UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

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

Commission file number 000-51718

COLORADO GOLDFIELDS INC.

(Name of registrant as specified in its charter)

Nevada (State or other jurisdiction of incorporation or organization)		20-0716175 (I.R.S. Employer Identification No.)
10920 West Alameda Avenue, Suite 201 Lakewood, CO (Address of principal executive offices)		80226 (Zip Code)

(303) 984-5324
(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $0.001 par value

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 þ

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

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 þ 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 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. o

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 definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ

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

The aggregate market value of the Class A common stock of the registrant held by non-affiliates as of February 28, 2011 the last business day of the registrant’s most recently completed second fiscal quarter based on the closing sale price of the registrant’s Class A common stock on that date as reported on the Over the Counter Bulletin Board was $2,787,668.

Class		Shares Outstanding at November 22, 2011
Class A Common Stock, $0.001 Par Value		9,704,203,671
Class B Common Stock (Restricted), $0.001 Par Value		490,371,533

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 

TABLE OF CONTENTS

PART I			1
Item 1. Business			3
Item 1A. Risk Factors			8
Risks Relating to Our Company			8
Risks Associated with Our Common Stock in General			12
Item 2. Properties			15
Pride of the West Mill			15
The Pay Day and Rage Mining Claims			18
The Brooklyn Mine			19
The King Solomon Mine			21
Item 3. Legal Proceedings			23
Item 4. Submission of Matters to a Vote of Security Holders			25
PART II			26
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 8. Financial Statements and Supplementary Data			35
Balance Sheets			36
Statements of Operations			37
Statements of Cash Flows			38
Statements of Stockholders’ (Deficit) Equity			39
Notes to the Financial Statements			40
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			55
Item 9A. Controls and Procedures			56
PART III			57
Item 10. Directors, Executive Officers and Corporate Governance			57
Item 11. Executive Compensation			60
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			64
Item 13. Certain Relationships and Related Transactions, and Director Independence			65
Item 14. Principal Accountant Fees and Services			66
PART IV			67
Item 15. Exhibits and Financial Statement Schedules			67
SIGNATURES			68
EXHIBIT INDEX			69
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

This document (including information incorporated herein by reference) 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, which involve a degree of risk and uncertainty due to various factors affecting Colorado Goldfields Inc. For a discussion of some of these factors, see the discussion in Item 1A, Risk Factors, of this report.

PART I

Forward-Looking Statements

Certain statements contained in this report (including information incorporated by reference) are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provided for under these sections. Our forward-looking statements include, without limitation:

•

Statements regarding future earnings;

•

Estimates of future mineral production and sales, for specific operations and on a consolidated or equity basis;

•

Estimates of future costs applicable to sales, other expenses and taxes for specific operations and on a consolidated basis;

•

Estimates of future cash flows;

•

Estimates of future capital expenditures and other cash needs, for specific operations and on a consolidated basis, and expectations as to the funding thereof;

•

Estimates regarding timing of future capital expenditures, construction, production or closure activities;

•

Statements as to the projected development of certain ore deposits, including estimates of development and other capital costs and financing plans for these deposits;

•

Estimates of reserves and statements regarding future exploration results and reserve replacement and the sensitivity of reserves to metal price changes;

•

Statements regarding the availability and costs related to future borrowing, debt repayment and financing;

•

Statements regarding modifications to hedge and derivative positions;

•

Statements regarding future transactions;

•

Statements regarding the impacts of changes in the legal and regulatory environment in which we operate; and

•

Estimates of future costs and other liabilities for certain environmental matters.

Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by those forward-looking statements. Such risks include, but are not limited to: the ability of Colorado Goldfields to obtain or maintain necessary financing; the price of gold, silver and other commodities; currency fluctuations; geological and metallurgical assumptions; operating performance of equipment, processes and facilities; labor relations; timing of receipt of necessary governmental permits or approvals; domestic laws or regulations, particularly relating to the environment and mining; domestic and international economic and political conditions; and other risks and hazards associated with mining operations. More detailed information regarding these factors is included in Item 1, Business, Item 1A, Risk Factors, and elsewhere throughout this report. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements.

All subsequent written and oral forward-looking statements attributable to Colorado Goldfields or to persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Colorado Goldfields disclaims any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Available Information

Colorado Goldfields maintains an internet website at www.cologold.com. Colorado Goldfields makes available, free of charge, through the Investor Information section of the web site, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 filings and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. Colorado Goldfields’ Code of Business Ethics and Conduct are available on the web site at

www.cologold.com/uploads/Code_of_Business_Conduct_Ethics.pdf

Any of the foregoing information is available in print to any stockholder who requests it by contacting Colorado Goldfields’ Investor Relations Department at 866-579-9444.

Item 1.		Business

Background

We were organized under the laws of the State of Nevada on February 11, 2004 under the name Garpa Resources Inc. On June 18, 2007, we changed our name to Colorado Goldfields Inc.

Our principal executive offices are located at 10920 West Alameda Avenue, Suite 201, Lakewood, Colorado, 80226 and our telephone number is (303) 984-5324. Our common stock is quoted on the OCT Markets Inc. owned and operated OTCQB Inter-dealer Quotation System, and FINRA owned and operated OTC Pinksheets under the symbol “CGFIA.”

Our Business

Colorado Goldfields Inc. (“we,” “us,” “our,” or the “Company”) is a milling and mining exploration stage company engaged in the acquisition, exploration, and development of mineral properties, primarily for gold, silver, copper, uranium, lead, and zinc, and the milling and processing of ore from both owned and non-owned mining properties.

Our four properties are:

1.

The Pride of the West Mill, Silverton, Colorado

2.

Pay Day and Rage Uranium Claim Group, Monticello, Utah

3.

Brooklyn Mine, San Juan County, Colorado

4.

King Solomon Mine, San Juan County, Colorado

The Pride of the West Mill (“Mill”), is located 5.3 miles northeast of Silverton, Colorado. The Mill is located on approximately 120 acres of patented mining claims on San Juan County Road 2, within a nine air-mile radius of the Brooklyn Mine Property, the King Solomon Mine Property and the many other Mine Properties. The Mill is located within the famous “San Juan Triangle” mining center of southwestern Colorado, which also includes the historic mining towns of Telluride and Ouray, and encompasses one of the most richly mineralized areas of North America. The mill is currently not operational. We hope to bring the Mill into operation, which is more fully described in “Item 2. Properties,” in 2012.

We own the Pay Day and Rage Claim Group located in San Juan County, Utah, and we also hold leases with an option to purchase for the Brooklyn Mine and the King Solomon Mine. We refer to these properties collectively as “the CGFI Mineral Properties” throughout this report. We are presently in the exploration stage at the CGFI Mineral Properties. We have not generated revenue from mining operations.

The Pay Day and Rage Claim Group consists of 63 (55 Pay Day and 8 Rage) claims. The Pay Day claim group is located in Township 32 South, Range 24 East of the Salt Lake Meridian in Sections 26, 27, 34, and 35, in San Juan County northeast of Monticello, Utah. The Rage claim group spans Stevens Canyon on the southeast flank of the Seven Sisters Buttes in Township 33 South, Range 20 East of the Salt Lake Meridian in Section 33, San Juan County, Utah.

The lease with an option to purchase the Brooklyn Mine was entered into on September 30, 2009. A work commitment averaging $200,000 per year, and a 5% Net Smelter Royalty is included in this lease/option. The lease automatically renews in 2012 so long as ores, minerals, or metals are being produced or sold.

The Brooklyn Mine consists of approximately 600 acres of patented and unpatented claims located along the historic Brooklyn Mine and associated structures. Since its discovery around 1900, the Brooklyn Mine has consistently produced exceptionally high-grade gold ore.

The lease with an option to purchase the King Solomon Mine includes a work commitment of $50,000 per year, and a 3.5% Net Smelter Royalty is also included in the lease/option. The lease automatically renews in 2012 so long as ores, minerals, or metals are being produced or sold.

The King Solomon Mine is located on the southern flank of King Solomon Mountain, just a few hundred yards up the mountain from the first discovery of gold in the San Juan Mountains in Little Giant Basin. Opened in 1876, the mine was in production until 1883.

In addition to the properties we own or on which we have executed lease/options, we also accepted an assignment of an Option to Purchase the Silver Wing Mine. The option that we hold allows us to acquire the properties in exchange for 1.5 million shares of 4-year restricted Class A Common Stock, due on or before December 15, 2011, a 5% Net Smelter Royalty, and a cash payment of $300,000 due by March 31, 2012.

As an exploration stage mining company, our activities are currently focused on exploration, geological evaluation and feasibility studies for gold and other metals and, where warranted, efforts to develop and construct mining and processing facilities. We may enter into joint ventures, partnerships or other arrangements to accomplish these activities.

We also actively consider the acquisition of other mining companies or their mining properties.

Recent Events

In November 2009, we reached a joint stipulation with the Division of Reclamation Mining and Safety regarding the status, re-activation, and reclamation of the Pride of the West Mill. The joint stipulation allows us to amend the current permit and include procedures for commencing “toll” or “Custom” milling.

Throughout fiscal 2010 we constructed a comprehensive amendment to the permit and have submitted extensive engineering and operations plans to the Colorado Division of Reclamation Mining and Safety (“Division”). The permit was considered by the Colorado Mined Land Reclamation Board and found to be deficient due to issues surrounding our tailings ponds.

Therefore during fiscal 2011, we developed a “dry stack” method of tailings disposal as part of a new permit amendment. We expect to submit this 3^rd amendment to the Division no later than December 21, 2011. See “Item 2. Properties” for additional detail.

In the third and fourth quarter of 2010, two outside funding sources became involved with the Company. A Delaware Partnership and a group of New York Private Investors have provided funding to us in the form of convertible debt. These investors continued to provide funding for the Company throughout fiscal 2011, however the funding was, and is, at their sole discretion. See Item 8. Notes to the Financial Statements for additional details.

Competitive Business Conditions

We compete with many companies in the mining business, including larger, more established mining companies with substantial capabilities, personnel and financial resources. There is a limited supply of desirable mineral lands available for claim-staking, lease or acquisition in the United States and other areas where we may conduct exploration activities. Because we compete with individuals and companies that have greater financial resources and larger technical staffs, we may be at a competitive disadvantage in acquiring desirable mineral properties. From time to time, specific properties or areas that would otherwise be attractive to us for exploration or acquisition are unavailable due to their previous acquisition by other companies or our lack of financial resources. Competition in the mining industry is not limited to the acquisition of mineral properties but also extends to the technical expertise to find, advance, and operate such properties; the labor to operate the properties; and the capital needed to fund the acquisition and operation of such properties. Competition may result in our company being unable not only to acquire desired properties, but to recruit or retain qualified employees, to obtain equipment and personnel to assist in our exploration activities or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operation and business.

General Government Regulations

Federal Lands. The Company’s property is situated adjacent to lands owned by the United States, which may require that the Company obtain certain special use permits in order to gain access to our land for exploration and mining activities.

Mining Operations. The operation of mines is governed by both federal and state laws. Federal laws, such as those governing the purchase, transport or storage of explosives, and those governing mine safety and health, also apply.

The State of Colorado likewise requires various permits and approvals before mining operations can commence, and permits and approvals that must regulate all operations. Among other things, a detailed reclamation plan must be prepared and approved, with bonding in the amount of projected reclamation costs. The bond is used to ensure that proper reclamation takes place, and the bond will not be released until that time. The Colorado Division of Reclamation, Mining and Safety is the state agency that administers the reclamation permits, mine permits and related closure plans on our property. Local jurisdictions (such as San Juan County) may also impose permitting requirements (such as conditional use permits or zoning approvals). Some permits require, or will require, monitoring, compliance, reporting, periodic renewal, or review of their conditions and may be subject to a public review process during which opposition to our proposed operations may be encountered.

The primary body of law that affects the Company’s operations in Colorado is the Mineral Rules And Regulations Of The Colorado Mined Land Reclamation Board For Hard Rock, Metal And Designated Mining Operations, first Promulgated May, 1977 Amended June-December, 1977; March-July, 1978; July-August, 1979; May, 1980; April, 1981; February-April, 1982; April, 1983; October, 1983; June, 1985; March, 1987; December, 1987; October, 1988; November, 1990; September, 1991; March, 1993; April, 1994; January, 1995; October, 1995; April, 1999, January, 2000; August, 2001;June 2005, August 2006, and August 2010.

And, Title 34 Mineral Resources Article 32, Colorado Mined Land Reclamation Act. Of the Colorado Revised Statutes. The complete and current Rules may be retrieved from the Internet at:

http://mining.state.co.us/Rules%20and%20Regs.htm.

Also, the “Statement of Basis, Specific Statutory Authority, and Purpose for New Rules and Amendments to the Mineral Rules and Regulations of the Colorado Mined Land Reclamation Board for Hard Rock, Metal and Designated Mining Operations, 2 CCR 407-1,” may be retrieved at:

http://mining.state.co.us/rulesregs/Rulemaking%20SBP%20Final%20Draft.pdf

When the mill or mines come into production we will also be subject to the rules and regulations of the Mine Safety and Health Administration, a Division of the United States Department of Labor.

Statutory and Regulatory authority for this agency is found in Code of Federal Regulations — 30 CFR — Parts 1 to 199, and may be retrieved at:

http://www.msha.gov/regsinfo.htm

Environmental Laws. Mining activities at the Company’s properties are also subject to various environmental laws, both federal and state, including but not limited to the federal National Environmental Policy Act, CERCLA (as defined below), the Resource Recovery and Conservation Act, the Clean Water Act, the Clean Air Act and the Endangered Species Act, and certain Colorado state laws governing the discharge of pollutants and the use and discharge of water. Various permits from federal and state agencies are required under many of these laws. Local laws and ordinances may also apply to such activities as construction of facilities, land use, waste disposal, road use and noise levels.

These laws and regulations are continually changing and, as a general matter, are becoming more restrictive. Colorado Goldfields’ policy is to conduct our business in a manner that safeguards public health and mitigates the environmental effects of our business activities. To comply with these laws and regulations, we have made, and in the future may be required to make, capital and operating expenditures.

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (CERCLA), imposes strict, joint, and several liability on parties associated with releases or threats of releases of hazardous substances. Liable parties include, among others, the current owners and operators of facilities at which hazardous substances were disposed or released into the environment and past owners and operators of properties who owned such properties at the time of such disposal or release. This liability could include response costs for removing or remediating the release and damages to natural resources. Our properties, because of past mining activities, could give rise to potential liability under CERCLA.

Under the Resource Conservation and Recovery Act (RCRA) and related state laws, mining companies may incur costs for generating, transporting, treating, storing, or disposing of hazardous or solid wastes associated with certain mining-related activities. RCRA costs may also include corrective action or clean up costs.

Mining operations may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, such as crushers and storage facilities, and from mobile sources such as trucks and heavy construction equipment. All of these sources are subject to review, monitoring, permitting, and/or control requirements under the federal Clean Air Act and related state air quality laws. Air quality permitting rules may impose limitations on our production levels or create additional capital expenditures in order to comply with the permitting conditions.

Under the federal Clean Water Act and the delegated Colorado water-quality program, point-source discharges into Waters of the State are regulated by the National Pollution Discharge Elimination System (NPDES) program. Stormwater discharges also are regulated and permitted under that statute. Section 404 of the Clean Water Act regulates the discharge of dredge and fill material into Waters of the United States, including wetlands. All of those programs may impose permitting and other requirements on our operations.

The National Environmental Policy Act (NEPA) requires an assessment of the environmental impacts of major federal actions. The federal action requirement must be satisfied if the project involves federal land or if the federal government provides financing or permitting approvals. NEPA does not establish any substantive standards, but requires the analysis of any potential impacts. The scope of the assessment process depends on the size of the project. An Environmental Assessment (EA) may be adequate for smaller projects. An Environmental Impact Statement (EIS), which is much more detailed and broader in scope than an EA, is required for larger projects. NEPA compliance requirements for any of our proposed projects could result in additional costs or delays.

The Endangered Species Act (ESA) is administered by the U.S. Fish and Wildlife Service of the U.S. Department of Interior. The purpose of the ESA is to conserve and recover listed endangered and threatened species and their habitat. Under the ESA, endangered means that a species is in danger of extinction throughout all or a significant portion of its range. The term threatened under such statute means that a species is likely to become endangered within the foreseeable future. Under the ESA, it is unlawful to take a listed species, which can include harassing or harming members of such species or significantly modifying their habitat. Future identification of endangered species or habitat in our project areas may delay or adversely affect our operations.

U.S. federal and state reclamation requirements often mandate concurrent reclamation and require permitting in addition to the posting of reclamation bonds, letters of credit or other financial assurance sufficient to guarantee the cost of reclamation. If reclamation obligations are not met, the designated agency could draw on these bonds or letters of credit to fund expenditures for reclamation requirements. Reclamation requirements generally include stabilizing, contouring and re-vegetating disturbed lands, controlling drainage from portals and waste rock dumps, removing roads and structures, neutralizing or removing process solutions, monitoring groundwater at the mining site, and maintaining visual aesthetics.

Employees

There were three people employed by Colorado Goldfields as of August 31, 2011:

1.

Lee R. Rice, President Chief Executive Officer, and Director

2.

C. Stephen Guyer, Chief Financial Officer and Director

3.

John Ferguson, Director of Operations

We make extensive use of consultants and advisors for specific technical projects so that the resource is most closely matched to the need. See Item 11 Executive Compensation for additional details.

Office Facilities

Due to frequent travel, our executive staff generally offices remotely from the corporate offices in Lakewood, Colorado and we do not pay rent for the Lakewood facility. We also have an office and housing facility at our Pride of the West Mill in Howardsville, Colorado in San Juan County Colorado. We believe these arrangements are and will be adequate for our needs for the foreseeable future.

Item 1A.		Risk Factors

An investment in our securities involves a high degree of risk. You should consider carefully the following risks, along with all of the other information included in this report, before deciding to buy our common stock. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also impair our business operations. If we are unable to prevent events that have a negative effect from occurring, then our business may suffer.

This report, including Management’s Discussion and Analysis or Plan of Operation, contains forward-looking statements that may be materially affected by several risk factors, including those summarized below.

Risks Relating to Our Company

We have incurred losses since our inception in 2004 and may never be profitable which raises doubt about our ability to continue as a going concern.

Since our inception in 2004, we have had nominal operations and incurred operating losses. As of August 31, 2011, our accumulated deficit since inception was approximately $19 million. We have substantial current obligations and at August 31, 2011, we had approximately $2.7 million of current liabilities as compared to only approximately $0.1 million of current assets. Since August 31, 2010, we have been able to raise only minimal additional capital, and we have minimal cash on hand. Accordingly, the Company does not have sufficient cash resources or current assets to pay its current obligations, and we have been meeting many of our obligations through the issuance of our Class A common stock to our employees, consultants and advisors as payment for the goods and services.

Our management continues to search for additional financing; however, considering the difficult U.S. and global economic conditions along with the substantial turmoil in the capital and credit markets, there is a significant possibility that we will be unable to obtain financing to continue our operations.

As we are in the beginning stages of our exploration activities on the CGFI Mineral Properties, we expect to incur additional losses in the foreseeable future, and such losses may continue to be significant. To become profitable, we must be successful in raising capital to continue with our mill re-activation efforts, exploration activities, meet the work commitment requirements on the CGFI Mineral Properties, discover economically feasible mineralization deposits and establish reserves, successfully develop the properties and finally realize adequate prices on our minerals in the marketplace. It could be years before we receive any revenues from gold and mineral production, if ever. Thus, we may never be profitable.

These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent registered public accounting firm’s report on our audited financial statements as of and for the year ended August 31, 2011. If we are unable to continue as a going concern, investors will likely lose all of their investment in our company. The financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty. Please see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources,” for further information.

The feasibility of mineral extraction on the CGFI Mineral Properties has not been established; as we have not completed exploration or other work necessary to determine if it is commercially feasible to develop the properties.

We are currently a mining exploration stage company. See “Item 2 Properties” of this Report for more information regarding our mining assets.

The CGFI Mineral Properties do not have any proven or probable reserves. A “reserve,” as defined by the SEC, is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. A reserve requires a feasibility study demonstrating with reasonable certainty that the deposit can be economically extracted and produced. We have not carried out any feasibility study with regard to the CGFI Mineral Properties. As a result, we currently have no reserves and there are no assurances that we will be able to prove that there are reserves on the CGFI Mineral Properties.

In June 2007, we acquired the Pride of the West Mill (the “Mill”) located in Howardsville, Colorado for consideration of $900,677 plus the assumption of an estimated asset retirement obligation of $500,000 for a total cost of $1,400,677. We paid the seller cash of $250,677 and the remaining $650,000 was financed by the seller. The seller’s loan is secured by the property bearing interest at 12% per year, with all unpaid principal and interest due July 1, 2012. We will be required to obtain debt or equity financing from external sources in order to fund payment on the mortgage. In addition, as the Mill is currently inactive and under a cease and desist order issued by the Colorado Division of Reclamation, Mining and Safety due to operational deficiencies, we will require further funds to cure the deficiencies and bring the Mill back into active status.

We cannot generate any income from the Mill until such time as we (i) cure the deficiencies contained in the cease and desist order, (ii) obtain approval from the State of Colorado Mined Land Reclamation Board of a comprehensive permit amendment, and (iii) refurbish it to operational status. Please see “Item 2 — Properties — Pride of the West Mill” and “ Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further information.

We may never find commercially viable gold or other reserves.

Mineral exploration and development involve a high degree of risk and few properties that are explored are ultimately developed into producing mines. We can not assure you that any future mineral exploration and development activities will result in any discoveries of proven or probable reserves as defined by the SEC since such discoveries are remote. Nor can we provide any assurance that, even if we discover commercial quantities of mineralization, a mineral property will be brought into commercial production. Development of our mineral properties will follow only upon obtaining sufficient funding and satisfactory exploration results.

We will require significant additional capital to continue our exploration activities, and, if warranted, to develop mining operations.

Under our lease with an option to purchase the Brooklyn Mine we are required to expend an average of $200,000 per year in the form of a work commitment. We were unable to complete the first year’s work commitment. However, the lessor has extended the first year minimum work commitment through February 29, 2012.

Under our lease with an option to purchase the King Solomon Mine we are required to expend $50,000 over three years in the form of a work commitment.

We will be required to raise significantly more capital in order to develop the CGFI Mineral Properties for mining production assuming that economically viable reserves exist. There is no assurance that our investments in the CGFI Mineral Properties will be financially productive. Our ability to obtain necessary funding depends upon a number of factors, including the price of gold and other base metals and minerals which we are able to mine, the status of the national and worldwide economy and the availability of funds in the capital markets. If we are unable to obtain the required financing in the near future for these or other purposes, our exploration activities would be delayed or indefinitely postponed, we would likely lose our lease/options and option to acquire an ownership interest in the CGFI Mineral Properties and this would likely, eventually, lead to failure of our Company. Even if financing is available, it may be on terms that are not favorable to us, in which case, our ability to become profitable or to continue operating would be adversely affected. If we are unable to raise funds to continue our exploration and feasibility work on the Brooklyn and King Solomon Properties, or if commercially viable reserves are not present, the market value of our securities will likely decline, and our investors may lose some or all of their investment.

Historical production of gold at the Brooklyn, King Solomon, and Pay Day and Rage Claim Group may not be indicative of the potential for future development or revenue.

Historical production of gold and other metals and minerals from the mines encompassed under our Lease/Options cannot be relied upon as an indication that the CGFI Mineral Properties will have commercially feasible reserves. Investors in our securities should not rely on historical operations of the CGFI Mineral Properties as an indication that we will be able to place the CGFI Mineral Properties into commercial production again. We expect to incur losses unless and until such time as the properties enter into commercial production and generate sufficient revenue to fund our continuing operations.

Fluctuating gold, metal and mineral prices could negatively impact our business plan.

The potential for profitability of our gold and other metal and mineral mining operations and the value of any mining properties we may acquire will be directly related to the market price of gold and the metals and minerals that we mine. Historically, gold and other mineral prices have widely fluctuated, and are influenced by a wide variety of factors, including inflation, currency fluctuations, regional and global demand and political and economic conditions. Fluctuations in the price of gold and other minerals that we mine may have a significant influence on the market price of our common stock and a prolonged decline in these prices will have a negative effect on our results of operations and financial condition.

Reclamation obligations on the Brooklyn, King Solomon, and our Mill could require significant additional expenditures.

We are responsible for the reclamation obligations related to any exploratory and mining activities located on the Brooklyn and King Solomon. Since we have only begun exploration activities, we cannot estimate these costs at this time. In November 2007, the Colorado Division of Reclamation, Mining and Safety transferred the mill permit into our name, and we delivered to the Division a reclamation bond in the amount of $318,154 and deposited an additional $196,976 in June, 2011 for a total of $515,130. We have currently estimated the total reclamation costs on the Mill at $656,570 and have recorded a liability in this amount as of August 31, 2011. There is a risk that the Mill reclamation costs may exceed our current estimate, and such excess could be significant. The satisfaction of current and future bonding requirements and reclamation obligations will require a significant amount of capital. There is a risk that we will be unable to fund these additional bonding requirements, and further that increases to our bonding requirements or excessive actual reclamation costs will negatively affect our financial position and results of operation.

Title to mineral properties can be uncertain, and we are at risk of loss of ownership of our property.

Our ability to explore and mine the leased and optioned properties depends on the validity of title to that property. The CGFI Mineral Properties, which are subject to our Lease/Options, consist of patented and unpatented mining claims. Unpatented mining claims are effectively only a lease from the federal government to extract minerals; thus an unpatented mining claim is subject to contest by third parties or the federal government. These uncertainties relate to such things as the sufficiency of mineral discovery, proper posting and marking of boundaries, failure to meet statutory guidelines, assessment work and possible conflicts with other claims not determinable from descriptions of record. Since a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, this uncertainty is inherent in the mining industry. We have not obtained a title opinion on our leased properties or the San Juan Properties we have under option. Thus, there may be challenges to the title to the properties which, if successful, could impair development and/or operations.

Our ongoing operations and past mining activities of others are subject to environmental risks, which could expose us to significant liability and delay, suspension or termination of our operations.

Mining exploration and exploitation activities are subject to federal, state and local laws, regulations and policies, including laws regulating the removal of natural resources from the ground and the discharge of materials into the environment. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Exploration and exploitation activities are also subject to federal, state and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of exploration methods and equipment.

Environmental and other legal standards imposed by federal, state or local authorities are constantly evolving, and typically in a manner which will require stricter standards and enforcement, and increased fines and penalties for non-compliance. Such changes may prevent us from conducting planned activities or increase our costs of doing so, which would have material adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages that we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Unknown environmental hazards may exist on the CGFI Mineral Properties, or we may acquire properties in the future that have unknown environmental issues caused by previous owners or operators, or that may have occurred naturally.

The CGFI Mineral Properties are subject to royalties on production.

As part of the Lease/Options for the Brooklyn and King Solomon Mines, the Company granted Net Smelter Royalties of 5% and 3.5%, respectively. In addition, historical royalties may be asserted by third-parties which are currently unknown to us.

Weather interruptions in the San Juan County, Colorado area may delay or prevent exploration on the CGFI Mineral Properties

The Brooklyn and King Solomon mines are located in a mountainous, high alpine region of the Colorado Rocky Mountains. The area receives extreme winter conditions which delay or prevent exploration of the properties during the winter months.

Our industry is highly competitive, attractive mineral lands are scarce and we may not be able to obtain quality properties.

We compete with many companies in the mining industry, including large, established mining companies with capabilities, personnel and financial resources that far exceed our limited resources. In addition, there is a limited supply of desirable mineral lands available for claim-staking, lease or acquisition in the United States, and other areas where we may conduct exploration activities. We are at a competitive disadvantage in acquiring mineral properties, since we compete with these larger individuals and companies, many of which have greater financial resources and larger technical staffs. Likewise, our competition extends to locating and employing competent personnel and contractors to prospect, develop and operate mining properties. Many of our competitors can offer attractive compensation packages that we may not be able to meet. Such competition may result in our company being unable not only to acquire desired properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operation and business.

We depend on our Chief Executive Officer and Chief Financial Officer and the loss of these individuals could adversely affect our business.

Our company is completely dependent on our Chief Executive Officer, Lee R. Rice, and on our Chief Financial Officer, C. Stephen Guyer, both of whom are also members of our Board of Directors. As of the date of this report, we only employed three individuals: Messrs. Rice and Guyer and our Director of Operations. Thus, the loss of either Messrs. Rice or Guyer could significantly and adversely affect our business, and certainly the loss of both individuals on or about the same time could result in a complete failure of the Company. We do not carry any life insurance on the lives of either Messrs. Rice or Guyer.

The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses that could materially and adversely affect our operations.

Exploration for minerals is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result in the discovery of economically feasible mineralization. Few properties that are explored are ultimately advanced to the stage of producing mines. We are subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties such as, but not limited to:

	•		economically insufficient mineralized material;
	•		fluctuations in production costs that may make mining uneconomical;
	•		labor disputes;
	•		unanticipated variations in grade and other geologic problems;
	•		environmental hazards;
	•		water conditions;
	•		difficult surface or underground conditions;
	•		industrial accidents; personal injury, fire, flooding, cave-ins and landslides;
	•		metallurgical and other processing problems;
	•		mechanical and equipment performance problems; and
	•		decreases in revenues and reserves due to lower gold and mineral prices.

Any of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures and production commencement dates. We currently have no insurance to guard against any of these risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write-down of our investment in these interests. All of these factors may result in losses in relation to amounts spent which are not recoverable.

Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations on our mining property.

Our operations, including our planned mill re-activation and exploration activities on the CGFI Mineral Properties, require permits from the state and federal governments. We may be unable to obtain these permits in a timely manner, on reasonable terms or at all. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration of the CGFI Mineral Properties will be adversely affected.

Risks Associated with Our Common Stock in General

Trading on the Over the Counter markets 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 OTC Pinksheets service of the Financial Industry Regulatory Authority (“FINRA”) and the OTCQB Inter-Dealer Quotation System owned and operated by the OTCMarkets Group, Inc. Trading in stock quoted on over the counter markets 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 markets are not a stock exchange, and trading of securities on the over the counter markets is often more sporadic than the trading of securities listed on other stock exchanges such as the NASDAQ Stock Market, New York Stock Exchange or American Stock Exchange. Accordingly, our 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 the FINRA’s sales practice requirements, which may limit a stockholders ability to buy and sell our stock.

Our stock is a penny stock. The SEC 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 must also 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 customers 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 or willingness of broker-dealers to trade our securities. We believe that the penny stock rules discourage broker-dealer and investor interest in, and limit the marketability of, our common stock.

FINRA sales practice requirements may also limit a stockholders ability to buy and sell our stock.

In addition to the penny stock rules promulgated by the SEC, which are discussed in the immediately preceding risk factor, FINRA rules 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, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares.

Because the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline.

Our shares are classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) which imposes additional sales practice requirements on broker-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written agreement prior from you to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices, it is possible that broker-dealers will not want to make a market in our common stock. This could prevent you from reselling your shares and may cause the value of your investment to decline.

Although DTC eligible, our stock is “chilled for deposits” at DTCC, and the National Securities Clearing Corporation has exited our stock from the Continuous Net Settlement System, therefore, trades are executed and cleared on a trade for trade basis in certificate form.

As a result, the settlement of physical certificated positions can carry significant pass-through charges, including: execution fees, DTC fees, deposit fees, and transfer agent fees. These fees, which can vary and may be substantial, increase the cost that shareholders must bear for clearing and execution of trades. Furthermore, pass-through charges described above may not be immediately charged to a customer account following a trade in non-DTC eligible securities, as our clearing firms may receive notice of such fees as late as three weeks following the trade. Broker-dealers may reserve the right to withhold funds in a customer account pending potential assessment of fees associated with trading in low priced or sub-penny securities.

A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, or convertible debt instruments, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. a result, our business may suffer, and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.

We have never paid a cash dividend on our common stock and we do not anticipate paying any in the foreseeable future.

We have not paid a cash dividend on our common stock to date, and we do not intend to pay cash dividends in the foreseeable future. Our ability to pay dividends will depend on our ability to successfully develop one or more properties and generate revenue from operations. Notwithstanding, we will likely elect to retain any earnings, if any, to finance our growth. Future dividends may also be limited by bank loan agreements or other financing instruments that we may enter into in the future. The declaration and payment of dividends will be at the discretion of our Board of Directors.

We have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.

Recent federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors’ independence, audit committee oversight and the adoption of a code of ethics. While our Board of Directors has adopted a Code of Ethics and Business Conduct, we have not yet adopted any of these corporate governance measures and, since our securities are not listed on a national securities exchange or NASDAQ, we are not required to do so. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

Item 2.		Properties

Pride of the West Mill

The Pride of the West Mill (“Mill”) is an inactive mining mill located at Howardsville, Colorado in San Juan County. The Pride of the West Mill is located on approximately 120 acres of patented mining claims on San Juan County Road 2, within a six air mile radius of the Gold King Property, the Mogul Mine Property and the Mayflower Mine Property. The physical address is 2201 County Road 2, Silverton, Colorado. No mineral is known to exist in deposit form on the property. The economic significance of the property is as a mineral processing site, with residual post-mining value. The Mill is located within the famous “San Juan Triangle” mining center of southwestern Colorado, which also includes the historic mining towns of Telluride and Ouray, and encompasses one of the most richly mineralized areas of North America. Fourteen thousand feet mountain peaks tower over the mill, which is accessible year round because of its location on county maintained access roads.

The mill has the capability to process five metals: gold, silver, copper, lead, and zinc. In operation as recently as 2004, the mill contains virtually all of its working components enclosed within one complex. The complex includes: 1) ore stockpile pad, 2) crushing plant consisting of a coarse ore bin adjacent to the stockpile area, an apron feeder, conveyor to the crushing section, a 3 foot Symons vibrating grizzly, jaw crusher, 4’x 8’ Symons rod deck screen, conveyors, a 3 foot Symons standard cone crusher, and electromagnets, 3) grinding circuit including a Macy Rod mill and a Denver Ball mill, 4) flotation circuit and ancillary equipment all in one building. The leach plant is in a separate building and is configured for 2 or 4 tank agitation leach with carbon in leach. The carbon stripping plant is in the main mill building as is the melt furnace. A separate building houses a metallurgical laboratory for sample preparation, and an assay laboratory. A large steel frame metal building houses offices and a truck shop, with living quarters for personnel upstairs.

The mill is readily accessible by heavy trucks, has a power substation in place, and has two water rights from Cunningham and Hematite Creeks with associated water pipelines on the property that are sufficient to supply the needs of the mill complex.

In March 2008, the Colorado Division of Reclamation, Mining and Safety transferred the mill permit into our name, and in connection therewith, we posted a bond in the amount of $318,154 with the Division in the form of a letter of credit. We have recorded an estimated asset retirement obligation of $656,570 in connection with our estimated future reclamation costs.

The Pride of the West Mill was (and is) the subject of a cease and desist order (“C&D”), issued by the State of Colorado Mined Land Reclamation Board due to the operational deficiencies of the previous operator in the period 2002-2003.

During fiscal year 2011, we focused primarily on re-activation of the Pride of the West Mill (the “Mill”), securing agreements for “custom” or “toll” milling, and seeking out new properties to explore and develop.

A key factor for re-activating the Mill is the disposal of tailings; that is, the material that remains after ore has been processed. Our original mill tailings disposal method was to move mill tailings (finely ground waste rock from which the valuable metals have been removed in the milling process) as a slurry, generally consisting of 15% solids and 85% water, to a closed, lined tailings pond. After the solids have settled and separated from the water, some of the process water is returned to the mill for re-use. The tailings pond is essentially a lake containing saturated mill tailings (liquid mud).

However, through the permit amendment process and working with the Division of Reclamation Mining and Safety, we have learned that this method of tailings disposal has more challenges than originally anticipated. Furthermore, the DRMS accepted the parts of the amendment regarding the following.

•

Mill building;

•

Laboratory building;

•

Ore stockpile area;

•

Leach plant building;

•

River protection dike;

•

Procedures for custom or “toll” milling.

Moving forward we will develop a “dry stack” method of tailings disposal as part of a new permit amendment (“AM-03”).

In a Filtered Tailings or Dry Stacking system, the mill tailings are filtered (de-watered), to remove approximately 85% of the water at the mill plant itself. The resulting material is approximately 85% solids and 15% water and can be transported by belt conveyor or trucks to a disposal area where they can be placed in an environmentally contained area and handled with earth moving equipment.

Utilizing this approach for tailings disposal will remove some of the issues associated with our prior permit amendment, such as:

•

Providing improved long term geotechnical stability of the tailings disposal area;

•

Reducing concerns about potential seismic activity;

•

Greatly reduce environmental risks of contamination of ground and surface water;

•

Making overall compliance with environmental regulations much more efficient and straight forward.

We will also realize some immediate benefits from this Dry Stack approach, such as:

•

Smaller environmental footprint for tailings disposal area;

•

Smaller operating area at any one time, which is easier to manage;

•

Vastly improved management of tailing disposal operations during winter season, which is approximately 7 months of the year;

•

Facilitates the ability to use tailings for mine backfill to improve underground ore extraction efficiency and reduce need for additional tailings disposal area;

•

Conserves water use in the milling process;

•

Lower long-term environmental liability from possible failure of conventional tailings dam structures.

During the third and fourth quarters of fiscal 2011, we continued to construct revisions to our prior reclamation permit amendment application. On March 25, 2011 we filed the first component of our dry stacking permit with the Colorado Division of Reclamation, Mining and Safety (“DRMS”). Technical Revision 11 (TR-11) is the foundation of the process that will bring the Mill into operation under the new dry stacking approach. TR-11 was approved by the DRMS on June 27, 2011.

Furthermore on June 3, 2011 we submitted a Notice of Intent to Conduct Prospecting Activities on the 35-acre dry stacking site. This notice is describes the necessary work to be performed pursuant to constructing the major portion of Amendment No. 3 to the Reclamation Permit. This work is also subject to the approval of the DRMS, which was given on June 21, 2011.

During fourth quarter of the 2011 fiscal year and as part of the geotechnical investigation, Registered Engineer David Trautner used truck mounted drilling equipment to perform the field exploration. Auger test borings were completed on the project site to a depth of 60 feet, and SPT tests were performed in the test borings at intervals of five (5) feet. The subsurface information obtained during the field study is now being used to determine the stability of the substrate. This information gathering, which is now complete, was the central analysis required by AM-03.

The complete permitting process for the dry stacking operation of the Mill, is formed from three parts: 1) Closure of the old tailings ponds, thereby removing any lingering issues with that part of he site, 2) Geotechnical, seismic and other analysis of the dry stack land site, 3) Incorporation of that analysis into Amendment Number 3 (“AM-03”), to be presented to the DRMS. This first filing ensures that the project will move forward as rapidly and efficiently as possible.

TR-11 consists of 8 work tasks that will commence immediately upon approval from the DRMS. Approval could come very quickly since no hearing before the State of Colorado Minded Land Reclamation Board (“MLRB”) is required.

The 8 tasks within TR-11 will address the closure of six test pits and two geotechnical drill holes located within the Upper and Lower Tailings Pond areas of the site and the relocation and final disposition of certain Waste Rock, initiates the final reclamation of the Mill Drain Pond, the Upper Tailings Pond and the Lower Tailings Pond. These were the major problem areas in the December 2010 permit amendment, and now are removed from the scope of the permit.

The work described in TR-11 is important in several respects. First, it will help ensure that the Mill is in compliance with applicable laws and regulations. It also will provide increased protection of public health and the environment through:

•

Proper closure of the test wells and pits will prevent cross-contamination of ground water resources.

•

Relocation of the Mine Dump Rock above any potential ground water levels will protect background ground water quality from degradation from leaching from the Mine Dump Rock.

•

Capping and re-vegetation of the Upper and Lower Tailings Ponds and the mill drain pond area will reduce fugitive dust emissions. Further, it will reduce leaching of residual metals contained in mill tailings from oxygenated rain and snowmelt water sources. This will result in a reduction of metals loading to ground water resources.

On February 4, 2011, we reached an agreement with the DRMS to extend the time required to fully fund a $196,000 increase to our financial warranty from February 2011 to June 2011. The financial warranty is in effect a surety bond that serves to guarantee the ultimate reclamation of the site. As of June 10, 2011, we have made all of the four specified payments, and satisfied the joint stipulation. The total amount of financial warranty for the mill that is held by the Board is now $515,130.

We believe that the AM-03 permit amendment along with the one year extension of the mill mortgage to July 1, 2012, and the successful arrangement with DRMS for funding the bond increase will move the business plan forward.

The Pride of the West Mill is also subject to certain local, state and federal regulations.

The Pay Day and Rage Mining Claims

On June 13, 2011, we purchased the Pay Day and Rage claims. These claim groups consist of 63 (55 Pay Day and 8 Rage) claims. The Pay Day claim group is located in Township 32 South, Range 24 East of the Salt Lake Meridian in Sections 26, 27, 34, and 35, in San Juan County northeast of Monticello, Utah. The Rage claim group spans Stevens Canyon on the southeast flank of the Seven Sisters Buttes in Township 33 South, Range 20 East of the Salt Lake Meridian in Section 33, San Juan County, Utah. Both claim groups have been plotted on USGS topographic maps as shown.

An initial internal analysis by Company president Lee R. Rice indicates that the historical information used by others did not account for all possible sources and additional potential resource at depth. For that reason, we have engaged Allan P. Juhas, Ph.D. in Economic Geology, University of Manitoba 1973, to undertake the preparation of an NI43-101 technical report based upon the Company’s exploration plan and previous work that can be verified. Dr. Juhas has over 50 years experience in a broad spectrum of precious metals and base metals geological pursuits. He is well recognized in the industry, and prepares a number of NI43-101 reports each year.

We will be performing exploration and constructing an N1431-01 Report to confirm and verify the value of these assets.

We acquired the properties in all stock transaction consisting of 125,000,000 shares of 1-year restricted Class A Common Stock and 125,000,000 shares of 2-year restricted Class A Common Stock.

The Brooklyn Mine

On September 30, 2009, we entered into a Lease with an Option to Purchase the Brooklyn Mine.

The Brooklyn properties consist of approximately 600 acres of patented and unpatented claims located along the historic Brooklyn Mine and associated structures. The Brooklyn Mine has produced exceptionally high-grade gold ore since its discovery around 1900.

The abundance of free gold associated with the ore makes historical production records difficult to interpret. However, a historic resource estimate of $13.8 million (14,535 ounces of gold times $950 per ounce) at a grade of 0.69 ounces per ton contained in two known and accessible ore shoots below the existing workings is based on well-documented and confirmed prior exploration.¹ The Brooklyn has produced some of the most spectacular specimen quality gold in the Country.

The overall goal of fiscal 2011’s exploration project was to confirm historic data on two major targets; including the sampling of the intersection of two veins, the Rainbow and the Gloucester. Historic sampling data indicates a probable zone of high grade gold in the intersection area. Sampling of this area has been completed. The Company is awaiting assay results, which should be available in the near future.

The second major sampling project was geochemical sampling of the property. Soil and/or rock chip samples on a grid system with sample lines 125 meters apart and 50 meters between sample points have been collected. The samples will be analyzed for the presence of 48 elements. The concentration of the 48 elements within the grid enables the Company’s geologists to determine the shape and course of known structures and to identify structures which are not visible from the surface.

In addition to gold and silver, previous studies in the area have identified a number of trace elements in the vicinity of ore bodies. We are closely monitoring the data for indications of economically important elements, which include the rare metals tellurium and indium and monazite, which are essential to many of today’s green technologies. Tellurium is known to be present in Brooklyn Mine ores. Indium is known to be associated with zinc in the district.

Although very speculative, historic information has revealed enough to warrant study of a possible intrusive breccia pipe. The area surrounding the Brooklyn is known for high grade ores contained in these breccia pipes, which geologists call “spectacular.” Previous investigations have shown that a number of veins radiate from the possible breccia zone. One short crosscut into the zone indicates that ore grade silver might extend to the perimeter of the zone. This prospective pipe is known as the Growler Pipe.

As of the date of this report, 216 samples have been prepared for laboratory analysis. Analysis include: Aquaregia dig ICP-MS ICPAES for 51 elements, and Au Ag fire assay w/gravimetric finish.

Upon completion of the geotechnical sample analysis, the diamond drilling plan will be prepared and application for drilling permits will be submitted to the state.

Terms of our Lease/Option and Related Agreements on the Brooklyn Mine

In summary,

1.

The Lease/Option is for a period of three years in consideration for which we issued 75,000,000 shares of restricted Class A Common Stock. The stock is further restricted from sale during the initial term of the lease.

2.

The Lease/Option shall automatically renew and continue so long as ores, minerals, or metals are produced or sold.

3.

We shall perform exploration, mining, development, production, processing or any other activity (“work” herein) which benefits the Leased Premises at a minimum cost of $150,000 for the first year, $200,000 for the second year and $250,000 for the third year. The first two years of work have been combined are currently due by February 29, 2012.

4.

We shall pay Lessor a Five Percent (5%) Net Smelter Royalty on all mineral bearing ores.

5.

We have the sole and exclusive option to purchase all of Lessor’s right, title and interest in the property (the Leased Premises) for a total purchase price of $4,000,000, plus a perpetual 2% Net Smelter Royalty. This amount may be paid in cash or other cash equivalent as mutually agreed by us and the Lessor.

The King Solomon Mine

The King Solomon Mine is located on the southern flank of King Solomon Mountain, just a few hundred yards up the mountain from the first discovery of gold in the San Juan Mountains in Little Giant Basin. Opened in 1876, the mine was in production until 1883. Newspaper accounts and shipping records of the day indicate that the product was good to very high grade silver ore with substantial credits for lead and copper.

The King Solomon Mine is of particular interest to Colorado Goldfields because of its strategic placement in Little Giant Basin. Although no activity has occurred on the property since 1883, nearby properties in Little Giant Basin have produced significant gold.

During fiscal 2011, the land position surveys were completed and corner monuments were set for the King Solomon claims. Several original corners, first placed in the 1800s, were found and the monuments were reset, which verifies the claim locations. Specific survey control points were completed to establish and fix the location of the two principal mine portals relative to the claim boundaries and surface vein expressions.

Exploration teams entered and explored the underground workings, locating important vein structures, and took ore samples from each. Underground workings also revealed areas that are ready to be mined along with those that will require re-habilitation and timbering.

Most importantly, sufficient data was collected to begin the construction of the 3-D model of the mine; the most efficient way to develop the surface and underground diamond drilling exploration plan.

Terms of our Option and Related Agreements on the King Solomon Mine

In summary,

1.

The Lease/Option is for a period of three years in consideration for which we issued 50,000,000 shares of restricted Class A Common Stock. The stock is further restricted from sale during the initial term of the lease.

2.

The Lease/Option shall automatically renew and continue so long as ores, minerals, or metals are produced or sold.

3.

We shall perform exploration, mining, development, production, processing or any other activity (“work” herein) which benefits the Leased Premises at a minimum cost of $50,000 for each successive three year term during the term of the Lease/Option.

4.

We shall pay Lessor a 3.5% Net Smelter Royalty on all mineral bearing ores.

5.

We have the sole and exclusive option to purchase all of Lessor’s right, title and interest in the property (the Leased Premises) for a total purchase price of $1,250,000. This amount may be paid in cash or other cash equivalent as mutually agreed by Lessor and us.

The Silver Wing Mine

On May 16, 2011, we issued One Million (1,000,000) Restricted Shares of Colorado Goldfields Inc. Class A Common Stock to accept assignment of an Option Contract for Sale and Purchase of the Silver Mine.

The properties consist of 27 patented mining claims (224 acres) in San Juan County, in southwestern Colorado known as the Silver Wing mine. The mine’s polymetallic ore contains recoverable metal values in gold, silver, lead, copper and zinc. Colorado Goldfields intends to develop a mining and milling operation and produce approximately 14,500 tons annually of gold, silver, copper, lead and zinc concentrates. After a 1-year of ramp up work, ultimate production could reach 360 tons per day.

The option that we hold allows Colorado Goldfields to acquire the properties in exchange for 1.5 million shares of 4-year restricted Class A Common Stock, due on or before December 15, 2011, a 5% Net Smelter Royalty, and a cash payment of $300,000 due by March 31, 2012.

Item 3.		Legal Proceedings

Pride of the West Mill Proceedings

See “Item 2. Properties” for a description of the proceedings relating to the Pride of the West Mill.

San Juan Properties and Hennis Proceedings

On April 6, 2009, Todd C. Hennis (the former President and CEO of the Company), and entities San Juan Corp., and Salem Minerals Inc. (which are substantially owned by Mr. Hennis), served upon the Company a Complaint seeking among other things, a $100,000 payment pursuant to the San Juan Properties’ option agreement, and release from his shareholder lock-up agreement and from Rule 144 trading restrictions on approximately 51,500,000 shares of Class A Common Stock held by Hennis. Company counsel advises that the Hennis complaint is barred due to Hennis’s affiliate and control person status and moreover is filed in bad faith, since among other things, on June 17, 2008 as President and CEO of the Company, Hennis elected not to pay the option fee then due. The Company received a written settlement offer from Mr. Hennis two days after the Company was served on April 8, 2009. A counter-claim with jury demand was filed against Mr. Hennis and his entities for wrongful conversion, breach of duty of loyalty, lack of good faith, breach of fiduciary duty, and significant conflicts of interest.

