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EX-31.2 - GUINNESS EXPLORATION 10K, CERTIFICATION 302, CFO - Guinness Exploration, Incguinnessexh31_2.htm
EX-31.1 - GUINNESS EXPLORATION 10K, CERTIFICATION 302, CEO - Guinness Exploration, Incguinnessexh31_1.htm
EX-32.1 - GUINNESS EXPLORATION 10K, CERTIFICATION 906, CEO/CFO - Guinness Exploration, Incguinnessexh32_1.htm



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
 
FORM 10-K
____________________________

x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2011

¨
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_______________ to _______________
 
 
Commission File # 000-53375
 
GUINNESS EXPLORATION, INC.
(Exact name of small business issuer as specified in its charter)
 
Nevada
(State or other jurisdiction of incorporation or organization)
 
98-0465540
(IRS Employer Identification Number)
 
Suite 12E, Eclipse, 156 Vincent West
Auckland, New Zealand 1010
(Address of principal executive offices)

(509) 252-9157
 (Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: 
 
Common Stock, $0.001 par value
(Title of class)
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:   Yes o  No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act:   Yes x  No o




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes x  No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:   Yes o  No x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:
 
Large accelerated filer o Accelerated filer o
Non-accelerated filer o 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 o  No x
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:

Based on the closing price on September 6, 2011 of $0.07, the aggregate market value of the 90,325,000 common shares held by non-affiliates was $6,322,750.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 129,325,000 Common shares were outstanding as of September 6, 2011.
 
Documents incorporated by reference: None











 
 
Table of Contents
 
 
   
   
   
   
   
   
 
 
     


 
 
 
 
 



 
PART I
 

ITEM 1.       DESCRIPTION OF BUSINESS

This current report on Form 10-K contains forward-looking statements as that term is defined in section 27A of the United States Securities Act of 1933, as amended, and section 21E of the United States Securities Exchange Act of 1934, as amended.  These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", ‘targets”, or "continue" or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" included in this report, which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, certain delays beyond the company's control with respect to mining operations, changes in the worldwide price of gold, silver, or certain other commodities; legislative, political or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; employee relations; contests over title to properties; and the risks involved in the exploration, development and mining business.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results and the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

Unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.

OVERVIEW

Guinness Exploration, Inc. was incorporated in the State of Nevada on July 15, 2005 and incorporated its subsidiary, Nantawa Resources Inc., in Yukon, Canada on November 6, 2009. Guinness Exploration Inc. trades on the OTC-BB under the symbol GNXP. As used in this Report on Form 10-K and unless otherwise indicated, the terms "we", "us", "our", “Company”, and “Guinness” mean collectively Guinness Exploration, Inc., a Nevada corporation, and its wholly owned subsidiary, Nantawa Resources Inc., a Yukon corporation, unless otherwise indicated.

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles and we have expensed all development expenses related to the establishment of the company. Our fiscal year end is May 31st. Since inception the Company has not been involved in any bankruptcy, receivership or similar proceedings. Since inception the Company has not been involved in any reclassification, consolidation, or merger arrangements.


 
 
Reports to security holders

We are not currently required to deliver an annual report to our security holders and do not expect to do so for the foreseeable future.

We are a reporting company and file Forms 10-Q quarterly reports and Forms 10-K annual reports with the SEC. We also file other reports including reports on Form 8-K, proxy and information statements and other information regarding the Company. The public may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549 and/or obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, we are an electronic filer and as such, all items filed by us are available through an Internet site maintained by the SEC which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which site is available at http://www.sec.gov.
 
 
ITEM 1A.     RISK FACTORS

The following risk factors should be considered in connection with an evaluation of the business of our business:

In addition to other information in this current report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition.  As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements.  Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition.  If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Associated With Mining

Mineral exploration and development activities are speculative in nature

Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by our company may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in our company not receiving an adequate return of investment capital.

Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities and grades to justify commercial operations or that funds required for development can be obtained on a timely basis. Estimates of reserves, mineral deposits and production costs can also be affected by such factors as environmental permitting

 
 
 
regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. In addition, the grade of ore ultimately mined may differ from that indicated by drilling results. Short term factors relating to reserves, such as the need for orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on the results of operations. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.

All of our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral resource on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business could fail.

Despite exploration work on our mineral properties, we have not established that any of them contain any mineral reserve, nor can there be any assurance that we will be able to do so. If we do not, our business could fail.

A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7, which can be viewed at www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7, as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a "reserve" that meets the requirements of the Securities and Exchange Commission's Industry Guide 7 is extremely remote; in all probability our mineral resource property does not contain any 'reserve' and any funds that we spend on exploration will probably be lost.

Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our properties, our business may fail.

Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could fail.



 
 
 
We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

If we establish the existence of a mineral resource on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could fail.

If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.

Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our company.

Mineral exploration, development and production involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our company.

Mineral prices are subject to dramatic and unpredictable fluctuations.

We expect to derive revenues, if any, either from the sale of our mineral resource properties or from the extraction and sale of precious and base metals such as gold, silver and copper. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond our control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of precious and base metals, and therefore the economic viability of any of our exploration properties and projects, cannot accurately be predicted.

 

 
 
 
The mining industry is highly competitive and there is no assurance that we will continue to be successful in acquiring mineral claims. If we cannot continue to acquire properties to explore for mineral resources, we may be required to reduce or cease operations.

The mineral exploration, development, and production industry is largely un-integrated. We compete with other exploration companies looking for mineral resource properties. While we compete with other exploration companies in the effort to locate and acquire mineral resource properties, we will not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of mineral products. Therefore, we will likely be able to sell any mineral products that we identify and produce.

In identifying and acquiring mineral resource properties, we compete with many companies possessing greater financial resources and technical facilities. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future. Accordingly, there can be no assurance that we will acquire any interest in additional mineral resource properties that might yield reserves or result in commercial mining operations.
 
Risks Related To Our Company
 
We have a limited operating history on which to base an evaluation of our business and prospects.
 
We have been in the business of exploring mineral resource properties since July 15, 2005 and we have not yet located any mineral reserve. As a result, we have never had any revenues from our operations. In addition, our operating history has been restricted to the acquisition and exploration of our mineral properties and this does not provide a meaningful basis for an evaluation of our prospects if we ever determine that we have a mineral reserve and commence the construction and operation of a mine. We have no way to evaluate the likelihood of whether our mineral properties contain any mineral reserve or, if they do that we will be able to build or operate a mine successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during the period when we are exploring our properties. We therefore expect to continue to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from mining operations and any dispositions of our properties, we will not be able to earn profits or continue operations. At this early stage of our operation, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition. There is no history upon which to base any assumption as to the likelihood that we will prove successful and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.



 
 
 
Our activities will be subject to environmental and other industry regulations which could have an adverse effect on our financial condition

Our company's activities are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailing disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations could have an adverse effect on the financial condition of our company.

The operations of our company include exploration and development activities and commencement of production on our properties, which requires permits from various federal, state, provincial and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.

Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.

The fact that we have not earned any operating revenues since our incorporation raises substantial doubt about our ability to continue to explore our mineral properties as a going concern.

We have not generated any revenue from operations since our incorporation and we anticipate that we will continue to incur operating expenses without revenues unless and until we are able to identify a mineral resource in a commercially exploitable quantity on one or more of our mineral properties and we build and operate a mine. At May 31, 2011, we had cash in the amount of $54,382 and net working capital of $56,566. We incurred a net loss of $(774,720) for the twelve month period ended May 31, 2011 and a net loss of $(2,284,328) since inception on July 15, 2005. We may have to raise additional funds to meet our currently budgeted operating requirements for the next 12 months. As we cannot assure a lender that we will be able to successfully explore and develop our mineral properties, we will probably find it difficult to raise debt financing from traditional lending sources. We have traditionally raised our operating capital from sales of equity securities and shareholder loans, but there can be no assurance that we will continue to be able to do so. If we cannot raise the money that we need to continue exploration of our mineral properties, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these were to occur, there is a substantial risk that our business would fail.


 
 
 
These circumstances have lead our independent registered public accounting firm, in their report included in this Form 10-K, to comment about our company’s ability to continue as a going concern. Management has plans to seek additional capital through private placements and/or public offerings of its capital stock. These conditions raise substantial doubt about our company’s ability to continue as a going concern. Although there are no assurances that management’s plans will be realized, management believes that our company will be able to continue operations in the future. Our consolidated financial statements do not include any adjustments relating to the recoverability and potential classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event our company cannot continue in existence. We continue to experience net operating losses.

We currently rely on certain key individuals and the loss of one of these key individuals could have an adverse effect on the Company

Our success depends to a certain degree upon certain key members of our management. These individuals are a significant factor in the our growth and success. The loss of the service of members of the management and advisory board could have a material adverse effect on our company. In particular, the success of our company is highly dependent upon the efforts of our President & CEO, the loss of whose services would have a material adverse effect on the success and development of our company. Additionally, we do not anticipate having key man insurance in place in respect of our directors and senior officers in the foreseeable future.

