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EX-3.6 - CERTIFICATE OF DESIGNATION - Tao Minerals Ltd.exhibit3-6.htm
EX-32.1 - SECTION 906 CERTIFICATION - Tao Minerals Ltd.exhibit32-1.htm
EX-31.1 - SECTION 302 CERTIFICATION - Tao Minerals Ltd.exhibit31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 31, 2011

or

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

For the transition period from _______________________ to _______________________

Commission File Number 000-51922

TAO MINERALS LTD.
(Exact name of registrant as specified in its charter)

Nevada 20-1682702
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
   
Officina 301 Edeficio El Crusero, Carrera 48, 12 Sur – 148 Medellin, Colombia N/A
(Address of principal executive offices) (Zip Code)

0115-314-2330
(Registrant’s telephone number, including area code)

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

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

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

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

Large accelerated filer [   ]   Accelerated filer                 [   ]
Non-accelerated filer   [   ] (Do not check if a smaller reporting company) Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act
[X] YES      [   ] NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
[   ] YES      [   ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
595,994,828 common shares issued and outstanding as of November 29, 2011.


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our consolidated unaudited interim financial statements for the three and six month periods ended July 31, 2011 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

2



TAO MINERALS LTD. and Subsidiary
(An Exploration Stage Company)
Consolidated Balance Sheets
(Unaudited)

    July 31,     January 31,  
    2011     2011  
ASSETS  
Current            
 Cash $  14,492   $  18,295  
 Prepaids   8,721     8,695  
Total current assets   23,213     26,990  
             
Mineral Properties            
 Mineral Rights   132,500     132,500  
Total Mineral Properties   132,500     132,500  
             
Total assets $  155,713   $  159,490  
             
LIABILITIES AND STOCKHOLDERS’ DEFICIT  
Current            
             
 Accounts payable and accrued expenses $  88,676   $  102,558  
 Note payable   282,672     272,846  
 Derivative liability   637,269     683,057  
 Due to related parties   186,039     199,047  
 Stock issuance liability   93,140     93,140  
 Other accrued liabilities   73,458     228,618  
Total current liabilities   1,361,254     1,579,266  
             
STOCKHOLDERS’ DEFICIT            
Share Capital            
 Authorized:            
Preferred stock: $0.001 par value 1,000,000 shares authorized   -     -  
 None issued, allotted and outstanding            
             
Common stock: $0.001 par value, 1,000,000,000 shares authorized
     493,017,660 shares and 196,631,122 shares issued and outstanding 
     at July 31, 2011 and January 31, 2011
  493,019     196,632  
Additional paid-in capital   13,846,754     13,033,514  
Accumulated other comprehensive loss   (46,792 )   (39,255 )
Deficit accumulated during exploration stage   (15,486,446 )   (14,599,401 )
Total stockholders’ deficit   (1,193,465 )   (1,408,510 )
Non-controlling interest   (12,076 )   (11,266 )
Total deficit   (1,205,541 )   (1,419,776 )
Total liabilities and deficit $  155,713   $  159,490  

The accompanying notes are an integral part of these financial statements.

3


TAO MINERALS LTD. and Subsidiary
(An Exploration Stage Company)
Consolidated Statements of Operations
(Unaudited)

    From                          
    Inception to     For the Six Months     For the Three Months  
    July 31, 2011     Ended July 31,     Ended July 31,  
    (Unaudited)     2011     2010     2011     2010  
                               
OPERATING EXPENSES                              
     Exploration expenses $  197,556   $  49,382   $  -   $  3,201   $  -  
     Professional fees   357,362     64,141     -     21,799     16,808  
     Director fees   120,000     -     -     -     -  
     Consulting fees   1,591,506     102,000     193,333     51,000     63,333  
     Legal fees   333,356     13,718     26,441     6,621     -  
     General and administrative   3,354,248     161,278     1,821,903     83,802     1,789,322  
     Impairment charge   4,719,650     -     -     -     -  
LOSS FROM OPERATIONS   10,673,678     390,519     2,041,677     166,423     1,869,463  
     Total Operating Expenses   (10,673,678 )   (390,519 )   (2,041,677 )   (166,423 )   (1,869,463 )
OTHER INCOME (EXPENSE)                              
     Derivative expense   (1,868,490 )   (4,911 )   (176,871 )   96,628     88,241  
     Loss on settlement of debt   (1,456,151 )   -     -           -  
     Interest expense   (1,322,305 )   (492,425 )   (50,764 )   (301,191 )   (34,463 )
     Other loss, net   (1,067 )   -     -           -  
     Foreign currency translation gain   1,531     -     -           -  
TOTAL OTHER                              
INCOME (EXPENSE)   (4,646,482 )   (497,336 )   (227,635 )   (204,563 )   53,778  
                               
 Net loss for the period   (15,320,160 )   (887,855 )   (2,269,312 )   (370,986 )   (1,815,685 )
 Less: net loss attributable to
 
noncontrolling interest
  3,640     810     -     240     -  
 Net loss attributable to TAO
 common
shareholders
$  (15,316,520 ) $  (887,045 ) $  (2,269,312 ) $  (370,746 ) $  (1,815,685 )
 Other Comprehensive Loss                              
 Foreign currency translation
 
adjustment
  (46,792 )   (7,537 )   (85 )   (2,709 )   -  
                               
 Comprehensive Loss $  (15,363,312 ) $  (894,582 ) $  (2,269,397 ) $  (373,455 ) $  (1,815,685 )
                               
 LOSS PER SHARE – BASIC       $  (0.00 ) $  (0.14 ) $  (0.00 ) $  (0.07 )
                               
WEIGHTED AVERAGE NUMBER OF ISSUED SHARES:                    
   - BASIC         316,578,326     16,095,455     378,640,848     26,485,771  

The accompanying notes are an integral part of these financial statements.

4


TAO MINERALS LTD. And Subsidiary
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)

    From Inception to     For the Six Months  
    July 31, 2011     Ended July 31,  
    (Unaudited)     2011     2010  
Cash Provided by (Used for) Operating Activities
Net (loss) for the period $  (15,316,520 ) $  (887,045 ) $  (2,269,312 )
Stock issued for services   3,286,386     -     1,707,827  
Loss on settlement of debt   1,456,151     -     -  
Impairment charges   4,719,650     -     -  
Minority interest in loss   (13,641 )   (810 )   -  
Changes in non-cash working capital items:                  
           Prepaids   (8,721 )   (26 )   (59,901 )
           Discount on note payable   986,437     428,611     -  
           Accounts payable and accrued liabilities   1,415,285     12,011     128,918  
           Due to related parties   (366,576 )   (83,985 )   -  
           Derivative liability   1,968,556     4,977     253,508  
Cash used by operations   (1,872,993 )   (526,267 )   (238,960 )
Investing Activities                  
Acquisition of subsidiary   (114,185 )   -     -  
Purchase of fixed assets   (19,370 )   -     -  
Purchase of mineral rights   (379,941 )   -     -  
Cash used by investing activities   (513,496 )   -     -  
Financing Activities                  
Issuance of debt   2,395,320     530,000     303,198  
Issuance of common stock   55,310     -     -  
Cash provided by financing activities   2,450,630     530,000     303,198  
                   
Effect of Exchange Rate on Cash   (49,649 )   (7,536 )   -  
Cash Increase (Decrease) During the Period   14,492     (3,803 )   64,238  
Cash, Beginning of Period   -     18,295     7,865  
Cash and Equivalents, End of Period $  14,492   $  14,492   $  72,103  

Supplemental Cash Flow Information;
The Company did not pay cash for either interest or taxes for the six months ended July 31, 2011 and 2010.