Hennis filed a Motion for Summary Judgment on October 16, 2009. The Company responded to this motion on November 16, 2009. On September 2, 2010, the court granted partial summary judgment in favor of Mr. Hennis and awarded him damages of $230,707. An evidentiary hearing regarding the remaining portion of the judgment was held on September 22, 2010. At that hearing, the court awarded additional damages in the amount of $114,896 to Mr. Hennis for a total of $345,603, which has been recorded as an accrued liability by the Company as of August 31, 2010 and May 31, 2011. On March 25, 2011, the court awarded an additional $58,989 to Hennis for attorney’s fees, which has been accrued as of August 31, 2011.

The Company filed motions for (a) a new trial on all or part of the issues; (b) an amendment of findings; and (c) an amendment of judgment pursuant to C.R.C.P. Rule 58(a). On March 25, 2011, the court evoked C.R.C.P. 59(j) and denied the post trial motions by not ruling on them.

The Company filed a Notice of Appeal with the Colorado Court of Appeals on January 7, 2011. The outcome of the appeal process is not certain; however, Company legal counsel advised that it appears that the appeal has merit. On March 29, 2011 the Colorado Court of Appeals served the notice of filing the record, and set the brief due date as May 9, 2011. On April 5, 2011, the Company filed an amendment to the Notice of Appeal to include the March 25, 2011 order of attorney’s fees. On May 16, 2011, the Court of Appeals accepted an amendment to the case to include the March 25, 2011 order awarding attorney’s fees. The Company’s opening brief was filed on September 2, 2011. Mr. Hennis’s answer brief was filed on November 2, 2011. The Company’s reply brief was filed on November 15, 2011.

On March 17, 2011, Hennis attempted to garnish funds held in the Company’s bank account. On March 21, 2011, the Company filed a Motion to stay the garnishment and followed with a motion to traverse the garnishment in its entirety on May 11, 2011. On April 18, 2011, the court ordered the funds (approximately $85,000) to be sent into the court registry and held there until further order. However on March 25, 2011, JPMorgan Chase Bank (the “Garnishee”) had released the funds back to the Company. On June 15, 2011, the Garnishee filed a notice of appearance and requested that the court hold the funds in the court registry.

On July 29, 2011, Garnishee filed a Motion for Contempt of Court against the Company and its CFO C. Stephen Guyer seeking remedial sanctions against the Company and C. Stephen Guyer to immediately deposit approximately $85,000 into JPMorgan Chase Bank. The Company filed responsive pleadings and a hearing was set for October 5, 2011.

On October 5, 2011, a hearing was held regarding the traverse to the garnishment and contempt of court motion to determine if the Company’s CFO had violated two of the court’s orders. The Garnishee asserted that the Company’s CFO had “induced” them to release funds, which retrospectively, were in violation of the court’s orders. The court denied the Company’s motion to traverse the garnishment. As of the filing date of this report, the funds remain in the court registry and the remedial contempt motion remains unresolved.

Former Law Firm Litigation

On March 2, 2009 the Company’s former legal counsel, Jackson Kelly PLLC, filed a Complaint in District Court, Denver, Colorado, claiming breach of contract of the promissory note executed by the Company October 2, 2008. On October 16, 2009, the Court granted a Motion for Summary Judgment against the Company in the amount of $138,005 plus interest at 6.25% until satisfied. The promissory note has been purchased by an unrelated third-party in individual transactions of $25,000. On November 17, 2010 Satisfaction of Judgment was filed with the court, as the promissory note was fully paid in full satisfaction of the promissory note and judgment.

Other Legal Matters

On November 12, 2009, an individual filed a breach of contract complaint in San Juan County, Colorado claiming damages of $67,140. We believe that this lawsuit is without merit and have filed a Motion for Change of Venue with the court. On January 15, 2010, the Court denied our Motion to Change Venue. On February 11, 2010 we filed a Request to Reconsider Motion to Change Venue. The motion to change venue was denied. In July 2010 the Company filed a motion to dismiss and filed a reply to the plaintiff’s response to the motion to dismiss on August 25, 2010. On September 12, 2011, we entered into a stipulated settlement agreement. The agreement specifies that we pay to the Plaintiff the sum of $80,000 with accrued interest at 8% per annum due on September 13, 2013. On October 4, 2011 a stipulated motion to dismiss with prejudice was filed with the court.

Mines and mining claims near to the CGFI Mineral Properties are owned by other parties. Because the various mines possibly have interconnections between adits and tunnels and common stormwater conveyances and treatment sites, the environmental issues are both factually complex and legally complex. Disputes among the various property owners, over environmental liabilities, responsibility for clean-up and maintenance of the sites and facilities, and responsibility for site remediation continue.

Permitting requirements can be a costly undertaking and we could be at risk for fines and penalties if required permits are not timely in place.

Item 4.		Submission of Matters to a Vote of Security Holders

No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders.

PART II

Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

On February 23, 2011, the Company’s stock quotation coverage moved from the FINRA operated OTC Bulletin Board to the OTC Markets Group, Inc.’s OTCQB under the same symbol “CGFIA.” OTCQB is the middle tier of the OTC market. OTCQB companies are reporting with the SEC or a U.S. banking regulator, making it easy for investors to identify companies that are current in their reporting obligations. There are no financial or qualitative standards to be in this tier. Our Class A common stock also continues to trade on the FINRA owned OTC Pinksheets. Our Class B common stock is restricted and does not trade on any market.

The table below sets forth the high and low sales prices for our common stock for the periods indicated as reported by the OTCBB. Sales prices represent prices between dealers, do not include retail markups, markdowns or commissions and do not necessarily represent prices at which actual transactions were effected.*

Year Ended		High				Low
August 31, 2006
April 11 to May 31, 2006 (1)		$	0.32			$	Nil
Fourth Quarter			0.32				0.31
August 31, 2007
First Quarter		$	0.31			$	0.04
Second Quarter			0.06				0.04
Third Quarter			0.19				0.04
Fourth Quarter			0.63				0.19
August 31, 2008
First Quarter		$	0.85			$	0.51
Second Quarter			0.85				0.55
Third Quarter			0.85				0.22
Fourth Quarter			0.25				0.08
August 31, 2009
First Quarter		$	0.13			$	0.02
Second Quarter			0.02				0.01
Third Quarter			0.02				0.0058
Fourth Quarter			0.0091				0.0030
August 31, 2010
First Quarter		$	0.0043			$	0.0012
Second Quarter			0.0031				0.0015
Third Quarter			0.0029				0.0016
Fourth Quarter			0.0021				0.0009
August 31, 2011
First Quarter		$	0.0029			$	0.0007
Second Quarter			0.001				0.0009
Third Quarter			0.001				0.0006
Fourth Quarter			0.0008				0.0004

On November 21, 2011 the last reported sales price of our Class A common stock as reported on the OTCQB was $0.0003 per share. As of November 21, 2011, there were 83 holders of record of our Class A common stock. The number of holders of record does not include those shareholders who own their shares in street name. We estimate that the ultimate number of beneficial owners of both Class A and Class B shares is approximately 7,000.

On October 17, 2008, the Company’s Board of Directors authorized a 30% (thirty percent) stock dividend of the Company’s Class A Common Stock for its Stockholders of Record as of November 6, 2008. The Stock Dividend Pay Date to stockholders was November 26, 2008.

We have never paid a cash dividend. Payment of future dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including the terms of any credit arrangements, our financial condition, operating results, current and anticipated cash needs and plans for growth. Our initial earnings, if any, will likely be retained to finance our growth. At the present time, we are not party to any agreement that would limit our ability to pay dividends.

The Securities Enforcement and Penny Stock Reform Act of 1990

The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our shares are currently subject to the penny stock rules.

A purchaser is purchasing penny stock which limits the ability to sell the stock. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the Commission, which:

•

contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

•

contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities Act of 1934, as amended;

•

contains a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the bid and ask price;

•

contains a toll-free telephone number for inquiries on disciplinary actions;

•

defines significant terms in the disclosure document or in the conduct of trading penny stocks; and

•

contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation.

•

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:

•

the bid and offer quotations for the penny stock;

•

the compensation of the broker-dealer and its salesperson in the transaction;

•

the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and

•

monthly account statements showing the market value of each penny stock held in the customer’s account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those 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 acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements have the effect of reducing the trading activity in the secondary market for our stock. Thus, stockholders may have difficulty selling their securities.

Securities Authorized for Issuance Under Equity Compensation Plans

Equity Compensation Plan Information

The following sets forth information for the equity compensation plans outstanding as of August 31, 2011 (including individual compensation arrangements) under which shares of our common stock are authorized for issuance:

Equity Compensation Plan Information

		Number of securities
		to be issued upon				Weighted average				Number of securities
		exercise of				exercise price of				remaining available for
		outstanding options,				outstanding options,				future issuance as of
Plan Category		warrants and rights				warrants and rights				November 22, 2011
Equity compensation plans approved by security holders:			—				—				—
Equity compensation plans not approved by security holders:			—				—				—
2008 Employee Stock Incentive Plan			—				—				67,730
2008 Non-Qualified Consultants & Advisors Stock Compensation Plan.			—				—				4,544,057
2008 Stock Compensation Plan			—				—				2,418,712,167

2008 Stock Incentive Plan

In February 2008, the Company approved the 2008 Stock Incentive Plan (“2008 Plan”) which provides incentive stock and non-statutory options to be granted to select employees, directors and consultants of the Company. The 2008 Plan provides that awards may be granted for up to 12,480,000 shares of the Company’s Class A common shares.

2008 Non-Qualified Consultants & Advisors Stock Compensation Plan

On September 12, 2008, our Board of Directors approved the 2008 Non-Qualified Consultants & Advisors Stock Compensation Plan (the “2008 Consultants Plan”). As of November 22, 2011 we are authorized to issue up to 1,865,000,000 shares of our Class A Common Stock (subject to adjustment in case of a subdivision of our outstanding shares of Common Stock, recapitalization, stock dividend, or other change in our corporate structure that affects our Common Stock) to consultants or advisors in connection with services rendered by such persons or entities. The 2008 Consultants Plan is administered by our Compensation Committee of the Board of Directors, or if the we do not have a Compensation Committee, then a committee appointed by the Board which is to consist of one executive officer of the Company and at least one independent, non-employee member of the Board. If no committee is appointed, then the Board of Directors administers the plan. We currently do not have a Compensation Committee. Our Board has appointed C. Stephen Guyer, our Chief Financial Officer and Director, and Norman J. Singer, one of our independent Directors, to act as the committee to administer the 2008 Consultants Plan. We have registered with the Securities and Exchange Commission the common shares issuable under the 2008 Consultants Plan. One of the primary purposes of the plan is to give our company the flexibility to pay for services with shares of our common stock rather than with cash during our exploratory stage.

2008 Employee & Director Stock Compensation Plan

In November, 2008, our Board of Directors approved the Employee & Director Stock Compensation Plan (the “2008 Employee Plan”). The purpose of the 2008 Employee Plan is (i) to further our growth by allowing us to compensate employees and Directors who have provided bona fide services to our company through the award of shares of our Common Stock, and (ii) attract, motivate, retain and reward quality employees and directors to acquire or increase a proprietary interest in our company. Considering that we are an exploratory mining company which faces challenging economic times and difficult capital markets, the Board of Directors believes that using our common stock is an important means of retaining and compensating employees and directors. As of November 22, 2011 we are authorized to issue up to 6,110,800,000 Shares of our Class A Common Stock (subject to adjustment in case of a subdivision of our outstanding shares of Common Stock, recapitalization, stock dividend, or other change in our corporate structure that affects our Common Stock). The 2008 Employee Plan is administered by a committee consisting of at least two persons to be appointed by the Board of Directors, one of whom is an independent director, or in the absence of such a committee, the Plan is to be administered by the Board of Directors. Our Board of Directors appointed C. Stephen Guyer, our CFO, and Norman J. Singer, one of our independent directors, to the committee. Any of our employees or directors are eligible to receive awards under the Plan.

On April 18, 2011 the Board of Directors amended the 2008 Employee Plan defining eligible persons to be: “officers, directors, employees, consultants, and advisors of the Company and/or one or more of its subsidiaries, if any.” On June 1, 2011 The Board of Directors amended the name of the 2008 Employee and Director Stock Compensation Plan to “2008 Stock Compensation Plan.”

Transfer Agent

Corporate Stock Transfer is the transfer agent for our common stock. Their address is at 3200 Cherry Creek Drive, Suite 430, Denver, Colorado 80209, and their telephone number is (303) 282-4800.

Issuer purchase of equity securities

There were no issuer purchases of securities during the period covered by this report.

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides information that management believes is relevant to an assessment and understanding of the financial condition and results of operations of Colorado Goldfields Inc. (the “Company”).

This discussion addresses matters we consider important for an understanding of our financial condition and results of operations as of and for the two years ended August 31, 2011, as well as our future results. It consists of the following subsections:

•

“Results and Plan of Operation” which provides a brief summary of our consolidated results and financial position and the primary factors affecting those results, as well as a summary of our expectations for fiscal 2012;

•

“Liquidity and Capital Resources,” which contains a discussion of our cash flows and liquidity, investing activities and financing activities, contractual obligations, and critical obligations;

•

“Results of Operations and Comparison”,” which sets forth an analysis of the operating results for the last two years;

•

“Critical Accounting Policies,” which provides an analysis of the accounting policies we consider critical because of their effect on the reported amounts of assets, liabilities, income and/or expenses in our consolidated financial statements and/or because they require difficult, subjective or complex judgments by our management;

•

“Recent Accounting Pronouncements and Developments,” which summarizes recently published authoritative accounting guidance, how it might apply to us and how it might affect our future results.

This item should be read in conjunction with our financial statements and the notes thereto included in this annual report.

Results and Plan of Operation

The following discussion updates our plan of operation for the foreseeable future. The discussion also summarizes the results of our operations for the year ended August 31, 2011 and compares those results to the year ended August 31, 2010.

During fiscal 2011 we continued to experience the negative effects of the financial markets upheaval, which made capital acquisition extremely difficult. The litigation commenced by our former president, Todd C. Hennis necessarily caused all work relating to the Gold King Mine to be terminated.

Therefore, in fiscal 2011 we focused primarily on re-activation of the Pride of the West Mill, securing agreements for “custom” or “toll” milling, and acquiring rights to new properties for exploration and development. In that regard, we were generally successful. We purchased the Pay Day and Rage uranium claim group, undertook a redesign of the mill’s tailings disposal facility, and completed several milestones of exploration on both the Brooklyn and King Solomon mines.

See “Item 2. Properties,” for a detailed description of the results of our activities relating to work performed in fiscal 2011.

In summary and as described in “Item 2. Properties,” while the ultimate result of our amendment presented to the Mined Land Reclamation Board did not result in the granting of Amendment Number 2, many parts of the amendment were accepted. Through that permit amendment process and working with the Division of Reclamation Mining and Safety, we have learned what methods of tailings disposal will most likely be acceptable. Furthermore, the DRMS accepted the parts of the amendment regarding the following.

•

Mill building;

•

Laboratory building;

•

Ore stockpile area;

•

Leach plant building;

•

River protection dike;

•

Procedures for custom or “toll” milling.

This put us in a position to move forward with the mill re-activation project with much more focus and certainty. A “dry stack” method of tailings disposal will be part of a new permit amendment (“AM-03”). We believe that AM-03 will be completed and submitted by December 31, 2011.

Last year we predicted profits from operations by August 2011. Given the events described above, especially the necessity to develop a new approach to tailings handling, which caused a much longer than expected permit amendment process related to the mill, we are now targeting profits from operations by August 2012.

Weather conditions in San Juan County, Colorado vary dramatically by season. During the winter season our activities are concentrated on analysis, planning, and development of properties in more temperate climates. Surface drilling and property exploration in San Juan County can reasonably take place between May and late October. Of course underground operations continue year-round.

Our plan of operation for fiscal 2012 is to continue seeking funding for our operations and mining exploration program, complete all necessary permitting requirements, bring the Pride of the West Mill into operation, and commence custom/toll milling of ore.

Liquidity and Capital Resources

We were formed in early 2004 and have primarily had limited activity until our acquisition of the Pride of the West Mill in Silverton, Colorado. Since we have received no revenue from the production of gold or other metals, we have relied on funds received in connection with our equity and debt offerings to finance our ongoing operations. We have experienced net losses since inception, and we expect we will continue to incur losses for the next year.

As of the date of this filing, we have two available external sources source of funds. Although those sources have provided funding in the past, those sources are under no obligation to do so in the future. We require additional capital in the near term to maintain our current operations. Although we are actively seeking additional equity and debt financing, such financing may not be available on acceptable terms, if at all.

Our financial statements have been prepared assuming that we will continue as a going concern. Since our inception in February 2004, we have not generated revenue and have incurred net losses. We have a working capital deficit of $2,632,979 at August 31, 2011, incurred net losses of $6,163,394 and $3,660,418 for the years ended August 31, 2011 and 2010 respectively, and have a deficit accumulated during the exploration stage of $19,204,248 for the period from February 11, 2004 (inception) through August 31, 2011. Accordingly, we have not generated cash flow from operations and have primarily relied upon loans from officers, convertible promissory notes and advances from unrelated parties, sale of assets, and equity financing to fund our operations. These conditions (as indicated in the 2011 audit report of our Independent Registered Public Accounting Firm), raise substantial doubt about the Company’s ability to continue as a going concern.

We currently have minimal cash on hand. Accordingly, we do not have sufficient cash resources or current assets to pay our obligations, and we have been meeting many of our obligations through the issuance of our common stock to our employees, consultants and advisors as payment for goods and services. Considering the foregoing, we are dependent on additional financing to continue our operations and exploration efforts and, if warranted, to develop and commence mining and milling operations. Our significant capital requirements for the foreseeable future include exploration commitments of $650,000 on our mining property options, payment on a $444,371 promissory note, which is collateralized by the Pride of the West Mill, and related accrued interest of $9,204, payment on notes payable including accrued interest to related parties totaling $320,521, re-activation expenses for the mill, and our corporate overhead expenses.

We are actively seeking additional equity or debt financing. However, there can be no assurance that funds required during the next twelve months or thereafter will be available from external sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force us to substantially curtail or cease operations and would, therefore, have a material adverse effect on our business. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantly dilutive effect on our existing shareholders. All of these factors have been exacerbated by the extremely unsettled credit and capital markets presently existing.

As of August 31, 2011, we had cash of approximately $12,000, and other current assets of approximately $89,000 and current liabilities of approximately $2,734,000, resulting in a working capital deficit of approximately $2,633,000. We used cash and cash equivalents of $619,000 in operating activities for the year ended August 31, 2011. Cash provided by investing activities for the year ended August 31, 2011 of $43,000 consisted primarily of the sale of property, plant and equipment. Capital provided by financing activities of $568,000 consisted of cash proceeds from loans made by private investors during the year, net of repayments and loan acquisition costs.

Results of Operations

We are presently in the exploration stage of our business and have not earned any revenues to date, and we do not anticipate earning revenues until we acquire and develop mining properties with proven reserves or perform milling for other mining companies.

Year Ended August 31, 2011 Compared to Year Ended August 31, 2010

For the year ended August 31, 2011, we incurred a net loss of approximately $6,163,000 compared to a net loss of approximately $3,660,000 for the year ended August 31, 2010. The $2,477,000 increase in net loss is primarily due to the accounting treatment of convertible debt financing, which has been our primary source of funding.

For the years ended August 31, 2011 and 2010, overall mineral property and exploration costs increased $143,000 to $711,000 from $568,000, respectively. The increase was due to increasing expenditures related to mill re-activation.

Professional fees primarily relate to the litigation brought by our former president Todd C. Hennis and increased to $360,000 from $270,000 from 2010 to 2011, and increase of $90,000.

General and administrative costs were approximately $2,821,000 and $2,620,000 for the years ended August 31, 2011 and 2010, respectively; an increase of $201,000. Additional detail regarding general and administrative expenses follows.

Consulting expenses were $1,831,000 and $1,053,000 for the years ended August 31, 2011 and 2010, respectively, an increase of $778,000. The vast majority of these expenses are all in the form of stock based compensation. The increase is due to an award by the district court of $59,000 to Todd C. Hennis pursuant to the San Juan Properties litigation, increasing economic imaging activities, and consulting services related to potential and actual acquisitions.

Salaries and related payroll liabilities were $490,000 and $453,000 for the years ended August 31, 2011 and 2010, respectively, a $37,000 increase. The increase is due to higher compensation pursuant to our executive compensation agreements with our Chief Executive Officer and Chief Financial Officer in fiscal 2011. All salaries are either paid in the form of stock awards in lieu of cash, which are exempt under Rule 16b-3, or accrued as unpaid compensation. Our Chief Executive Officer and Chief Financial Officer have forgone any cash compensation since September 2008. Since September 2010, the CEO and CFO have not accepted any stock based compensation. However, compensation for amounts owed pursuant to our executive employment agreements has been fully accrued as August 31, 2011.

Travel and related costs were $10,000 and $14,000 for the years ended August 31, 2011 and 2010, respectively, a decrease of $4,000. The decrease in travel during the 2011 fiscal year was due to a lower level of management’s physical presence at the operations site in Silverton, Colorado in favor of local consulting supervision.

Website costs were zero and $55,000 for the years ended August 31, 2011 and 2010, respectively, a decrease of $55,000. The decrease was due to the completion of redesign activities related to our website in fiscal 2010.

Investor relations expenses were $251,000 and $511,000 for the years ended August 31, 2011 and 2010, respectively, a decrease of $260,000. The decrease is due to a more stringent selection criteria applied to media resources to keep our shareholders informed of the Company’s progress.

Total interest expense was $2,660,000 and $241,000 for the years ended August 31, 2011 and 2010, respectively; an increase of $2,419,000. The primary reason for the increase relates to the required accounting treatment of convertible debt derivative liabilities. Non-cash amortization of debt discount and deferred financing costs, included in interest expense, was $2,512,402 and $88,767 for the years ended August 31, 2011 and 2010, respectively. The remaining interest expense is primarily related to the mortgage on the mill which was purchased in June 2007, officer loans and legal settlement interest.

Other income was $22,000 and $26,000 during the years ended August 31, 2011 and 2010 respectively, a decrease of $4,000 due primarily to the net effect of gains and losses on the sale of assets that are not immediately needed for operations.

Legal settlement costs of $245,000 are included in operating expenses in 2010. This was due to recording a potential liability to our former president Todd C. Hennis who, as result of litigation, may have a claim against the Company if we are not successful in the Colorado Court of Appeals. See Item 3. Legal Proceedings for additional details.

Critical Accounting Policies

We have identified the following critical accounting policies which were used in the preparation of our financial statements.

Exploration and Development Costs: Costs of exploration and development costs are expensed as incurred unless proven and probable reserves exist and the property is a commercially minable property. When it has been determined that a mineral property can be economically developed as a result of established proven and probable reserves, the costs to develop such property will be capitalized. Costs of abandoned projects will be charged to operations upon abandonment.

Long-lived Assets: We periodically evaluate the carrying value of property, plant and equipment costs, to determine if these costs are in excess of their net realizable value and if a permanent impairment needs to be recorded. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain circumstances.

Property Retirement Obligation: Asset retirement costs are capitalized as part of the carrying amount of certain long-lived assets. Accretion expense is recorded in each subsequent period to recognize the changes in the liability resulting from the passage of time. Changes resulting from revisions to the original fair value of the liability are recognized as an increase or decrease in the carrying amount of the liability and the related asset retirement costs capitalized as part of the carrying amount of the related long-lived asset.

Mining Rights: The Company has determined that its mining rights meet the definition of mineral rights and are tangible assets. As a result, the costs of mining rights are initially capitalized as tangible assets when purchased. 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 reserves. For mining rights in which proven and probable reserves have not yet been established, the Company assesses the carrying value for impairment at the end of each reporting period. Mining rights are stated at cost less accumulated amortization and any impairment losses. Mining rights for which probable reserves have been established will be amortized based on actual units of production over the estimated reserves of the mines.

