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

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

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

Our fiscal year end is May 31st. Through May 31, 2004, we reported our financial information using Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) using the Canadian dollar as our functional and reporting currency. During the fiscal year ended May 31, 2005, we changed our reporting basis to the United States Generally Accepted Accounting Principles (“U.S. GAAP”) and our functional and reporting currency to the United States dollar (“U.S. dollar”). Accordingly, historical cumulative financial information included in this Quarterly Report on Form 10-Q has been restated using U.S. GAAP with a functional and reporting currency of the U.S. dollar, unless otherwise noted. All references herein to “$” and “US$” refer to U.S. dollars. Unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to Common Shares refer to shares of our common stock (without par value) unless otherwise indicated.

Our ability to continue as a going concern depends upon our ability to generate profitable operations in the future and/or to raise additional funds through equity or debt financing. Since inception, we have raised $23,446,994$24,346,944 through the issuance of equity securities and $17,311,960$17,353,960 through the issuance of debt instruments, which has been used primarily to provide operating funds, repay long termlong-term debt, and acquire mineral interests. Subsequent to August 31, 2011,February 29, 2012, we have acquired an additional $420,000$50,000 through financing,issuance of equity securities, as described more fully in Note 12. On December 1, 2011, the Brigus note (see Note 5) matured and we have not made payment as of the date of these financial statements. There is no assurance that we will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to us or at all. If we cannot obtain needed funds for implementing our mine plan after completion of the feasibility study, we may be forced to curtail or cease our activities. Equity financing, if available, may result in substantial dilution to existing stockholders. All of these factors cause substantial doubt about our ability to continue as a going concern. These financial statements do not include any

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the presentation in the current period financial statements.

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

In December 2011, the FASB issued ASU No. 2011-12,Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05(“ASU 2011-12”). ASU 2011-12 defers changes in Update 2011-05 that relate to the presentation of reclassification adjustments. ASU 2011-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 (November 30, 2012 for the Company). We do not expect the adoption of ASU 2011-12 to have a provision for income taxes. Actualmaterial impact on our results could materially differ from those estimates.

There were no material changes to our mineral properties from those disclosed in the audited annual consolidated financial statements for the year ended May 31, 2011.

During the quarternine months ended August 31, 2011February 29, 2012, we began test mining operations at our Cross mine. We have begun test processing at an out of state facility. We have incurred $307,820$706,634 in costs associated with these operations, while weand have not generated revenues through August 31, 2011.

On August 11, 2011, we renewed a convertible debenture payable to Aardvark Agencies Inc. “AAI” which contained repurchase rights for interests in our Caribou properties, including the price payable for the reacquisition (a total of Cdn$747,728) and AAI’s right to convert that debenture before it is paid (Note 6).

As of August 31, 2011February 29, 2012 and May 31, 2011, we had one outstanding note payable (the “Brigus Note”) in the amount of $10,253,878 (the “Brigus Note”).$10,253,878. The original maturity date for the note was February 1, 2011. On January 15, 2011, we received forbearance under the terms of an agreement effectively extending the maturity date of the debt throughto June 30, 2011.

On June 8, 2011, we and the note holder extended the maturity of the note through October 31, 2011. In connection with this forbearance we paid the note holder $1,000,000 which was applied against interest due on the promissory notes. On October 24, 2011, we and the note holder further extended the maturity of the note through December 1, 2011. In connection with this forbearance we paid the note holder $200,000 which was applied against interest due on the notes. The note bears interest at 8% and is secured by a lien on our Caribou property.

We continue to explore financing opportunities related to the October 31,December 1, 2011 maturity date of the Brigus Note.

This debenture is unsecured, non-interest bearing, and initially matured in May 2011. This debenture is owned by Marlowe Harvey who was the President and a director of ours until he resigned as President in 2000 and as a director in November 2003. The debenture is convertible into common stock at $1.23 in Canadian Dollars at the holder’s discretion and contains no restrictive covenants.

This debenture matured in May 2011. On August 11, 2011 the convertible debenture was renewed for a period of ten years maturing on August 31, 2021. All terms contained in the debenture agreement remain consistent with the original note, as fully described in our annual report on Form 10-K for the period ended May 31, 2011.

Transactions involving our common stock during the threenine months ended August 31, 2011February 29, 2012 were as follows: