CALAIS RESOURCES INC - FORM 10-Q

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EX-31 - EXH 31 CERTIFICATION - CALAIS RESOURCES INC	exh31_certification.htm
EX-32 - EXH 32 CERTIFICATION - CALAIS RESOURCES INC	exh32_certification.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

FORM 10-Q

(Mark One)


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

For the quarterly period ended February 28, 2011


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

For the transition period from _______ to ______

Commission file number: 0-29392

CALAIS RESOURCES INC.

(Exact name of registrant as specified in its charter)


British Columbia (State or other jurisdiction of incorporation or organization)		98-0434111 (IRS Employer Identification No.)

4415 Caribou Road P.O. Box 653 Nederland, Colorado (Address of principal executive offices)		80466-0653 (Zip Code)

Registrant’s telephone number, including area code: (303) 258-3806

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes[ ] No [ ] (not required)

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

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] 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 [ ] No [X]

As of May 26, 2011 the registrant had 149,184,754 shares of common stock outstanding.

TABLE OF CONTENTS

		Page
Part I – Financial Information
	Item 1. Financial Statements.	3
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	13
	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	17
	Item 4. Controls and Procedures.	17

Part II – Other Information
	Item 1. Legal Proceedings.	19
	Item 1A. Risk Factors.	20
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20
	Item 3. Defaults Upon Senior Securities.	20
	Item 4. (Removed and Reserved).	20
	Item 5. Other Information.	20
	Item 6. Exhibits.	21

	Signatures	22

PART I – FINANCIAL INFORMATION.

CALAIS RESOURCES INC.

(A Mining Company in the Exploration Stage)

CONSOLIDATED BALANCE SHEETS

	As of
	2/28/2011			5/31/2010
ASSETS	(unaudited)
Current Assets
Cash and cash equivalents	$	775,615		$	27,919
Prepaid expenses and other assets		52,628			15,063
Total current assets		828,243			42,982

Restricted cash		15,400			15,400
Note receivable		60,000			60,000
Fixed assets, net		5,264			-
Total assets	$	908,907		$	118,382

LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities	$	1,548,193		$	2,669,242
Convertible debentures		731,069			4,809,649
Convertible debentures - employee		-			45,500
Notes payable		10,253,878			10,253,878
Total current liabilities		12,533,140			17,778,269

Royalty interest		150,000			150,000
Environmental remediation liabilities		50,000			50,000
Total liabilities		12,733,140			17,978,269

Shareholders' Deficit
Common stock, no par value, unlimited shares authorized, 140,991,134, and 76,278,142 shares issued and outstanding as of February 28, 2011 and May 31, 2010, respectively		35,061,079			29,299,883
Deficit accumulated in the development stage		(46,636,899	)		(45,781,468	)
Accumulated other comprehensive loss		(248,413	)		(1,378,302	)
Total Shareholders' Deficit		(11,824,233	)		(17,859,887	)
Total Liabilities and Shareholders' Deficit	$	908,907		$	118,382

See accompanying notes to the unaudited consolidated financial statements.

CALAIS RESOURCES INC.

(A Mining Company in the Exploration Stage)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

													December 30, 1986
	Three Months Ended February 28,						Nine Months Ended February 28,						(inception) through
	2011			2010			2011			2010			February 28, 2011

Expenses
General and administrative expense	$	1,034,855		$	228,003		$	1,668,883		$	824,797		$	11,832,889
Exploration and business development expenses		61,871			15,481			120,047			52,126			12,337,914
Depreciation and amortization expense		100			-			199			-			202,602
Total operating expenses		1,096,826			243,484			1,789,129			876,923			24,373,405

Other income and expenses
Loss on impairment		-			-			-			-			9,808,572
(Gain) loss on settlement of debts		(2,614,853	)		(359,992	)		(2,927,784	)		(314,528	)		(3,388,741	)
Interest and financing fees		203,227			1,276,603			626,649			1,968,915			14,230,224
Foreign currency transaction loss		1,368,064			-			1,368,174			-			1,368,174
Other (income) expense		(581	)		-			(737	)		356,090			245,265
Total other (income) and expenses		(1,044,143	)		916,611			(933,698	)		2,010,477			22,263,494

Loss before income taxes		(52,683	)		(1,160,095	)		(855,431	)		(2,887,400	)		(46,636,899	)
Income tax expense (benefit)		-			-			-			-			-
Net loss	$	(52,683	)	$	(1,160,095	)	$	(855,431	)	$	(2,887,400	)	$	(46,636,899	)

Other comprehensive loss (income) - foreign currency translation adjustments		(1,296,172	)		7,148			(1,129,889	)		135,550			248,413

Comprehensive income (loss)	$	1,243,489		$	(1,167,243	)	$	274,458		$	(3,022,950	)	$	(46,885,312	)

Basic and diluted weighted-average number of common shares outstanding		137,426,187			65,174,884			107,627,924			61,222,618
Basic and diluted loss per common share	$	(0.00	)	$	(0.02	)	$	(0.01	)	$	(0.05	)

See accompanying notes to the unaudited consolidated financial statements.

CALAIS RESOURCES INC.