We require substantial funds merely to determine whether commercial precious metal deposits exist on our properties

Any potential development and production of our exploration properties depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified engineers and geologists. Such programs require substantial additional funds. Any decision to further expand our operations on these exploration properties is anticipated to involve consideration and evaluation of several significant factors including, but not limited to:

 
§
Costs of bringing each property into production, including exploration work, preparation of production feasibility studies, and construction of production facilities;
 
§
Availability and costs of financing;
 
§
Ongoing costs of production;
 
§
Market prices for the precious metals to be produced;
 
§
Environmental compliance regulations and restraints; and
 
§
Political climate and/or governmental regulation and control.
 
 
Risks Associated with Our Common Stock

Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

Our common stock is quoted on the Over-The-Counter Bulletin Board service of the Financial Industry Regulatory Authority. Trading in stock quoted on the Over-The-Counter Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the Over-The-Counter Bulletin Board is not a stock exchange, and trading of securities on the Over-The-Counter Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ, or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of their shares.

 
 
 
Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The Financial Industry Regulatory Authority ’ requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
 
 
ITEM 1B.     UNRESOLVED STAFF COMMENTS

None.



 
 
 
ITEM 2.       PROPERTIES

Executive Offices

Our executive, administrative, and operating offices is located at Suite 12E, Eclipse, 156 Vincent West Auckland, New Zealand 1010. We are provided these premises by our CEO at no cost the Company. We believe these facilities are adequate for our current needs and that alternate facilities on similar terms would be readily available if needed.

Mineral Properties

Charlotte Project

The Charlotte Project (formerly named the Nantawa Project) is situated in the prolific Tintina Gold Belt, a 1,200 km long area extending from northern British Columbia, through the Yukon Territory and into southwest Alaska. The Tintina Gold Belt includes such world-class, multi-million ounce gold deposits as Pogo, Fort Knox, True North, and Donlin Creek. (A detailed description of the region and properties follows.)

Nantawa Modification Agreement

On October 12, 2010, Guinness signed the Nantawa Modification Agreement with Eagle Trail Properties Inc. (“ETPI”) in which Guinness received full vesting of a 49% interest in 175 full or fractional mineral claims/leases (now renamed the "Charlotte Project") located in the Mount Nansen area of the Whitehorse Mining District of the Yukon Territory, Canada (the “Mineral Claims”). The other 51% interest in the Mineral Claims was retained by ETPI. The Mineral Claims had been part of the Nantawa Agreement signed between the Company and ETPI on November 19, 2009 and amended February 4, 2010, under which the Company acquired the right to purchase the Mineral Claims and an additional set of 47 mineral claims/leases (the “Tawa Claims”) from ETPI for total consideration of US$1,005,668 (comprised of: US$943,868 cash, plus 60,000,000 restricted common shares of Guinness valued at US$0.00103 per share for a total share value of $61,800).

Cash payments under the Nantawa Agreement had been scheduled to be made in two equal installments of US$471,934, the first due by May 30, 2010 and the second due by February 28, 2011. The Company met its first payment, but projected it would not have the resources to fulfill the second payment by February 28, 2011 and the Board determined it was in the best interests of the Company to negotiate revised purchase terms from ETPI for the Mineral Claims.

To provide consideration to ETPI, the Company agreed to waive its rights under the Nantawa Agreement to the Tawa Claims, which had lapsed while in trust with ETPI.

In sum, the Nantawa Modification Agreement has resolved the Tawa Claims matter between the parties and has provided the Company an immediate vesting of a 49% interest in the Mineral Claims without the requirement to make further payments to ETPI.

A copy of the Nantawa Modification Agreement was filed as an Exhibit to a Form 8-K on October 12, 2010 and is incorporated herein by reference.


 

 
Ansell Agreement

On March 4, 2011, the Company executed an option agreement (the “Ansell Agreement”) with Ansell Capital Corp. (“Ansell”), ETPI and two individuals (the “Additional Parties”) which will provide funding for the Charlotte Project.
 
Subject to the terms of the Ansell Agreement (incorporated herein by reference), Guinness, ETPI and the Additional Parties (collectively the “CSG Group”), have agreed to grant Ansell an option to acquire up to an 85% undivided interest in the 128 mineral claims which form the Charlotte Project based on Ansell providing financing and expertise for development of the project. Under the Ansell Agreement, ETPI will hold the Charlotte Project claims (the “Properties”) in trust for all parties during the term of the Ansell Agreement. Upon Ansell earning an interest in the Properties, the parties have agreed to form a joint venture to further explore and develop the Properties, all upon and subject to the terms and conditions set out in the Ansell Agreement.

Ansell has received the required approval of the Canadian TSX Venture Exchange in connection with the Ansell Agreement and Ansell is now the Operator of the project and will bear all project expenditures.

The Ansell Agreement specifies the following primary three tiers for the exercise of the option by Ansell:
 
First Option (Article 4)
 
On, or before, June 1, 2014, Ansell may acquire a 49% earned interest, free and clear of all encumbrances (except existing royalties to be paid to ETPI specified in the Nantawa Agreement) (the “First Option), by:
 
  (a) incurring not less than $2,048,761(1) of exploration expenditures on, or before, June 1, 2012;
     
  (b) incurring not less than an additional $3,073,141(1) in exploration expenditures on, or before, June 1, 2014.
     
  (c) paying the Additional Parties: (i) $512,190(1) on June 1, 2011; (ii) 12,000,000 units of Ansell securities on June 1, 2011 (such payments having been made); and (iii) $512,190(1) on, or before, July 31, 2012.
 
Second Option (Article 5)
 
Upon notice to the CSG Group (the “Third Option Commencement Date”), over a period of five years, Ansell may acquire an additional 26% earned interest, for an aggregate 75% earned interest, free and clear of all encumbrances except (except existing royalties to be paid to ETPI specified in the Nantawa Agreement) (the “Second Option”), by:
 
  (a) having exercised the First Option;
     
  (b)  solely funding all exploration expenditures and all joint venture expenditures defined in the joint venture agreement included in the Ansell Agreement (the “JVA”);
 
 

 
 
  (c)
delivering a suitable feasibility study, as defined in the Ansell Agreement, to each member of the CSG Group, or, incurring the following exploration expenditures: (i) not less than $1,024,380 in Expenditures on, or before, the first anniversary of the Second Option Commencement Date; (ii) not less than $1,024,380 in exploration expenditures on or before the second anniversary of the Second Option Commencement Date; (iii) not less than $1,024,380 in Expenditures on or before the third anniversary of the Second Option Commencement Date; and (iv) not less than $1,024,380 in Expenditures on or before the fourth anniversary of the Second Option Commencement Date; and then delivering a suitable feasibility study, as defined in the Ansell Agreement, to each member of the CSG Group.
 
(1)  (based on a foreign exchange rate of Cdn$1.00 to US$0.97620 on February 28, 2011)
 
Third Option (Article 6)
 
Upon notice to the CSG Group (the “Third Option Commencement Date”), over a period of two years, Ansell may acquire an additional 10% earned interest, for an aggregate 85% earned interest, free and clear of all encumbrances except (except existing royalties to be paid to ETPI specified in the Nantawa Agreement) (the “Third Option”), by:
 
  (a) having exercised the Second Option;
     
  (b) solely funding all exploration expenditures and all expenditures agreed under the JVA, if any, prior to delivery of notice of exercise of the Third Option; and
     
  (c)  obtaining a commitment letter which evidences the existence of project financing, as defined in the Ansell Agreement on, or before, the three years from the Third Option Commencement Date.
 
Subject to Ansell acquiring an 85% interest in and to the Charlotte Project, Guinness will retain a 5% carried working interest in and to the Charlotte Project.

Ansell Capital Corp. (TSX-V: ACP) is a publicly traded Canadian exploration company focused on exploring and developing gold/silver properties with the potential to host world class, economic deposits. Ansell's current projects are the Charlotte Project, Yukon, and the Kuyakuz Mountain Project, located in British Columbia. More information on Ansell can be found at: http://www.ansellcapital.com


Exploration properties description and location

The Charlotte Project is located in the Whitehorse Mining District on NTS map sheet 105I-03 (Figures 1).  The complete claim group includes 128 full or fractional quartz mineral claims (Table 1). Total size of the claim group is  2,336.14 square hectares.  The central block of the  Charlotte Project is some 185 km NNW of Whitehorse. The Charlotte Project claim group measure 8.7 km in the NS direction and 5.1 km in the EW direction. The approximate geographical location of the Charlotte Project claim block is shown in Table 2.


 
 
Figure 1:   Road access to the Charlotte Project
(Modified from Eaton and Archer, 1989 and Stroshein, 2007a)

 
 

 

 
Table 1:   Claim list for Charlotte Project

No.
 
