Tombstone Exploration (TMBXF) 20-F 2008 FY Annual report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

. REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year endedDecember 31, 2008

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

For the transition period from ____________ to ____________

. SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report __________________

For the transition period from ____________ to ____________

Commission file number: 0-29922

TOMBSTONE EXPLORATION CORPORATION

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant's name into English)

Canada

(Jurisdiction of incorporation or organization)

1515 Red Top Rd. P.O. Box 1280, Tombstone, AZ. 85638

(Address of principal executive offices)

Copy of communications to:

Luis Carrillo, Esq.

Carrillo Huettel, LLP

501 W. Broadway, Suite 800

San Diego, CA 92101

Telephone: (619) 399-3090 Facsimile: (619) 330-1888

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of Class	Name of exchange on which registered
Not Applicable	Not Applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act

Common Shares Without Par Value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not Applicable

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

There were 47,260,865 Common Shares without par value issued and outstanding as at December 31, 2008.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.. YES X. NO

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

. YES. NO

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer. Accelerated filer. Non-accelerated filer X.

Indicate by check mark which financial statement item the registrant has elected to follow.

 X. ITEM 17. ITEM 18

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

. YES X. NO

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

. YES X. NO

2

TABLE OF CONTENTS

			Page
Forward-Looking Statements			5
PART I
Financial Information And Accounting Principles			6
Item 1	Identity of Directors, Senior Management and Advisers		6
	A.	6	6
	B.	6	6
	C.	6	6
Item 2	Offer Statistics and Expected Timetable		6
Item 3	Key Information		6
	A.	Selected Financial Data	6
	B.	Capitalization and Indebtedness	7
	C.	Reasons for the Offer and Use of Proceeds	7
	D.	Risk Factors	7
Item 4	Information on our Company		12
	A.	History and Development of our Company	12
	B.	Business Overview	14
	C.	Organizational Structure	19
	D.	Property, Plant and Equipment	19
Item 5	Operating and Financial Review and Prospects		25
	A.	Operating Results	26
	B.	Liquidity and Capital Resources	26
	C.	Research and Development, Patents and Licenses, etc.	27
	D.	Trend Information	27
	E.	Off-Balance Sheet Arrangements	27
	F.	Tabular Disclosure of Contractual Obligations	27
Item 6	Directors, Senior Management and Employees		28
	A.	Directors and Senior Management	28
	B.	Compensation	28
	C.	Board Practices	29
	D.	Employees	29
	E.	Share Ownership	29
Item 7	Major Shareholders and Related Party Transactions		29
	A.	Major Shareholders	29
	B.	Related Party Transactions	30
	C.	Interests of Experts and Counsel	30
Item 8	Financial Information		30
	A.	Financial Statements and Other Financial Information	30
	B.	Significant Changes	30
Item 9	The Offer and Listing		31
Item 10	Additional Information		31
	A.	Share Capital	31
	B.	Articles of Incorporation and By-laws	31
	C.	Material Contracts	35
	D.	Exchange Controls	35
	E.	Taxation	36
	F.	Dividends and Paying Agents	41
	G.	Statement by Experts	41
	H.	Documents on Display	41
	I.	Subsidiary Information	41
Item 11	Quantitative and Qualitative Disclosures About Market Risk		41
Item 12	Description of Securities Other than Equity Securities		41

3

PART II
Item 13	Defaults, Dividend Arrearages and Delinquencies		41
Item 14	Material Modifications to the Rights of Security Holders and Use of Proceeds		42
Item 15	Controls and Procedures		42
Item 16	[Reserved]		43
	A.	Audit Committee Financial Expert	43
	B.	Code of Ethics	43
	C.	Principal Accountant Fees and Services	43
	D.	Exemptions from the Listing Standards for Audit Committees.	43
	E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers.	44
PART III
Item 17	Financial Statements		44
Item 18	Not Applicable		44
Item 19	Exhibits		44
SIGNATURE			45

