SOUTH AMERICAN GOLD CORP. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - SOUTH AMERICAN GOLD CORP.	Financial_Report.xls
EX-32.1 - EXHIBIT321 - SOUTH AMERICAN GOLD CORP.	exhibit321.htm
EX-31.1 - EXHIBIT311 - SOUTH AMERICAN GOLD CORP.	exhibit311.htm
EX-31.2 - EXHIBIT312 - SOUTH AMERICAN GOLD CORP.	exhibit312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

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

For the transition period from to

Commission File Number: 000-52156

South American Gold Corp.

(Exact name of registrant as specified in its charter)

Nevada		98-0486676
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3645 E. Main Street, Suite 119, Richmond, IN 47374

(Address of principal executive offices)

(765) 356-9726

(Registrant’s telephone number, including area code)

___________________________________________________________________

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

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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. o Yes x No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ No

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

Large accelerated filer ¨ Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ý

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Outstanding at November 7, 2011
Common Stock, $0.001 par value		79,211,890

Table of Contents

	FORM 10-Q SOUTH AMERICAN GOLD CORP. SEPTEMBER 30, 2011 TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	14

Item 4.	Controls and Procedures.	14
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	16

Item 1A.	Risk Factors.	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	16

Item 3.	Defaults Upon Senior Securities.	16

Item 4.	(Removed and Reserved).	16

Item 5.	Other Information.	16

Item 6.	Exhibits.	17

	Signatures

	Exhibits

	Certifications

- 2 -

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Our unaudited financial statements included in this Form 10-Q are as follows:

F-1	Unaudited Balance Sheet as of September 30, 2011.

F-2	Unaudited Statements of Operations for the three months ended September 30, 2011 and 2010 and from inception on May 25, 2005 to September 30, 2011.

F-3	Unaudited Statements of Cash Flows for the three months ended September 30, 2011 and 2010 and from inception on May 25, 2005 to September 30, 2011.

F-4	Notes to Unaudited Financial Statements.

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the interim period ended September 30, 2011 are not necessarily indicative of the results that can be expected for the full year.

- 3 -

Table of Contents

SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES
(formerly Grosvenor Explorations Inc.)
(An Exploration Stage Company)
Consolidated Balance Sheets

	(Unaudited)			(Audited)
	September 30,			June 30,
	2011			2011

Assets
Current Assets
Cash and cash equivalents	$	484		$	120,537
Prepaid Expenses		5		$	-
Total current assets		490			120,537

Equipment net of depreciation		1,501			1,657

Deposit		497,959			532,140

Total Assets		499,950			654,334

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable		471,407			252,262
Due to related parties		-			-
Total Liabilities		471,407			252,262


Stockholders' Equity (Deficit)
Common stock, $0.001 par value, 450,000,000 shares
authorized, 79,211,890 & 79,211,890 issued & outstanding
as of September 30, 2011 & June 30, 2011 respectively		79,212			79,212
Additional paid-in capital		3,158,181			3,158,181
Accumulated other comprehensive income		(11,119	)		27,332
Deficit accumulated during the exploration stage		(4,084,425	)		(3,854,622	)

Total Stockholders' Equity (Deficit) attributable to South American
Gold Corp. and Subsidiaries		(858,151	)		(589,897	)

Non-controlling interest		886,694			991,968

Total stockholders' equity (deficit)		28,543			402,071

Total liabilities and stockholders' equity (deficit)	$	499,950		$	654,333



The accompanying notes are an integral part of these financial statements

F - 1

Table of Contents

SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES
(formerly Grosvenor Explorations Inc.)
(Exploration Stage Company)
Statements of Operations and Comprenensive Income
(Unaudited)

	For the three months ended September 30			For the three months ended September 30			For the Period May 25, 2005 (Inception) to
	2011			2010			September 30, 2011


Revenues	$	-		$	-		$	-

Operating Expenses
Exploration Expense		121,274			-			621,972
Stock Based Compensation		-			-			1,566,348
Impairment loss on Goodwill		-			-			1,280,913
Management Expense		57,563			7,000			253,888
Legal Expense		33,172			-			172,881
Accounting and Audit Expense		32,616			7,500			166,978
Professional Fees - Consulting		44,022			7,500			170,000
Other General & Administrative Expense		50,996			17,051			213,418
Total Operating Expense		339,643			39,051			4,446,397

Income (loss) from operations		(339,643	)		(39,051	)		(4,446,397	)

Other Income
Interest income		4,566			-			11,167
Total Other Income		4,566			-			11,167

Net Loss		(335,077	)		(39,051	)		(4,435,230	)

Other comprehensive income (loss)
Foreign currency translation adjustment		(9,613	)		-			(2,780	)
Foreign currency translation adjustment attributable to non-controlling interest attributable to non-controlling interest		(28,838	)		-			(8,339	)
Total other comprehensive income (loss)		(38,451	)		-			(11,119	)

Comprehensive income (loss)		(373,528	)		(39,051	)		(4,446,349	)

Net Loss		(335,077	)		(39,051	)		(4,435,230	)

Net income (loss) attributable to non-controlling interest		(105,274	)		-			(350,806	)

Net income (loss) attributable to South American Gold Corp.	$	(229,803	)	$	(39,051	)	$	(4,084,425	)


Net loss per common share outstanding,
basic and diluted		**			**			**

Weighted average shares outstanding of common
stock, basic and diluted		79,211,890			214,226,504



The accompanying notes are an integral part of these financial statements

F - 2

Table of Contents

SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES
(formerly Grosvenor Explorations Inc.)
(Exploration Stage Company)
Consolidated Statement of Cash Flows


							For the period
							May 25, 2005
	For the three months ended						(inception) to
	September 30, 2011			September 30, 2010			September 30, 2011


Cash Flows Used in Operating Activities:
Net Loss		(335,077	)		(39,051	)		(4,435,231	)
Adjustments to reconcile net loss to net cash used in operations
Expenses paid by shareholders		-			-			39,000
Stock Based Compensation		-			-			1,566,348
Impairment loss on Goodwill		-			-			1,280,913
Accrued Interest - Deposit		3,872						7,294
Depreciation		156			-			156
Changes in operating assets and liabilities
Accounts Payable		219,145			31,818			597,002

Net Cash (Used In) Operating Activities		(111,904	)		(7,233	)		(944,519	)


Net Cash Used In Investing Activities
Equipment		-			-			(1,657	)
Business Acquisition		-			-			(550,000	)


Net Cash (Used In) Investing Activities		-			-			(551,657	)

Cash Flows From Financing Activities:
Advances from loan from related party		-			7,215			-
Proceeds from issuance of common stock		-			-			1,506,450

Net Cash Provided by Financing Activities		-			7,215			1,506,450

Effect of Foreign Currency on Cash		(8,149	)					(9,790	)

Net Increase (Decrease) in Cash		(120,053	)		(18	)		484

Cash at Beginning of Period		120,537			54			-

Cash at End of Period		484			36			484

Supplemental disclosure of cash flow information:

Expenses paid by shareholders								39,000
Shares issued for debt		-			-			125,595





The accompanying notes are an integral part of these financial statements

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

1. ORGANIZATION

The Company, South American Gold Corp. (formerly Grosvenor Explorations Inc.), was incorporated under the laws of the State of Nevada on May 25, 2005 with the authorized capital stock of 75,000,000 shares at $0.001 par value. In January 2008, a majority of the shareholders agreed to an increase in the authorized capital stock to 450,000,000 shares at $0.001 par value.

The Company was organized for the purpose of acquiring and developing mineral properties. The Company has not established the existence of a commercially minable ore deposit and therefore is considered to be in the exploration stage.

On September 8, 2010, the Company incorporated South American Gold Corp., as a subsidiary entity. On October 11, 2010, the company merged with this subsidiary for the sole purpose of effecting a name change. On the effective date of the merger, the company’s name changed to South American Gold Corp. In connection with the name change the common stock of the Company was assigned a new symbol for quotation on the OTC market, “SAGD”, and a new CUSIP number of 836301101.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for financial information.

Activities during the exploration stage include search for mineral deposits. As an exploration stage enterprise, our ability to address our liquidity issues by obtaining additional equity or debt financing is imperative. We have yet to generate a positive internal cash flow, and until we achieve the production stage, we are dependent upon debt and equity financing to fund our current operating activities.

In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows for all periods presented have been made. The information for the consolidated balance sheet as of June 30, 2011 was derived from audited financial statements. The results of operations for the three months ended September 30, 2011 are not necessarily indicative of the results to be expected for the year ending June 30, 2012.

Principles of consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. All significant intercompany accounts and transactions are eliminated upon consolidation.

In December 2007, the FASB issued a new standard which established the accounting for and reporting of non-controlling interest in partially owned consolidated subsidiaries. Certain provisions of this standard indicate, among other things, that non-controlling interest be treated as a separate component of equity. Increases and decreases in the parent's ownership interest that leave control intact are treated as equity transactions, rather than as step acquisitions or gains or losses on purchases or sales. Losses of a partially owned consolidated subsidiary are allocated to the non-controlling interest even when such allocation might result in a deficit balance.

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

Revenue and Cost Recognition

The Company recognizes revenue based on FASB Account Standards Codification (“ASC”) 605 “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. Revenues from service contracts are recognized on a monthly, quarterly or semiannual basis as specified in the terms of a given contract. Revenues from additional services are recognized currently as the work is performed.

Accounting Method

The Company recognizes income and expenses based on the accrual method of accounting.

Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with ASC 260 “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.

Evaluation of Long-Lived Assets

The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

Foreign Currency Translation

The Company’s functional and reporting currency is the U.S. dollar. The consolidated financial statements of the Company are translated to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters.” Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.

On September 30, 2011, the Company had a net operating loss carry forward of $4,084,425 for income tax purposes. The tax benefit of approximately $1.4 million from the loss carry forward has been fully offset by a valuation reserve because the future tax benefit is undeterminable since the Company is unable to establish a predictable projection of operating profits for future years. The losses expire 2025 through 2031.

Advertising and Market Development

The company expenses advertising and market development costs as incurred.

Goodwill

Goodwill consists of the excess of cost of acquired enterprises over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed. Goodwill is reviewed for impairment annually at the beginning of the Company’s fourth fiscal quarter, or more frequently if impairment indicators arise, on a reporting unit level. We compare our fair value, which is determined utilizing both a market value method and discounted projected future cash flows, to our carrying value for the purpose of identifying impairment. Our annual impairment review requires extensive use of accounting judgment and financial estimates.

Mineral Property Acquisition and Exploration Costs

Mineral property acquisition costs are initially capitalized as tangible assets when purchased. At the end of each fiscal quarter end, the Company assesses the carrying costs for impairment. If proven and probable reserves are established for a property and it has been determined that a mineral property can be economically developed, costs will be amortized using the units-of-production method over the estimated life of the probable reserve. Mineral property exploration costs are expensed as incurred.

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.

As of the date of these financial statements, the Company has not established any proven or probable reserves on its mineral properties and incurred only acquisition and exploration costs.

Although the Company has taken steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

Environmental Requirements

At the report date environmental requirements related to the mineral claim acquired are unknown and therefore any estimate of any future cost cannot be made.

Reclassifications

Certain prior period amounts have been reclassified to conform with current period presentation.

Stock-based compensation

Effective 9 November 2010, the Company adopted the provisions of ASC 718, “Compensation – Stock Compensation”, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting period of the equity grant). The Company adopted ASC 718 using the modified prospective method, which requires the Company to record compensation expense over the vesting period for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Accordingly, financial statements for the periods prior to 9 November 2010 have not been restated to reflect the fair value method of expensing share-based compensation. Adoption of ASC 718 does not change the way the Company accounts for share-based payments to non-employees, with guidance provided by ASC 505-50, “ Equity-Based Payments to Non-Employees”.

International Financial Reporting Standards

In November 2008, the Securities and Exchange Commission (“SEC”) issued for comment a proposed roadmap regarding potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Under the proposed roadmap, the Company would be required to prepare financial statements in accordance with IFRS in fiscal year 2014, including comparative information also prepared under IFRS for fiscal 2013 and 2012. The Company is currently assessing the potential impact of IFRS on its financial statements and will continue to follow the proposed roadmap for future developments.

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

Recent Accounting Pronouncements

The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements

3. MINERAL PROPERTIES

In February 2008, the Company purchased the Kon Tum Gold Claim located in Vietnam for $5,000. The Company had not established the existence of a commercially minable ore deposit on the Kon Tum Gold Claim. The claim has no expiry date and only if the Company decides to abandon them will it no longer have an interest in the minerals thereon. The acquisition costs have been impaired and expensed because there has been no exploration activity nor have there been any reserves established and we cannot currently project any future cash flows or salvage value for the coming years and the acquisition costs might not be recoverable.

4. BUSINESS ACQUISITION

On April 25, 2011, the “Company entered into an Amendment No.1 to the Stock Purchase Agreement dated February 25, 2011 with Minera Kata S.A., a corporation organized under the laws of the Republic of Panama, in order to acquire a twenty-five percent (25%) of the outstanding capital stock of Kata Enterprises, Inc., a corporation organized under the laws of the Republic of Panama (“Kata”), and to revise the terms of the options under which the Company has the ability to acquire the remaining seventy-five percent (75%) of the outstanding capital stock of Kata Enterprises, Inc. In November 2010, Kata entered into an agreement to acquire, through its subsidiary, an eighty-five percent (85%) interest in certain mining concessions located in the Nariño province of Colombia, but Kata has not successfully closed that transaction as of this time. Kata is an entity that has nominal operations and was recently incorporated. The closing of the transaction is conditioned upon the transferor of the Mining Concessions receiving acceptance of an application for a concession contract, executing a concession contract with Ingeominas (the entity authorized by the Colombian Ministry of Mines and Energy to grant mining concession contracts), registration of that contract at the National Mining Registry and securing the requisite approvals and governmental consents for the transfer of the Mining Concessions to Kata’s subsidiary. In the event that Kata fails to close the transaction by February 25, 2012 and to have the Mining Concessions registered in the National Mining Registry of Colombia in favor of Kata, the Agreement provides that Seller will be obligated to deliver to the Company one-hundred percent (100%) of the outstanding capital stock of Kata without any additional consideration being paid. In such event, the Company will not have acquired any direct or indirect interest in the Mining Concessions and not be entitled to recover any of its exploration expenditures of other expenses incurred in connection with acquiring the 25% Stake, other than its entitlement, indirectly through its subsidiary, to the return of the $500,000 paid to Seller on closing of the Agreement. Pursuant to the terms of the Amendment, the Company paid the Seller an additional $50,000 on the Effective Date, in addition to the $500,000 paid in cash at the closing of the Agreement, for the acquisition of the 25% Stake.

The Company follows ASC 810-10 and fully consolidates the assets, liabilities, revenues and expenses of Kata Enterprises, Inc. As a condition of stock purchase agreement, members of the board of directors of each of the acquired companies was required to tender their resignation with the Company subsequently appointing the new members of the board of directors. This effectively provided the Company management control of Kata Enterprises, Inc. as of February 25, 2011, resulting in a consolidation of the financial statements of Kata Enterprises, Inc.

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

The purchase price of $550,000 for 25% of the shares of Kata Enterprises, Inc. was allocated to the fair values of the assets and liabilities of Kata Enterprises, Inc., and noncontrolling interest, as follows:

Assets purchased:
Cash and cash equivalents	$	6,901
Mineral property interests		499,846
Total assets acquired		506,747

Liabilities assumed:
Accounts payable and accrued liabilities		160
Total liabilities assumed		160

Non-controlling interest:		1,237,500

Goodwill	$	1,280,913

As of September 30, 2011 mineral property interests of $497,959 consist of a deposit held in escrow pending the execution of the concessions contract with Ingeominas. The funds in the escrow account, which are denominated in Colombian pesos, have accrued interest of $7,294 as of September 30, 2011.

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

	Mineral Property Interests
Balance as of 2/25/2011 (Acquisition)	$	499,843
Accrued Interest as of 9/30/2011		7,294
Foreign Currency Adjustment as of 9/30/2011		(9,178	)
Balance as of September 30, 2011	$	497,959

5. GOODWILL

Goodwill is reviewed for impairment annually at the beginning of the fourth fiscal quarter, or more frequently if impairment indicators arise. During fiscal year 2011, we acquired goodwill totaling approximately $1.28 million in connection with the acquisition of Kata Enterprises, Inc. We compared our fair value, utilizing both a market value method and discounted projected future cash flows, to our carrying value for the purpose of identifying impairment. During fiscal year 2011 the Company recorded an impairment loss on goodwill of approximately $1.28 million that relate primarily to indeterminate future cash flow related to the acquisition.

6. RELATED PARTY TRANSACTIONS

As of September 30, 2011, the current officers are owed a total of $9,025 for management fees and expenses which are recorded in accounts payable on the balance sheet. Officers-directors also have made contributions to capital of $39,000, since inception, in the form of expenses paid for the Company.

7. CAPITAL STOCK

During January 2006, the Company completed a private placement of post-split 28,000,000 common shares for $4,000 to its directors and a private placement of post-split 7,350,000 common shares for $52,450.

On February 5, 2007, the shareholders approved a forward stock split at the ratio of seven shares for one share of the Company’s common stock. The forward split does not affect the Company’s authorized number of shares of common stock as set forth in its Articles of Incorporation and therefore such authorized number of shares after the forward split was 75,000,000.

The authorized share capital was increased from 75,000,000 common shares with a par value of $0.001 to 450,000,000 common shares with a par value of $0.001.

On January 18, 2008, the Company has a forward split of its common shares on the basis of 6 new shares for each one old share held. On August 25, 2009, certain creditors of the Company accepted 2,511,890 common shares at a price of $0.05 per share in consideration of amounts owed to them of $125,595. With this split and the shares issued for debt, there are now issued and outstanding 214,611,890 common shares outstanding with a par value of $0.001 per share. The post-split shares have been shown from inception.

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

On February 8, 2011, the former Chief Executive Officer and the Company’s former Chief Financial Officer agreed to allow the Company to cancel 141,200,000 shares of the Company’s common stock. No consideration was provided by the Company for the cancellation of shares.

On March 30, 2011, the Company completed a private placement of 5,800,000 Units at a purchase price of $0.25 per Unit to an aggregate of eight non-U.S. persons. The aggregate purchase price we received from the sale of these Units was $1,450,000 of which $1,450,000 was received by the closing date. Each unit is comprised of one (1) share of common stock, par value $0.001, and one (1) common stock purchase warrant to purchase one (1) share of our common stock, exercisable commencing six months after the date of issuance and terminating one (1) year from the closing date of the Private Placement. The exercise price for the Warrant is priced at $0.50 per share. As a result, we sold in the initial closing of the Private Placement a total of 5,800,000 shares of common stock and warrants to purchase 5,800,000 shares of common stock. The Units were not sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved. No registration rights were granted to the any of the Investors. On April 8, 2011 5,800,000 common shares were issued pursuant to this private placement. As of September 30, 2011, all share purchase warrants in this series remain outstanding.

Share Purchase Warrants

The following share purchase warrants were outstanding at 30 September 2011

	Exercise price		Number of warrants		Remaining contractual life (years)
Warrants	$	0.50		5,800,000		.50

				5,800,000

The following is a summary of warrant activities during the three months ended 30 September 2011:

	Number of warrants		Weighted average exercise price


Outstanding at 1 July 2011		5,800,000		0.50

Granted		-		-
Exercised		-		-
Cancelled		-		-
Expired		-		-

Outstanding at 30 September 2011		5,800,000		0.50

Weighted average fair value of warrants granted during the year				0.50

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SOUTH AMERICAN GOLD CORP. AND SUBSIDIARIES

(formerly Grosvenor Explorations Inc.)

(Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

Stock Options

The following incentive stock options were outstanding at 30 September 2011:

	Exercise price		Number of options		Remaining contractual life (years)
Options	$	0.59		2,900,000		9.5

				2,900,000

The following is a summary of stock option activities during the three months ended 30 September 2011:

	Number of options		Weighted average exercise price
Outstanding and exercisable at 1 July 2011		2,900,000		0.59

Granted		-		-
Exercised		-		-
Cancelled		-		-

Outstanding and exercisable at 30 September 2011		2,900,000		0.59

The aggregate intrinsic value of all warrants and stock options outstanding and exercisable at September 30, 2011 was $0.

8. GOING CONCERN

Our financial statements have been prepared on the basis of accounting principles applicable to a going concern. As a result, they do not include adjustments that would be necessary if we were unable to continue as a going concern and would therefore be obligated to realize assets and discharge our liabilities other than in the normal course of operations. As reflected in the accompanying financial statements, the Company is in the exploration stage with no revenues, has used cash flows in operations of $944,519 from inception of May 25, 2005 to September 30, 2011 and has a deficit accumulated during the exploration stage of $4,084,424 through September 30, 2011. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue,” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.

Important factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:

●	risk that we will not be able to remediate identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting;

●	risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our contemplated acquisition and exploration and development projects;

●

risk that Kata, through its subsidiary, fails to close a transaction by February 25, 2012 providing for registration in the National Mining Registry of Colombia of certain mining concessions located in the Nariño province of Colombia covered by concession application IKE-10421X (the “Mining Concessions”) in favor of Kata’s subsidiary resulting in us not having acquired any direct or indirect interest in the Mining Concessions and not be entitled to recover any of our exploration expenditures of other expenses incurred in connection with acquiring the 25% Stake;

●

risk that we are unable to acquire more than twenty-five percent (25%) of the outstanding capital stock of Kata Enterprises Inc., a company incorporated under the laws of Panama (“Kata”), by failing to complete the acquisition of a portion or all of the remaining seventy-five percent (75%) of the outstanding capital stock of Kata resulting in us holding only a minority interest in Kata;

●

risk that efforts to reclassify the entire area, or a portion thereof, that is the subject of the concession contract applied for so that it is no longer is classified as a forestry reserve fail resulting in the inability to commence any exploration or mining activities causing any significant surface disturbance on the area subject to the concession contact and our investment in Kata having no value;

●	risk that changes to Colombian mining laws, which include a comprehensive overhaul of rules applicable to companies engaged in mining activities, will adversely impact our current and contemplated operations in Colombia;

●	risk that we cannot attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations in Colombia;

●	risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits;

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●	results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with our expectations;

●	mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;

●	the potential for delays in exploration or development activities or the completion of feasibility studies;

●	risks related to the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses;

●	risks related to commodity price fluctuations;

●	the uncertainty of profitability based upon our history of losses;

●	risks related to environmental regulation and liability;

●	risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;

●	risks related to tax assessments;

●	political and regulatory risks associated with mining development and exploration; and

●	other risks and uncertainties related to our prospects, properties and business strategy.

The forgoing list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

As used in this Quarterly Report, the terms “we,” “us,” “our,” and “Company” mean South American Gold Corp., unless otherwise indicated.

Overview

We were incorporated in the state of Nevada on March 25, 2005 and previously operated under the name Grosvenor Explorations Inc. Effective October 18, 2010, we changed our name to “South American Gold Corp.” pursuant to a parent/subsidiary merger with our wholly-owned non-operating subsidiary, South American Gold Corp., which was established for the purpose of giving effect to this name change. Our current focus is the acquisition, exploration, and potential development of mining properties.

We previously acquired mineral claims situated in British Columbia, Canada, but allowed these mineral claims to lapse during the year ended June 30, 2008. As a result, we no longer have any rights to these mineral claims in British Columbia, Canada. In January 2008, we entered into an assignment agreement where we were assigned a 100% interest in a 7-unit claim block containing 92.8 hectares located in Vietnam, referred to herein as the “Kon Tum Gold Claim.” The Kon Tum Gold Claim has been staked and recorded with the Mineral Resources Department of Energy and Mineral Resources of the government of the Republic of Vietnam. We did not conduct any exploration work on the Kon Tum Gold Claim.

In light of some of the potential opportunities presented to our management to acquire interests in certain prospective mineral claims and mining rights on properties located in Colombia, South America, our management decided to reassess its proposed plan for exploration for the Kon Tum Gold Claim and the overall desirability of maintaining an ownership interest in mineral claims and mining rights located

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in Vietnam. We reviewed current economic conditions within Vietnam and globally and concluded that it is more likely that favorable economic trends can be sustained over an extended period of time within Colombia, as compared to Vietnam. Our management also believes that the emergence of a strong mineral exploration industry within Colombia will make it easier for us to attract, retain and motivate qualified personnel and access the equipment necessary for exploration. For the foregoing reasons, our management determined that it would be in our best interest to focus our efforts exclusively on the acquisition and development of mining properties in Colombia, a geographical area in which our management believes offers a more promising opportunity for our company.

We reviewed our available alternatives and canvassed a number of qualified parties in an attempt to dispose of our interests in the Kon Tum Gold Claim for value. As a result of our inability to locate an interested party to enter into a transaction to dispose of our interests in the Kon Tum Gold Claim for value and a determination that further canvassing of the market would likely be fruitless, we made a determination to abandon our interests in the Kon Tum Gold Claim and sent a notice indicating such to the appropriate governmental body in Vietnam.

We are considered an exploration or exploratory stage company because our business plan is to engage in the examination, investigation and exploration of land that we believe may contain valuable minerals, for the purpose of discovering the presence of ore, if any, and its extent. We have not acquired any mineral property interests at the present and there is no assurance that a commercially viable mineral deposit will exist on any of the properties underlying any mineral property interests that we may acquire in the future. In order to make any final evaluation as to the economic and legal feasibility of placing any exploration project into production, a great deal of exploration is required. We possess no known reserves of any type of mineral, have not discovered an economically viable mineral deposit and there is no assurance that we will ever discover one. If we cannot acquire or locate mineral deposits, or if it is not economical to recover any mineral deposits that we do find, our business and operations will be materially and adversely affected and we may have to cease operations.

Substantially all of our assets will be put into commercializing mining rights and mineral claims located within a limited geographical area. Accordingly, any adverse circumstances that affect these areas would affect us and your entire investment in shares of our common stock. If any adverse circumstances were to arise, we would need to consider alternatives, both in terms of our prospective operations and for the financing of our activities. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash-flow positive, or raise additional debt and/or equity capital. If we are unable to raise additional capital, we will continue to experience liquidity problems and management expects that we will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures including ceasing operations. We may also consider entering into a joint venture arrangement to provide the required funding to acquire and explore any mineral property interests. We have not undertaken any efforts to locate a joint venture participant. Even if we determine to pursue a joint venture participant, there is no assurance that any third party would enter into a joint venture agreement with us in order to fund the acquisition and exploration of mineral property interests. If we enter into a joint venture arrangement, we would likely have to assign a percentage of any mineral property interest we may hold to the joint venture participant.

Agreement with Minera Kata S.A. for Acquisition of Equity Interest in Kata Enterprises Inc.

On February 25, 2011 (the “Effective Date”), we entered into a Stock Purchase Agreement with Minera Kata S.A., a corporation organized under the laws of the Republic of Panama (“Seller”), as amended and supplemented by Amendment No. 1 (the “Amendment”) dated April 25, 2011 (collectively, the “Agreement”), and acquired from Seller twenty-five percent (25%) of the outstanding capital stock (the “25% Stake”) of Kata Enterprises Inc., a corporation organized under the laws of the Republic of

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Panama (“Kata”), with an option to acquire from Seller the remaining seventy-five percent (75%) of the outstanding capital stock of Kata in exchange for total consideration of $550,000. We paid Seller partial consideration of $500,000 in cash (the “Closing Payment”) on the Effective Date and the remaining $50,000 in cash upon execution of the Amendment.

In November 2010, Kata entered into an agreement to acquire, through its subsidiary, an eighty-five percent (85%) interest in certain mining concessions located in the Nariño province of Colombia covering the area that is the subject of the IKE-10421X concession application (the “Mining Concessions”), but has not successfully closed that transaction as of this time (the “Kata Transaction”). Kata is an entity that has nominal operations and was recently incorporated. Our understanding is that closing of the Kata Transaction is conditioned upon the transferor of the Mining Concessions receiving acceptance of an application for a concession contract, executing a concession contract with Ingeominas (the entity authorized by the Colombian Ministry of Mines and Energy to grant mining concession contracts), registration of that contract at the National Mining Registry and securing the requisite approvals and governmental consents for the transfer of the Mining Concessions to Kata’s subsidiary. We can provide no assurance that Kata, through its subsidiary, will be able to successfully close the Kata Transaction. In the event that Kata, through its subsidiary, fails to close the Kata Transaction and thus fails by February 25, 2012 to have the Mining Concessions registered in the National Mining Registry of Colombia in favor of Kata’s subsidiary, the Agreement provides that Seller will be obligated to deliver to us one-hundred percent (100%) of the outstanding capital stock of Kata (the “100% Stake”) without any additional consideration being paid. In such event, we will not have acquired any direct or indirect interest in the Mining Concessions and not be entitled to recover any of our exploration expenditures of other expenses incurred in connection with acquiring the 25% Stake, other than our entitlement, indirectly through our subsidiary, to the return of the $500,000 Closing Payment.

We currently do not have any interest, directly or indirectly, in mining properties located in Colombia and our acquisition of an interest in the Mining Concession is subject to the certain conditions and contingencies for which we can provide no assurance that they will ever be satisfied. Our ownership interest in the Mining Concessions will occur, if at all, indirectly through our ownership of an equity interest in Kata. We can provide no assurance that a concession contract will be approved based on the IKE-10421X concession application or that Kata, through its subsidiary, will be able to successfully close the Kata Transaction. In the event that the Kata Transaction does not close and a concession contract is not approved based on the IKE-10421X concession application, we will have not acquired any direct or indirect interest in the Mining Concessions.

Under the terms of the Agreement, we are entitled to also acquire from Seller the remaining seventy-five percent (75%) of the outstanding capital stock of Kata as follows:

We can exercise our option to acquire an additional 25% stake in Kata, resulting in the acquisition of fifty percent (50%) of the outstanding capital stock of Kata (the “50% Stake”), beginning five (5) business days following such time that we receive written notice that the Mining Concessions are registered in the National Mining Registry of Colombia in favor of Kata’s subsidiary in accordance with the regulations set forth in the Colombian Mining Code (the “Registration”) and ending no later than March 2, 2012 by:

(i)	paying Seller $450,000 in cash on or before five (5) business days following the Company’s receipt of notice that the Registration was completed;

(ii)	paying Seller $1,000,000 in cash on or before sixty (60) days following our receipt of notice that the Registration was completed or twelve (12) months following the Closing Date of the Agreement (February 25, 2012), whichever is earlier; and

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(iii)

issuing to Seller 2,000,000 shares of our common stock.

Provided that we have acquired the 50% Stake, we can exercise our option to acquire an additional 25% stake in Kata, resulting in the acquisition of seventy-five percent (75%) of the outstanding capital stock of Kata (the “75% Stake”), within thirteen months of the Effective Date of the Agreement (March 25, 2012) by:

(i)	paying Seller $1,000,000 in cash; and

(ii)	issuing to Seller 1,000,000 shares of our common stock.

·	Provided that we have acquired the 75% Stake, we can exercise our option to acquire an additional 25% stake of Kata, resulting in the acquisition of the 100% Stake, by:

(i)	paying Seller $1,000,000 in cash; and

(ii)	issuing to Seller 1,000,000 shares of our common stock within eighteen months of the Effective Date of the Agreement (August 25, 2012).

Under the terms of the Agreement, if we exercise all of the foregoing options and acquire the entire 100% Stake, we would pay Seller an aggregate of $4,000,000 in cash and issue to Seller 4,000,000 shares of our common stock in order to acquire one hundred percent (100%) of the outstanding capital stock of Kata.

In connection with due diligence conducted prior to entering into the Agreement, we determined that the entire area encompassing the Mining Concessions overlaps with a forestry reserve. Under Colombia law, only prospecting activities which would not result in any significant surface disturbance can be undertaken in an area classified as a forestry reserve. In order to commence any exploration and mining activities that would result in any significant surface disturbance in the area that is the subject of a concession contract, it will be necessary to initiate a proceeding before the competent environmental authority to reclassify the entire area, or a portion thereof, that is the subject of the Mining Concessions so that it is no longer classified as a forestry reserve. We anticipate, but cannot provide any assurance, that efforts to declassify a portion or all of the subject area as a forestry reserve will be successful. In the unanticipated event that we are unable to succeed in reclassifying a portion or all of the area that is the subject of the Mining Concessions so that it is no longer classified as a forestry reserve, we will be unable to commence any exploration or mining activities causing any significant surface disturbance on the area subject to the Mining Concessions resulting in our investment in Kata being without any value. In the event this were to occur, there is a substantial risk that we would not be entitled to any return of the Closing Payment paid to Seller, our investment in Kata would be without any value, we may be forced to delay, scale back, or eliminate our planned activities and there is a substantial risk that our business would fail. In addition, even if the effort to reclassify the entire area that is the subject of the Mining Concessions so that it is no longer classified as a forestry reserve is successful, there may be significant delay adversely impacting our prospects.

As a part of our business plan, we intend to seek out and acquire interests in other mineral exploration properties which, in the opinion of our management, offer attractive mineral exploration opportunities. Presently, we are considering the acquisition of other exploration properties, but have not entered into any letters of intent or agreements providing for the acquisition of other exploration properties as of the date of this report.

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Recent Diligence, Exploration and Exploration Plan

In connection with our consideration of entering into the Agreement described above, which resulted in our acquisition of the 25% Stake in Kata and an option to acquire the remaining 75% of the outstanding capital stock of Kata, we conducted a legal, financial and business review of the financial condition, assets, liabilities and business of Kata and its subsidiary entities, which included diligence of the property underlying the Mining Concessions that is the subject of the IKE-10421 concession application. We refer to the property underlying the IKE-10421X concession application as the “Santacruz Gold Project”

After the first visit to the district where the concession application is located, it was determined to create the initial database as a baseline to evaluate the area of interest. Beginning in December 2010, we as part of our due diligence process began data compilation and review and site visits began in 2011. Initial site visits included beginning work on geologic mapping and surveying, and sampling of nearby properties in the area to gain additional knowledge of the geological characteristics of the area. To the extent we have sufficient financing, this reconnaissance work will be ongoing as much of the property position has had only limited historical exploration. In February 2011, samples were taken from nearby properties.

Reconnaissance work within the concession application area was started in early April 2011. The work program included mapping and sampling the concession and nearby properties, including the El Desquite mine and other mines that are encountered during the Phase I exploration program, with emphasis on locating the identified geochemical anomalies indicated by the study conducted by the Japan International Cooperation Agency (“JICA”) from 1981 to 1983. This is required because of the humus accumulation over the 25 years since JICA study. The areas within the IKE-10421X concession application and in proximity of El Desquite and Las Delicias mines are the principal exploration targets of the current program. The work is aimed at locating favorable areas for exploration drilling. This work will include taking stream sediment and soil samples, geochemical analyses, and interpretation of results. This work commenced in April 2011. To date, we have taken assays from the nearby Diamante mine and assay results are under review and will be used to guide future efforts to determine projections of geological structures onto the concession application area. Field work has also provided basis for updated maps and geological maps. We incurred expenditures on exploration in the year ended June 30, 2011 of $470,432 and $121,274 for the three months ended September 30, 2011.

Field reconnaissance work, which we began earlier this year, has been ongoing to cover the 1,800 + hectare area (approx. 7 square miles). The initial focus is on geologic mapping and confirming historical data from government studies conducted in the 1980s. To date, this work has confirmed the location of several former and current artisanal mines and workings within the project boundaries. In addition, we have been evaluating and sampling the nearby Las Delicias and El Diamante mines to increase our knowledge of the general area. In particular, the intent is to locate projections of veins from the two producing mines from adjacent properties onto the Santacruz Gold Project. In the Cerro Los Churros area of the proposed Santacruz concession area, five old workings were identified. Mineralization was identified in the form of quartz veins with associated arsenopyrite and iron oxide, in part derived from alteration of basic rock-forming minerals and oxidation of pyrite in the veins and adjacent rock

We believe that an inactive small mine, known as Mina San Antonio, lies within the proposed concession area, but there is no specific recorded production from this mine that we have been able to ascertain . Evidence shows the mine was operated as an open-pit facility and that it contained several underground workings. Sampling at the Mina San Antonio has proved inconclusive to date.

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We conducted surveying at the El Chitan area mine within the proposed concession. The Chitan I mine is inactive while the adjacent Chitan 2 mine and the nearby Narvaez area have artisanal mining occurring, with workings all being found along one vein at El Chitan mines and probably a different vein at Narvaez. The veins are located along faults and the adjacent wall rock shows phyllic alteration with a high sericite, pyrite and quartz content, and the accessible veins are narrow under 0.3 m. From May through July 2011, Preliminary channel sampling was conducted at El Chitan 1 and 2 mines and the Narvaez mine and surface outcrops in accessible areas with (fire) assays performed by SGS Peru. This work was conducted according to quality control procedures supervised by our Vice President of Exploration. The results of this limited sampling is set forth below.

Vn = vein, w= wallrock, Poligonal Guia refers to surface outcrops

Sample #	Localization	Sample	Type	Width (m)	Au Ppb	Au g/t	Ag Ppm
R00147	Poligonal Guia Narvaez 1	Channel	(vn)	0.15	542	--	1.12
R00148	Poligonal Guia Narvaez 1	Channel	(w)	1.10	699	--	1.96
R00153	Poligonal Guia Narvaez 1	Channel	(vn)	0.10	398	--	.034
R00166	Poligonal Guia Narvaez 2	Channel	(vn)	0.15	2256	--	0.45
R00167	Poligonal Guia Narvaez 2	Channel	(vn)	0.15	> 5000	10.42	3.02
R00175	Mina Narvaez	Channel	(vn)	0.40	485	--	25.00
R00176	Mina Narvaez	Channel	(vn)	0.70	122	--	0.45
R00177	Mina Narvaez	Stockpile			720	--	1.67
R00179	Mina Chitan 1	Channel	(vn)	0.25	2159	--	6.71
R00181	Mina Chitan 2	Channel	(vn)	0.15	383	--	0.20
R00182	Mina Chitan 3	Channel	(vn)	0.30	> 5000	21.85	12.00

(Note sampling methodology used included over 5000 parts PPB (Parts Per Billion) as the upper range)

Exploration work continues to advance knowledge of the area, conduct surveying and geologic mapping activities, determine prime areas for soil sediment sampling and re-sampling prospect pits that have been located. Our primary objective during Phase I exploration, which is anticipated in current plans to be complete by the end of 2012, is to identify drill targets, prepare logistical arrangements for a drilling plan, continue work for securing approval of the mining concession application which has been submitted and prepare for data to support our subsequent applications for regulatory approval of exploration activities, and review data of prior exploration in the area along with field work to verify historical data, particularly information on JICA maps indicating clusters of veins on the western portion within the concession. Our initial plan was to establish semi-permanent base camps in the concession before January 2012, but these plans have been extended and our current estimate of when a base camp will be established in before April 2012. Our Phase II exploration phase, subject to results and timing of the completion Phase I exploration and regulatory approvals, includes a 6,000 meter planned drill program. We estimate drilling costs, including assays and review work, to be $200 a meter, thus the program before secondary charges would require $1.2 million in working capital to fund. We currently forecast ongoing exploration activities at $150,000 to $300,000 per quarter for the upcoming 18 months exclusive of our

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projected drilling program. We are forecasting subject to capital availability and timing of regulatory approvals required to explore in the area, a budget of approximately $2.1 to $3.0 million dollars for the Santacruz Gold project over the next 18 months. We are planning to duplicate exploration efforts of the prior Japanese studies by auger drilling and currently reviewing the permissibility of such work under Colombian prospecting rules. We will also be required to conduct certain environmental and community studies during this period leading to permission for exploration drilling, with minimum cost estimates of such studies at $150,000.