The accompanying notes are an integral part of these financial statements.

5



1.

Organization

   

This summary of accounting policies for Tao Minerals Ltd. is presented to assist in understanding the Company's financial statements. The accounting policies conform to U.S. generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

   

Nature of Operations and Going Concern

   

Tao Minerals, Ltd. (the “Company”) is a natural resource exploration company with an objective of acquiring, exploring and if warranted and feasible, developing natural resource properties. The Company was incorporated under the laws of the State of Nevada on September 23, 2004, and has been in the exploration stage since inception.

   

As reflected in the accompanying financial statements, the Company is in the exploration stage and has cumulative negative cash flows from operations of $1,872,993 since inception and losses of $887,045 for the six months ended July 31, 2011. This raises substantial doubt about its ability to continue as a going concern. These consolidated financial statements have been prepared on the assumption that the Company is a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

   

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. Management plans to raise equity financings over the next twelve months to finance operations. There is no guarantee that the Company will be able to complete any of these objectives.

   
2.

Significant Accounting Policies

   

Basis of Presentation

   

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. These consolidated financial statements include the accounts of TAO Minerals, LTD (“Parent” or “TAO”) and its 99% owned subsidiary, Minera TAO, SA “Minera”. Collectively, the consolidated entities are referred to herein as the “Company”. All significant inter-company transactions have been eliminated. The Company’s fiscal year end is January 31.

   

Accounting Estimates

   

The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to valuation of long-lived assets, stock based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

6


Cash Equivalents

For purposes of the statement of cash flows cash equivalents usually consist of highly liquid investments which are readily convertible into cash with maturity of three months or less when purchased.

Concentrations

The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. The company’s assets and operations are concentrated in the country of Colombia, South America.

Mineral Interests

Mineral interests associated with other than owned properties are classified as tangible assets. As of July 31, 2011, the Company had capitalized $132,500 related to the mineral rights. The mineral rights will be amortized using the units-of-production method when production at each project commences.

Long-Lived Assets

In accordance with ASC 360, Property Plant and Equipment, 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.

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Management has adopted ASC 740 Foreign Currency Translation Matters. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

The financial statements of the subsidiary are translated to United States dollars in accordance with ASC 740 using period-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ deficit. Foreign currency transaction gains and losses are included in current operations.

7


Environmental Costs

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to plan of action based on the then known facts.

Loss per Share

The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company has $529,430 of convertible debentures which can be converted to common stock. These shares have not been included in any weighted average computations since the effect would be anti-dilutive.

Income Taxes

The Company accounts for income taxes under the ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Fair Value of Financial Instruments

Our financial instruments consist principally of cash, accounts payable, notes payable, derivative liabilities, amounts due to related parties, stock issuance liabilities and convertible notes. Pursuant to ASC 820, Fair Value Measurements and Disclosures, and ASC 825, Financial Instruments, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets, the fair value of derivative liabilities, stock issuance liabilities and convertible notes are determined based on “Level 3” inputs, which consist of unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Comprehensive Loss

ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. At July 31, 2011 and 2010, the Company’s only component of comprehensive loss was foreign currency translation adjustments. Accordingly, the balance of accumulated other comprehensive loss was charged to operations.

8



Stock-Based Compensation

   

In accordance with ASC 718, Compensation – Stock Based Compensation, the Company accounts for share- based payments using the fair value method. Common shares issued to third parties for non-cash consideration are valued based on the fair market value of the services provided or the fair market value of the common stock on the measurement date, whichever is more readily determinable.

   

Business Segments

   

The Company operates in one segment and therefore segment information is not presented.

   

Mining Properties and Exploration Costs

   

Exploration costs are charged to operations in the year in which they are incurred. Costs of acquiring mineral properties are capitalized until such time commencement of production commences or a determination that such property is not commercially viable.

   

Mining properties are, upon commencement of production, amortized over the estimated life of the ore body to which they relate or are written off if the property is abandoned or if there is considered to be a permanent impairment in value.

   

Investments in mining properties over which the company has significant influence but not joint control are accounted for using the equity method.

   

Site Restoration and Post Closure Costs

   

Expenditures related to ongoing environmental and reclamation activities are expensed, as incurred, unless previously accrued. Provisions for future site restoration and reclamation and other post closure costs in respect of operating facilities are charged to operations over the estimated life of the operating facility, commencing when a reasonably definitive estimate of the cost can be made.

   

Accounting Changes and Error Corrections

   

The Company follows ASC 250, Accounting Changes and Error Corrections. Changes in accounting principle are reported through retrospective application of the new accounting principle to all prior periods. Errors in the financial statements of a prior period discovered subsequent to their issuance shall be reported as a prior-period adjustment by restating the prior period.

   

Recent Accounting Pronouncements

   

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

   
3.

Acquisition of Mineral Rights

Golondrina Property

   

On October 22, 2004, the Company acquired the mining rights to two claims collectively known as the Whale Mine property for a purchase price of $3,000. The Company received rights to all minerals contained in the Whale Mine property. During the year ended January 31, 2008 the Company abandoned the property and wrote off the capitalized amount of $3,000.

9


On February 28, 2006, the Company entered into an Assignment Agreement (the “Definitive Agreement”), with Primecap Resources Inc., of Las Vegas, Nevada, (Primecap), concerning the acquisition of Primecap’s option (the “Option”), to acquire a 100% interest in the Risaldo La Golondrina D14-082 mineral property located in Narino, Colombia (the “Property”). Primecap had been granted the Option by Nueva California S.A., of Medellin, Colombia, pursuant to the terms and conditions of a Heads of Agreement dated August 23, 2004 (the “HOA”).

The Definitive Agreement provides for the assignment of the Option for the following consideration:

Payment of US $150,000, (paid on April 13, 2006) and the issuance of 2,500,000 common shares in the capital stock of the Company, subject to applicable trading restrictions, to Nueva California. In addition, the Company will assume Primecap’s financial obligations under the HOA. The obligations under the HOA are:

  1.

US$30,000 upon execution of the HOA, which amount has been paid;

  2.

US$20,000 on or before August 23, 2005, which amount has been paid;

  3.

US$32,000 on or before August 23, 2006;

  4.

US$40,000 on or before August 23, 2007;

  5.

US$48,000 on or before August 23, 2008; and

  6.

US$160,000 on or before August 23, 2009.

  7.

200,000 shares of the Assignor, as of August 23, 2004, which issuance has been completed;

  8.

200,000 shares of the Assignor, as of August 23, 2005, which issuance has been completed;

  9.

300,000 shares of the Assignor, as of August 23, 2006;

  10.

300,000 shares of the Assignor, as of August 23, 2007

On, June 30, 2006, the Company entered into an amending agreement (the “Agreement”) which Agreement amended certain terms of an assignment agreement (the “Assignment Agreement”) dated February 28, 2006, between our Company and Primecap Resources Inc. of Nevada, as amended by an amending agreement dated March 15, 2006.