(A Mining Company in the Exploration Stage)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended February 28,			Nine Months Ended February 28,			December 30, 1986 (inception) through
	2011			2010			February 28, 2011

Cash flows from operating activities:
Net loss	$	(855,431	)	$	(2,887,400	)	$	(46,636,899	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion expense		-			-			105,655
Amortization of deferred financing costs		-			-			3,369,936
Depreciation and depletion		199			-			200,935
Non-cash interest expense		613,907			845,717			11,633,137
Loss on impairment of mineral properties		-			-			8,824,989
Loss on impairment of investment		-			-			983,583
Common shares issued in connection with trust deed modification		-			-			90,000
Common shares issued in connection with debt settlement		-			1,102,597			1,102,597
Common shares issued for services		753,092			170,000			1,524,441
Warrants cancelled for services		-			-			(18,173	)
Warrants issued in connection with debt restructure		-			-			155,007
Losses (gains) recognized in connection with debt settlement		(2,927,785	)		(314,528	)		(3,388,742	)
Gain on sale of property, plant and equipment		-			-			4,873
Loss on disposal of property, plant and equipment		-			-			8,040,143
Loss on abandonment of mineral properties		-			-			300,600
Loss on default of exploration development agreement		-			456,090			456,090
Loss on foreign exchange		1,296,172			-			1,614,942
Environmental remediation liability		-			-			50,000
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses		(37,565	)		(9,759	)		(95,915	)
Increase (decrease) in accounts payable and other current liabilities		(225,542	)		535,582			2,585,768
(Increase) decrease in other operating assets and liabilities		17,840			63,016			98,254

Net cash (used in) operating activities		(1,365,113	)		(38,685	)		(8,998,779	)

Cash flows from investing activities:
Purchase of mineral properties & equipment		-			-			(17,481,692	)
Dispositions of equipment		-			-			161,352
Net additions to equipment		(5,464	)		-			(173,393	)
Deferred exploration expenditures		-			-			(143,071	)
Deposit on equipment		-			-			(17,880	)
Acquisition of shares of subsidiary		-			-			(715,932	)
Advance to subsidiary		-			-			(177,875	)
Payable under option agreement		-			-			716,481
Refundable deposit on purchase of shares of subsidiary		-			-			(73,847	)
Net cash provided by (used in) investing activities		(5,464	)		-			(17,905,857	)

See accompanying notes to the unaudited consolidated financial statements.

CALAIS RESOURCES INC.

(A Mining Company in the Exploration Stage)

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(UNAUDITED)

	Nine Months Ended February 28,			Nine Months Ended February 28,			December 30, 1986 (inception) through
	2011			2010			February 28, 2011

Cash flows from financing activities:
Proceeds from sale of common shares	$	2,342,500		$	72,500		$	21,055,079
Proceeds from sale of private equity		-			-			345,000
Proceeds from borrowings long term-debt		-			-			17,029,960
Proceeds from borrowing on shareholder note		-			-			282,000
Repayments of long term debt		-			-			(11,902,794	)
Repayments of debt - convertible debentures		(224,227	)		(30,750	)		(445,153	)
Advances to affiliated companies, shareholders and directors		-			-			(106,730	)
Restricted cash		-			-			(31,789	)
Share subscriptions received in advance		-			-			518,415

Net cash provided by financing activities		2,118,273			41,750			26,743,988

Effect of foreign exchange		-			-			936,263

Net change in cash and cash equivalents		747,696			3,065			775,615
Cash at beginning of period		27,919			-			-
Cash at end of period	$	775,615		$	3,065		$	775,615


Supplemental Cash Flow Information
Interest expense paid in cash	$	-		$	-		$	1,188,233
Interest received	$	-		$	-		$	3,999
Debt restructuring - warrants issued	$	-		$	-		$	412,407
Common shares issued in connection with debt restructuring and settlement of accrued liabilities	$	2,665,604		$	1,308,370		$	4,931,489
Common shares issued for acquisition of property	$	-		$	-		$	32,500
Shares issued for mineral property development	$	-		$	-		$	96,315
Shares issued for repayment of shareholder advances	$	-		$	-		$	9,240,146

See accompanying notes to the unaudited consolidated financial statements.

CALAIS RESOURCES INC.

(A Mining Company in the Exploration Stage)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2011

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Calais Resources Inc. was incorporated under the laws of the Province of British Columbia, Canada, on December 30, 1986. Calais Resources Inc. and its subsidiaries (collectively with its subsidiaries, referred to herein as “Calais”, “we”, “us” or “our”) are currently in the process of exploring various mineral interests, primarily gold and silver. We are headquartered in Colorado, and have mining interests in Colorado and Nevada.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves, impairment of fixed assets, valuation allowances for deferred tax assets and the fair value of financial instruments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

We filed Form 10-K for our fiscal year ended May 31, 2010 with the Securities and Exchange Commission (“SEC”) on May 9, 2011; however we have not filed other financial statements with the SEC since our Form 10-QSB for the quarter ended August 31, 2004. We intend to complete and file with the SEC our financial statements for all periods including November 30, 2004 through February 28, 2011.

Our activities to date have primarily consisted of raising capital and acquiring and exploring our mining interests. We have had no significant revenue in our history. Accordingly, we are considered to be in the exploration stage.

Our fiscal year end is May 31st. Through May 31, 2004, we reported our financial information using Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) using the Canadian dollar as our functional and reporting currency. During the fiscal year ended May 31, 2005, we changed our reporting basis to US GAAP and our functional and reporting currency to the United States dollar (“U.S. Dollar”). This change was made for several reasons, including the following: (1) substantially all of our assets and employees are now located in the United States; (2) substantially all of our labor, materials and other costs are now denominated in the U.S. Dollar; and (3) our recent financing transactions, including both lending activities and cash infusions in exchange for equity, have been denominated in the U.S. Dollar and have involved parties and investors located in the United States. Accordingly, historical financial information included in this Quarterly Report on Form 10-Q has been restated using US GAAP with a functional and reporting currency of the U.S. Dollar, unless otherwise noted. All references herein to “$” and “US$” refer to U.S. Dollars. Unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to Common Shares refer to shares of our common stock (without par value) unless otherwise indicated.

The financial information with respect to the three and nine months ended February 28, 2011 and 2010 is unaudited. In the opinion of management such information contains all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of the results for such periods. The results of operations for interim periods are not necessarily indicative of the results of operations for the full fiscal years.

NOTE 2 – LIQUIDITY

As of February 28, 2011 we had a working capital deficit of $11,704,897 and for the nine months then ended cash used in operating activities amounted to $1,365,113. To date, we have not generated any revenues from operations and have incurred losses since inception resulting in a deficit accumulated during the development stage of

$46,636,899 as of February 28, 2011. Further losses are anticipated as we continue to be in the exploration stage, as defined in ASC Topic 915, Development Stage Entities. Our ability to continue operations depends upon our ability to generate profitable operations in the future and/or to raise additional funds through equity or debt financing. Since inception, we have raised $21,918,494 through the through the issuance of equity securities and $17,311,960 through the issuance of debt instruments, which has been used primarily to provide operating funds, repay long term debt, and acquire mineral interests. Subsequent to February 28, 2011, we have acquired an additional $592,300 through financing, as described more fully in Note 10. There is no assurance that we will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to us or at all. If we cannot obtain needed funds for implementing our mine plan after completion of the feasibility study, we may be forced to curtail or cease our activities. Equity financing, if available, may result in substantial dilution to existing stockholders. All of these factors cause substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event we cannot continue as a going concern.

NOTE 3 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the SEC, and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company.

In June 2009, FASB established the Accounting Standards Codification (“ASC”) as the single source of authoritative US GAAP to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative US GAAP for SEC registrants. The ASC is a new structure which took existing accounting pronouncements and organized them by accounting topic. The ASC did not change current US GAAP, but was intended to simplify user access to all authoritative US GAAP by providing all the relevant literature related to a particular topic in one place. All previously existing accounting standards were superseded and all other accounting literature not included in the ASC is considered non-authoritative. New accounting standards issued subsequent to June 30, 2009 will be communicated by the FASB through Accounting Standards Updates (“ASUs”). The ASC was effective during the period ended August 31, 2009. Adoption of the ASC did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

The Company has recently adopted the following new accounting standards:

Subsequent Events - In May 2009, the ASC guidance for subsequent events was updated to establish accounting and reporting standards for events that occur after the balance sheet date but before financial statements are issued. The guidance was amended in February 2010 via ASU No. 2010-09. The standard sets forth: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet in its financial statements, and (iii) the disclosures that an entity should make about events or transactions occurring after the balance sheet date in its financial statements. The amended ASU was effective immediately and its adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.

Fair Value Measurements – In January 2010, ASU No. 2010-06 amended existing disclosure requirements about fair value measurements by adding required disclosures about items transferring into and out of levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchase, sales, issuances, and settlements relative to level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. The ASU was adopted during the period ended February 28, 2010, and its adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Standards Updates. The following accounting standards updates were recently issued and have not yet been adopted by the Company. These standards are currently under review to determine their impact on the Company’s consolidated financial position, results of operations, or cash flows.

ASU No. 2010-13 was issued in April 2010, and will clarify the classification of an employee share based payment award with an exercise price denominated in the currency of a market in which underlying security trades. This ASU will be effective for the first fiscal quarter beginning after December 15, 2010, with early adoption permitted.

There were various other updates recently issued, most of which represented technical corrections to the to the accounting literature or application to specific industries and are not expected to have material impact on the Company's consolidated financial position, results of operations or cash flows.

NOTE 4 – DEBT

As of February 28, 2011 and May 31, 2010, we had one outstanding note payable in the amount of $10,253,878. The original maturity date for the note was February 1, 2011. On January 15, 2011, we received forbearance under the terms of an agreement effectively extending the maturity date of the debt through June 30, 2011. The note bears interest at 8% and is secured by a lien on our Caribou property.

As of February 28, 2011 and May 31, 2010, we have accrued interest in the amounts of $883,238 and $269,691, respectively, on this note.

NOTE 5 – DEBENTURES

A summary of convertible debentures outstanding is as follows:

	As of
	February 28, 2011			May 31, 2010
Debentures (a)	$	731,069		$	4,809,649
Debentures (b)		-			45,500
Total debentures payable		731,069			4,855,149
Less: Current portion		(731,069	)		(4,855,149	)
Long-term portion	$	-		$	-

(a) These debentures are unsecured, non-interest bearing, and initially matured in May 2011. These debentures are owned by Marlowe Harvey who was the President and a director of ours until he resigned as President in 2000 and as a director in November 2003; Argus Resources, Inc., the president of which is Mr. Harvey; Judy Harvey who is Mr. Harvey’s spouse; and Lynne Martin. Ms. Martin is the spouse of Melvin Martin, who was a director of ours until he resigned on July 28, 2005. The debentures are convertible into common stock at $1.23 in Canadian Dollars at the holders’ discretion and contain no restrictive covenants.

In December 2010, $4,306,347 of the debentures were converted into 9,550,368 shares of common stock and in exchange for $259,149 in cash. The remaining debenture will mature in May 2011.

(b) This debenture is owed to Thomas S. Hendricks, an officer, director and shareholder of the Company. The debenture is non interest-bearing, convertible into common stock at $0.85 per share in $50,000 annual increments, contains no restrictive covenants and matured on July 8, 2008. We repaid $25,000 of this debenture in 2007, $119,500 in 2009, and $60,000 in 2010. As of May 31, 2010, the balance of the unpaid debenture was $45,500. During the quarter ended August 31, 2010 we repaid $5,000 related to this debenture to Mr. Hendricks. In September and October 2010 we repaid the remaining $40,500 balance of this debenture in full.

Debenture Settlements

On December 6, 2010, we entered into two agreements which relate to the settlement of a total of four convertible debentures in the aggregate principal amount of $4,306,347 in exchange for a total of $259,149 in cash and the issuance of a total of 9,550,368 restricted shares of our common stock. The two settlements, each of which involved parties who are considered to be “related parties”, are described below.

Lynne Martin Settlement

We entered into a Settlement Agreement with Lynne Martin regarding a debenture payable to her in the principal amount of $1,097,367. Ms. Martin is the spouse of Melvin Martin, who was a director of ours until he resigned on July 28, 2005. We and Ms. Martin agreed that Ms. Martin would accept as full payment for the debenture the amount of $109,781 in cash which is to be paid by us in four quarterly payments of $27,445, with the first payment due on December 15, 2010 and the three remaining payments due on March 15, 2011, June 15, 2011, and September 15, 2011. We made the first payment on December 15, 2010 and we made the second payment of $27,445 on March 18, 2011.

The Harvey Settlement

We entered into a Settlement Agreement with Marlowe and Judy Harvey and Argus Resources, Inc. regarding the following three debentures:

1. Judy Harvey $ 2,038,840

2. Judy Harvey $ 949,417

3. Argus Resources, Inc. $ 220,723

Marlowe Harvey was the President and a director of ours until he resigned as President in 2000 and as a director in November 2003. Mr. Harvey is the President of Argus Resources, Inc. Judy Harvey is Mr. Harvey’s spouse. After the closing of this transaction, Mr. Harvey beneficially holds more than 5% percent of our outstanding shares.

We and Judy Harvey agreed that Ms. Harvey would accept as full payment for her two debentures the total amount of $149,368 in cash and a total of 8,890,638 restricted shares of our common stock. The cash was paid on December 15, 2010 and the shares were issued on December 20, 2010 to an escrow agent to hold the shares until the Cease Trade Order in British Columbia has been revoked.

We and Argus Resources agreed that Argus Resources would accept as full payment for its debenture 659,730 restricted shares of our common stock. The shares were issued on December 20, 2010.

NOTE 6 – SHAREHOLDERS’ DEFICIT

Common Stock - We have authorized an unlimited number of common shares of our no par value common stock. Common shares outstanding as of February 28, 2011 and May 31, 2010 were 140,991,134 and 76,278,142, respectively.

Transactions involving our common stock during the nine months ended February 28, 2011 were as follows:

·	In June 2010, we issued 9,500,000 shares of our common stock valued at $0.08 per share or $760,000 to our Directors as compensation for their services. These amounts had been previously accrued in our balance sheet as accrued salaries and wages.

·	In August 2010, we sold 650,000 shares of our common stock at $0.08 per share to the wife of our current Chief Executive Officer (“CEO”) for net proceeds of $52,000 as part of a private placement.

·	In June 2010, we issued 1,000,000 shares of our common stock at $0.05 per share for accounting services provided in May 2010 totaling $50,000.

·	In June and August 2010, we issued a total of 1,500,000 shares of our common stock at $0.05 per share in connection with the payment of $76,539 in accounts payable.

·	In September 2010, we issued 4,500,000 shares of our common stock at $0.06 per share to accredited investors for net cash proceeds of $270,000. In October 2010, we issued 5,753,334 shares of our common stock at $0.06 per share to accredited investors for net cash proceeds of $345,200.

In October 2010, we issued 2,270,420 shares of our common stock at $0.10 per share to our Company President in connection with settlement of accrued liabilities owed to him. We have recorded a gain in the amount of $227,042 in connection with this issuance. In addition we issued 2,000,000 shares of our common stock at $.0762 per share to our former CFO in connection with the settlement of accrued liabilities owed to him of $152,468. We have not recorded any gain or loss in connection with this settlement.

·	In November 2010, we issued 1,066,666 shares of our common stock at $0.075 to accredited investors for net cash proceeds of $80,000. In addition we issued 17,651,667 shares of our common stock at $0.06 per share for net cash proceeds of $1,059,100.

·	In December 2010, we issued 9,550,368 shares of our common stock at $0.15 per share in connection with the settlement of four convertible debentures totaling $1,432,555.

In December 2010, we issued 536,666 shares of our common stock at $0.06 per share for net cash proceeds of $32,200. In addition we issued 2,666,666 shares of our common stock at $.08 per share for net cash proceeds of $200,000. In January 2011, we issued 66,666 shares of our common stock at $0.06 per share for net cash proceeds of $4,000. In February 2011, we issued 1,764,706 shares of our common stock for $0.17 per share for net cash proceeds of $300,000.

In December 2010, we issued 2,102,500 shares of our common stock at $0.17 per share in connection with fundraising and consulting services valued at $357,425. In January 2011, we issued 2,033,333 shares of our common stock at $0.17 per share valued at $345,667 in connection with fundraising and consulting activities.

·	In December 2010, we issued 100,000 shares of our common stock at $0.17 per share in connection with the settlement of previously accrued liabilities.