4

GENERAL

We use the U.S. dollar as our reporting currency. All references in this Annual Report to “dollars” or “$” are expressed in U.S. dollars, unless otherwise indicated. See also “Item 3. Key Information” for more detailed currency and conversion information. Our consolidated financial statements which form part of this Report are presented in U.S. dollars and are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

FORWARD-LOOKING STATEMENTS

Except for the statements of historical fact contained herein, some information presented in this Report constitutes forward-looking statements. When used in this Report, the words “estimate”, “project”, “believe”, “anticipate”, “intend”, “expect”, “predict”, “may”, “should”, the negative thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, changes in project parameters as plans continue to be refined, future prices of silver, as well as those factors discussed in the section entit led “Risk Factors”. Although our company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause actual results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements. The forward-looking statements in this Report speak only as to the date hereof. Our company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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.

As used in this prospectus, the terms “we”, “us”, “our” and “Tombstone Exploration” mean Tombstone Exploration Corporation, unless otherwise indicated.

5

PART I

FINANCIAL INFORMATION AND ACCOUNTING PRINCIPLES

The financial statements and summaries of financial information contained in this document are reported in U.S. dollars (“$”) unless otherwise stated. All such financial statements have been prepared in accordance with United States generally accepted accounting principles.

The financial statements of Tombstone Exploration Corporation for the year ended December 31, 2008 have been audited by M&K CPAS, PLLC, 13831 Northwest Freeway, Suite 575 Houston, TX, 77040. The financial statements of Tombstone Exploration Corporation for the years ended December 31, 2007 and December 31, 2006 were audited by Moore & Associates, CHARTERED, 6490 W. DESERT INN ROAD, LAS VEGAS, NV 89146. 

ITEM 1.

Identity of Directors, Senior Management and Advisers

Not Required.

ITEM 2.

Offer Statistics and Expected Timetable

Not Required.

ITEM 3.

Key Information

A.

Selected Financial Data

The following tables set forth the data of our fiscal years ended December 31, 2004 to December 31, 2008. We derived all figures from our financial statements as prepared by our management, approved by our audit committee and audited by our independent auditor. This information should be read in conjunction with our financial statements included in this annual report.

Our financial statements included in this Report have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States (“US”). All amounts are expressed in United States dollars.

SUMMARY OF FINANCIAL INFORMATION IN THE COMPANY'S FINANCIAL STATEMENTS

	December 31, 2004	December 31, 2005	December 31, 2006	December 31, 2007	December 31, 2008
OPERATING DATA:
Revenue	-	-	-	-	-
Gross Profit	-	-	-	-	-
Net Income (Loss)	(1,194,987)	(546,941)	(4,277,579)	(3,213,209)	(2,676,172)
Earnings (Loss) Per Share	(2.77)	(0.48)	(1.02)	(0.11)	(0.07)
BALANCE SHEET DATA:
Cash	-	116	42,981	252,718	8,625
Total Assets	-	116	1,419,203	338,344	76,943
Total Liabilities	1,084,163	1,015,287	49,149	122,199	184,470
Shareholders’ Equity (Deficit)	(1,084,163)	(1,015,171)	1,370,054	216,145	(107,527)

6

CURRENCY TRANSLATIONS

The following table sets out the exchange rates for the conversion of one Canadian dollar into U.S. dollars in effect at the end of the following periods, and the average exchange rates (based on the average of the exchange rates on the last day of each month in such periods) and the range of high and low exchange rates for such periods.

At Year End December 31	2008	2007	2006	2005	2004
End ($)	0.8166	0.98200	0.8547	0.8577	0.8308
Average ($)	1.0660	1.07465	0.8849	0.8255	0.7683
High ($)	1.0298	1.18730	0.8547	0.8751	0.8493
Low ($)	0.7688	0.90570	0.9091	0.7853	0.7159

The following table sets forth the high and low exchange rates for the conversion of one Canadian dollar into U.S. dollars for each of the last 6 months.