The Agreement amends the total consideration that our Company is to pay Primecap Resources Inc. (“Primecap”) as to $100,000 on or before July 1, 2006 and $100,000 on or before July 1, 2007. This Agreement satisfy’s our obligation in assuming the above noted financial obligations under the HOA. The first $100,000 payment was made.

On May 9, 2008, we entered into a second amending agreement which clarifies the first amending agreement as follows:

Items 1 through 6 of the HOA agreement are deleted. The total amounts payable to Primecap remains as amended in the first amendment. The second $100,000 payment is now due on or before August 1, 2008 and was paid. As of January 31, 2009 the Company has not issued the 300,000 shares of common stock due August 23, 2006 and the 300,000 shares of common stock due August 23, 2007. The Company has accrued $51,000 as a liability for the issuance of 300,000 shares of common stock on August 23, 2006 at $0.17 the closing price of the stock as of such date and $41,100 for the issuance liability of 300,000 shares of common stock at August 23, 2007 at $0.137 the closing price of the stock at such date. The Company has no further obligations under the HOA agreement other than those stated here.

During the year ended January 31, 2009 the Company wrote off the $350,000 capitalized cost of the Golondrina property. The Company has not been fiscally able to obtain an appraisal or other means of valuing the market value of such property.

10


El Colmillo Property

On September 13, 2006, Minera entered into an option agreement with Agronomicas de Colombia (“ADC”) to acquire a mineral rights concession from Colombia for a gold mine called El Colmillo intthe municipality of Antioquia, Colombia. In April 2008, Minera obtained a six month extension and on July 15, 2008, a modification of the original terms was obtained. The terms of the contract are now as follows:

  1.

Payment of $80,000,000 Colombian pesos (“COP”) (approximately $50,000 US)

     
  2.

Payment of $40,000,000 COP (approximately $25,000 US) on the 15th of every month until the initial and monthly payments reach $320,000,000 COP (approximately $200,000 US)

     
  3.

A royalty of 40% of net production until $1,100,000,000 COP (approximately $687,500 US) has been paid.

     
 

When 80% of item 3 has been reached ADC will pass legal title of the concession to Minera and will receive a 20% net royalty as long as the concession is maintained.

     
  4.

Minera has paid $240,000,000 COP (approximately $150,000 US) through December 2008 of the $320,000,000 COP (approximately $200,000 US). During the month of December 2008 Minera personnel were met at the site by Colombian rebels that demanded a war tax. The Company immediately stopped its development efforts and reported the activity to the authorities. A force majeure clause in the contract allows Minera to cease operations until the cause that activates this clause is resolved.

The Company is still assessing the security risk on this property and operations are still suspended.

Mutata Property

On October 12, 2010, the Company entered into a letter of intent to acquire the Mutata property, a prospective gold and platinum project in Colombia. The prospective acquisition consists of one concession that is located approximately 200 kilometers north of Medellin in the northwest region of the Antioquia Department known as Uraba. Collectively the concession covers an area of over 4,900 hectares.

The letter of intent provides the Company the right to examine the property for a period of one year and does not specify any acquisition terms or conditions. Should the Company decide to acquire the property the Company will negotiate and enter into a formal acquisition agreement. During the one year period of assessment the Company is responsible for all ongoing costs. At July 31, 2011, the Company was currently completing the due diligence related to this property.

Las Aquadas Property

During the six months ended July 31, 2011, the Company entered into a letter of intent to acquire the Las Aquadas property, a prospective gold project in Colombia. The prospective acquisition consists of five concessions located in the Central Cordillera region of Colombia. Collectively the concession covers an area of over 38,000 hectares.

The letter of intent provides the Company the right to examine the property for a period of one year and does not specify any acquisition terms or conditions. Should the Company decide to acquire the property the Company will negotiate and enter into a formal acquisition agreement.

The key point issues of the Proposed Transaction structure are as follows:

11



 

Listing on Frankfurt Exchange – The Company will undertake its best efforts within 90 days to seek a listing on the Frankfurt Exchange consistent with any and all listing requirements.

 

The vendor will transfer its interest in the Las Aquadas property with a minimum valuation of US$ 10,000,000 in exchange for a minimum of 60 % of the issued and outstanding shares warrants and/or debentures of Tao on a fully diluted basis conditioned upon the completion of the Financing.

 

Financing – the Company completing a financing for gross proceeds of at least US$ 10,000,000

 

James M. Sikora will agree to serve as the President of Tao on a full time basis for a period of at least two years from Closing.

 

The board of directors of the Company at closing shall be compromised of seven people, three nominees of the Company, three nominees of the vendor and the seventh nominee being jointly agreed upon by both parties.

 

The Closing shall occur no later than September 30, 2011

At July 31, 2011, the Company was currently completing the due diligence related to this property.

4.

Related Party Transactions

     
a)

The Golondrina property was acquired from a Company controlled by James Sikora our current president. At the time of the acquisition Mr. Sikora was not related to the Company.

     
b)

Management fees incurred for the six months ended July 31, 2011 totaled $120,000 to the President of the Company.

     
5.

Notes Payable


      July 31,     January 31,  
      2011     2011  
      $     $  
  a)        Demand loans - unsecured, non-interest bearing   25,020     50,020  
  b)        Convertible notes - interest rate 12% per annum; due May 28, 2011   81,930     125,800  
  c)        Convertible notes - interest rate 12% per annum; due February 15, 2011       250,000  
  d)        Convertible notes - interest rate 12% per annum; due August 15, 2011   167,500      
  e)        Convertible notes - interest rate 12% per annum; due August 21, 2011   250,000      
  f)        Convertible notes - interest rate 12% per annum; due August 3, 2011   30,000      
  Less: Discount on convertible notes   (271,778 )   (152,974 )
  Convertible Notes   282,672     272,846  
            Less: Current Portion   (282,672 )   (272,846 )
  Long Term Portion        

  a)

During the fiscal year ended January 31, 2010, the Company borrowed $50,020 of which $25,020 is owed to its President. During the six months ended July 31, 2011, $25,000 of the loans were secured with a convertible note (Note 5(g)) and converted into 26,000,000. The remaining $25,020 of loans are unsecured, due on demand and bear no interest.

12



  b)

During the year ended January 31, 2011, the Company entered into a 12% convertible debenture for $125,800 is due in one year. The terms of the debenture indicate both the holder and the Company is entitled, at its option, to convert at any time and from time to time, all or any part of the principal amount, plus accrued interest into common shares at a price per share equal to 50% of the lowest trading price of the common stock for the 30 days immediately prior to the notice of conversion. Due to this provision, the embedded conversion options qualify for derivative accounting under ASC 815-15 (See Note 9 below). This fair value of the derivative liabilities at issuance resulted in a full discount to the note payable. The carrying value of the convertible note was accreted over the term of the convertible note up to the value of $125,800.