NOTE 7 – COMMON STOCK WARRANTS

Activity related to our common stock purchase warrants for the nine months ended February 28, 2011 is as follows:

	Number of Warrants Outstanding	Weighted Average Exercise Price	Number Exercisable
Outstanding as of May 31, 2010	28,498,196	$0.16	28,498,196
Issued	-
Expirations	(4,000,000)	$0.25
Outstanding as of February 28, 2011	24,498,196	$0.13	24,498,196

Subsequent to February 28, 2011, we sold 7,000,000 warrants to purchase our common stock at $0.12 for a period of one year in connection with a sale of common stock units. (Note 10)

NOTE 8 – LOSS PER SHARE

Basic loss per share is computed by dividing income available to common stockholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflect the potential of securities that could share in our earnings. All of the common shares underlying warrants outstanding as of February 28, 2011 and 2010 were excluded from diluted weighted average shares outstanding for each of the respective years because their effects were considered anti-dilutive.

NOTE 9 – RELATED PARTY TRANSACTIONS

We have frequent transactions with related parties, employees and shareholders holding more than 10% of our outstanding common stock.

Transactions involving related parties during the nine months ended February 28, 2011, were as follows:

·	In June 2010, we issued 9,500,000 shares of our common stock valued at $0.08 per share or $760,000 to our Directors as compensation for their services. These amounts had been previously accrued in our balance sheet as accrued salaries and wages.

·	On August 24, 2010, we sold 650,000 shares of our common stock at $0.08 per share to the wife of our current CEO for $52,000.

In October 2010, we issued 2,270,420 shares of our common stock at $0.10 per share to our Company President in connection with settlement of accrued liabilities owed to him. We have recorded a gain in the amount of $227,042 in connection with this issuance. In addition, we issued 2,000,000 shares of our common stock at $0.0762 per share to our former CFO in connection with the settlement of accrued liabilities owed to him of $152,468. We have not recorded any gain or loss in connection with this settlement.

Our notes payable balance as of February 28, 2011 consisted of one note payable to Brigus Gold Corp. (“Brigus”). When this note was consummated in February 2010, the counterparty to this note was Apollo Gold Corp., a predecessor of Brigus. Our now-current CEO, R. David Russell, was the CEO of Apollo Gold Corp. at that time.

·	From time to time our President and Vice President of Corporate Development incur expenses on behalf of the Company and are reimbursed by us. As of February 28, 2011, included in accounts payable are amounts due to the officers as reimbursement. These amounts are not considered to be material.

NOTE 10 – SUBSEQUENT EVENTS

We have evaluated all of our activity and have concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the unaudited consolidated financial statements, except as disclosed below.

Common Stock

Since February 28, 2011, we have issued 8,233,852 shares of common stock as follows:

·	8,040,000 shares issued for cash proceeds of $752,400

·	193,852 shares issued in connection with the settlement of previously accrued liabilities

On May 9, 2011, we entered into a subscription agreement with an accredited investor wherein we intend to issue 7,000,000 common stock units priced at $0.10. Each unit consisting of one share of our common stock and one warrant to purchase our common stock at $0.12 per share for a period of one year. We have received $700,000 in connection with this subscription. This transaction has been included in the summary of shares issued for cash since February 28, 2011 above.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the accompanying financial statements and related notes included elsewhere in this report. It contains forward looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward looking statements.

In our effort to make the information in this report more meaningful, this Quarterly Report on Form 10-Q and documents incorporated by reference herein (or otherwise made by us or on our behalf) contain both historical and forward-looking statements. Such forward-looking statements are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events. Forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “plan,” “goal” or other similar words or variations that convey the uncertainty of future events or outcomes. These statements are based on the beliefs an assumptions of our management based on information currently available to us. These statements by their nature are subject to certain risks, uncertainties and assumptions and will be influenced by various factors, some of which are beyond our control. Actual results could vary materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation, the following risk factors:

· our ability to execute against our plans;

· our ability to continue as a going concern;

· the possible loss of our interest in our Caribou properties if we do not meet our debt obligations;

· the potential that we will not obtain good title to our Manhattan project;

· the volatility and low trading volume of our common stock;

· our ability to secure additional capital;

· the possibility we may never achieve any mineral production;

· the future dilution to our shareholders from future capital-raising activities and payments to employees, directors and consultants;

· the possibility our Board of Directors may issue authorized and unissued shares of common stock and preferred stock;

· the effects the penny stock rules may have on the trading of our stock;

· our dependence on a few key employees;

· the influence of a few large shareholders on our business;

· risks associated with our incorporation in Canada;

· our lack of experience in mining and selling minerals;

· operational end environmental risks associated with the mining industry;

· the effect of government regulations on our business;

· lack of clear title to our mineral prospects;

· the fact our mineral interests are not yet proven; and

· fluctuation in the prices of gold and silver.

All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Executive Summary

We are a mineral exploration company engaged directly and indirectly through subsidiaries, in the acquisition and exploration of minerals and metals, primarily gold and silver. Our business is currently in the exploratory or exploration stage as defined by ASC 915-10 and SEC Industry Guide 7 and, to date, our activities have not included development or mining operations. Our primary property is the Caribou project (advanced exploration stage) located in Nederland, Colorado; we also have properties in Nye County, Nevada.

Recent Events

We filed Form 10-K for our fiscal year ending May 31, 2010 with the SEC on May 9, 2011; however we have not filed other financial statements with the SEC since our Form 10-QSB for the quarter ended August 31, 2004. In August 2010, we began the process of regaining compliance with the SEC.