Through	June 2009	May 2009	April 2009	March 2009	February 2009	January 2009
High for the month ($)	0.9269	0.9176	0.8421	0.8202	0.8224	0.8503
Low for the month ($)	0.8595	0.8365	0.7870	0.7653	0.7855	0.7834

Exchange rates are based upon the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The noon rate of exchange on June 26, 2009 as reported by the Federal Reserve Bank of New York for the conversion of one Canadian dollar into U.S. dollars was $0.8672.

B.

Capitalization and Indebtedness

Not required.

C.

Reasons for the Offer and Use of Proceeds

Not required.

D.

Risk Factors

This Report contains forward-looking statements which relate to future events or our future performance, including 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”, or “potential” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in enumerated in this section entitled “Risk Factors”, that may cause our company’s 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.

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 in this Report. 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.

An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this Report in evaluating our company and our business before purchasing shares of our company’s common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are not the only ones facing our company. Additional risks not presently known to us may also impair our business operations. You could lose all or part of your investment due to any of these risks.

7

Risks Associated with Mining

All of our properties are in the exploration stage. There is no assurance that any of our properties contain any mineral resources in commercially exploitable quantities. If we do not discover any mineral resource in a commercially exploitable quantity, our business will fail and investors may lose all of their investment in our company.

Despite our acquisition of mineral claims and rights, we have not established that any of them contain any commercially exploitable mineral reserves, nor can there be any assurance that we will ever find commercially exploitable mineral reserves. The probability of an individual prospect ever having a commercially exploitable mineral reserve is extremely remote; in all probability our mineral resource properties do not contain any reserves and any funds that we spend on exploration will probably be lost. The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that any exploration on our properties will establish that commercially exploitable reserves of minerals exist on our mineral properties. Additional potential problems that may prevent us from discovering any reserves of minerals on our property include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that ma y exceed current estimates. Most of these factors are beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

If we are unable to establish the presence of commercially exploitable reserves of minerals on our property, our ability to fund future exploration activities will be impeded, we will not be able to operate profitably and investors may lose all of their investment in our company.

We face intense competition in the mineral exploration and exploitation industry and we compete with our competitors for financing, for new mineral resource properties and for qualified managerial and technical employees.

Our competition includes large established mining companies with substantial capabilities and with greater financial and technical resources than those available to us. As a result of this competition, we may have to compete for financing and be unable to acquire financing on terms we consider acceptable. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future. We may also have to compete with the 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 programs may be slowed down or suspended. If we are unable to successfully compete for the acquisition of suitable prospects for exploration in the future, there can be no assurance that we will acquire any interest in additional mineral resource properties. The occurrence of any of these things may cause us to cease operati ons as a company.

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

The search for 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. At the present time we have no coverage to insure against these hazards. The payment of such liabilities may have a material adverse effect on our financial position.

Our title to our resource properties may be challenged by third parties or the licenses that permit us to explore our properties may expire if we fail to timely renew them and pay the required fees.

We have investigated the status of our title to our mineral resource properties and we are satisfied that the title to these properties is properly registered in the name of our company, but we cannot guarantee that the rights to explore our properties will not be revoked or altered to our detriment. The ownership and validity of mining claims and concessions are often uncertain and may be contested. Should such a challenge to the boundaries or registration of ownership arise, the resolution of disputes or the process of clarifying the accuracy of our mining license registration could take substantial time and money. Further, the preservation of our title to our mineral properties requires that we continue to expend money or work the claims. If we fail to expend the necessary amount of money or if we fail to work our mineral claims, then our title to our mineral properties could expire or be forfeit.

8

Mineral prices are subject to dramatic and unpredictable fluctuations.