The Colombian government is in the process of considering changes to its administration of the mining sector , which we understand may include the establishment of new government agencies and regulations prior to February 2012. We are monitoring these changes and whether the implementation of any such changes will adversely impact us by resulting in delays in implementing our plans or increased compliance costs.

Our current cash on hand is insufficient to complete any of the planned exploration activities and the full implementation of our planned exploration program is dependent on our ability to secure sufficient financing and to confirm that Kata has closed the Kata Transaction and completed the acquisition of an interest in 85% of the mining concession contract covering the area that is the subject of the IKE-10421X concession application. We can provide no assurance that we will secure sufficient financing or that a concession contract will be approved based on the IKE-10421X concession application providing for our indirect interest in an underlying mining concession contract. The IKE-10421X concession application is under review by the relevant government body, Ingeominas. During the reporting period, we received information that the initial technical and financial review steps had been completed, though the next step of the concession application contract being signed has not yet occurred, after which additional review is required prior to the registration of the concession application.

Other Exploration Activities

We have conducted reconnaissance exploration on various locations in the Nariño Mining district primarily to develop better understanding of the geology of the district and to consider in the future further acquisitions in the area, which would be contingent on securing sufficient financing and regulatory approvals, neither of which can be assured. We have considered and evaluated projects in Colombia outside of the Narino district and in Bolivia and plan to continue to do the same subject to same financing and regulatory conditions. We anticipate that general exploration activities required to identify and evaluate new prospects would require additional consulting, travel and sampling expense of $50,000 in the current fiscal year.

Results of Operations for the Three Months Ended September 30, 2011 and 2010

Revenues

We have not generated any revenues from operations since our inception. We do not anticipate earning revenues until such time that we are able, if at all, to locate a commercially exploitable mineral deposit and either enter into commercial production or sell any mineral properties we may acquire.

Operating Expenses

We incurred operating expenses in the amount of $339,643 for the three months ended September 30, 2011, as compared to operating expenses of $39,051 for the three months ended September 30, 2010. The increase in our operating expenses for the three months ended September 30, 2011, as compared to the three months ended September 30, 2010, relates to increased expenditures associated with an increase in operations and exploration costs incurred in performing initial diligence of the property underlying the

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Mining Concessions that is the subject of the IKE-10421X concession application for which Kata, through its subsidiary, has entered into an agreement to acquire an eighty-five percent (85%) interest. Expenses for management fees, legal and accounting services, professional fees and other general and administrative expense also increased with the escalation of our operations and exploration activities.

We incurred exploration costs of $121,274 during the three months ended September 30, 2011, as compared to $0 for the three months ended September 30, 2010. We reported management fees of $57,563 for the three months ended September 30, 2011, compared to $7,000 for the three months ended September 30, 2010. We incurred consulting fees of $44,022 for the three months ended September 30, 2011, compared to $7,500 for the three months ended September 30, 2010. The increase in management and consulting fees during the three months ended September 30, 2011, as compared to the prior year, is attributable to compensation payable to newly appointed officers and directors and the securing of a consultant to assist with administrative matters.

We incurred accounting and auditing expenses of $32,616 for the three months ended September 30, 2011, compared to $7,500 for the three months ended September 30, 2010. We incurred legal expenses of $33,172 for the three months ended September 30, 2011, compared to $0 for the three months ended September 30, 2010. The increase in accounting and auditing and legal fees during the three months ended September 30, 2011, as compared to the prior year, is attributable to expenditures associated with increased operations associated with the implementation of our business plan.

We incurred other general and administrative expenses of $50,996 for the three months ended September 30, 2011, compared to $17,051 for the three months ended September 30, 2010. The increase in other general and administrative expenses during the three months ended September 30, 2011, as compared to the prior year, is attributable to an increase in our operations.

Other Items

We reported other comprehensive loss of $38,451 for the three months ended September 30, 2011, as compared to $0 in the three months ended September 30, 2010. Other comprehensive loss during the three months ended September 30, 2011 was attributable to an adjustment in the amount of $9,613 related to foreign currency translation and an adjustment in the amount of $28,838 related to foreign currency translation attributable to non-controlling interest. The business operations of our subsidiaries are transacted in Colombian Pesos. The assets and liabilities are translated into U.S. Dollars for financial reporting purposes which results in a translation adjustment due to changes in the currency exchange rates. Other loss for the three months ended September 30, 2011 was partially offset by other income of $4,566 attributable to interest income.

Net Loss

As a result of the above, for the three months ended September 30, 2011, we reported a net loss of $335,077, which included a net loss of $105,274 attributable to our non-controlling interest in Kata, as compared to a net loss of $39,051 for the three months ended September 30, 2010. The increase in our net loss was primarily attributable to increased operating expenses incurred during the reporting period, which are described above.

Basic and Diluted Loss per Share

As a result of the above, the basic and diluted loss per common share was ($0.00) and ($0.00) for the three months ended September 30, 2011 and 2010, respectively.

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Liquidity and Capital Resources

At September 30, 2011, we had cash of $484 (June 30, 2011 - $120,537) and a working capital deficit of $470,917 (June 30, 2011 - $131,725).

We anticipate spending approximately $70,000 in general and administrative expenses per month for the next twelve months, for a total anticipated general and administrative expenditures $840,000 over the next twelve months. This anticipated expenditures are closely related to the level of activities we have contemplated in our business plan. The general and administrative expenses for the year will consist primarily of professional fees for the audit and legal work relating to our regulatory filings throughout the year, as well as transfer agent fees, general management and office expenses. General support activities, additional organizational supervision of subsidiaries in the process of acquisition or contemplated to be acquired, and general management costs contribute to the forecasted increase in general and administrative expenditures. We currently forecast ongoing exploration activities at $150,000 to $300,000 per quarter for the upcoming 18 months exclusive of our projected drilling program. We are forecasting subject to capital availability and timing of regulatory approvals required to explore in the area, a budget of approximately $2.1 to $3.0 million dollars for the Santacruz Gold project over the next 18 months. We will also be required to pay $1,450,000 in cash in order to exercise our option to acquire an additional 25% stake in Kata, resulting in the acquisition of fifty percent (50%) of the outstanding capital stock of Kata.

Our current cash on hand is insufficient to be able to fully implement our business plan as planned. Accordingly, we must obtain additional financing in order to close the Proposed Transaction and maintain operations. We believe that debt financing will not be an alternative for funding exploration as we have limited tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of additional shares of our common stock. We anticipate seeking additional funding in the form of equity financing from the sale of our common stock, but cannot provide any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our exploration program or maintain operations for any period of time. In the absence of such financing, we will not be able to commence our exploration program or increase our ownership interest in Kata and may be forced to cease operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures.

We may consider entering into a joint venture arrangement to provide the required funding to explore the properties underlying our mineral property interests. We have not undertaken any efforts to locate a joint venture participant. Even if we determine to pursue a joint venture participant, there is no assurance that any third party would enter into a joint venture agreement with us in order to fund exploration of the properties underlying our mineral property interests. If we enter into a joint venture arrangement, we would likely have to assign a percentage of our interest in our mineral property interests to the joint venture participant.

Net cash used in operating activities for the three months ended September 30, 2011 was $111,904, as compared to net cash used in operating activities of $7,233 for the three months ended September 30, 2010. Our net loss of $335,077 for the three months ended September 30, 2011 was the primary reason for our negative operating cash flow, which was offset by an increase in accounts payable of $219,145 and accrued interest of $3,872.

There was no cash used in investing activities for the three months ended September 30, 2011 or 2010.

Net cash provided by financing activities for the three months ended September 30, 2011 was $0, as compared to net cash provided by financing activities of $7,215 for the three months ended September 30, 2010. Net cash provided by financing activities for the three months ended September 30, 2010 related to offering loan advance from a related party.

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Off Balance Sheet Arrangements

We do not have any off-balance sheet debt, nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effects on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.

Going Concern

We have incurred net losses for the period from inception on May 25, 2005 to September 30, 2011 of $4,084,425 and have no source of revenue. The continuity of our future operations is dependent on our ability to obtain financing and upon future acquisition, exploration and development of profitable operations from our mineral properties. These conditions raise substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

Our financial statements have been prepared in conformity with GAAP. For a full discussion of our accounting policies as required by GAAP, refer to our Annual Report on Form 10-K for the year ended June 30, 2011. We consider certain accounting policies to be critical to an understanding of our financial statements because their application requires significant judgment and reliance on estimations of matters that are inherently uncertain. The specific risks related to these critical accounting policies are unchanged at the date of this report and are described in detail in our Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2011. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Mr. Raymond DeMotte, and our Chief Financial Officer, Mr. Camilo Velasquez. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2011, our disclosure controls and procedures are not effective. Our conclusion is based primarily on the material weakness in internal control over financial reporting which was disclosed in our Annual Report on Form 10-K for the year ended June 30, 2010, our failure to complete the process of remediating these weaknesses by the end of the period covered by this Quarterly Report and our failure to make timely disclosure of certain changes in our results of operations for the quarter ended March 31, 2011 necessitating that we file an amendment to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 to restate the financial statements included therein .

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2011, no changes other than those made in conjunction with certain remediation efforts described below, were identified to our internal control over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

Remediation of Material Weaknesses

As discussed above, as of June 30, 2010, we identified material weaknesses in our internal control over financial reporting due to the occurrence of a significant number of out-of-period adjustments and the magnitude of such that were identified during the quarterly closing process for the periods ended December 31, 2009 and March 31, 2010, which we believe primarily stems from the fact that we had limited accounting and financial staff during the year ended June 30, 2010 which did not possess the requisite qualifications. We are currently addressing these material weaknesses as described below.

We are in the process of developing sufficient written policies and procedures relating to our redesigned accounting processes and related controls. We began implementing these measures in the third and fourth quarters of fiscal 2011 and are continuing these remedial actions. We expect these remedial actions to be effectively implemented by the end of the second quarter of fiscal 2012.

If the remedial measures described above are insufficient to address any of the identified material weaknesses or are not implemented effectively, or if additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future. Among other things, any unremediated material weaknesses could result in material post-closing adjustments in future financial statements.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

On October 17, 2011, our Board of Directors concluded that our previously issued interim financial statements for the three and nine month periods ended March 31, 2011, as reported in our Quarterly Report on Form 10-Q, can no longer be relied upon. As a result of this determination, we intend to amend our Quarterly Report on Form 10-Q for the three and nine month periods ended March 31, 2011.

On February 25, 2011, we entered into a Stock Purchase Agreement, as amended on April 25, 2011, with Minera Kata S.A., a corporation organized under the laws of the Republic of Panama (“Seller”), to acquire from Seller twenty-five percent (25%) of the outstanding capital stock of Kata Enterprises Inc., a corporation organized under the laws of the Republic of Panama (“Kata”), with an option to acquire from Seller the remaining seventy-five percent (75%) of the outstanding capital stock of Kata. We paid Seller partial consideration of $500,000 in cash at closing and in order to acquire the 25% Stake, we are obligated to pay Seller an additional $500,000 in cash and issue to Seller 1,000,000 shares of our common stock within five business days following closing of the Kata Transaction and receipt of notification that the Mining Concessions have been registered in the National Mining Registry of Colombia in favor of Kata Enterprises Inc. Additionally, five business days prior to the closing date of the February 25, 2011 Stock Purchase Agreement, the acquired company delivered to us the resignation letters of all members of the board of directors and we appointed the new members to the board of directors effective as of the closing date of the Stock Purchase Agreement transaction.

As a result of the control rights we obtained resulting from the transaction described above, we are required under accounting principles generally accepted in the United States of America ("GAAP") to consolidate the financial statements of Kata Enterprises, Inc. Our board of directors, including the members of our audit committee, in consultation with management, concluded that our previously issued interim financial statements for the three and nine month periods ended March 31, 2011, as reported in our Quarterly Report on Form 10-Q, should be restated. The Board of Directors and management have discussed this conclusion with Madsen & Associates CPA's, Inc, their independent registered public accounting firm.

The estimated effect on our consolidated net income for the three and nine month periods ended March 31, 2011is a loss of approximately $1.3 million due to an impairment loss on goodwill. We note that the impact on the interim financial statements for the three and nine month periods ended March 31, 2011 reflects management’s preliminary estimate as of the date of this filing and analyses of whether any other potential adjustments may be necessary are ongoing.

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Item 6. Exhibits.

See the Exhibit Index following the signatures page of this report, which is incorporated herein by reference.

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SIGNATURES

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

	South American Gold Corp.

Date:	November 21, 2011

	By: /s/ Raymond DeMotte Raymond DeMotte Title: Chief Executive Officer
Date:	November 21, 2011
	By: /s/ Camilo Velasquez Camilo Velasquez Title: Chief Financial Officer

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SOUTH AMERICAN GOLD CORP.

(the “Registrant”)

(Commission File No. 000-52156)

Exhibit Index

to Quarterly Report on Form 10-Q

for the Quarter Ended September 30, 2011

Exhibit Number	Description	Incorporated by Reference to:	Filed Herewith
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X

31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		X

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SOUTH AMERICAN GOLD CORP. - FORM 10-Q - November 21, 2011

Attached files

SOUTH AMERICAN GOLD CORP. Reports