     
 

At July 31, 2011, $43,870 has been converted into 28,846,765 shares of the Company’s common stock.

     
  c)

On August 15, 2010, the Company entered into a 12% convertible debenture due February 15, 2011 in the amount of $250,000. The Holder is entitled, at its option, to convert at any time and from time to time, all or any part of the principal amount of this debenture, plus accrued interest, into common shares, at a price per share equal to the lowest 50% of the average of the 3 (three) lowest closing bid prices of the common stock for the 30 trading days immediately prior to the date that the Company receives notice of the conversion or 50% of the lowest trading price for the 20 trading days prior to closing of this agreement. Likewise the Company is entitled, at its option, at any time and from time to time, to convert all or any part of the principal amount of the debenture, plus accrued interest, into shares of the Company’s common stock at a price equal to 50% of the lowest traded price of the common stock for the prior 20 trading days that the Company issues such a notice of conversion. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 (See Note 9 below). This fair value of the derivative liability at issuance resulted in a full discount to the note payable. The carrying value of the convertible note was accreted over the term of the convertible note up to their value of $250,000.

     
 

During the six month period ended July 31, 2011, the $250,000 note and $15,000 of accrued interest was converted into 83,149,328 shares of the Company’s common stock.

     
  d)

On November 15, 2010, the Company entered into a 12% convertible debenture due 180 days from the date of advancement in the amount of $250,000. The Holder is entitled, at its option, to convert at any time and from time to time, all or any part of the principal amount of this debenture, plus accrued interest, into common shares, at a variable conversion price equal to the lower of 50% of the lowest trading price for the common stock during the 30 trading days prior to the date of the conversion notice and $0.0035. The loan bears interest at 12% per year and the principal amount and any interest thereon are due on 180 days from the date of advancement. Likewise the Company is entitled, at its option, at any time and from time to time, to convert all or any part of the principal amount of the debenture, plus accrued interest, into shares of the Company’s common stock at a price equal to 50% of the lowest traded price of the common stock for the prior 20 trading days that the Company issues such a notice of conversion. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 (See Note 9 below). This fair value of the derivative liability at issuance resulted in a full discount to the note payable. The carrying value of the convertible note will be accreted over the term of the convertible note up to the value of $250,000. At July 31, 2011, $83,101 of accretion had been recorded.

     
 

During the six month period ended July 31, 2011, $82,500 of the note was converted into 85,000,000 shares of the Company’s common stock.

     
  e)

On December 1, 2010, the Company entered into a 12% convertible debenture due 180 days from the date of advancement in the amount of $250,000. The Holder is entitled, at its option, to convert at any time and from time to time, all or any part of the principal amount of this debenture, plus accrued interest, into common shares, variable conversion price equal to the lower of 50% of the lowest trading price for the common stock during the 30 trading days prior to the date of the conversion notice and 50% of the lowest traded price for the 20 trading days prior to the closing of the agreement. The loan bears interest at 12% per year and the principal amount and any interest thereon are due on 180 days from the date of advancement. Likewise the Company is entitled, at its option, at any time and from time to time, to convert all or any part of the principal amount of the debenture, plus accrued interest, into shares of the Company’s common stock at a price equal to 50% of the lowest traded price of the common stock for the prior 20 trading days that the Company issues such a notice of conversion. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 (See Note 9 below). This fair value of the derivative liability at issuance resulted in a full discount to the note payable. The carrying value of the convertible note will be accreted over the term of the convertible note up to the value of $250,000. At July 31, 2011, $80,057 of accretion had been recorded.

13



 

During the six month period ended July 31, 2011, $16,500 of accrued interest was converted into 19,411,765 shares of the Company’s common stock.

     
  f)

On February 3, 2011, the Company entered into a 12% convertible debenture due 180 days from the date of advancement in the amount of $500,000. At July 31, 2011, the Company had received $30,000 of proceeds relating to the debenture. The Holder is entitled, at its option, to convert at any time and from time to time, all or any part of the principal amount of this debenture, plus accrued interest, into common shares, at a variable conversion price equal to the lower of 50% of the lowest trading price for the common stock during the 30 trading days prior to the date of the conversion notice and $0.004. The loan bears interest at 12% per year and the principal amount and any interest thereon are due on 180 days from the date of advancement. Likewise the Company is entitled, at its option, at any time and from time to time, to convert all or any part of the principal amount of the debenture, plus accrued interest, into shares of the Company’s common stock at a price equal to 50% of the lowest traded price of the common stock for the prior 20 trading days that the Company issues such a notice of conversion. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 (See Note 9 below). This fair value of the derivative liability at issuance resulted in a full discount to the note payable. The carrying value of the convertible note will be accreted over the term of the convertible note up to the value of $30,000. At July 31, 2011, $12,564 of accretion had been recorded.

     
  g)

On May 31, 2010, the Company entered into a 8% convertible debenture due November 30, 2011 in the amount of $25,000 to secure the demand loan referred to in Note 5(a). The Holder is entitled, at its option, to convert at any time and from time to time, all or any part of the principal amount of this debenture, plus accrued interest, into common shares, variable conversion price equal to the lower of 50% of the three lowest trading prices for the common stock during the 30 trading days prior to the date of the conversion notice and 50% of the lowest traded price for the 20 trading days prior to the closing of the agreement. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on November 30, 2011. Likewise the Company is entitled, at its option, at any time and from time to time, to convert all or any part of the principal amount of the debenture, plus accrued interest, into shares of the Company’s common stock at a price equal to 50% of the three lowest traded prices of the common stock for the prior 20 trading days that the Company issues such a notice of conversion. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 (See Note 9 below). This fair value of the derivative liability at issuance resulted in a full discount to the note payable. The carrying value of the convertible note will be accreted over the term of the convertible note up to the value of $25,000. At July 31, 2011, $25,000 of accretion had been recorded and the $25,000 note and $1,000 of accrued interest was converted into 26,000,000 shares of the Company’s common stock.


6.

Common Stock

     
a)

During the six months ended July 31, 2011, the Company converted $433,870 of notes payable and interest into 235,496,093 shares of the Company’s common stock.

     
b)

During the six months ended July 31, 2011 the company converted $38,058 of accounts payable to 47,461,874 shares of common stock.

     
c)

On March 4, 2011, the Company issued 3,428,571 shares of common stock for $12,000 consulting fees included in accounts payable.

     
d)

On April 27, 2011, the Company issued 10,000,000 shares of common stock for $20,000 of debt included in accounts payable.

     
e)

During the six month period ended July 31, 2010, the President converted $339,000 of accounts payable to 4,237,500 shares of stock and Minera Primecap converted $94,500 of accounts payable for 1,181,250 shares of stock.

14



7.

Commitments

     
a)

During May 2010, the Directors consented to a subscription of 999,000 shares of common stock at $0.10 per share ($99,900) to three individuals in a private placement. As of July 31, 2011, the private placement had not been completed.

     
b)

On May 15, 2010, the Company signed an investor relations agreement to provide marketing, promotional and investor relations services through November 1, 2010. The cost of these services will be the issuance of 100,000 shares of common stock and a monthly fee of $3,000. The monthly fee is being paid but the stock has not been issued as of July 31, 2011. The Company has accrued the fair value of the shares of $1,040 as a stock issuance liability.

     
8.

Fair Value Measurements

     

ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

     

Fair Value Hierarchy

     

ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 825 establishes three levels of inputs that may be used to measure fair value.

     

Level 1 applies to assets and liabilities for which there are quoted prices in active markets for identical assets or liabilities. Valuations are based on quoted prices that are readily and regularly available in an active market and do not entail a significant degree of judgment.