Derivatives: The Company follows the relevant accounting guidance and records derivative instruments (including certain derivative instruments embedded in other contracts) in the balance sheet as either an asset or liability measured at its fair value, with changes in the derivative’s fair value recognized currently in earnings unless specific hedge accounting criteria are met. The Company values these derivative securities under the fair value method at the end of each reporting period (quarter), and their value is marked to market at the end of each reporting period with the gain or loss recognition recorded in earnings. The Company continues to revalue these instruments each quarter to reflect their current value in light of the current market price of our Common Stock. The Company utilizes a Black-Scholes option-pricing model to estimate fair value. Key assumptions of the Black-Scholes option-pricing model include applicable volatility rates, risk-free interest rates and the instrument’s expected remaining life. These assumptions require significant management judgment.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Improving Disclosures about Fair Value Measurements” (ASU 2010-06). This update requires additional disclosure within the roll forward of activity for assets and liabilities measured at fair value on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, the update requires enhanced disclosures of the valuation techniques and inputs used in the fair value measurements within Levels 2 and 3. The new disclosure requirements are effective for interim and annual periods beginning after December 15, 2009, except for the disclosure of purchases, sales, issuances and settlements of Level 3 measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 (September 1, 2011 for the Company). As ASU 2010-06 only requires enhanced disclosures, the Company does not expect that the adoption of this update will have a material effect on its financial statements.

In June 2011, FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220) — Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011 (March 1, 2012 for the Company). The Company does not expect the adoption of ASU 2011-05 to have a material impact on its results of operations, financial condition, or cash flows.

Item 8.		Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Colorado Goldfields Inc.

We have audited the accompanying balance sheets of Colorado Goldfields Inc. (an Exploration Stage Company) as of August 31, 2011 and 2010, and the related statements of operations, cash flows and stockholders’ (deficit) equity for each of the years then ended, and for the period from February 11, 2004 (inception) through August 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 financial position of Colorado Goldfields Inc. as of August 31, 2011 and 2010, and the results of its operations and cash flows for each of the years then ended, and for the period from February 11, 2004 (inception) through August 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. As discussed in Note 1 to the financial statements, the Company incurred a net loss of $6,163,394 for the year ended August 31, 2011, and a deficit accumulated during the exploration stage of $19,204,248 for the period from February 11, 2004 (inception) through August 31, 2011. The Company also has a limited history and no revenue producing operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GHP HORWATH, P.C.

Denver, Colorado
November 22, 2011

Colorado Goldfields Inc. (An Exploration Stage Company)

		August 31,				August 31,
		2011				2010
ASSETS
Current Assets
Cash		$	11,838			$	20,019
Prepaid expenses and other			88,823				18,459
Total Current Assets			100,661				38,478
Non-Current Assets
Property, plant and equipment, net (Note 3)			1,605,878				1,660,015
Mining rights and claims (Note 4)			294,722				280,556
Restricted cash (Note 3)			515,428				318,154
Deferred financing costs			28,805				13,206
Other			11,520				11,520
Total Non-Current Assets			2,456,353				2,283,451
Total Assets		$	2,557,014			$	2,321,929
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable		$	253,453			$	317,149
Accrued liabilities			1,023,340				507,140
Convertible debt, less unamortized discount of $285,693 (2011)
and $126,238 (2010), (Note 7)			153,605				23,762
Derivative liabilities (Note 8)			529,146				140,284
Notes payable, including accrued interest — related parties (Note 5)			320,521				280,600
Promissory note payable, including accrued interest (Note 6)			—				75,754
Mortgage notes payable, including accrued interest (Note 3)			453,575				807,896
Total Current Liabilities			2,733,640				2,152,585
Non-Current Liabilities
Notes payable, including accrued interest — related parties (Note 5)			—				31,979
Asset retirement obligation			656,570				612,550
Total Non-Current Liabilities			656,570				644,529
Total Liabilities			3,390,210				2,797,114
Contingencies and Commitments (Note 13)
Stockholders’ Deficit (Note 9)
Class A common stock, 15,000,000,000 shares authorized, $0.001 par value; 7,770,773,405 and 1,773,286,964 issued and outstanding, respectively			7,712,512				1,715,026
Class B common stock, 500,000,000 shares authorized, $0.001 par value; 490,371,533 and 40,744,353 shares issued and outstanding, respectively			—				—
Additional paid in capital			10,629,290				10,821,393
Donated capital			29,250				29,250
Deficit accumulated during the exploration stage			(19,204,248	)			(13,040,854	)
Total Stockholders’ Deficit			(833,196	)			(475,185	)
Total Liabilities and Stockholders’ Deficit		$	2,557,014			$	2,321,929

The accompanying notes are an integral part of these financial statements

Colorado Goldfields Inc. (An Exploration Stage Company)

										Accumulated
										from February 11,
		For the Year				For the Year				2004 (Date of
		Ended				Ended				Inception) to
		August 31, 2011				August 31, 2010				August 31, 2011
Revenue		$	—			$	—			$	—
Operating expenses
Donated rent			—				—				9,750
Donated services			—				—				19,500
General and administrative			2,820,984				2,619,760				12,502,560
Mineral property and exploration costs			711,122				567,927				2,597,068
Professional fees			359,536				270,452				1,520,998
Total operating expenses			(3,891,642	)			(3,458,139	)			(16,649,876	)
Other income (expense)
Other income			22,119				26,033				102,941
Interest income			647				1,907				33,781
Gain on derivative liabilities			365,735				10,789				376,524
Interest expense			(2,660,253	)			(241,008	)			(3,067,618	)
Total other expense			(2,271,752	)			(202,279	)			(2,554,372	)
Net Loss		$	(6,163,394	)		$	(3,660,418	)		$	(19,204,248	)
Net Loss Per Common Share — Basic and Diluted			*				*
Weighted Average Number of Common Shares Outstanding			3,927,613,802				1,186,999,066

The accompanying notes are an integral part of these financial statements

Colorado Goldfields Inc. (An Exploration Stage Company)

										Accumulated from
		For the Year				For the Year				February 11, 2004
		Ended				Ended				(Date of Inception) to
		August 31, 2011				August 31, 2010				August 31, 2011
Cash Flows Used in Operating Activities:
Net loss		$	(6,163,394	)		$	(3,660,418	)		$	(19,204,248	)
Adjustments to reconcile net loss to net cash used in operating activities:
Donated services and rent			—				—				29,250
Amortization of debt discount and deferred financing costs			2,512,402				88,767				2,601,169
Depreciation and amortization			32,039				38,321				130,464
Gain on derivative liabilities			(365,735	)			(10,789	)			(376,524	)
Impairment of mining rights			135,834				126,944				262,778
Stock issued for services			2,368,137				2,189,801				9,411,461
Stock-based compensation — options			—				—				899,303
Accrued interest on debt			107,483				101,850				310,379
Accretion expense on asset retirement obligation			44,020				41,050				156,570
Gain on sale of property, plant and equipment			(20,802	)			(13,716	)			(73,757	)
Change in operating assets and liabilities:
Increase in restricted cash			(197,274	)			—				(515,428	)
(Increase) decrease in prepaid expenses and other			(14,214	)			5,009				(14,214	)
Increase in accounts payable			430,053				393,412				1,599,088
Increase in accrued liabilities			511,969				401,529				1,019,108
(Increase) decrease in other assets			—				2,000				(11,520	)
Net cash used in operating activities			(619,482	)			(296,240	)			(3,776,121	)
Cash Flows from Investing Activities:
Proceeds from sale of property, plant and equipment			42,900				15,000				202,400
Acquisition of property, plant and equipment			—				—				(717,736	)
Net cash provided by (used in) investing activities			42,900				15,000				(515,336	)
Cash Flows from Financing Acitvities:
Advances received			—				—				405,733
Repayment of advances			—				—				(405,733	)
Proceeds from notes from related parties			—				195,700				581,452
Repayment of advances from related party			(10,544	)			—				(20,596	)
Proceeds from note payable			—				—				100,000
Repayment of notes payable			(513,704	)			(75,000	)			(688,704	)
Proceeds from issuance of convertible debt			1,218,977				200,000				1,418,977
Loan acquisition costs			(126,898	)			(20,000	)			(146,898	)
Proceeds from exercise of warrants			570				—				570
Net proceeds from issuance of common stock			—				—				3,058,494
Net cash provided by financing activities			568,401				300,700				4,303,295
(Decrease) increase in cash			(8,181	)			19,460				11,838
Cash — Beginning of Period			20,019				559				—
Cash — End of Period		$	11,838			$	20,019			$	11,838
Supplemental Disclosures:
Interest paid		$	16,459			$	6,736			$	94,781
Income taxes paid		$	—			$	—			$	—
Non-cash investing and financing activities:
Exchange of accounts payable for debt		$	30,742			$	—			$	166,036
Issuance of common stock to satisfy accounts payable		$	459,024			$	343,828			$	1,172,867
Issuance of common stock for prepaid expenses		$	191,140			$	79,940			$	528,579
Issuance of common stock for mining rights		$	150,000				407,500			$	557,500
Exchange of convertible debt for common shares		$	2,771,502			$	107,136			$	2,878,638
Exchange of property, plant and equipment for accounts payable		$	—			$	—			$	2,750
Forgiveness of related party debt and accrued interest		$	—			$	—			$	288,361
Acquisition of land and building:
Cash paid		$	—			$	—			$	250,677
Mortgage note given to seller			—				—				650,000
Asset retirement obligation assumed			—				—				500,000
Assets acquired		$	—			$	—			$	1,400,677

The accompanying notes are an integral part of these financial statements

Colorado Goldfields Inc. (An Exploration Stage Company)

																										Deficit
																										Accumulated				Total
		Class A								Class B								Additional								During the				Stockholders’
		Common Stock								Common Stock								Paid in				Donated				Exploration				(Deficit)
Number of Shares		Shares				Amount				Shares				Amount				Capital				Capital				Stage				Equity
Balances — February 11, 2004 (Date of inception)			—			$	—				—			$	—			$	—			$	—			$	—			$	—
Issuance of common stock for cash			51,350,000				2,500				—				—				—				—				—				2,500
Donated services and rent			—				—				—				—				—				4,500				—				4,500
Net loss			—				—				—				—				—				—				(5,898	)			(5,898	)
Balances — August 31, 2004			51,350,000				2,500				—				—				—				4,500				(5,898	)			1,102
Issuance of common stock for cash			63,160,500				53,750				—				—				—				—				—				53,750
Donated services and rent			—				—				—				—				—				9,000				—				9,000
Net loss			—				—				—				—				—				—				(35,319	)			(35,319	)
Balances — August 31, 2005			114,510,500				56,250				—				—				—				13,500				(41,217	)			28,533
Donated services and rent			—				—				—				—				—				9,000				—				9,000
Net loss			—				—				—				—				—				—				(36,148	)			(36,148	)
Balances — August 31, 2006			114,510,500				56,250				—				—				—				22,500				(77,365	)			1,385
Donated services and rent			—				—				—				—				—				6,750				—				6,750
Net loss			—				—				—				—				—				—				(300,193	)			(300,193	)
Balances — August 31, 2007			114,510,500				56,250				—				—				—				29,250				(377,558	)			(292,058	)
Issuance of common stock for cash (net of offering costs of $282,231)			11,386,180				11,386				—				—				2,990,858				—				—				3,002,244
Shares issued for services			9,829,440				9,829				—				—				859,910				—				—				869,739
Stock-based compensation — options			—				—				—				—				895,209				—				—				895,209
Net loss			—				—				—				—				—				—				(3,721,021	)			(3,721,021	)
Balances — August 31, 2008			135,726,120				77,465				—				—				4,745,977				29,250				(4,098,579	)			754,113
Shares issued for services			370,282,860				370,283				—				—				3,871,000				—				—				4,241,283
Issuance of common stock to satisfy accounts payable			29,389,147				29,389				—				—				340,626				—				—				370,015
Stock-based compensation — options			—				—				—				—				4,094				—				—				4,094
Stock issued to beneficial owners of Class A Common Stock			—				—				35,732,285				—				—				—				—				—
Forgiveness of related party debt and accrued interest			—				—				—				—				288,361				—				—				288,361
Net loss			—				—				—				—				—				—				(5,281,857	)			(5,281,857	)
Balances — August 31, 2009			535,398,127				477,137				35,732,285				—				9,250,058				29,250				(9,380,436	)			376,009
Shares issued for services			921,203,109				921,203				—				—				1,029,557				—				—				1,950,760
Issuance of common stock to satisfy accounts payable			144,810,731				144,811				—				—				199,017				—				—				343,828
Shares issued for mining rights			125,000,000				125,000				—				—				282,500				—				—				407,500
Shares issued for convertible debt			46,874,997				46,875				—				—				60,261				—				—				107,136
Stock issued to beneficial owners of Class A Common Stock			—				—				5,012,068				—				—				—				—				—
Net loss			—				—				—				—				—				—				(3,660,418	)			(3,660,418	)
Balances — August 31, 2010			1,773,286,964			$	1,715,026				40,744,353			$	—			$	10,821,393			$	29,250			$	(13,040,854	)		$	(475,185	)
Shares issued for services (Note 9)			3,016,771,036				3,016,771				—				—				(592,484	)			—				—				2,424,287
Issuance of common stock to satisfy accounts payable (Note 9)			583,549,464				583,549				—				—				(124,525	)			—				—				459,024
Shares issued for convertible debt (Note 9)			2,147,165,941				2,147,166				—				—				624,336				—				—				2,771,502
Shares issued for mining rights (Note 4)			250,000,000				250,000												(100,000	)											150,000
Stock issued to officers (Note 9)			—				—				449,623,244				—				—				—				—				—
Class B warrants exercised and shares issued (Note 9)			—				—				3,936				—				570				—				—				570
Net loss			—				—				—				—				—				—				(6,163,394	)			(6,163,394	)
Balances — August 31, 2011			7,770,773,405			$	7,712,512				490,371,533			$	—			$	10,629,290			$	29,250			$	(19,204,248	)		$	(833,196	)

The accompanying notes are an integral part of these financial statements

Colorado Goldfields Inc. (An Exploration Stage Company)

Notes to the Financial Statements

August 31, 2011

1.