Claim
Registered Claim
Owner
Grant
Number
Expiry Date
Area (Ha)
Comments
1
ROSE
 Eagle Trail Properties Inc.
04241
09/10/2019
20.42
Lease
2
GOLDEN EAGLE
Eagle Trail Properties Inc.
04278
09/10/2019
20.96
Lease
3
WAR EAGLE
Eagle Trail Properties Inc.
04279
09/10/2019
20.77
Lease
4
SHAMROCK
Eagle Trail Properties Inc.
04354
09/10/2019
20.73
Lease
5
SPOT
Eagle Trail Properties Inc.
04361
09/10/2019
19.92
Lease
6
ARLEP
Eagle Trail Properties Inc.
04368
09/10/2019
14.48
Lease
7
PHYLLIS
Eagle Trail Properties Inc.
04369
09/10/2019
20.26
Lease
8
RUB
Eagle Trail Properties Inc.
55633
09/10/2019
1.84
Lease
9
PUB
Eagle Trail Properties Inc.
55663
09/10/2019
1.93
Lease
10
SUN DOG
Eagle Trail Properties Inc.
55665
09/10/2019
3.20
Lease
11
CUB
Eagle Trail Properties Inc.
55666
09/10/2019
1.29
Lease
12
JAM
Eagle Trail Properties Inc.
55890
09/10/2019
11.64
Lease
13
PAM
Eagle Trail Properties Inc.
55892
09/10/2019
2.64
Lease
14
DOME 1
Eagle Trail Properties Inc.
73537
06/02/2014
15.10
-
15
DOME 2
Eagle Trail Properties Inc.
73538
06/02/2014
15.51
-
16
DOME 3
Eagle Trail Properties Inc.
73539
06/02/2014
17.29
-
17
DOME 4
Eagle Trail Properties Inc.
73540
06/02/2014
17.98
-
18
DOME 6
Eagle Trail Properties Inc.
73542
06/02/2014
17.32
-
19
DOME 7
Eagle Trail Properties Inc.
73543
06/02/2014
25.34
-
20
DOME 8
Eagle Trail Properties Inc.
73694
06/02/2014
12.47
-
21
DOME 14
Eagle Trail Properties Inc.
73700
06/02/2014
21.07
-
22
DOME 16
Eagle Trail Properties Inc.
73702
06/02/2014
20.61
-
23
DOME 17
Eagle Trail Properties Inc.
73703
06/02/2014
18.41
-
24
DOME 18
Eagle Trail Properties Inc.
73704
06/02/2014
18.56
-
25
DOME 19
Eagle Trail Properties Inc.
73705
06/02/2014
16.73
-
26
DOME 20
Eagle Trail Properties Inc.
73706
06/02/2014
13.42
-
27
JOANNE 1
Eagle Trail Properties Inc.
74283
06/02/2014
19.79
-
28
JOANNE 2
Eagle Trail Properties Inc.
74284
06/02/2014
19.51
-
29
JOANNE 3
Eagle Trail Properties Inc.
74285
06/02/2014
20.36
-
30
JOANNE 4
Eagle Trail Properties Inc.
74286
06/02/2014
14.78
-
31
JOANNE 5
Eagle Trail Properties Inc.
74287
06/02/2014
19.83
-
32
JOANNE 6
Eagle Trail Properties Inc.
74288
06/02/2014
19.69
-
33
DOME 25
Eagle Trail Properties Inc.
77746
06/02/2014
15.19
-
34
DOME 26
Eagle Trail Properties Inc.
77747
06/02/2014
22.54
-
35
DOME 27
Eagle Trail Properties Inc.
77748
06/02/2014
20.32
-
36
DOME 28
Eagle Trail Properties Inc.
77749
06/02/2014
21.74
-
37
DOME 33
Eagle Trail Properties Inc.
77754
06/02/2014
25.50
-
38
DOME 34
Eagle Trail Properties Inc.
77755
06/02/2014
23.29
-
39
DOME 35
Eagle Trail Properties Inc.
77756
06/02/2014
22.39
-
40
DOME 36
Eagle Trail Properties Inc.
77757
06/02/2014
23.97
-






 
No.
 
Claim
Registered Claim
Owner
Grant
Number
Expiry Date
Area (Ha)
Comments
41
DOME 37
Eagle Trail Properties Inc.
77758
06/02/2014
14.23
-
42
DOME 38
Eagle Trail Properties Inc.
77759
06/02/2014
18.48
-
43
DOME 39
Eagle Trail Properties Inc.
77760
06/02/2014
14.95
-
44
DOME 40
Eagle Trail Properties Inc.
77761
06/02/2014
20.51
-
45
DOME 41
Eagle Trail Properties Inc.
77762
06/02/2014
20.76
-
46
DOME 42
Eagle Trail Properties Inc.
77763
06/02/2014
19.93
-
47
DOME 43
Eagle Trail Properties Inc.
77764
06/02/2014
20.47
-
48
DOME 49
Eagle Trail Properties Inc.
77770
06/02/2014
8.18
-
49
DOME 50
Eagle Trail Properties Inc.
77771
06/02/2014
18.83
-
50
DOME 51
Eagle Trail Properties Inc.
77772
06/02/2014
19.05
-
51
DOME 52
Eagle Trail Properties Inc.
77773
06/02/2014
21.85
-
52
DOME 53
Eagle Trail Properties Inc.
77774
06/02/2014
22.80
-
53
DOME 54
Eagle Trail Properties Inc.
77775
06/02/2014
14.69
-
54
DOME 55
Eagle Trail Properties Inc.
77776
06/02/2014
13.09
-
55
DOME 56
Eagle Trail Properties Inc.
77777
06/02/2014
13.35
-
56
DOME 57
Eagle Trail Properties Inc.
77778
06/02/2014
20.47
-
57
DOME 58
Eagle Trail Properties Inc.
77779
06/02/2014
19.41
-
58
DOME 60
Eagle Trail Properties Inc.
77781
06/02/2014
20.06
-
59
DOME 61
Eagle Trail Properties Inc.
77782
06/02/2014
18.91
-
60
DOME 63
Eagle Trail Properties Inc.
77784
06/02/2014
22.51
-
61
DOME 64
Eagle Trail Properties Inc.
77785
06/02/2014
22.88
-
62
DOME 65
Eagle Trail Properties Inc.
77786
06/02/2014
20.66
-
63
DOME 66
Eagle Trail Properties Inc.
77787
06/02/2014
21.18
-
64
DOME 78
Eagle Trail Properties Inc.
81842
06/02/2014
25.41
-
65
DOME 79
Eagle Trail Properties Inc.
81843
06/02/2014
24.10
-
66
DOME 80
Eagle Trail Properties Inc.
81844
06/02/2014
24.20
-
67
DOME 81
Eagle Trail Properties Inc.
81845
06/02/2014
22.52
-
68
DOME 82
Eagle Trail Properties Inc.
81846
06/02/2014
23.26
-
69
DOME 83
Eagle Trail Properties Inc.
81847
06/02/2014
18.72
-
70
DOME 84
Eagle Trail Properties Inc.
81848
06/02/2014
19.37
-
71
DOME 86
Eagle Trail Properties Inc.
81850
06/02/2014
20.76
-
72
HIW 9
Eagle Trail Properties Inc.
YA23835
06/02/2014
19.44
-
73
HIW 10
Eagle Trail Properties Inc.
YA23836
06/02/2014
20.83
Fractions
74
HIW 11
Eagle Trail Properties Inc.
YA23837
06/02/2014
21.55
Fractions
75
HIW 12
Eagle Trail Properties Inc.
YA23838
06/02/2014
19.93
Fractions
76
HIW 13
Eagle Trail Properties Inc.
YA23839
06/02/2014
20.72
-
77
HIW 14
Eagle Trail Properties Inc.
YA23840
06/02/2014
19.55
-
78
HIW 15
Eagle Trail Properties Inc.
YA23841
06/02/2014
20.15
-
79
HIW 16
Eagle Trail Properties Inc.
YA23842
06/02/2014
19.86
-
80
HIW 17
Eagle Trail Properties Inc.
YA23843
06/02/2014
19.92
-





 
No.
 