     

Level 2 applies to assets and liabilities for which there are other than Level 1 observable inputs such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 2 instruments require more management judgment and subjectivity as compared to Level 1 instruments. For instance: determining which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer, credit rating and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced; and determining whether a market is considered active requires management judgment.

     

Level 3 applies to assets and liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity.

     

Pursuant to ASC 825, the fair value of the cash equivalent is determined based on “Level 1” inputs, which consists of quoted prices in active markets for identical assets. Convertible notes payable and derivative are valued based on “Level 3” inputs, consisting of unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

     

Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s balance sheet as at July 31, 2011 as follows:

15



      Fair Value Measurements Using        
      Quoted prices in                    
      active markets     Significant other     Significant        
      for identical     observable     Unobservable     Balance,  
      instruments     Inputs     inputs     July 31,  
      (Level 1)     (Level 2)   (Level 3)   2011  
      $     $     $     $  
  Cash and cash equivalents   14,492             14,492  
  Convertible notes payable             (282,672 )   (282,672 )
  Derivative liabilities           (637,269 )   (637,269 )
      14,492         (919,941 )   (905,449 )

The fair values of other financial instruments, which include accounts payable, due to related parties, and accrued liabilities approximate their carrying values due to the relatively short-term maturity of these instruments.

9.        Derivative Liability

ASC 815-15 lays out a procedure to determine if an equity-linked financial instrument (or embedded feature) is indexed to its own common stock.

Convertible Debt - The embedded conversion option in the Company’s convertible notes described in Note 5 contain a conversion feature that qualifies for embedded derivative classificiation. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in our consolidated statement of operations as a gain or loss on derivative financial instruments.

The following table summarizes the change in derivative liabilities for the three months ended July 31, 2011:

  Derivative Liabilities at January 31, 2011 $  683,057  
  Addition of new derivative liabilities   555,000  
  Conversion of derivatives   (605,699 )
  Change in fair value of embedded conversion option   4,911  
  Derivative Liabilities at July 31, 2011 $  637,269  

The Company used the Black-Scholes option pricing model to value the embedded conversion feature using the following assumptions: number of options as set forth in the convertible notes agreements; no expected dividend yield; expected volatility ranging from 138% - 503%; risk-free interest rates ranging from 0.04% - 0.53% and expected terms based on the contractual term.

     
10.

Subsequent Events

     

Subsequent events were evaluated through October 25, 2011.

     
a)

On August 9, 2011, the Company converted $15,000 of accounts payable into 30,000,000 shares of the Company’s common stock.

     
b)

On August 11, 2011, the Company converted $15,500 of accounts payable into 34,444,444 shares of the Company’s common stock.

     
c)

Subsequent to July 31, 2011, the holder of the convertible debenture described in Note 5(b) converted $26,579 of the outstanding debt into 58,951,492 shares of the Company’s common stock.

     
d)

Subsequent to July 31, 2011, the holder of the convertible debenture described in Note 5(b) converted $10,500 of the outstanding debt into 35,000,000 shares of the Company’s common stock.

16



  e)

On September 12, 2011, the Company filed a Certificate of Change to effect a 1,000 to 1 reverse stock split of its authorized capital and its issued and outstanding shares. As a result, the authorized capital will decrease from 1,000,000,000 shares with a par value of $0.001 per share to 1,000,000 shares with a par value of $0.001 per share. The issued and outstanding shares will decrease from 671,931,178 shares with a par value of $0.001 to 671,931 shares with a par value of $0.001. The Certificate of Change has not been approved by FINRA.

     
  f)

On September 13, 2011, the Company filed a Certificate of Designation to designate 10,000,000 shares of preferred stock with a par value of $0.001 as Series A Preferred Stock with a par value of $0.001 per share. The Series A Preferred Stock shall rank senior to the Company’s common stock and to all other classes and series of equity security of the Company.

17


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

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Tao Minerals Ltd. and our subsidiary Minera Tao S.A., unless otherwise indicated.

General Overview and Business Development over the Last Three Years

We were incorporated in the State of Nevada on September 23, 2004.

Effective September 21, 2009, we effected a 200 for 1 share consolidation of our authorized and issued and outstanding common stock. As a result, our authorized capital decreased from 552,000,000 shares of common stock with a par value of $0.001 to 2,760,000 shares of common stock with a par value of $0.001 and our issued and outstanding shares decreased from 547,370,946 shares of common stock to 2,736,854 shares of common stock.

The consolidation became effective with the Over-the-Counter Bulletin Board at the opening for trading on September 23, 2009 under the stock symbol “TAON”. Our CUSIP number is87600P 402.

Effective September 13, 2011 we amended our Articles of Incorporation to create a series of preferred stock, designated as Series A Preferred Stock, consisting of 10,000,000 shares with a par value of $0.001 per share. The Series A Preferred Stock shall rank senior to our company’s common stock and to all other classes and series of equity security of our company.

On August 24, 2011 the directors of our company approved the consolidation of our authorized and issued and outstanding common stock on a 1,000 old for 1 new basis. Upon effect of the consolidation, our company's authorized shares of common stock shall decrease from 1,000,000,000 to 1,000,000 shares of common stock, and our issued and outstanding shares of common stock shall decrease from 671,931,178 shares of common stock to 671,931, all with a par value of $0.001. As of the date of this quarterly report we have not received regulatory approval for this transaction.

18


On July 16, 2008, through our majority owned subsidiary Minera Tao S.A., we entered into an amended option agreement with Agrominas De Colombia, LTDA to acquire 80% of a mining interest called El Comillo in Antioquia, Colombia. The agreement amended the terms of the original option agreement entered into by Minera Tao on October 2, 2007, and subsequently extended on April 18, 2008.

Under the terms of the amended option agreement, the purchase price of the option is $1.42 billion Colombian pesos or approximately US$825,000 dollars. We paid $80,000,000 pesos (approximately US$50,000) upon closing of the option agreement and are obligated to pay $40,000,000 pesos on the 15th of every month until $320,000,000 pesos has been paid. Thereafter 20% of production will be paid until $1.1 billion pesos have been received by Agrominas De Colombia. After the acquisition price is paid Agrominas De Colombia will continue to receive 20% of the mining production. Upon receipt of $1.42 billion pesos by Agrominas De Colombia the option will be exercised and 80% ownership in the property will be transferred to Minera Tao. To date, we have paid to Agrominas De Colombia $240,000,000 pesos (or US$150,000). Our company suspended operations on this property in December 2008 due to our personnel being met by Columbian rebels demanding a war tax. We immediately reported the activity to the authorities. Pursuant to a force majeure clause in the contract, we are allowed to cease operations until the cause that activates this clause is resolved. We are still assessing the risk on this property and operations are still suspended.

We are a start-up, exploration stage company and have not yet generated or realized any revenues from our business operations. We must raise cash in order to implement our plan and stay in business.

We are in the mineral resource business. This business generally consists of three stages: exploration, development and production. Mineral resource companies that are in the exploration stage have not yet found mineral resources in commercially exploitable quantities, and are engaged in exploring land in an effort to discover them. Mineral resource companies that have located a mineral resource in commercially exploitable quantities and are preparing to extract that resource are in the development stage, while those engaged in the extraction of a known mineral resource are in the production stage. Our company is in the exploration stage.