The market price of precious metals and other minerals is volatile and has fluctuated widely, particularly in recent years. The prices of various metals are affected by numerous factors beyond our control, including international economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods. The supply of and demand for metals are affected by various factors, including political events, economic conditions and production casts in major mineral producing regions. Variations in the market prices of metals may impact on our ability to raise funding to continue exploration of our properties. In addition, any significant fluctuations in metal prices will impact on our decision to accelerate or reduce our exploration activities. If the price of precious metals and other minerals should drop significa ntly, the cost of mineral extraction may be higher than is economically feasible. The marketability of minerals is also affected by numerous other factors beyond our control, including government regulations relating to royalties, allowable production and importing and exporting of minerals, the effect of which cannot be accurately predicted.

Mineral operations are subject to government regulations which could have the effect of reducing or preventing us from exploiting any possible mineral reserves on our properties.

Exploration activities are subject to national and local laws and regulations governing prospects, taxes, labor standards, occupational health, land use, environmental protection, mine safety and others which may in the future have a substantial adverse impact on our company’s prospects. In order to comply with applicable laws, we may be required to make capital expenditures until a particular problem is remedied. Existing and possible future environmental legislation, regulation and action could cause additional expense, capital expenditure, restriction and delay in the activities of our company, the extent of which cannot be reasonably predicted. If we violate any applicable law or regulation, we could be forced to stop work and we could be fined. If we are forced to suspend our activities or if we are required to pay a large fine for a violation of these applicable laws and regulations, our business could be adversely affected.

Our operations may be subject to environmental regulations which may result in the imposition of fines and penalties.

Our operations may be subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in the imposition of fines and penalties. Environmental legislation is evolving in a manner which means stricter standards, and enforcement; fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.

Risks Related To Our Company

The fact that we have not generated any operating revenues for the last five years raises substantial doubt about our ability to continue as a going concern.

We have not generated any operating revenues for the last five years and we will, in all likelihood, continue to incur operating expenses without revenues until our mining properties are fully developed and in commercial production. We had cash in the amount of $8,625 as of December 31, 2008. As a result, we need to generate significant revenues from our operations or obtain financing. We cannot assure that we will be able to successfully explore and develop our mining properties or assure that viable reserves exist on the properties for extraction. These circumstances raise substantial doubt about our ability to continue as a going concern. It is unlikely that we will generate any funds internally until we discover commercially viable quantities of precious metals and other minerals. If we are unable to generate revenue from our business in the next twelve months, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these actions were to become necessary, we may not be able to continue to explore our properties or operate our business and if either of those events happen, then there is a substantial risk our business would fail.

9

We have a limited operating history on which to base an evaluation of our business and prospects.

As of the date of this Report, we have not yet located any mineral reserve. As a result, we have never had any revenues from our operations. In addition,we have no operating history related to the acquisition and exploration of our mineral properties. We have no way to evaluate the likelihood of whether our mineral properties contain any mineral reserve or, if they do that we will be able to build or operate a mine successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during the period when we are exploring our properties. We expect to continue to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from mining operations and any dispositions of our properties, we will not be able to earn profits or continue operations. At this early stage of our operation in this industry, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a material adverse effect on our financial condition. There is no history upon which to base any assumption as to the likelihood that we will prove successful and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.

We have not generated any revenue from our business and we may need to raise additional funds in the near future. If we are not able to obtain future financing when required, we might be forced to discontinue our business.

Because we have not generated any revenue from our business and we cannot anticipate when we will be able to generate revenue from our business, we will need to raise additional funds for the further exploration and future development of our mining claims and to respond to unanticipated requirements or expenses. We do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing if required. We have no assurance that additional funding will be available to us for further exploration and development of our projects or to fulfill our obligations under any applicable agreements. Although we have been successful in the past in obtaining financing through the sale of equity securities, there can be no assurance that we will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain such additional financing could result in a delay or indefinit e postponement of further exploration and development of our projects with the possible loss of such properties.

Our Articles of Incorporation indemnify our officers and directors against all costs, charges and expenses incurred by them.