Claim
Registered Claim
Owner
Grant
Number
Expiry Date
Area (Ha)
Comments
81
HIW 1
Eagle Trail Properties Inc.
YA24813
06/02/2014
4.74
Fractions
82
HIW 2
Eagle Trail Properties Inc.
YA24814
06/02/2014
5.15
Fractions
83
HIW 7
Eagle Trail Properties Inc.
YA24819
06/02/2014
3.01
Fractions
84
DD 1
Eagle Trail Properties Inc.
YA59596
06/02/2014
20.62
-
85
DD 2
Eagle Trail Properties Inc.
YA59597
06/02/2014
22.35
-
86
DD 15
Eagle Trail Properties Inc.
YA59610
06/02/2014
19.20
-
87
DD 16
Eagle Trail Properties Inc.
YA59611
06/02/2014
19.21
-
88
DD 17
Eagle Trail Properties Inc.
YA59612
06/02/2014
19.37
-
89
DD 18
Eagle Trail Properties Inc.
YA59613
06/02/2014
19.85
-
90
DD 19
Eagle Trail Properties Inc.
YA59614
06/02/2014
20.17
-
91
DD 20
Eagle Trail Properties Inc.
YA59615
06/02/2014
19.90
-
92
DD 21
Eagle Trail Properties Inc.
YA59616
06/02/2014
19.64
-
93
DD 22
Eagle Trail Properties Inc.
YA59617
06/02/2014
19.17
-
94
DD 23
Eagle Trail Properties Inc.
YA59618
06/02/2014
18.69
-
95
DD 24
Eagle Trail Properties Inc.
YA59619
06/02/2014
18.30
-
96
DD 25
Eagle Trail Properties Inc.
YA59620
06/02/2014
18.18
-
97
DD 26
Eagle Trail Properties Inc.
YA59621
06/02/2014
17.65
-
98
DD 27
Eagle Trail Properties Inc.
YA59622
06/02/2014
19.49
-
99
DD 28
Eagle Trail Properties Inc.
YA59623
06/02/2014
18.71
-
100
TBR 1
Eagle Trail Properties Inc.
YA86690
06/02/2014
8.92
-
101
TBR 2
Eagle Trail Properties Inc.
YA86691
06/02/2014
20.16
-
102
TBR 3
Eagle Trail Properties Inc.
YA86692
06/02/2014
20.03
-
103
TBR 4
Eagle Trail Properties Inc.
YA86693
06/02/2014
20.84
-
104
TBR 5
Eagle Trail Properties Inc.
YA86694
06/02/2014
18.34
-
105
TBR 6
Eagle Trail Properties Inc.
YA86695
06/02/2014
20.92
-
106
TBR 7
Eagle Trail Properties Inc.
YA86696
06/02/2014
15.96
-
107
TBR 8
Eagle Trail Properties Inc.
YA86697
06/02/2014
21.79
-
108
ONT 38
Eagle Trail Properties Inc.
YA87204
06/02/2014
20.26
-
109
ONT 40
Eagle Trail Properties Inc.
YA87206
06/02/2014
18.34
-
110
ONT 42
Eagle Trail Properties Inc.
YA87208
06/02/2014
5.73
-
111
EEK 1
Eagle Trail Properties Inc.
YA87210
06/02/2014
21.07
-
112
EEK 2
Eagle Trail Properties Inc.
YA87211
06/02/2014
20.08
-
113
EEK 3
Eagle Trail Properties Inc.
YA87212
06/02/2014
20.70
-
114
EEK 4
Eagle Trail Properties Inc.
YA87213
06/02/2014
20.68
-
115
EEK 5
Eagle Trail Properties Inc.
YA87214
06/02/2014
20.80
-
116
EEK 6
Eagle Trail Properties Inc.
YA87215
06/02/2014
19.58
-
117
EEK 7
Eagle Trail Properties Inc.
YA87216
06/02/2014
19.97
-
118
EEK 8
Eagle Trail Properties Inc.
YA87217
06/02/2014
21.91
-
119
EEK 9
Eagle Trail Properties Inc.
YA87218
06/02/2014
22.64
-
120
EEK 14
Eagle Trail Properties Inc.
YA87223
06/02/2014
21.36
-






 
No.
 
Claim
Registered Claim
Owner
Grant
Number
Expiry Date
Area (Ha)
Comments
121
EEK 15
Eagle Trail Properties Inc.
YA87224
06/02/2014
21.22
-
122
EEK 16
Eagle Trail Properties Inc.
YA87225
06/02/2014
21.76
-
123
EEK 17
Eagle Trail Properties Inc.
YA87226
06/02/2014
20.01
-
124
EEK 18
Eagle Trail Properties Inc.
YA87227
06/02/2014
20.74
-
125
ONT 44
Eagle Trail Properties Inc.
YA92655
06/02/2014
16.80
-
126
ONT 45
Eagle Trail Properties Inc.
YA92656
06/02/2014
12.91
-
127
ONT 46
Eagle Trail Properties Inc.
YA92657
06/02/2014
18.48
-
128
ONT 47
Eagle Trail Properties Inc.
YA92658
06/02/2014
14.41
-
 
Total
     
2,336.14
 
 
Table 2:   Coordinates of the corners of the Charlotte Project claim block

Corner
N-S
E-W
NW
62o06.0’ N
137o12.0’ W
NE
62o05.5’ N
137o05.8’ W
SE
62o01.2’ N
137o05.3’ W
SW
62o02.4’ N
137o11.7’ W
 
Accessibility, Climate, Local Resources, Infrastructure and Physiography
 
The Charlotte Project is located approximately 180 km northwest of Whitehorse and 60 km west of the Village of Carmacks in the Yukon Territory. This property is accessible from Whitehorse via the Klondike highway to the town of Carmacks and then via an all weather gravel road. Carmacks is 170 km north of Whitehorse. Whitehorse is connected to Vancouver, Edmonton, and Calgary by air service. The Charlotte Project is facilitated with an extensive network of gravel and dirt roads (Figure 1).

The Charlotte Project lies northwest of the maximum advance of the Wisconsin ice sheet, and, consequently, are not affected by the Pleistocene continental glaciations (Figure 2; Eaton and Archer, 1989). This resulted in deep weathering in the properties reaching to depths of over 70 m from the topographic surface (Denholm et al, 2000; Roder, 1996). In mineralized zones, sulphides are commonly altered into limonite and other oxides (Denholm et al, 2000; Melling, 1995; Roder, 1996). The topography in the two properties is hilly with rounded ridges and shallow valleys. Local elevation ranges from 1030 m to 1560 m (Melling, 1995; Rodger, 1996).

Permafrost is widespread in the area and varies according to the amount of vegetation and slope facing direction (Stroshein, 2007b). In the north-facing slopes, permafrost is frozen all year around and in the south-facing slopes permafrost thaw to a depth of 1-2 m in the summer (Eaton and Archer, 1989; Roder, 1996).

The average precipitation in the Charlotte Project is approximately 25 cm, most of which falls as rain in the summer months (Stroshein, 2007b). Snow fall is normally 30-40 cm deep in late winter. The average monthly temperature ranges from -25oC in January to 15oC in July (Stroshein, 2007b).


 



The Charlotte Project is situated in the traditional Territory of the Little Salmon/Carmacks First Nation (Stroshein, 2007b). At the mine site, there is no infrastructure other than the mine plant and buildings. The village of Carmacks has been established since 1893 and has provided fuel for river steamboats, a roadhouse on the Whitehorse to Dawson stage run, and an area service center (Campbell, 1994). In the Village of Carmacks, there reside approximately 500 people. The village is also the main and administrative center of the Little Salmon Traditional Lands.




















 
 
Figure 2:   Glaciation, Dawson Range, Yukon Territory






 


 
The Company does not have any investments or interests in real estate, nor real estate mortgages, nor in securities, nor interests in persons primarily engaged in real estate activities and therefore has no investment policies related to such matters. There is no limitation on the Company acquiring such interests and there is no limitation on the percentage of assets which the Company might invest in any one of such investments. Additionally, there is no requirement for the Board of Directors to seek approval through a vote of security holders for changes to any such policies if such investment policies were implemented in the future. It is not a policy of the Company to acquire assets neither primarily for possible capital gains nor primarily for income. At this time the Company has no intention of investing in any of the aforementioned investments.
 
 
ITEM 3.       LEGAL PROCEEDINGS
 
There are no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our officer and director, or any registered or beneficial shareholders are an adverse party or has a material interest adverse to us.
 
 
ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the year ended May 31, 2011, no matters were submitted to a vote of the Company's security holders, through the solicitation of proxies or otherwise.





 
 
 
 
 
 
 

 










 
 
PART II


ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
Market Information
The Company’s shares were cleared for trading by the Financial Industry Regulatory Authority (‘FINRA’) on November 8, 2007 under the symbol “GNXP”. Our common shares are quoted on the Over-the-Counter Bulletin Board (‘OTC-BB’) and the following table sets forth the range of high and low bid quotations, obtained from www.finance.yahoo.com, for our common stock as reported each of the periods indicated. The market for our shares is limited, volatile and sporadic. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
 
National Association of Securities Dealers
OTC Bulletin Board(1) Quotes
Quarter Ended
 
High
Trade
 
Low
Trade
 
Closing
Trade
             
November 30, 2007
$
n/a(2)
$
n/a(2)
$
n/a(2)
February 28, 2008
 
n/a(2)
 
n/a(2)
 
n/a(2)
May 31, 2008
 
n/a(2)
 
n/a(2)
 
n/a(2)
             
August 31, 2008
$
n/a(2)
$
n/a(2)
$
n/a(2)
November 30, 2008
 
n/a(2)
 
n/a(2)
 
n/a(2)
February 28, 2009
 
n/a(2)
 
n/a(2)
 
n/a(2)
May 31, 2009
 
n/a(2)
 
n/a(2)
 
n/a(2)
             
August 31, 2009
$
n/a(2)
$
n/a(2)
$
n/a(2)
November 30, 2009
 
0.70
 
0.50
 
0.65
February 28, 2010
 
1.30
 
0.40
 
1.05
May 31, 2010
 
1.25
 
0.46
 
0.59
             
August 31, 2010
$
0.89
$
0.35
$
0.35
November 30, 2010
 
0.40
 
0.17
 
0.19
February 28, 2011
 
0.19
 
0.06
 
0.11
May 31, 2011
 
0.12
 
0.06
 
0.07
 
Notes:
(1) Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.
(2) No trades occurred during this period.
 