The address of our principal executive office is Officina 301 Edeficio El Crusero, Carrera 48, 12 Sur – 148 Medellin Colombia. Our telephone numbers is 877-331-8777.

Mineral resource exploration can consist of several stages. The earliest stage usually consists of the identification of a potential prospect through either the discovery of a mineralized showing on that property or as the result of a property being in proximity to another property on which exploitable resources have been identified, whether or not they are or have in the past been extracted.

After the identification of a property as a potential prospect, the next stage would usually be the acquisition of a right to explore the area for mineral resources. This can consist of the outright acquisition of the land or the acquisition of specific, but limited, rights to the land (e.g., a license, lease or concession). After acquisition, exploration would probably begin with a surface examination by a prospector or professional geologist with the aim of identifying areas of potential mineralization, followed by detailed geological sampling and mapping of this showing with possible geophysical and geochemical grid surveys to establish whether a known trend of mineralization continues through un-exposed portions of the property (i.e., underground), possibly trenching in these covered areas to allow sampling of the underlying rock. Exploration also commonly includes systematic regularly spaced drilling in order to determine the extent and grade of the mineralized system at depth and over a given area, as well as gaining underground access by ramping or shafting in order to obtain bulk samples that would allow one to determine the ability to recover various commodities from the rock. Exploration might culminate in a feasibility study to ascertain if the mining of the minerals would be economic. A feasibility study is a study that reaches a conclusion with respect to the economics of bringing a mineral resource to the production stage.

19


Our mineral resource properties consist of exploration claims located in Columbia (Risaldo La Golondrina D14-082 mineral property located in Narino, Colombia) ( El Colmillo mineral property located in Antioquia, Colombia). There is no assurance that a commercially viable mineral deposit exists on any of our properties, and further exploration is required before we can evaluate whether any exist and, if so, whether it would be economically and legally feasible to develop or exploit those resources. Even if we complete our current exploration program and we are successful in identifying a mineral deposit, we would be required to spend substantial funds on further drilling and engineering studies before we could know whether that mineral deposit will constitute a reserve (a reserve is a commercially viable mineral deposit). Please refer to the section entitled ‘Risk Factors’, of this quarterly report on Form 10-Q, for additional information about the risks of mineral exploration.

Our Current Business

We are an exploration stage company that has not yet generated or realized any revenues from our business operations. We have concentrated our recent exploration efforts on the La Golondrina Property in Columbia. In July, 2008 we acquired a mineral right in the El Colmillo property in Colombia. In October, 2009, our company decided to employ our efforts in exploration of the El Colmillo property for the next 12 months and will hold exploration of the Golondrina property until a determination of viability at El Colmillo can be determined. In December 2008, company personnel at the El Colmillo property were met by Colombian rebels who demanded a war tax to permit the development activities to continue. Our company immediately ceased any efforts at the mine and reported the situation to the Colombian government and to the issuer of the option. Our company invoked the force majeure section of the contract and we are waiting to see what developments will take place.

Results of Operations

The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the quarter ended July 31, 2011 which are included herein.

Three Months Ended July 31, 2011 and 2010

Our operating results for the three months ended July 31, 2011, for the three months ended July 31, 2010 and the changes between those periods for the respective items are summarized as follows:

                Change Between  
                Three Month Period  
                Ended  
    Three Months Ended     Three Months Ended     July 31, 2011  
    July 31, 2011     July 31, 2010     and July 31, 2010  
Revenue $  Nil   $  Nil   $  Nil  
Exploration expenses $  3,201   $  Nil   $  3,201  
Professional fees $  21,799   $  16,808   $  4,991  
Consulting fees $  51,000   $  63,333   $  (12,333 )
Legal fees $  6,621   $  Nil   $  6,621  
General and administrative $  83,802   $  1,789,322   $  (1,705,520 )
Other Income (Expense)                  
Derivative expense $  (96,628 ) $  (88,241 ) $  (8,387 )
Interest expense $  301,191   $  34,463   $  266,728  
Net Income (Loss) $  (370,986 ) $  (1,815,685 ) $  (1,444,699 )

Our consolidated financial statements report a net loss of $1,514,494 for the three month period ended July 31, 2011 compared to a net loss of $1,815,685 for the three month period ended July 31, 2010. Our losses have decreased primarily as a result of a reduction in consulting fees and general and administrative expenses.

20


Six Months Ended July 31, 2011 and 2010

Our operating results for the six months ended July 31, 2011, for the six months ended July 31, 2010 and the changes between those periods for the respective items are summarized as follows:

                Change Between  
                Six Month Period  
                Ended  
    Six Months Ended     Six Months Ended     July 31, 2011  
    July 31, 2011     July 31, 2010     and July 31, 2010  
Revenue $  Nil   $  Nil   $  Nil  
Exploration expenses $  49,382   $  Nil   $  49,382  
Professional fees $  64,141   $  Nil   $  64,141  
Consulting fees $  102,000   $  193,333   $  (91,333 )
Legal fees $  13,718   $  26,441   $  (12,723 )
General and administrative $  161,275   $  1,821,903   $  (1,660,628 )
Other Income (Expense)                  
Derivative expense $  4,911   $  176,871   $  (171,960 )
Interest expense $  492,425   $  50,764   $  441,661  
Net Income (Loss) $  (887,855 ) $  (2,269,312 ) $  (1,381,457 )

Our consolidated financial statements report a net loss of $887,855 for the six month period ended July 31, 2011 compared to a net loss of $2,269,312 for the six month period ended July 31, 2010. Our losses have decreased primarily as a result of a reduction in consulting fees and general and administrative expenses.

Revenues

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

Liquidity and Financial Condition

As of July 31, 2011, our current total assets were $23,213 and our total current liabilities were $1,361,254 and we had a working capital deficit of $1,338,041. Our financial statements report a net loss of $887,885 for the six month period ended July 31, 2011, and a net loss of $15,320,160 for the period from September 23, 2004 (date of inception) to July 31, 2011.

We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard we have raised additional capital through equity offerings and loan transactions.

Working Capital               Change between  
                January 31,  
    At     At     2011  
    July 31,     January 31,     and July 31,  
    2011     2011     2011  
    ($)     ($)     ($)  
Current Assets   23,213     26,990     (3,777 )
Current Liabilities   1,361,254     1,579,266     (218,012 )
Working Capital/(Deficit)   (1,338,041 )   (1,552,726 )   (214,685 )

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Cash Flows   As at  
    July 31,  
    2011     2010  
             
Net Cash (Used) Provided by Operating Activities $  (526,267 ) $  (238,960 )
Net Cash Used In Investing Activities $  Nil   $  Nil  
Net Cash Provided by Financing Activities $  530,000   $  303,198  
Cash Increase (Decrease) In Cash During The Period $  (3,803 ) $  64,238  

We had cash in the amount of $14,492 as of July 31, 2011 as compared to $72,103 as of July 31, 2010. We had a working capital deficit of $1,338,041 as of July 31, 2011 compared to working capital deficit of $1,552,726 as of July 31, 2010.

Our principal sources of funds have been from sales of our common stock and short term loans.