Settlements

During the nine months ended February 28, 2011, we have executed against a plan to settle our trade payables with certain of our vendors as well as wages and other payables owed to current and former employees of ours, either by paying outstanding balances in full or by entering into agreements for mutually agreed-upon settlement amounts. During the nine months ended February 28, 2011, we have recognized net gains of $2,614,853 related to settlements and releases on our trade payables and wages payable in our Consolidated Statements of Operations. In addition, we have issued 4,370,420 shares of restricted common stock related to these settlements.

Debenture Settlements

On December 15, 2010, we entered into two agreements related to the settlement of a total of four convertible debentures in the aggregate principal amount of $4,306,347 in exchange for a total of $259,149 in cash and the issuance of a total of 9,550,368 restricted shares of our common stock.

Note Payable

On January 15, 2011, we received forbearance under the terms of an agreement effectively extending the maturity date of our 8% $10,253,878 note payable through June 30, 2011. This note was originally due on February 1, 2011 and is secured by a lien on our Caribou property.

Common Stock

During the quarter ended August 31, 2010, we issued 12,650,000 shares of our restricted common stock as follows:

·	650,000 shares for cash proceeds of $52,000

·	1,000,000 shares for consulting services

·	9,500,000 shares to directors for services

·	1,500,000 shares related to the payment of trade accounts payable

During the quarter ended November 30, 2010, we issued 33,242,087 shares of our restricted stock as follows:

·	28,971,667 shares for cash proceeds of $1,754,300.

·	4,270,420 shares in connection with the settlement of accounts payable and accrued wages payable to our Company President and former CFO

During the quarter ended February 28, 2011, we issued 18,820,905 shares of our restricted common stock as follows:

·	5,034,704 shares for cash proceeds of $536,200

·	9,650,368 shares in connection with the settlement of four convertible notes payable and accrued liabilities

·	4,135,833 shares in connection with consulting and fund raising activities.

New Chief Executive Officer

On January 18, 2011, we announced that R. David Russell has been appointed to the positions of Director, Chairman and Chief Executive Officer. Mr. Russell has over 33 years of experience in the mining industry, having served in a variety of operating, executive and board of director positions.

On the same date, we announced that David K. Young resigned his position as our CEO, but remains on the Board and will continue to serve as our President. Mr. Young was also simultaneously appointed as our Chief Operating Officer.

Interim Financial Statements

The financial information with respect to the three and nine months ended February 28, 2011 and 2010, discussed below, is unaudited. In the opinion of management, such information contains all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for such periods. The results of operations for interim periods are not necessarily indicative of the results of operations for the full fiscal years.

Results of Operations

During the three and nine months ended February 28, 2011, we generated a net losses of $52,683 and $855,431, respectively, as compared to net losses of $1,160,095 and $2,887,400 during the prior three and nine month periods. The decreases of $1,107,412 or 95% and $2,031,969 or 70% result from higher interest and financing fees and wages and benefits expenses in the 2010 periods as compared to 2011, as discussed further below. In addition, we recognized increased gains on debt settlements and stock subscriptions in the 2011 periods compared to the 2010 periods. These expense decreases were partially offset by increases in consulting and professional fees during the three and nine months ended February 28, 2011 as compared to the three and nine months ended February 28, 2010.

General and Administrative Expense

For the three and nine months ended February 28, 2011, general and administrative expense was $1,034,855 and $1,668,883 as compared to $228,003 and $824,797 in the corresponding 2010 periods. The increases for the three and nine months ended February 28, 2011 of $806,852 (354%) and $844,086 (102%), respectively, were due to increased consulting and professional fees that were offset in part by decreased wages and benefits expense as discussed further below.

Consulting and professional fees. Consulting and professional fees were $837,161 and $1,231,345 for the three and nine months ended February 28, 2011 as compared to $20,118 and $202,472 in the corresponding 2010 periods. These increases of $817,043 and $1,028,873 or 4,061% and 508%, respectively, relate primarily to fundraising activities in the current 2011 period compared to the 2010 prior period. In addition, the increases relate to increased fees for accounting and other professional services incurred as we began the process of attempting to regain compliance with our SEC reporting requirements.

Wages and benefits expense. Wages and benefits expenses were $104,556 and $266,783 for the three and nine months ended February 28, 2011 as compared to $189,870 and $569,056 in the corresponding 2010 periods. These decreases of $85,314 and $302,273 or 45% and 53%, respectively, relate to the issuance of restricted shares of common stock granted to our Board of Directors as payment for services during the 2010 periods. This expense did not recur in the 2011 periods.

Other Income and Expenses

(Gain) loss on settlements of debts. During the three and nine months ended February 28, 2011 management began to execute against a plan to settle its trade debts and convertible debentures. As a result, gains of $2,614,853 and $2,927,784 were recognized as compared to $359,992 and $314,528 in the corresponding 2010 periods. The gains during the 2011 period relate more specifically to the settlement of four convertible debentures and the settlement of

accrued wages with our Company President. In addition, gains recognized during the 2011 period include settlement of certain trade payables for fractional amounts.

Interest and financing fees. During the three and nine months ended February 28, 2011 we recorded interest and financing fees of $203,227 and $626,649 as compared to $1,276,603 and $1,968,915 in the corresponding 2010 periods. These decreases of $1,073,376 and $1,342,266 or 84% and 68% result from our February 2010 debt restructure, wherein we consolidated our outstanding notes payable at a lower interest rate, and incurred approximately $927,000 in interest charges in the prior period related to the debt restructuring.