Our common shares are issued in registered form.  The registrar and transfer agent for our common shares is: Empire Stock Transfer Inc., 1859 Whitney Mesa Dr., Henderson, NV, USA 89014, Tel: 702.818.5898, Fax: 702.974.1444, email: www.empirestock.com

Shareholders

As of May 31, 2011, there were 10 registered shareholders of our common shares.

 

 
Dividend Policy

There are no restrictions that would limit the Company from paying dividends. We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.

Securities Authorized for Issuance Under Equity Compensation Plans
 
Other than our Option Plan, during the most recent fiscal year ended, the Company did not have any compensation plans nor individual compensation arrangements under which it might authorize the issuance of equity securities, or registration rights to employees or non-employees in exchange for consideration in the form of goods or services. With respect to our Option Plan:  On July 12, 2010, the board approved and adopted the Company’s 2010 Equity Incentive Plan (the “Plan”), pursuant to which up to an aggregate of 10,000,000 options with a maximum exercise term of 10 years for 10,000,000 shares of the Corporation’s common stock are reserved for issuance to employees and non-employees, directors of, and consultants to the Company in connection with their retention and/or continued employment by the Company. On May 31, 2011, 2,225,000 options vested under the Plan. This was recorded in these financial statements as an addition of $50,265 to Exploration Expenses and $169,473 to Professional Fees for the year ended May 31, 2011.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during the fiscal year ended May 31, 2011.

Section 15(g) of the Securities Exchange Act of 1934

The Company’s shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, which imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by this Section 15(g), the broker/dealer must make a special suitability determination for the purchase and must have received the purchaser's written agreement to the transaction prior to the sale. Consequently, Section 15(g) may affect the ability of broker/dealers to sell the Company’s securities and also may affect your ability to sell your shares in the secondary market.

Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and the secondary market; terms important to an understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customer’s rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

Recent Sales of Unregistered Securities

None.
 
 
 
 
ITEM 6.       SELECTED FINANCIAL DATA

 
Fiscal
2011
Fiscal
2010
Fiscal
2009
Fiscal
2008
Fiscal
2007
 
$
$
$
$
$
Operating Revenue:
         
Quarter I - Three Months to August 31
-
-
-
-
-
Quarter II - Three Months to November 30
-
-
-
-
-
Quarter III- Three Months to February 28
-
-
-
-
-
Full Year – Twelve Months to May 31
-
-
-
-
-
           
Net Income/(Loss):
         
Quarter I - Three Months to August 31
(119,404)
(7,553)
(6,619)
(8,011)
(1,855)
Quarter II - Three Months to November 30
(398,506)
(12,635)
(8,604)
(3,309)
(5,025)
Quarter III- Three Months to February 28
(70,466)
(1,096,370)
(4,137)
(2,517)
(20,807)
Full Year – Twelve Months to May 31
(774,720)
(1,396,663)
(23,112)
(37,913)
(51,071)
           
Net Earnings/(Loss) per share:
         
Quarter I - Three Months to August 31
Nil
Nil
Nil
Nil
Nil
Quarter II - Three Months to November 30
Nil
Nil
Nil
Nil
Nil
Quarter III- Three Months to February 28
Nil
(0.01)
Nil
Nil
Nil
Full Year – Twelve Months to May 31
(0.01)
(0.01)
Nil
Nil
Nil
           
Cash:
         
Quarter I - Three Months to August 31
452,845
13,955
185
523
31,196
Quarter II - Three Months to November 30
90,486
4093
32,652
3,360
17,656
Quarter III- Three Months to February 28
24,535
833,427
23,400
2,263
6,670
Full Year – Twelve Months to May 31
54,382
973,227
20,638
9,503
6,407
           
Total assets:
         
Quarter I - Three Months to August 31
552,128
20,375
1,964
16,508
52,181
Quarter II - Three Months to November 30
103,817
10674
37,002
19,526
46,641
Quarter III- Three Months to February 28
28,436
861,399
29,649
18,248
26,480
Full Year – Twelve Months to May 31
57,501
1,164,953
26,841
10,618
22,706
           
Total stockholders’ equity:
         
Quarter I - Three Months to August 31
486,288
(66,998)
(42,951)
(6,430)
50,798
Quarter II - Three Months to November 30
87,782
(79632)
(51,555)
(6,852)
45,772
Quarter III- Three Months to February 28
19,643
385,798
(55,692)
(9,369)
24,966
Full Year – Twelve Months to May 31
56,566
605,692
(59,444)
(36,332)
1,581
           
Total liabilities and stockholders’ equity:
         
Quarter I - Three Months to August 31
552,128
20,375
1,964
16,508
52,181
Quarter II - Three Months to November 30
103,817
10,674
37,002
19,526
46,641
Quarter III- Three Months to February 28
28,436
861,399
29,649
18,248
26,480
Full Year – Twelve Months to May 31
57,501
1,164,953
26,841
10,618
22,706
           
Cash dividends per share:
         
Quarter I - Three Months to August 31
-
-
-
-
-
Quarter II - Three Months to November 30
-
-
-
-
-
Quarter III- Three Months to February 28
-
-
-
-
-
Full Year – Twelve Months to May 31
-
-
-
-
-
 
 
 
 
ITEM 7.       MANAGEMENTS’ DISCUSSION AND ANALYSIS

Overview

This Annual Report on Form 10-K contains "forward-looking statements" relating to the registrant which represent the registrant's current expectations or beliefs including, statements concerning registrant’s operations, performance, financial condition and growth. For this purpose, any statement contained in this annual report on Form 10-K that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "anticipation", "intend", "could", "estimate", or "continue" or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel and variability of quarterly results, ability of registrant to continue its growth strategy and competition, certain of which are beyond the registrant's control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.

We are a start-up, exploration stage company with a limited operating history. We intend to pursue exploration opportunities regarding mineral exploration projects as opportunities arise.

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles and we have expensed all development expenses related to the establishment of the company.

Project Funding
As reported in a Form 8-K filed May 3, 2011, Guinness' partner Ansell Capital Corp (TSXV: ACP) (‘Ansell’) successfully raised Cdn$5,582,000 (US$5,297,318) to fund exploration work at the Charlotte Project located in the Whitehorse Mining District of the Yukon Territory. This funding initiative fulfills a key term of the Ansell Agreement and provides sufficient capital for the first stage of development at the Charlotte Project.

Charlotte Project Assay Results
Assay results from the Charlotte Project 2011 and 2010 summer exploration programs  have yielded promising data and are as follows:

2011 PROGRAM:

On September 6, 2011, Ansell Capital Corp. in its role as operator of the Charlotte Project, released the following drill results from the first nine holes of its Charlotte Project 2011 exploration program:

"Assays have been received for the first nine diamond drill holes, totalling 1492 metres, from the recently completed 20 hole drill program on the Flex Zone at the Charlotte property located in the prolific Tintina belt. Previous historical drilling by other operators in the general area returned encouraging results such as drill holes DDH-10-243, which contained an intersection of 28.9 metres averaging 5.06 grams per tonne (g/t) gold and DDH-10-248, which contained 8.60 metres averaging 5.00 g/t gold.

Drilling this year has intersected broad well-mineralized zones, enhancing the potential for a bulk mineable deposit to be hosted on the property.


 
 
 
Highlights include:

           DDH-11-257                      11.04 g/t Au over 23.05 m
           DDH-11-254                      3.38 g/t Au over 12.40 m
           DDH-11-255                      2.29 g/t Au over 18.45 m
           DDH-11-259                      3.00 g/t Au over 14.55 m
           DDH-11-258                      2.45 g/t Au over 12.50 m and
           DDH-11-262                      11.71 g/t Au over 6.60 m.
 