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

Going Concern

We have not yet achieved profitable operations and are dependent on our ability to raise capital from stockholders or other sources to meet our obligations and repay our liabilities arising from normal business operations when they become due, in their report on our audited financial statements for the year ended January 31, 2011, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosure describing the circumstances that lead to this disclosure by our independent auditors.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

Mineral Interests

Mineral interests associated with other than owned properties are classified as tangible assets. As of July 31, 2011, our company had capitalized $132,500 related to the mineral rights. The mineral rights will be amortized using the units-of-production method when production at each project commences.

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Foreign Currency Translation

Our company’s functional and reporting currency is the United States dollar. Management has adopted ASC 740 Foreign Currency Translation Matters. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Our company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

The financial statements of the subsidiary are translated to United States dollars in accordance with ASC 740 using period-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ deficit. Foreign currency transaction gains and losses are included in current operations.

Environmental Costs

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or our company’s commitments to plan of action based on the then known facts.

Loss per Share

Our company computes net earnings (loss) per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. Our company has $529,430 of convertible debentures which can be converted to common stock. These shares have not been included in any weighted average computations since the effect would be anti-dilutive.

Comprehensive Loss

ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. At July 31, 2011 and 2010, our company’s only component of comprehensive loss was foreign currency translation adjustments. Accordingly, the balance of accumulated other comprehensive loss was charged to operations.

Stock-Based Compensation

In accordance with ASC 718, Compensation – Stock Based Compensation, our company accounts for share-based payments using the fair value method. Common shares issued to third parties for non-cash consideration are valued based on the fair market value of the services provided or the fair market value of the common stock on the measurement date, whichever is more readily determinable.

Mining Properties and Exploration Costs

Exploration costs are charged to operations in the year in which they are incurred. Costs of acquiring mineral properties are capitalized until such time commencement of production commences or a determination that such property is not commercially viable.

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Mining properties are, upon commencement of production, amortized over the estimated life of the ore body to which they relate or are written off if the property is abandoned or if there is considered to be a permanent impairment in value.

Investments in mining properties over which the company has significant influence but not joint control are accounted for using the equity method.

Site Restoration and Post Closure Costs

Expenditures related to ongoing environmental and reclamation activities are expensed, as incurred, unless previously accrued. Provisions for future site restoration and reclamation and other post closure costs in respect of operating facilities are charged to operations over the estimated life of the operating facility, commencing when a reasonably definitive estimate of the cost can be made.

Recent Accounting Pronouncements

Our company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Item 3. Quantitative Disclosures About Market Risks

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president and chief financial officer (also our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

As the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president and chief financial officer (also our principal executive officer, principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and chief financial officer (also our principal executive officer, principal financial and accounting officer) concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our reports as of the end of the period covered by this quarterly report.

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended July 31, 2011 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

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Item 1A. Risk Factors

Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".

Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.

Risks Associated With Our Business

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

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

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

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

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

We have a limited operating history and as a result there is no assurance we can operate on a profitable basis.

We have a limited operating history and must be considered in the exploration stage. Our company's operations will be subject to all the risks inherent in the establishment of an exploration stage enterprise and the uncertainties arising from the absence of a significant operating history. Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the mineral claims may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations of rock or land and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralization, we may decide to abandon our claims and acquire new claims for new exploration or cease operations. The acquisition of additional claims will be dependent upon us possessing capital resources at the time in order to purchase such claims. If no funding is available, we may be forced to abandon our operations. No assurance can be given that we may be able to operate on a profitable basis.

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If we do not obtain additional financing, our business will fail and our investors could lose their investment.

We had cash in the amount of $14,492 and a working capital deficit of $1,338,041 as at our quarter ended July 31, 2011. We currently do not generate revenues from our operations. Our business plan calls for substantial investment and cost in connection with the acquisition and exploration of our mineral properties currently under lease and option. Any direct acquisition of the claim under lease or option is subject to our ability to obtain the financing necessary for us to fund and carry out exploration programs on the properties. The requirements are substantial. We do not currently have any arrangements for additional financing and we can provide no assurance to investors that we will be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including market prices for minerals, investor acceptance of our properties, and investor sentiment. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us. The most likely source of future funds presently available to us is through the sale of equity capital and loans. Any sale of share capital will result in dilution to existing shareholders.

Because there is no assurance that we will generate revenues, we face a high risk of business failure.

We have not earned any revenues as of the date of this quarterly report and have never been profitable. We do not have an interest in any revenue generating properties. We were incorporated in September 2004 and to date have been involved primarily in organizational activities and limited exploration activities. Prior to our being able to generate revenues, we will incur substantial operating and exploration expenditures without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We have limited operating history upon which an evaluation of our future success or failure can be made. Our net loss from inception to our quarter ended July 31, 2011 was $15,320,160. We have incurred losses for the quarter ended July 31, 2011 of $370,986. We recognize that if we are unable to generate significant revenues from our activities, we will not be able to earn profits or continue operations. Based upon current plans, we also expect to incur significant operating losses in the future. We cannot guarantee that we will be successful in raising capital to fund these operating losses or generate revenues in the future. We can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail and our investors could lose their investment.

Because of the speculative nature of the exploration of natural resource properties, there is substantial risk that this business will fail.

There is no assurance that any of the claims we explore or acquire will contain commercially exploitable reserves of minerals. Exploration for natural resources is a speculative venture involving substantial risk. Hazards such as unusual or unexpected geological formations and other conditions often result in unsuccessful exploration efforts. We may also become subject to significant liability for pollution, cave-ins or hazards, which we cannot insure or which we may elect not to insure.

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Our foremost project is located in Colombia where mineral exploration activities may be affected in varying degrees by political and government regulations which could have a negative impact on our ability to continue our operations.

Certain projects in which we have interests are located in Colombia. Mineral exploration activities in Colombia may be affected in varying degrees by political instabilities and government regulations relating to the mining industry. Any changes in regulations or shifts in political conditions are beyond our control and may adversely affect our business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriations of property, environmental legislation and mine safety. The status of Colombia as a developing country may make it more difficult for us to obtain any required financing for our projects. The effect of all these factors cannot be accurately predicted. Notwithstanding the progress achieved in restructuring Colombia political institutions and revitalizing its economy, the present administration, or any successor government, may not be able to sustain the progress achieved. While the Colombian economy has experienced growth in recent years, such growth may not continue in the future at similar rates or at all. If the economy of Colombia fails to continue its growth or suffers a recession, we may not be able to continue our operations in that country. We do not carry political risk insurance.

If we cannot compete successfully for financing and for qualified managerial and technical employees, our exploration program may suffer.

Our competition in the mining industry includes large established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to acquire additional financing on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration program may be slowed down or suspended.

If we are unable to hire and retain key personnel, we may not be able to implement our business plan.

Our success is also largely dependent on our ability to hire highly qualified personnel. This is particularly true in highly technical businesses such as mineral exploration. These individuals are in high demand and we may not be able to attract the personnel we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Failure to hire key personnel when needed, or on acceptable terms, would have a significant negative effect on our business.

Inability of our officers and directors to devote sufficient time to the operation of the business may limit our company's success.

Presently some of our officers and directors allocate only a portion of their time to the operation of our business. If the business requires more time for operations than anticipated or the business develops faster than anticipated, the officers and directors may not be able to devote sufficient time to the operation of the business to ensure that it continues as a going concern. Even if this lack of sufficient time of our management is not fatal to our existence, it may result in limited growth and success of the business.

Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.

The exploration of valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.