Organization, Nature of Business, Going Concern and Management’s Plans

Organization and Nature of Business

The Company was incorporated in the State of Nevada on February 11, 2004. The Company is considered to be an Exploration Stage Company. The Company’s principal business is the acquisition and exploration of mineral resources. The Company has not presently determined whether the properties it has acquired and intends to acquire contain mineral reserves that are economically recoverable.

Going Concern and Management’s Plans

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Since its inception in February 2004, the Company has not generated revenue and has incurred net losses. The Company has a working capital deficit of $2,632,979 at August 31, 2011, incurred net losses of $6,163,394 and $3,660,418 for the years ended August 31, 2011 and 2010, respectively, and has incurred a deficit accumulated during the exploration stage of $19,204,248 for the period from February 11, 2004 (inception) through August 31, 2011. Accordingly, it has not generated cash flows from operations and has primarily relied upon advances from stockholders, promissory notes, advances from unrelated parties, and equity financing to fund its operations.

The Company is dependent upon the State of Colorado Mined Land Reclamation Board (“MLRB”), approving an amendment to the existing reclamation permit for the Company’s Pride of the West Mill (“the Mill”). The amendment, if approved, would cure a current cease and desist order, which was issued in 2005 and allow the Mill to become operational. The permit amendment process is lengthy and complex. In December 2010, the Company presented a proposed permit amendment to the MLRB. While portions of that permit amendment were approved, there remain deficiencies that require additional work. As a result, on December 30, 2010, the MLRB denied the Company’s permit amendment application.

The Company is preparing additional material for consideration by the State of Colorado Division of Reclamation, Mining and Safety (“DRMS”) and the MLRB. Management expects to submit a new permit amendment application to the DRMS by the end of 2011. Ultimately, should the Company not be able to obtain the approval of a new permit amendment, management anticipates that the Mill will be reclaimed and liquidated.

The Company currently faces a severe working capital shortage and is not presently generating any revenues. The Company will need to obtain additional capital to fund its operations, continue mining exploration activities, fulfill its obligations under its mineral property lease/option agreements, and satisfy existing creditors.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts or classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans with regards to these conditions are described below.

The Company continues to explore sources of additional financing to satisfy its current operating requirements. In May 2010, the Company closed a one-year funding arrangement with an institutional investor (the “Delaware Partnership Investor”), in which the Delaware Partnership Investor has provided convertible debt financing to the Company of approximately $1 million. In November 2010, the Company closed an additional one-year funding arrangement with the Delaware Partnership Investor, in which the Delaware Partnership Investor may provide convertible debt financing in no less than $50,000 tranches, up to $650,000. The Delaware Partnership Investor is under no obligation to provide funding, and the timing of funding is solely at the discretion of the Delaware Partnership Investor. Proceeds from the financings are to pay the Company’s existing aged debt and for working capital requirements. Through August 31, 2011, the Company has received $1,203,978 ($1,053,978 during the year ended August 31, 2011) under these facilities (Note 7), of which $151,989 was used to pay off a promissory note payable and accrued interest (Note 6) and $425,000 was used to pay down the mortgage payable and accrued interest (Note 3). During the year ended August 31, 2011, the Company also entered into four funding arrangements for a total of $165,000, with a group of New York private investors in the form of convertible notes (Note 7).

Considering the difficult U.S. and global economic conditions, along with the substantial stability problems in the capital and credit markets, there is a significant possibility that the Company will be unable to obtain financing to continue its operations.

There is no assurance that required funds during the next twelve months or thereafter will be generated from operations, or that those funds will be available from external sources, such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantly dilutive effect on the Company’s existing shareholders. All of these factors have been exacerbated by the extremely unsettled credit and capital markets presently existing.

2.

Summary of Significant Account Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in US dollars. The Company’s fiscal year-end is August 31.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 periods. Actual results could differ from those estimates.

Basic and Diluted Net Loss Per Share

Basic earnings (loss) per share (“EPS”) is computed by dividing net loss available to common stockholders (numerator) by the weighted average number of shares of the Class A Common Stock outstanding (denominator) during the period. During the years ended August 31, 2011 and 2010, the Company issued Class B Common Stock, which are not publicly-traded shares. The Class B Common Stock share dividends equally with Class A Common Stock, and are defined as participating securities under US GAAP; however, they have no contractual obligation to share in losses of the Company. The Company has therefore not included the Class B Common Stock in determining basic EPS. Diluted EPS gives effect to all potential dilutive common shares

outstanding during the periods using the treasury stock method (for options and warrants) and the two-class method (for Class B common stock). 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 excludes all dilutive potential shares if their effect is anti-dilutive. For the years ended August 31, 2011 and 2010, the effect of the conversion of outstanding options, warrants and debt and Class B common shares would have been anti-dilutive. The following table represents the potential dilutive securities from the calculation of diluted loss per share.

		August 31, 2011				August 31, 2010
Class B Common Stock			490,371,533				40,744,353
Class B warrants			—				40,744,353
Convertible debt			1,399,185,672				254,515,600

Comprehensive Income (Loss)

For the years ended August 31, 2011 and 2010 there were no differences between net loss and comprehensive loss.

Cash

Cash, excluding restricted cash, includes deposits in banks which are unrestricted as to withdrawal or use.

Mineral Property and Exploration Costs

The Company has been in the exploration stage since its formation on February 11, 2004, and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties.

Before mineralization is classified as “proven and probable” reserves; costs are expensed and classified as Mineral property and exploration costs. Capitalization of mine development project costs, that meet the definition of an asset, begins once mineralization is classified as “proven and probable reserves.”

When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to acquire and develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

Mining Rights

The Company has determined that its mining rights meet the definition of mineral rights, as defined by accounting standards, and are tangible assets. As a result, the costs of mining rights are initially capitalized as tangible assets when purchased. 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 reserves. The Company’s rights to extract minerals are contractually limited by time. However, the Company has the ability to extend the leases (Note 4). For mining rights in which proven and probable reserves have not yet been established, the Company assesses the carrying value for impairment at the end of each reporting period. During the years ended August 31, 2011 and 2010, the Company recorded impairment charges of $135,834 and $126,944, respectively.

Long-Lived Assets

The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. Management believes no impairment exists as of August 31, 2011.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value.

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 — assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

As of August 31, 2011, the Company had the following financial assets and liabilities which are measured at fair value:

		Level 1				Level 2				Level 3
Restricted cash (time deposits)			—			$	515,428				—
Derivative liabilities			—			$	529,146				—

The fair values of financial instruments, which include cash, accounts payable, notes payable, and convertible debt, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The fair value of amounts due to related parties are not practicable to estimate, due to the related party nature of the underlying transactions. The fair value of the letter of credit issued in conjunction with the reclamation bond (Note 3) approximates the amount of fees paid to obtain it.

Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is determined to be more likely than not. The potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured that it is more likely than not it will utilize the net operating losses carried forward in future years.

The Company has no unrecognized tax benefits. The Company files income tax returns in the U.S. federal jurisdiction and in the state of Colorado. Management does not believe there will be any significant changes in the Company’s tax positions over the next 12 months.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There was no income tax expense recognized during the years ended August 31, 2011 or 2010, for interest and penalties.

Asset Retirement Obligation

The fair value of a liability for an asset retirement obligation is required to be recognized in the period that it is incurred if a reasonable estimate of fair value can be made. In connection with the Company’s acquisition of the Pride of the West Mill (the “Mill”) in June 2007, an asset retirement obligation was recorded. The associated asset retirement costs were capitalized as part of the carrying amount of the Mill (See Note 3). Accretion expense is recorded in each subsequent period to recognize the changes in the liability resulting from the passage of time. During the years ended August 31, 2011 and 2010, the Company recorded accretion expense of $44,020 and $41,050, respectively. Changes resulting from revisions to the original fair value of the liability are recognized as an increase or decrease in the carrying amount of the liability and the related asset retirement costs capitalized as part of the carrying amount of the long-lived asset. Other than the increase due to accretion, no other changes or revisions to the original fair value of the liability occurred during the years ended August 31, 2011 or 2010.

Recent accounting pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). This update requires additional disclosure within the roll forward of activity for assets and liabilities measured at fair value on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, the update requires enhanced disclosures of the valuation techniques and inputs used in the fair value measurements within Levels 2 and 3. The new disclosure requirements are effective for interim and annual periods beginning after December 15, 2009 (the adoption of which did not have an impact on the Company’s financial statements), except for the disclosure of purchases, sales, issuances and settlements of Level 3 measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 (September 1, 2011 for the Company). As ASU 2010-06 only requires enhanced disclosures, the Company does not expect that the adoption of this update will have a material effect on its results of operations, financial condition, or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220) — Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011 (March 1, 2012 for the Company). The Company does not expect the adoption of ASU 2011-05 to have a material impact on its results of operations, financial condition, or cash flows.

3.

Property, Plant and Equipment

On June 29, 2007, the Company acquired the Mill located in Howardsville, Colorado for consideration of $900,677 plus the assumption of an estimated asset retirement obligation of $500,000 for a total cost of $1,400,677. The Company paid the seller cash of $250,677 and the remaining $650,000 was paid through a mortgage with the seller, which is collateralized by the property and bears interest at 12% per year. All unpaid principal was originally due June 29, 2009. The due date on the mortgage was extended and is currently due in full on July 1, 2012. During the year ended August 31, 2011, $425,000 of the mortgage including accrued interest was paid with proceeds from the issuance of convertible notes (See Note 7).

Interest expense in connection with the mill mortgage for the years ended August 31, 2011 and 2010 was $70,679 and $78,000, respectively.

In connection with the acquisition of the Mill, the Company was obligated to replace a financial warranty that the seller had provided to the DRMS. In December 2007, the Company replaced the financial warranty by purchasing a certificate of deposit, which is restricted, to secure an irrevocable standby letter of credit (the “LOC”) totaling $318,654, with a financial institution. On May 13, 2011, the LOC was drawn upon in the amount of $318,654. The funds were deposited as a restricted cash deposit with the State of Colorado.

In October 2009, the DRMS notified the Company of a potential $196,476 increase in the financial warranty. On February 23, 2011, the Company entered in to a joint stipulation with the DRMS that provides for the payment of the increase in the financial warranty in four equal monthly installments of $49,119 beginning in March 2011. The additional funds are held as a restricted cash deposit with the State of Colorado. As of August 31, 2011, the total funds held as a restricted cash deposit with the State of Colorado related to the mill financial warranty is $515,130.

Property, plant and equipment consist of the following as of August 31, 2011 and 2010:

		August 31, 2011				August 31, 2010
Computer equipment		$	2,118			$	2,118
Mine and drilling equipment			77,150				111,250
Mobile mining equipment			28,400				61,519
Land and mill			1,567,176				1,567,176
			1,674,844				1,742,063
Less accumulated depreciation			(68,966	)			(82,048	)
		$	1,605,878			$	1,660,015