Detailed results are shown in the following table:

Hole
 
From
To
Width
Au
   
(m)
(m)
(m)
g/t
DDH-11-254
 
92.40
104.80
12.40
3.38
Az 060
includes
97.20
98.50
1.30
22.21
Dip -65
         
   
118.00
125.30
7.30
1.11
           
   
148.60
154.00
5.40
3.09
 
includes
150.60
154.00
3.40
4.45
           
DDH-11-255
 
108.10
111.00
2.90
1.03
Az 078
         
Dip -65
 
112.90
114.25
1.35
1.22
           
   
118.15
136.60
18.45
2.29
 
includes
126.00
133.50
7.50
5.14
           
DDH-11-256
 
23.30
27.90
4.60
0.41
Az 078
         
Dip -50
 
56.90
58.60
1.70
1.47
           
   
71.15
81.10
9.95
3.83
 
includes
77.50
81.10
3.60
7.63
           
   
91.60
97.00
5.40
1.13
 
includes
93.00
93.50
0.50
9.64
           
DDH-11-257
 
20.12
22.12
2.00
0.80
Az 038
         
Dip -50
 
30.30
53.35
23.05
11.04
 
includes
47.66
52.85
5.19
43.16
           
DDH-11-258
 
29.82
32.90
3.08
3.29
Az 045
includes
31.80
32.90
1.10
8.26
Dip -52
         
   
50.90
63.40
12.50
2.45
 
includes
57.90
63.40
5.50
4.31
 
includes
61.85
62.55
0.70
16.00
           
   
69.20
77.15
7.95
1.78
 
includes
75.00
75.90
0.90
10.30
           
   
85.00
88.05
3.05
0.44
(continued)

 
 
Hole
 
From
To
Width
Au
   
(m)
(m)
(m)
g/t
DDH-11-259
 
55.90
70.45
14.55
3.00
Az 079
includes
58.10
60.30
2.20
16.26
Dip -50
         
   
83.50
92.15
8.65
3.41
 
includes
88.30
92.15
3.85
6.94
 
includes
89.85
90.55
0.70
18.60
           
   
120.20
122.70
2.50
1.64
           
   
127.30
133.23
5.93
1.21
 
includes
128.15
129.40
1.25
4.56
           
DDH-11-260b
 
45.12
63.41
18.29
1.45
Az 071
includes
58.75
63.41
4.66
4.37
Dip -50
         
   
119.00
126.70
7.70
3.10
 
includes
121.65
122.95
1.30
16.21
           
   
254.74
264.60
9.86
0.36
           
DDH-11-261
 
24.90
25.25
0.35
9.70
Az 045
         
Dip -50
 
53.10
69.00
15.90
0.89
           
 
 
116.58
119.80
3.22
2.16
           
DDH-11-262
 
97.85
99.60
1.75
0.90
Az 045
         
Dip -50
 
107.40
114.00
6.60
11.71
 
includes
107.40
108.60
1.20
62.80

Intersection widths reported are downhole widths. A minimum of 0.2 g/t Au was applied to calculate the average grade of each section, with no included internal waste.
 
It should be noted that no cutting of high grade samples has been applied. At this time, Ansell has insufficient data to apply a cutting factor that is statistically relevant to this property.
 
Incomplete silver assays have also been received. Once full silver results are delivered and reviewed, a further release will be made. At that time it is anticipated that a thorough geological analysis of these results will also be reported.
 
Chris M. Healey. P Geo, a director of Ansell, is the qualified person responsible for the technical information in this release."

 

 
 
2010 PROGRAM:

2010 Assays Set #1:

During its summer 2010 drill program at its Charlotte Project near Mt. Nansen in the Yukon Territory, Canada, core drilling was conducted to confirm prior drill intercepts and to expand on known gold and silver mineralization along strike and down dip. The Company completed a total of 1,451.68 metres in fourteen diamond drill holes in the Flex zone, one of five known mineralized zones on the property.

The drill holes were chosen specifically to test a 450m strike length of the Flex Zone at various depths. The holes tested gold and silver grades and thicknesses to confirm previously drilled holes (to view a map of the property, drill hole locations and other information, visit www.guinnessexploration.com).

New holes confirmed and previous holes as set out below:
 
2010 confirmation holes
Previous holes
DDH 10-240
DDH 98-193
DDH 10-241
DDH 98-194
DDH 10-242
DDH 86-30
DDH 10-243
DDH 94-139
DDH 10-244
DDH 95-164
DDH 10-245
DDH 94-141
 
Results are tabulated below. The 2010 confirmation holes are shown in regular font, with increased widths shown in bold font. Results of the previous holes are shown in an italics font for comparison on a hole by hole basis.

Drill Hole #
Dip
Azimuth
 
From:
To:
Width
Au (g/t)
Ag (g/t)
                 
DDH-10-240
-50 degrees
078
 
59.6
90.85
31.25
1.66
67.91
     
Including
66.3
68
1.7
13.14
778.03
       
73.5
74.35
0.85
3.09
81.6
       
78.8
79.3
0.5
8.68
172.9
       
89.9
90.85
0.95
2.21
103.6
     
and
96
97.75
1.75
1.89
60
confirming DDH 98-193
       
12.3
6.82
266.65
DDH-10-241
-50 degrees
078
 
58.25
82.5
24.25
1.77
115.96
     
Including
64.75
64.95
0.2
22.8
2946
       
67.15
68.6
1.45
2.56
97.4
       
81.6
82.5
0.9
23.81
973.44
confirming DDH 98-194
       
9.9
5.9
87.1
                 
DDH-10-242
-50 degrees
045
 
15.85
21.5
5.65
8.61
186.2
     
Including
15.85
17.95
2.1
9.73
337
       
19.4
21.5
2.1
12.92
152.23
       
36
36.7
0.7
3.56
58.8
confirming DDH 86-30
       
8.07
3.85
209.13
(continued)
 
 
 
 
Drill Hole #
Dip
Azimuth
 
From:
To:
Width
Au (g/t)
Ag (g/t)
                 
DDH-10-243
-50 degrees
045
 
19.45
48.35
28.9
5.06
138.09
     
Including
28.35
31.4
3.05
14.02
28.57
       
33.25
34.65
1.4
6.58
298
       
37.5
40.55
3.05
14.3
55.5
       
46.05
48.35
2.3
11.8
1215
confirming DDH 94-139
       
22.05
4.15
161.24
                 
DDH-10-244
-50 degrees
045
 
12.2
20.75
8.55
2.19
64.2
     
Including
14.55
15.75
1.2
4.37
193
confirming DDH 95-164
       
10.01
5.31
70.9
                 
DDH-10-245
-60 degrees
045
 
57
62.35
5.35
20.91
131.54
     
Including
58.8
61.85
3.05
35.6
18.1
confirming DDH 94-141
       
7.62
6.01
246.12

The Flex Zone occurs as two sub-parallel anastamosing quartz-sulfide vein systems, known historically as the “Hanging Wall” and “Footwall” veins. Veins host strong gold and silver mineralization associated primarily with pyrite and lesser arsenopyrite, stibnite, galena and sphalerite. Veins often exhibit propylitic, phyillic, argillic and silicic alteration in broad alteration envelopes.

The Flex Zone is hosted in an assemblage of metamorphic rocks comprised dominantly of quartz-feldspar+/-chlorite gneiss which grades locally into quartzite. Dark green amphbolite gneiss, comprised of equal parts plagioclase and actinolite, is commonly intercalated with the quartz-feldspar gneiss. These older rocks are cut by narrow quartz-feldspar dykes and sills. The north end of the Flex Zone, in the vicinity of 10-240 and 241, is underlain by a quartz-feldspar porphyry stock at depth.

Guinness management is extremely pleased with these initial results. Consulting geologist John Hiner commented, “We are well pleased with the level of gold and silver values, and the values match well with previous results.  Although these intersections are not true widths, we have confirmed the mineralized zones in all five holes, and have increased mineralized thicknesses in three of the five holes reported to date. These zones are substantially wider than has been reported previously, and we believe we have now demonstrated that there is an excellent opportunity to define a bulk-mineable deposit at this project.”

2010 Assays Set #2:

The Company reported on the final eight holes completed during its 2010 drill program at the Company’s Charlotte Project near Mt. Nansen in the Yukon Territory, Canada. As reported in the news release dated October 18, 2010, core drilling was conducted to confirm prior drill intercepts and to expand on known gold and silver mineralization along strike and downdip. The Company completed a total of 1,451.68 metres in fourteen diamond drill holes in the Flex zone, one of five known mineralized zones on the property.

 

 
Core holes DDH-10-246 through DDH-10-253 were drilled as twins of previous holes or infills along strike.  Holes 246 and 247 were planned to confirm previously encountered mineralization at the southeast end of the Flex Zone.  The other holes were drilled to test for extensions of gold and silver mineralization downdip from known mineralization.  The holes are described in more detail as follows:

DDH-10-246 was drilled to confirm the southeast extension of the Flex Zone.  However due to poor hole conditions, the hole was abandoned before intersecting the target mineralized zone.

DDH-10-247 was a 35 metre step out to the northwest of the prior hole, and was planned as an infill hole on the Flex Zone.  This hole also had to be abandoned due to poor ground conditions prior to reaching the mineralized zone.

DDH-10-248 was drilled from the same drill pad as hole DDH-10-240, which was a twin of hole 98-193.  This hole was steepened to pierce the mineralized zone 75 metres downdip from the surface and 25 metres below hole 98-193.

DDH-10-249 was located to test a 25 metre downdip extension of mineralization encountered in historic hole 98-192.

DDH-10-250 was located at the same location as DDH-10-249, but steepened to test mineralization 75 metres downdip from the surface and 25 metres below hole 98-192.

DDH-10-251 was drilled at the same location as historic hole 98-195, but steepened to test the mineralization at 75 metres depth.

DDH-10-252 was drilled at the same site as historic hole 98-196, but steepened to test the mineralized zone at 75 metres depth.

DDH-10-253 was located 50 metres west of DDH-10-240 and DDH-10-248 to test gold and silver mineralization at 125 metres depth.

Gold and silver assays for the holes are tabulated below:

Hole Number
Azimuth
(degrees)
Dip
(Degrees)
 
From:
To:
Length
(m)
Au
(ppm)
Ag
(ppm)
                 
DDH-10-246
078
-50
 
26.3
42.05
15.75
0.71
49.0
     
Including:
37.50
38.80
1.30
2.90
3.10
       
38.80
39.25
0.45
5.68
7.40
 Twin of hole 98-239
       
 8.40
 3.63
114
DDH-10-247
078
-50
     
No Significant Assays
35 metre step-out from of hole 98-239
     
 8.40
 3.63
114
DDH-10-248
078
-65
 
83.30
91.90
8.60
3.25
241
     
Including:
83.30
84.00
0.70
1.36
13.1
       
84.00
85.00
1.00
3.35
129
       
86.70
87.45
0.75
5.00
188
       
87.45
88.45
1.00
5.70
630
(continued)
 
 
 
 
Hole Number
Azimuth
(degrees)
Dip
(Degrees)
 
From:
To:
Length
(m)
Au
(ppm)
Ag
(ppm)
                 
DDH-10-248
078
-65
 
101.4
115.65
14.25
2.13
82.8
     
Including:
112.65
113.5
0.85
22.6
1078
Test Below 98-193
       
12.3
6.8
267
DDH-10-249
078
-48.8
 
76.15
83.65
7.50
3.81
38.2
     
Including:
77.15
78.15
1
3.02
125
       
78.15
78.65
0.50
6.06
22.5
DDH-10-249
078
-48.8
 
86.4
91.4
5.00
3.52
119
     
Including:
87.40
87.90
0.50
24.4
1058
Test below 98-192
       
14.3
1.01
29.3
DDH-10-250
076
-65
 
83.00
100.40
17.40
2.34
78.7
     
Including:
91.40
92.12
0.72
6.00
492
       
92.99
93.65
0.66
4.56
8.70
       
93.65
94.10
0.45
23.1
527
       
94.72
96.95
2.23
5.10
149
DDH-10-250
076
-65
 
111.5
112.5
1.00
0.15
26.6
DDH-10-250
076
-65
 
115
119.8
4.80
0.51
22.9
 Test Below 98-192
       
 14.30
1.01 
29.3
DDH-10-251
078
-65
 
101.5
116.74
15.24
0.72
34.5
     
Including:
114.75
116.74
1.99
2.05
184
 Test below 98-195
       
 13.6
1.2
52.7
DDH-10-252
078
-65
 
96.15
101.6
5.45
1.12
39.9
     
Including:
99
100.2
1.2
2.22
86.6
 Test below 98-196
       
2.5 
1.65
 73.4
DDH-10-253
078
-65
 
157.55
163.98
6.43
1.40
17.8
     
Including:
161.27
162.55
1.28
2.07
12.7
       
162.55
163.98
1.43
3.02
4.00
Step-out test of 98-193
       
12.3
6.8
267

2010 Assays Set #3:

The Company reported on the assay results from trenching numerous mineralized zones at the Company’s Charlotte Project, Yukon Territory, Canada. Trenches were cut at the Huestis, Webber, Cabin, Orloff-King, Dickson, and GRW zones. Trench results confirm or extend known mineralization at the Huestis and Webber zones.  Trenches at the Cabin, Orloff-King, and GRW zones have successfully delineated new zones of gold and silver mineralization that is open to depth and along strike.  In particular, trenching at the GRW zone identified gold and silver in structural settings similar to the Flex zone (although of lower grade), which was drilled earlier in 2010 and additionally disclosed the presence of copper in intrusive rocks that were identified in the GRW trenches.  Selected trench results are presented in the table below:



 
 
 
Zone
Trench #
From
To
Width
Au (g/t)
Ag (g/t)
Orloff King
OK10-1
45.5
49.2
3.7
1.50
40.3
Orloff King
OK10-2
47.8
50.7
2.9
2.12
Na
Orloff King
OK10-5
11.4
12.1
0.7
7.05
34.7
Orloff King
OK10-9
57.5
65.5
8.0
1.57
5.17
Cabin
CAB10-1
40.1
43
2.9
1.353
15.7
Webber
WEB10-2
21.0
23.4
2.2
1.43
4.03

Virtually all of the trenches contained zones of anomalous gold and silver, ranging from 0.2 grams/tonne (‘g/t’) up to the level of results presented above. At Orloff King, Cabin, Webber, and GRW zones, the mineralized trends can be tracked from trench to trench. Work on trace element geochemistry continues, but early analysis suggests the presence of geochemical zonation that may be attributed to the presence of porphyry copper-gold mineralization in the vicinity of the GRW zone.

Trenching totalled 2,243 metres in 20 trenches. Of these, 16 trenches totalling 1,917 metres bottomed in bedrock while the remaining four trenches bottomed in permafrost and may be completed in following seasons. Ten trenches totalling 1,100 metres were cut on the Orloff-King Zone, of which 9 trenches totalling 1,052 metres reached bedrock. A total of five trenches, combined for 665 metres, were cut on the GRW zone and, of these, three bottomed in bedrock for a total of 466 metres completed to bedrock. The remaining five trenches were cut on the Webber, Huestis, and Cabin zones, and on geochemical anomalies scattered across the property.  All but one of these five trenches reached bedrock for a total of 400 metres of trenching completed to bedrock. A total of 554 unique samples were collected from trenches and submitted for assay.

Other Recent Developments

Nantawa Modification Agreement

On October 12, 2010, Guinness signed the Nantawa Modification Agreement with Eagle Trail Properties Inc. (“ETPI”) in which Guinness received full vesting of a 49% interest in 175 full or fractional mineral claims/leases (now renamed the "Charlotte Project") located in the Mount Nansen area of the Whitehorse Mining District of the Yukon Territory, Canada (the “Mineral Claims”). The other 51% interest in the Mineral Claims was retained by ETPI. The Mineral Claims had been part of the Nantawa Agreement signed between the Company and ETPI on November 19, 2009 and amended February 4, 2010, under which the Company acquired the right to purchase the Mineral Claims and an additional set of 47 mineral claims/leases (the “Tawa Claims”) from ETPI for total consideration of US$1,005,668 (comprised of: US$943,868 cash, plus 60,000,000 restricted common shares of Guinness valued at US$0.00103 per share for a total share value of $61,800).

Cash payments under the Nantawa Agreement had been scheduled to be made in two equal installments of US$471,934, the first due by May 30, 2010 and the second due by February 28, 2011. The Company met its first payment, but projected it would not have the resources to fulfill the second payment by February 28, 2011 and the Board determined it was in the best interests of the Company to negotiate revised purchase terms from ETPI for the Mineral Claims. To provide consideration to ETPI, the Company agreed to waive its rights under the Nantawa Agreement to the Tawa Claims, which had lapsed while in trust with ETPI.

 



In sum, the Nantawa Modification Agreement has resolved the Tawa Claims matter between the parties and has provided the Company an immediate vesting of a 49% interest in the Mineral Claims without the requirement to make further payments to ETPI.

A copy of the Nantawa Modification Agreement was filed as an Exhibit to a Form 8-K on October 12, 2010 and is incorporated herein by reference.
 
Staff changes
 
Effective October 12, 2010, Mr. John Hiner resigned his positions as Chief Geologist, Vice
President, Secretary and Treasurer for personal reasons and has remained with the Company as our primary geological consultant. On October 12, 2010, Mr. Nigel Mattison was appointed as Secretary and Treasurer.

Ansell Agreement

On March 4, 2011, the Company executed an option agreement (the “Ansell Agreement”) with Ansell Capital Corp. (“Ansell”), ETPI and two individuals (the “Additional Parties”) which will provide funding for the Charlotte Project. Subject to the terms of the Ansell Agreement (incorporated herein by reference), Guinness, ETPI and the Additional Parties (collectively the “CSG Group”), have agreed to grant Ansell an option to acquire up to an 85% undivided interest in the 128 mineral claims which form the Charlotte Project based on Ansell providing financing and expertise for development of the project. Under the Ansell Agreement, ETPI will hold the Charlotte Project claims (the “Properties”) in trust for all parties during the term of the Ansell Agreement. Upon Ansell earning an interest in the Properties, the parties have agreed to form a joint venture to further explore and develop the Properties, all upon and subject to the terms and conditions set out in the Ansell Agreement. Ansell has received the required approval of the Canadian TSX Venture Exchange in connection with the Ansell Agreement and Ansell is now become the Operator of the project and will bear all project expenditures.

Ansell Capital Corp. (TSX-V: ACP) is a publicly traded Canadian exploration company focused on exploring and developing gold/silver properties with the potential to host world class, economic deposits. Ansell's current projects are the Charlotte Project, Yukon, and the Kuyakuz Mountain Project, located in British Columbia. More information on Ansell can be found at: http://www.ansellcapital.com


 






 
 
Results of Operations for the Fiscal Years ended May 31, 2011 and May 31, 2010 and the Exploration Stage Period of July 15, 2005 to May 31, 2011:

Our operating results for the years ended May 31, 2011 and May 31, 2010 and the Exploration Stage Period of July 15, 2005 to May 31, 2011 (the ‘Exploration Stage’) are summarized as follows:

   
May 31, 2011
   
May 31, 2010
   
Exploration
Stage
 
Revenue
  $ -     $ -     $ -  
Expenses (including interest expense)
  $ 1,246,654     $ 1,393,308     $ 2,756,262  
Debt cancelation gain non-cash gain
  $ (471,934 )   $ -     $ (471,934 )
Net Loss
  $ (774,720 )   $ (1,396,663 )   $ (2,284,328 )
 
Revenues

We have not earned any revenues since our inception and we do not anticipate earning revenues in the near future.

Expenses

Exploration Expenses
Exploration expenses were $850,347 and $177,415, respectively for the years ended May 31, 2011 and May 31, 2010. For the year ended May 31, 2011, exploration expenses included a non-cash charge of $50,265 related to the expensing of vested stock options. Exploration expenses for the Exploration Stage totaled $1,027,762. During the current year period, exploration expenses related to fees paid for geological consulting services and geological general contractor fees and expenditures. We do not expect to incur significant exploration expenses during the next twelve months.

Professional Fees
Profession fees were $301,952 and $136,206, respectively for the years ended May 31, 2011 and May 31, 2010. For the year ended May 31, 2011, professional fees included a non-cash charge of $169,473 related to the expensing of vested stock options. Professional fees for the Exploration Stage totaled $517,122. During the current year period, professional fees included fees paid to our CEO, Secretary and Treasurer, and were incurred for expenses for legal, auditor and accounting fees. In the next twelve months, we project professional fees will substantially decrease.

Administrative Expenses
Administrative expenses were $29,988 and $27,723, respectively for the years ended May 31, 2011 and May 31, 2010, respectively. During the Exploration Stage Period administrative expenses totaled $71,025. During the current period administrative fees were primarily composed of office expenses, bank charges and filing fees related to our SEC filings. We expect administrative fees to decrease moderately during the coming year.



 
 
Investor Relations
Investor Relations expenses comprise costs for press releases, maintenance of the Company’s website and other investor information initiatives. During the years ended May 31, 2011 and May 31, 2010, these expenses totaled $64,367 and $46,296, respectively. For the Exploration Stage Period, Investor Relations expenses totaled $110,663. We anticipate Investor Relations expenses decrease substantially during the coming year.

Impairment Losses on Mineral Properties
There were no impairments losses recorded for the year ended May 31, 2011. During the year ended May 31, 2010, the Company formalized its debt to ETPI by signing a promissory note in the amount of $943,868 plus share payments. To account for this event, $1,005,668 was entered as a mineral property asset, with a corresponding accounts payable entry. Additionally, to conform with generally accepted accounting principles, pertaining to the classification of the mineral properties as assets, an impairment charge of $1,005,668 was entered against this asset based on the Company’s impairment analysis as of May 31, 2010.

On April 6, 2006 we purchased a uranium property in Saskatchewan, Canada and on July 17, 2008 determined not to proceed with this property and formally abandoned the project. This abandonment is recorded in our financial statements as an Asset Impairment and totaled $15,985 and is included in the total loss for the Exploration Stage Period of $1,021,653.

Net Loss

We incurred a net loss of $(774,720) for the twelve months ended May 31, 2011 compared with a net loss of $(1,396,663) for the same period ended May 31, 2010. The net loss for the year ended May 31, 2011 included a non-cash gain of $471,934 related to the cancelation of the Note Payable owing to ETPI. The net loss for the Exploration Stage Period totaled $(2,284,328).

Liquidity and Capital Resources

Our financial position as at May 31, 2011 and May 31, 2010 are as follows:
 
Net Working Capital

   
As at
May 31, 2011
   
As at
May 31, 2010
 
             
Current Assets
  $ 57,501     $ 1,164,953  
Current Liabilities
    935       559,261  
Net Working Capital
    56,566       605,692  

Our net working capital decreased from 605,692 at May 31, 2010 to $56,566 at May 31, 2011 as a result of funds expended for our exploration program.
 
Cash Flows
 
   
Year ended
May 31, 2011
   
Year ended
May 31, 2010
 
             
Net cash (used) by Operating Activities
  $ (924,701 )   $ (489,192 )
Net cash (used) by Investing Activities
    -       (471,934 )
Net cash provided by Financing Activities
    -       1,913,715  
Increase (Decrease) in Cash during the Year
    (918,845 )     952,589  
Cash, Beginning of Year
    973,227       20,638  
Cash, End of Year
    54,382       973,227  


 
 
 
Since the date of our inception to May 31, 2011, we have raised $2,053,500 though private placements of our common shares. As of May 31, 2011 we had cash on hand of $54,382 and prepaid expenses of $3,119.

Purchase of Significant Equipment

We currently do not have plans to purchase any significant equipment over the next twelve months.

Personnel Plan

We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors). We do and will continue to outsource contract employment as needed.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Material Events and Uncertainties

Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in mineral resource markets. The continuation of our business is dependent upon obtaining further financing, a successful program of exploration, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. We will pursue various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

Employees

As of May 31, 2011, we had two employees and used contracted services to perform geological work, legal services and our bookkeeping. Going forward, the Company will use consultants with specific skills to assist with various aspects of its project evaluation, due diligence, acquisition initiatives, corporate governance and property management.



 


 
Critical Accounting Policies
 
The Company’s financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
 
Our significant accounting policies are summarized in NOTE 2 of our financial statements. While all these significant accounting policies impact its financial condition and results of operations, the Company views certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on the Company’s financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.


ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have not entered into derivative contracts either to hedge existing risk or for speculative purposes.
 
 
ITEM 8.       FINANCIAL STATEMENTS
 
 
INDEX TO FINANCIAL STATEMENTS






 
GUINNESS EXPLORATION, INC. AND SUBSIDIARY
(An Exploration Stage Company)
 
MADSEN & ASSOCIATES CPA’s INC.
684 East Vine Street, #3
Certified Public Accountants
Murray, Utah, 84107
 
Telephone 801-268-2632
 
Fax 801-262-3978

To the Board of Directors and
Stockholders of Guinness Exploration, Inc. and Subsidiary
(An Exploration Stage Company)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of Guinness Exploration, Inc. and Subsidiary (An Exploration Stage Company) (The Company) as of May 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended May 31, 2011, and for the period from July 15, 2005 (date of inception) to May 31, 2011. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Guinness Exploration, Inc. and Subsidiary (An Exploration Stage Company) as of May 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended May 31, 2011, and the period from July 15, 2005 (date of inception) to May 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company will need additional working capital for its planned activity, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in the notes to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.


“Madsen & Associates, CPA’s Inc.”
Murray, Utah
August 26, 2011

 


 

 
 
GUINNESS EXPLORATION, INC. AND SUBSIDIARY
(An Exploration Stage Company)
 
Consolidated Balance Sheets
 
   
May 31, 2011
   
May 31, 2010
 
ASSETS
           
             
CURRENT ASSETS
           
Cash
  $ 54,382     $ 973,227  
Prepaid expenses
    3,119       191,726  
Total current assets
    57,501       1,164,953  
                 
OTHER ASSETS
               
Mineral properties (Notes 2, 4, and 7)
           
Total other assets
           
                 
Total assets
  $ 57,501     $ 1,164,953  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
CURRENT LIABILITIES
               
Accounts payable and accrued expenses
  $ 935     $ 87,327  
Note payable (Note 6)
          471,934  
Total current liabilities
    935       559,261  
                 
STOCKHOLDERS’ EQUITY
               
Preferred stock, 100,000,000 shares with par value $0.001 authorized, zero shares issued and outstanding
           
Common stock, 500,000,000 shares with par value $0.001 authorized, 129,325,000 and 134,325,000 shares issued and outstanding at May 31, 2011 and May 31, 2010 respectively (Notes 2 and 9)
    129,325       134,325  
Paid-in Capital (Note 9)
    2,205,713       1,980,975  
Accumulated deficit in the exploration stage
    (2,284,328 )     (1,509,608 )
Accumulated other comprehensive income (Note 2)
    5,856        
Total stockholders’ equity
    56,566       605,692