Liquidity

Because we have not yet commenced our intended primary operations and are not yet generating revenue from any source, our liquidity is completely reliant on our ability to generate cash through capital-raising activities. During the nine months ended February 28, 2011, we sold 34.7 million shares for $2,342,500 in order to raise cash to fund ongoing operations. In addition, we issued 11.0 million shares of our common stock as settlement of liabilities and as payment of certain payables and services totaling $1,226,141.

Net cash flows from operating, investing and financing activities for the nine months ended February 28, 2011 and 2010 were as follows:

	2011			2010
Net cash used in operating activities	$	(1,365,113	)	$	(38,685	)
Net cash used in investing activities		(5,464	)		-
Net cash provided by financing activities	$	2,118,273		$	41,750

Net cash used in operating activities. Net cash used in operating activities of $1,365,113 and $38,685 for the nine month periods ended February 28, 2011 and 2010, respectively, are attributable to our net income adjusted for non-cash charges as presented in the consolidated statements of cash flows and changes in working capital as discussed above.

Net cash used in investing activities. We used $5,464 and $nil of cash in investing activities for the nine month periods ended February 28, 2011 and 2010, respectively. Cash used in fiscal 2011 relates to additions to fixed assets.

Net cash provided by financing activities. Net cash provided by financing activities of $2,118,273 and $41,750 for the nine month periods ended February 28, 2011 and 2010, respectively, was primarily related to proceeds received from the sale of common stock, partially offset by repayments on convertible debentures.

Going Concern

The report of our independent registered public accounting firm on the financial statements as of and for the year ended May 31, 2010, includes an explanatory paragraph relating to the significant doubts about our ability to continue as a going concern. As of February 28, 2011, we had an accumulated deficit of $46,636,899 and have a working capital deficit of $11,704,897. We require significant additional funding to commence our plan of operation. Our ability to establish ourselves as a going concern is dependent upon our ability to obtain additional funding in order to finance our planned operations.

Plan of Operation

For the remainder of our 2011 fiscal year and into 2012, our primary goals are to regain compliance with the SEC and British Columbia Securities Commission (“BCSC”) so that we can apply for a revocation of a 2004 Cease Trade Order from the BCSC. We intend to continue to raise capital so that we may further explore and begin extraction from our properties, thereby bringing us out of the exploration stage.

Off-Balance Sheet Arrangements

We do not have off-balance sheet arrangements.

Critical Accounting Policies and Estimates

For a discussion of accounting policies that we consider critical to our business operations and understanding of our results of operations, and that affect the more significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” contained in our annual report on Form 10-K for the year ended May 31, 2010 and incorporated by reference herein.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not required by Form 10-Q for Smaller Reporting Companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), are our controls and other procedures that are designed 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 SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Rule 13a-15 under the Exchange Act, requires us to carry out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2011. This evaluation was conducted under the supervision and with the participation of David K. Young (our functioning principal executive officer and principal financial officer). Based on this evaluation, Mr. Young concluded that the design and operation of our disclosure controls and procedures were not effective because of the identification of the material weaknesses in internal control over financial reporting described below that existed at May 31, 2010 and February 28, 2011. In light of the material weaknesses described above, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles (“GAAP”). Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

·	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;

·	Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including David K. Young (our functioning principal executive officer and principal financial officer), we conducted an assessment of the effectiveness of our internal control over financial reporting based on criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as of May 31, 2010, the end of our most recently completed fiscal year.

As a result of our material weaknesses described below, management concluded that, as of May 31, 2010, our internal control over financial reporting was not effective based on the criteria in “Internal Control-Integrated Framework” issued by COSO.

Material Weakness in Internal Control over Financial Reporting

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment, management identified the following control deficiencies that represent material weaknesses at May 31, 2010:

·	We have not consistently recorded transactions in our accounting records.

·	The non-cash components of certain debt and equity transactions were not properly accounted for.

·	We rely on external consultants for the preparation of our financial statements and reports. As a result, our management may not be able to identify errors and irregularities in the financial statements and reports.

·	We relied on one of our officers for oversight of the financial reporting process and therefore there was an inherent lack of segregation of duties with certain aspects of the financial reporting process, and a limited independent governing board.

·	We relied on an external consultant for the administration functions, some of which did not have standard procedures in place for formal review by the one officer who was providing financial oversight for us.

The internal control weaknesses identified above with regard to the failure to consistently record transactions and inadequate segregation of duties with certain aspects of the financial reporting process will only be completely corrected if the Company expands and has the capacity to perform necessary accounting functions and adequately segregate the duties to mitigate the risk in financial reporting. This expansion will depend mostly on the ability of management to fully execute its business operating strategy as outlined in this report and generate enough income to warrant growth in personnel. With regard to the internal control deficiency identified above related to preventative measures to properly and accurately account for the recording of the non-cash aspects of certain debt and equity issuances, management has already taken steps to mitigate such risk going forward by utilizing external financial consulting services prior to the review by our principal independent accounting firm to ensure that all 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 accurately and within the time periods specified in the Commission’s rule and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended February 28, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Other than discussed below, as of May 16, 2011, we are not involved as a plaintiff or defendant in any active, pending or (to our knowledge) threatened, legal proceedings which would be material to our operations. Also, except as described below, we are not aware of any material legal proceedings to which any director, officer or affiliate of the Company, any owner of record or beneficially of more than five percent of our common stock, or any associate of any such director, officer, affiliate of the Company or security holder is a party adverse to the Company or any of our subsidiaries or has a material interest adverse to the Company or our subsidiaries.

