
  28
  If we are
successful in completing future equity financing, the issuance of additional
shares will result in dilution to our existing shareholders.
 
 Debt
Financing
 
 During
the nine months ended October 31, 2008, we borrowed $475,000 from Richard N.
Jeffs, the father of our president, to whom we issued demand promissory notes to
secure the repayment of the principal sum together with interest at
8%.
  Challenges
and Risks
  Although
we have raised $1,775,000 since January 31, 2008, our cash position as of the
date of this report is inadequate to satisfy our working capital needs for the
next twelve months.  Over the next twelve months we will need to raise
capital to cover our operating costs, fulfill the obligations we may incur under
our property agreements and cover any exploration or development costs on our
properties.
  We expect
our general and administrative expenses to increase due to the costs associated
with setting up and increasing the scope of our operations in Chile, which
include exploring and developing our mineral properties and sourcing additional
mineral properties and exploration claims.  We have no capital
expenditures planned, but we are reviewing other mineral properties and could
decide to buy or acquire an option to buy more properties, which would require
that we raise more capital.
  We do not
anticipate generating any revenue over the next twelve months. We plan to fund
our operations through any combination of equity financing from the sale of our
securities, private loans, joint ventures or through the sale of a part interest
in our mineral properties.  Other than the letter agreement we signed on
May 2, 2008 relating to the private placement of our securities, we do not have
any financing arranged.  We cannot assure you that we can raise
significant funds through this offering.  Although we have succeeded
in raising funds as we have needed them, we cannot assure you that we will be
able to raise sufficient funds in order to cover our general and
administrative expenses and acquire and develop properties. Although we have not
obtained any financing in the United States and have no plans to do so, any
downturn in the United States economy could affect the willingness of non-US
persons to invest their United States funds in risky ventures such as
ours.
  We may
consider entering into a joint venture partnership with a more senior resource
company to provide the funding that we need to complete a mineral exploration
program in Chile.  Although we have not attempted to locate a joint
venture partner, if we enter into a joint venture arrangement, we would likely
have to assign a percentage of our interest in our mineral property to our joint
venture partner in exchange for the funding.
 
 Foreign
Exchange
  We are
subject to foreign exchange risk for transactions denominated in foreign
currencies.  Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar.  We do not believe that we have any material
risk due to foreign currency exchange.
 
 Other
Trends, Events or Uncertainties that may Impact Results of Operations or
Liquidity
  The
economic crisis in the United States and the resulting economic uncertainty and
market instability may make it harder for us to raise capital as and when we
need it and have made it difficult for us to assess the impact of the crisis on
our operations or liquidity and to determine if the prices we will receive on
the sale of minerals will exceed the cost of mineral exploitation.  If
we are unable to raise cash, we may be required to cease our
operations.  Other than as discussed in this quarterly report, we know
of no other trends, events or uncertainties that have or are reasonably likely
to have a material impact on our short-term or long-term liquidity.
  29
 
 Off-Balance
Sheet Arrangements
 
 We have
no off-balance sheet arrangements and no non-consolidated, special-purpose
entities.
 
 Contingencies
and Commitments
  We had no
contingencies at October 31, 2008.
 
 We have
the following long-term contractual obligations and commitments:
 
 Farellon royalty.We are
committed to paying the vendor a royalty equal to 1.5% on the net sales of
minerals extracted from the Farellon property up to a total of
$600,000.  The royalty payments are due monthly once exploitation
begins, and are subject to minimum payments of $1,000 per month.  We
have no obligation to pay the royalty if we do not commence
exploitation.  We have not commenced exploitation.
 
 Santa Rosa payments. To
exercise the property purchase option on the Santa Rosa properties, we must pay
a total of $295,000 in option payments to the owners of the Santa Rosa
properties between November 1, 2008 and June 20, 2011.  If we exercise
the option, we can purchase the mineral properties by paying the owners a
royalty equal to 1.5% of the net proceeds realized from the sale of minerals
extracted from the properties, or a minimum of $1,000 per month, once
exploitation begins until the remaining purchase price of $587,000 is
paid.
 
 Che option. Under the terms
of our option agreement with Minera Farellon, we must pay $20,000 by April 10,
2009 to exercise the option and purchase the Che mineral
properties.  If we exercise our option, then we must pay a royalty
equal to 1% of the net sales of minerals extracted from the property to a
maximum of $100,000 to the former owner. The royalty payments are due monthly
once exploitation begins, and are not subject to minimum payments.
 
 Investor
relations.  On October 21, 2008, we entered into a letter
agreement with an independent investor relations specialist who agreed to
provide us with an investor relations program for a flat monthly fee of $4,500.
The letter agreement can by terminated without cause by either party at any
time.
 