27


Our independent certified public accounting firm, in their Notes to the audited financial statements for the year ended January 31, 2011 states that there is a substantial doubt that we will be able to continue as a going concern.

Our independent certified public accounting firm state in their notes to the audited financial statements for the year ended January 31, 2011, that we have experienced significant losses since inception. Failure to arrange adequate financing on acceptable terms and to achieve profitability would have an adverse effect on our financial position, results of operations, cash flows and prospects, there is a substantial doubt that we will be able to continue as a going concern.

We are subject to various government regulations and environmental concerns.

We are subject to various government and environmental regulations. Permits from a variety of regulatory authorities are required for many aspects of exploration, mining operations and reclamation. We cannot predict the extent to which future legislation and regulation could cause additional expense, capital expenditures, restrictions, and delays in the development of our U.S. or Colombian properties, including those with respect to unpatented mining claims.

Our activities are not only subject to extensive federal, state and local regulations controlling the exploration and mining of mineral properties, but also the possible effects of such activities upon the environment. Future legislation and regulations could cause additional expense, capital expenditures, restrictions and delays in the development of our properties, the extent of which cannot be predicted. Also, as discussed above, permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. In the context of environmental permitting, including the approval of reclamation plans, we must comply with known standards, existing laws and regulations that may entail greater or lesser costs and delays, depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the permitting authority. We are not presently aware of any specific material environmental constraint affecting our properties that would preclude the economic development or operation of any specific property.

If we become more active on our properties, it is reasonable to expect that compliance with environmental regulations will increase our costs. Such compliance may include feasibility studies on the surface impact of the our proposed operations; costs associated with minimizing surface impact, water treatment and protection, reclamation activities, including rehabilitation of various sites, on-going efforts at alleviating the mining impact on wildlife, and permits or bonds as may be required to ensure our compliance with applicable regulations. It is possible that the costs and delays associated with such compliance could become so prohibitive that we may decide to not proceed with exploration, development, or mining operations on any of our mineral properties.

Risks Associated with Our Common Stock

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

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

28


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

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

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

Other Risks

Because some of our officers and directors are located in non-U.S. jurisdictions, you may have no effective recourse against the non U.S. officers and directors for misconduct and may not be able to enforce judgment and civil liabilities against our officers, directors, experts and agents.

Some of our directors and officers are nationals and/or residents of countries other than the United States, specifically Canada and Colombia, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

29


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

On May 2, 2011, we issued 12,500,000 shares of our common stock to settle $25,000 outstanding relating to a convertible note. We have issued all of the shares pursuant to an exemption from registration relying on the provisions of Rule 144 promulgated under the Securities Act of 1933, as amended.

On May 13, 2011, we issued 20,000,000 shares of our common stock to settle $35,000 outstanding relating to a convertible note. We have issued all of the shares pursuant to an exemption from registration relying on the provisions of Rule 144 promulgated under the Securities Act of 1933, as amended.

On May 18, 2011, we issued 7,461,874 shares of our common stock to settle $13,058.28 of debt. We have issued all of the shares pursuant to an exemption from registration relying on the provisions of Rule 144 promulgated under the Securities Act of 1933, as amended.

On May 24, 2011, we issued 30,000,000 shares of our common stock to settle $30,000 outstanding relating to a convertible note. We have issued all of the shares pursuant to an exemption from registration relying on the provisions of Rule 144 promulgated under the Securities Act of 1933, as amended.

On May 25, 2011, we issued 10,000,000 shares of our common stock to settle $10,000 of debt. We have issued all of the shares pursuant to an exemption from registration relying on the provisions of Rule 144 promulgated under the

Securities Act of 1933, as amended.

On July 5, 2011 we issued 26,000,000 shares of our common to settle $26,000 outstanding relating to a convertible note. We have issued all of the shares pursuant to an exemption from registration relying on the provisions of Rule 144 promulgated under the Securities Act of 1933, as amended.

On July 20, 2011, we issued 19,411,765 shares of our common to settle $16,500 in interest outstanding relating to a convertible note. We have issued all of the shares pursuant to an exemption from registration relying on the provisions of Rule 144 promulgated under the Securities Act of 1933, as amended.

On July 28, 2011, we issued 35,000,000 shares of our common stock to settle $17,500 outstanding relating to a convertible note. Also on July 28, 2011, we issued 30,000,000 shares of our common stock to settle $15,000 of debt. We have issued all of the shares pursuant to an exemption from registration relying on the provisions of Rule 144 promulgated under the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. [Removed and Reserved] Item 5. Other Information None.

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Item 6. Exhibits

Exhibit Description
Number  
   
(3)

(i) Articles of Incorporation; and (ii) Bylaws

   
3.1

Articles of Incorporation (incorporated by reference from our Form SB-2 Registration Statement, filed on March 24, 2005).

   
3.2

Bylaws (incorporated by reference from our Form SB-2 Registration Statement, filed on March 24, 2005).

   
3.3

Certificate of Change (incorporated by reference from our Current Report on Form 8-K, filed on March 24, 2006).

   
3.4

Certificate of Change (incorporated by reference from our Current Report on Form 8-K, filed on November 12, 2009).

   
3.5

Certificate of Change (incorporated by reference from our Current Report on Form 8-K, filed on December 12, 2011).

   
3.6*

Certificate of Designation

   
(10)

Material Contracts

   
10.1

Purchase and Sale Agreement dated October 22, 2004 (incorporated by reference from our Amendment No. 1 on Form SB-2/A Registration Statement, filed on April 28, 2005).

   
10.2

Letter Agreement dated February 1, 2006 between our company and Nueva California S.A. and Primecap Resources Inc. (incorporated by reference from our Current Report on Form 8-K, filed on February 6, 2006).

   
10.3

Assignment Agreement dated February 28, 2006 between our company and Primecap Resources Inc. (incorporated by reference from our Current Report on Form 8-K, filed on March 10, 2006).

   
10.4

Amending Agreement dated March 15, 2006 between our company and Primecap Resources Inc. (incorporated by reference from our Current Report on Form 8-K, filed on March 20, 2006).

   
10.5

Consulting Agreement dated April 1, 2006 between our company and James Sikora (incorporated by reference from our Current Report on Form 8-K, filed on April 20, 2006)

   
10.6

Amending Agreement Dated June 30, 2006 between our company and Primecap Resources Inc. (incorporated by reference from our Current Report on Form 8-K, filed on July 14, 2006).

   
10.7

Convertible Loan Agreement dated December 1, 2009 between our company and John C. Lama (incorporated by reference from our Current Report on Form 8-K, filed on December 11, 2009).

   
(31)

Rule 13a-14(a)/15d-14(a) Certifications

   
31.1*

Section 302 Certification under Sarbanes-Oxley Act of 2002.

   
(32)

Section 1350 Certifications

   
32.1*

Section 906 Certification under Sarbanes-Oxley Act of 2002.

   
101**

Interactive Data File (Form 10-Q for the quarterly period ended July 31, 2011 furnished in XBRL).

31



Exhibit Description
Number  
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

*

Filed herewith

   
**

Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

32


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  TAO MINERALS LTD.
   
   
Date: December  21, 2011 /s/ James Sikora
  James Sikora
  President, Chief Financial Officer and Director
  (Principal Executive Officer, Principal Financial Officer
  and Principal Accounting Officer)

33