On March 8, 2004, we entered into an agreement with Marlowe Harvey, his wife Judy Harvey, and several related entities by which Calais and Mr. and Mrs. Harvey resolved a number of issues that had arisen between them. Under the agreement,

	•		Mr. Harvey and Calais agreed on a more precise definition of Calais’ right (which expires August 31, 2011) to repurchase the interest of AAI in the Caribou properties, including the price payable for the reacquisition (a total of Cdn$747,728) and AAI’s right to convert that debenture before it is paid;
	•		Further defining Calais’ right to borrow against, enter in and upon those properties, construct buildings and mines on those properties, and remove and sell minerals from those properties for Calais’ own account;

	•		Mr. Harvey and his related entities agreed to assign their interests in the Manhattan prospect to Calais and completed this assignment in July 2004. In addition, Mr. Harvey and his related entities also agreed to convey to Calais (not later than December 31, 2005) the entire right, title and interest in the Manhattan prospect from all parties (“marketable title”). To our knowledge, Mr. Harvey and his related entities have not commenced the work necessary to obtain marketable title. Upon receipt of marketable title, Calais agreed to pay one of Mr. Harvey’s related entities 250,000 shares of Calais restricted stock. Calais agreed to undertake certain drilling obligations after receiving good title, and to issue 2,500,000 shares of common stock to Argus Resources, Inc., one of Mr. Harvey’s related entities, if Calais identifies gold or gold equivalent mineral resources (as determined in accordance with Canadian standards) exceeding 2,000,000 ounces.
	•		Mr. Harvey and his related entities agreed to comply with their shareholder filing obligations in the United States and Canada (if any) not later than April 30, 2004.

			Mr. Harvey also agreed to return a stock option agreement to Calais which evidenced the option to acquire 82,500 shares of Calais common stock granted to him in November 2002. That option expired on November 15, 2004, and had an exercise price of US$0.80 per share. Mr. Harvey did not comply with this obligation.
	•		Calais agreed to propose to its shareholders at its next shareholder meeting that the conversion price of the debentures be repriced from Cdn$1.23 to US$0.55. This proposal was defeated by the shareholder vote held at the shareholder meeting on November 10, 2004.

•

Calais agreed to retain Mr. Harvey as a consultant for one year at US $3,000 per month. Mr. Harvey resigned as a consultant as of June 1, 2004.

To facilitate the settlement, Thomas S. Hendricks agreed to transfer to Mr. Harvey a debenture for Cdn $984,000 that Mrs. Harvey had assigned to him in 2000. Mr. Hendricks executed the assignment of this debenture and delivered both the original debenture and the assignment to Calais to hold pending Mrs. Harvey’s acceptance of that debenture in a manner that complies with applicable securities laws. To date, Mrs. Harvey has refused to return to Calais documents that Calais believes is necessary to show compliance with securities laws, and Mrs. Harvey has not proposed any alternative procedure. Consequently, the debenture is still registered in Mr. Hendricks’ name and will remain so registered until Mrs. Harvey provides Calais with sufficient evidence of compliance with applicable securities laws.

In addition, Calais, Mr. Harvey, and his related entities entered into mutual releases. Calais has previously announced that it does not intend to expend any significant exploration dollars on the Manhattan prospect until such time as it has received further assurances as to title.

At the present time, we have no evidence that Mr. Harvey or his related entities have complied with their obligations under the settlement agreement (other than tendering certain assignments to Calais of certain portions of the Manhattan project), or that they have commenced doing the work necessary to deliver marketable title to the Manhattan project, both as required by the settlement agreement.

Subsequent to August 31, 2010, on December 15, 2010, the Company entered into a Settlement Agreements with AAI and Mrs. Harvey for said debentures wherein the parties agreed that Ms. Harvey would accept as full payment for her two debentures totaling $2,988,257, for cash of $149,368 in cash and a total of 8,890,638 shares of our restricted common stock. The cash was paid on December 15, 2010 and the shares were issued on December 20, 2010 to an escrow agent to hold the shares until the Cease Trade Order in British Columbia has been revoked.

Further, under the December 15, 2010 settlement, Argus accepted as full payment for its debenture (originally totaling $220,723) 659,730 shares of our restricted common shares. These shares were issued on December 20, 2010.

ITEM 1A. RISK FACTORS.

Not required for smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

				Warrants
Date of Sale	Name of Purchaser	Title of Securities	Shares of Stock	Number of Warrants	Exercise Price ($)	Expiration Date	Consideration ($)

12/10	6 accredited investors	Common Stock	3,203,332				232,200	(a)
12/10	2 accredited investors	Common Stock	2,102,500				357,425	(b)
12/10	3 accredited investors	Common Stock	9,550,368				1,432,555	(c)
01/11	1 accredited investor	Common Stock	66,666				4,000	(a)
01/11	3 accredited investors	Common Stock	1,433,334				243,667	(b)
02/11	3 accredited investors	Common Stock	1,764,706				300,000	(a)
02/11	1 accredited investor	Common Stock	700,000				119,000	(b)

(a) Issued for cash consideration.

(b) Issued for services.

We relied upon the exemption from registration contained in Section 4(2) of the Securities Act, as these persons were deemed to be sophisticated with respect to the investment in the securities due to their financial condition and involvement in our business and had access to the kind of information which registration would disclose.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Exhibit Number		Description

31		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.
32		Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CALAIS RESOURCES INC.

May 26, 2011	By:	/s/ David K. Young
		David K. Young
		President, Chief Operating Officer
		and Acting Chief Financial Officer

CALAIS RESOURCES INC - FORM 10-Q - May 26, 2011

Attached files

CALAIS RESOURCES INC Reports