 Internal
and External Sources of Liquidity
  To date
we have funded our operations by selling our securities and borrowing funds
secured with promissory notes, and from mining royalties.
 
 Critical
Accounting Policies
  An
appreciation of our critical accounting policies is necessary to understand our
financial results.  These policies may require that we make difficult
and subjective judgments regarding uncertainties, and as a result, such
estimates may significantly impact our financial results.  The
precision of these estimates and the likelihood of future changes depend on a
number of underlying variables and a range of possible
outcomes.  Other than our accounting for our unproved mineral
properties, our critical accounting policies do not involve the choice between
alternative methods of accounting.  We have applied our critical
accounting policies consistently.
  30
 
 A summary
of our significant accounting policies is included in our Annual Report on Form
10-KSB for the year ended January 31, 2008.  Significant accounting
policies which either affect us or have been developed since January 31, 2008,
are summarized below.
 
 Reclassifications
 
 Certain
prior period amounts in the accompanying financial statements have been
reclassified to conform to the current period’s presentation. These
reclassifications had no effect on our results of operations or financial
position for any period presented.
 
 Foreign
Exchange Risk
 
 We are
subject to foreign exchange risk for sales and purchases denominated in foreign
currencies. The functional currency for Polymet is the Chilean peso. Foreign
currency risk arises from the fluctuation of foreign exchange rates and the
degree of volatility of these rates relative to the United States
dollar.  We do not believe that we have any material risk to our
foreign currency exchange.
 
 Revenue
Recognition
 
 We record
revenues and royalties from the sale of minerals when persuasive evidence of an
arrangement exists, delivery to the customer has occurred and risk of ownership
or title has transferred, and collectability is reasonably
assured.  Interest income is recognized at the end of each
month.
 
 During
the nine months ended October 31, 2008, we received $14,261 in royalty revenue
from a related company.
 
 Recently
Adopted and Recently Issued Accounting Standards
  Refer to
Note 2 of the Notes to our Consolidated Financial Statements which is included
in our Form 10-KSB for the fiscal year ended January 31, 2008 for a discussion
of recent accounting standards and pronouncements.  Accounting
pronouncements that have been issued or adopted subsequent to January 31, 2008
are described below:
 
 On
February 1, 2008, we adopted Statement of Financial Accounting Standards (SFAS)
No. 157 , Fair Value
Measurements.  SFAS 157 relates to financial assets and
financial liabilities. In February 2008, the Financial Accounting Standards
Board (FASB) issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement
No. 157, which delayed the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on at least an
annual basis, until January 1, 2009 for entities with a calendar year end.
Also in February 2008, the FASB issued FSP No. FAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13, which states that SFAS No. 13, Accounting for Leases, and
other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under SFAS 13 are excluded from
the provisions of SFAS 157, except for assets and liabilities related to leases
assumed in a business combination that are required to be measured at fair value
under SFAS No. 141, Business Combinations, or
SFAS No. 141 (revised 2007), Business Combinations, (SFAS
141(R)).
 
 SFAS 157
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (GAAP),
and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with limited exceptions.
The adoption of SFAS 157, as it relates to financial assets and financial
liabilities, had no impact on our financial statements.
  31
 
 SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. This standard is now the single source in GAAP for the
definition of fair value, except for the fair value of leased property as
defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that
distinguishes between (a) market participant assumptions based on market
data obtained from independent sources (observable inputs), and (b) an
entity’s own assumptions about market participant assumptions that are based on
the best information available in the circumstances (unobservable inputs). The
fair value hierarchy consists of three broad levels, giving the highest priority
to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy under SFAS 157 are described
below:
  •
                  
                  Level
      1 - Unadjusted quoted prices in active markets that are accessible at the
      measurement date for identical, unrestricted assets or
      liabilities
  •
                  
                  Level
      2 - Inputs other than quoted prices included within Level 1 that are
      observable for the asset or liability, either directly or indirectly,
      including quoted prices for similar assets or liabilities in active
      markets; quoted prices for identical or similar assets or liabilities in
      markets that are not active; inputs other than quoted prices that are
      observable for the asset or liability (e.g., interest rates); and inputs
      that are derived principally from or corroborated by observable market
      data by correlation or other means
  •
                  
                  Level
      3 - Inputs that are both significant to the fair value measurement and
      unobservable
 
 In
February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115. SFAS 159 permits the measurement of certain
financial assets and financial liabilities at fair value.  If the fair
value option is elected, the unrealized gains and losses are reported in
earnings at each reporting date.  Generally, the fair value option may
be elected on an instrument-by-instrument basis, as long as it is applied to the
instrument in its entirety.  The fair value option election is
irrevocable, unless a new election date occurs.  SFAS 159 was
effective for us on February 1, 2008. The adoption of SFAS 159 did not have
a material impact on our consolidated financial statements as we did not elect
the fair value option for any of our financial assets or
liabilities.
 
 In
June 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities should be deferred and
capitalized. As the related goods are delivered or the services are performed,
or when the goods or services are no longer expected to be provided, the
deferred amounts would be recognized as an expense. This issue is effective for
financial statements issued for fiscal years beginning after December 15,
2007 and earlier application is not permitted. This consensus is to be applied
prospectively for new contracts entered into on or after the effective
date.  EITF 07-03 was effective for us on February 1,
2008.  The pronouncement did not have a material effect on our
consolidated financial statements.
 
 In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133
(SFAS 133). This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for us on February 1,
2009.  Early adoption of this provision is prohibited.  We
are evaluating the impact adoption of SFAS 161 may have on our consolidated
financial statement disclosures.
  32
  In May,
2008, FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP (the GAAP hierarchy). SFAS 162 is effective 60
days following the U.S. Securities and Exchange Commission’s approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. We are
reviewing the effect, if any, the proposed guidance will have on our
consolidated financial statement disclosures.
 
 In May,
2008, FASB issued SFAS No. 163, Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No.
60.  Diversity exists in practice in accounting for financial
guarantee insurance contracts by insurance enterprises under FASB Statement No.
60, Accounting and Reporting
by Insurance Enterprises. That diversity results in inconsistencies in
the recognition and measurement of claim liabilities because of differing views
about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies.
This statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the statement will improve the quality of information provided
to users of financial statements. SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years; disclosure requirements in paragraphs
30(g) and 31 are effective for the first period (including interim periods)
beginning after May 23, 2008. We do not expect the adoption of SFAS 163 to have
a significant impact on our consolidated financial statements.
 
 On May 9,
2008, the FASB issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement)
are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants.  Additionally, FSP
APB 14-1 specifies that issuers of such instruments should separately account
for the liability and equity components in a manner that will reflect the
entity's nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB14-1 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. We have not yet evaluated the impact that FSP APB 14-1 will have
on our consolidated results of operations or consolidated financial
position.
 
 On June
16, 2008, the FASB issued FASB Staff Position No. EITF 03-6-, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
to address the question of whether instruments granted in share-based payment
transactions are participating securities prior to vesting. FSP EITF 03-6-1
indicates that unvested share-based payment awards that contain rights to
dividend payments should be included in calculations of earnings per share. The
guidance will be effective for fiscal years beginning after December 15, 2008.
We are evaluating the requirements of FSP No. EITF 03-6-1 and the impact that
the adoption will have on our consolidated results of operations or consolidated
financial position.
  33
 
 In June
2008, the FASB issued EITF Issue 07-5, Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own
Stock.  EITF No. 07-5 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early application is not permitted. Paragraph 11(a)
of SFAS No. 133 Accounting for
Derivatives and Hedging Activities, specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to our own
stock and (b) classified in stockholders’ equity in the statement of financial
position would not be considered a derivative financial instrument. EITF 07-5
provides a new two-step model to be applied in determining whether a financial
instrument or an embedded feature is indexed to an issuer’s own stock and thus
able to qualify for the SFAS No. 133 paragraph 11(a) scope
exception.  We are evaluating the impact that adoption of EITF 07-5
will have on our consolidated financial statements.
 
 In June
2008, FASB released a proposed SFAS, Disclosure of Certain Loss
Contingencies, an amendment of FASB Statements No. 5 and 141) (the
proposed Statement),
for a comment period that ended during August 2008. The proposed statement would
(a) expand the population of loss contingencies that are required to be
disclosed, (b) require disclosure of specific quantitative and qualitative
information about those loss contingencies, (c) require a tabular
reconciliation of recognized loss contingencies and (d) provide an
exemption from disclosing certain required information if disclosing that
information would be prejudicial to an entity's position in a dispute. The
proposed statement would be effective for financial statements issued for fiscal
years ending after December 15, 2008, and for interim and annual periods in
subsequent fiscal years. When and if the proposed statement is approved in final
form by FASB, we will evaluate whether the adoption of the proposed statement
will have any material impact on our financial position or results of
operations.
 
 Part
I, Item 3.  Quantitative and Qualitative Disclosures about Market
Risk.
 
 As a
smaller reporting company, we are not required to provide this
disclosure.
 
 Part
I, Item 4T.  Controls and Procedures.
 
 (a)
Disclosure Controls and Procedures
 
 Caitlin
Jeffs, our chief executive officer, and John daCosta, our chief financial
officer, have evaluated the effectiveness of our disclosure controls and
procedures (as the term is defined in Rules 13a-15 and 15d-15 under the
Securities Exchange Act of 1934) as of the end of the period covered by this
quarterly report (the “evaluation date”).  Based on their evaluation,
they have concluded that, as of the evaluation date, our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms.
 
 (b)
Changes in internal control over financial reporting
 
 During
the quarter of the fiscal year covered by this report, there were no changes to
our internal control over financial reporting that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
  34
 
 Part
II, Item 1.  Legal Proceedings.
 
 We are
not a party to any pending legal proceedings and, to the best of our knowledge,
none of our properties or assets is the subject of any pending legal
proceedings.
 
 Part
II, Item 1A.  Risk Factors.
 
 As a
smaller reporting company we are not required to provide this
information.
 
 Part
II, Item 2.  Unregistered Sales of Equity Securities and Use of
Proceeds.
 
 We
occasionally borrow funds from Richard N. Jeffs, the father of our president,
for working capital purposes.  When we borrow money from Mr. Jeffs, we
issue demand promissory notes that accrue interest at the rate of 8% per
annum.  On September 8, 2008 we borrowed $50,000 in principal amount
from Mr. Jeffs and on October 22, 2008 we borrowed an additional $25,000 in
principal amount.  In total, we have borrowed $475,000 from Mr. Jeffs
between July 17, 2008 and October 31, 2008 and we expect to ask for additional
loans in the future.  We relied on section 4(2) of the Securities Act
of 1933 to issue the promissory notes inasmuch as the promissory notes were
offered and sold without any form of general solicitation or general advertising
and the offeree made representations that he was an accredited
investor.
 
 Part
II, Item 3.  Defaults upon Senior Securities.
 
 None.
 
 Part
II, Item 4.  Submission of Matters to a Vote of Security
Holders.
 
 On August
22, 2008 we held a special meeting of our shareholders for the purpose of (i)
increasing the number of shares of our authorized common stock from 75,000,000
to 500,000,000 and (ii) changing our name from Red Lake Explorations, Inc. to
Red Metal Resources Ltd.  As of the record date, July 28, 2008, a
total of 58,183,333 shares of our common stock were entitled to vote at the
meeting.  The results of the voting are as follows:
 
 Proposal
1 – To amend our articles of incorporation to increase the number of authorized
shares of common stock to 500,000,000.
  FOR
                  
                  AGAINST
                  
                  ABSTAIN46,928,193
                  
                  33,530
                  
                  6,703
 
 Proposal
2 – To amend our articles of incorporation to change our name from Red Lake
Exploration, Inc. to Red Metal Resources Ltd.
 FOR
                    
                    AGAINST
                    
                    ABSTAIN46,946,776
                    
                    19,950
                    
                    1,700
 Part
II, Item 5.  Other Information.
 
 On
September 9, 2008 our subsidiary, Minera Farellon Limitada (“Farellon”), entered
into a letter of intent with Minera Polymet Ltda.
(“Polymet”).  Pursuant to the letter of intent, subsequent to the
completion of a due diligence investigation by Polymet, Farellon will sell two
properties (mensura pertenencias) to Polymet for the price of
$20,000.  The price will be paid with Chilean pesos.
  Please
see the informatio at Part II, Item 2, which is incorporated by
reference.
  35


Part
II, Item 6.  Exhibits.
 
 Exhibit
      No.
              
              Description
      of Exhibit3.1
              
              Articles
      of Incorporation(1)3.2
              
              Bylaws(1)10.1
              
              Letter
      of Intent dated September 9, 2008 between Minera Polymet Ltda. And Minera
      Farellon Limitada*31.1
              
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*31.2
              
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*32
              
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002*
 * Filed
herewith.
 (1)
Incorporated by reference from the Registration Statement on Form SB-2 filed
with the Securities and Exchange Commission on May 22, 2006 as file number
333-134363.
  36
 
 SIGNATURES
 
 In
accordance with the requirements of the Securities Exchange Act of 1934, Red
Metal Resources Ltd. has caused this report to be signed on its behalf by the
undersigned, duly authorized.
  December 15,
2008
  RED
      METAL RESOURCES LTD.By:
              /s/
      Caitlin JeffsCaitlin
      Jeffs, President
  By:
              /s/
      John DaCostaJohn
      DaCosta, Chief Financial Officer