Our Articles of Incorporation contain provisions limiting the liability of our officers and directors for their acts, receipts, neglects or defaults and for any other loss, damage or expense incurred by our company which shall happen in the execution of the duties of such officers or directors, unless the officers or directors did not act honestly and in good faith with a view to the best interests of our company. Such limitations on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our shareholders from suing our officers and directors based upon breaches of their duties to our company, though such an action, if successful, might otherwise benefit our company and our shareholders.

Risks Relating to our Securities

Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

We are currently without a source of revenue and will most likely be required to issue additional shares to finance our operations and, depending on the outcome of our exploration programs, may issue additional shares to finance additional exploration programs of any or all of our projects or to acquire additional properties. If we are required to issue additional shares to raise financing, your interests in our company will be diluted and you may suffer dilution in your net book value per share depending on the price at which such securities are sold. If we issue any such share purchase warrants and share purchase options, and they are exercised, there will be a reduction in the proportionate ownership and voting power of all other shareholders. The dilution may result in a decline in the market price of our common shares.

10

Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue employee/director/consultant options.

We may in the future grant to some or all of our directors, officers, insiders, and key employees options to purchase our common shares as non-cash incentives to those persons. Such options may be granted at exercise prices equal to market prices, or at such other price as may be permitted under the policies of any stock exchange upon which our securities are traded (currently, our common shares are listed for trading on the OTC BB), when the public market is depressed. The issuance of additional shares will cause our existing shareholders to experience dilution of their ownership interests.

We Do Not Plan to Pay any Dividends in the Foreseeable Future

The Company has never paid a dividend and it is unlikely that the Company will declare or pay a dividend until warranted based on the factors outlined below. The declaration, amount and date of distribution of any dividends in the future will be decided by the Board of Directors from time-to-time, based upon, and subject to, the Company’s earnings, financial requirements and other conditions prevailing at the time.

In the Event that Key Employees Leave the Company, the Company Would Be Harmed Since We are Heavily Dependent Upon Them for All Aspects of Our Activities

The Company is heavily dependent on key employees and contractors, and on our sole officer and director, the loss of any of whom could have, in the short-term, any negative impact on our ability to conduct our activities and could cause a decline in profitability of our properties or additional costs from a delay in development or exploration of properties. The Company has consulting agreements with key employees and contractors, and an employment agreement with our sole officer and director.

We face exposure to fluctuations in the price of our common stock due to the very limited cash resources we have.

The Company has very limited resources to pay its professionals. If we are unable to pay professionals in order to perform various professional services for the company, it may be difficult, if not impossible, for the Company to maintain its reporting status under the Exchange Act. If the Company felt that it was likely that it would not be able to maintain its reporting status, it would make a disclosure by filing a Form 6-K with the SEC. In any case, if the Company was not able to maintain its reporting status, it would become “delisted” and this would potentially cause an investor or an existing shareholder to lose all or part of his investment.

The Company does not anticipate any contingency upon which it would voluntarily cease filing reports with the SEC, even though it may cease to be required to do so.

It is in the compelling interest of the Company to report its affairs quarterly, annually and currently, as the case may be, generally to provide accessible public information to interested parties, and also specifically to maintain its qualification for the OTCBB, if and when the Registrant's intended application for submission is effective.

Success of the Company will depend on the Developments of an Active Trading Market.

While the Company's common shares (“Common Shares”) are included on NASD Over the Counter Bulletin Board, there can be no assurance that an active trading market for the Common Shares will develop. In the absence of such a market, investors may be unable to readily liquidate their investment in the Common Shares. The market for equity securities in general has been volatile and the trading price of the Common Shares could be subject to wide fluctuations in response to general market trends, changes in general conditions in the economy, the financial markets and other factors that may be unrelated to the Company's performance.

11

Low-Priced Stocks Subject to Greater Disclosure Requirements.

The Securities and Exchange Commission adopted rules (“Penny Stock Rules”) that regulate broker-dealer practices in connection with transactions in penny stocks. The Common Shares of the Company may fall within the Commission's definition of a penny stock. The closing price of the Company's shares on July 23, 2009 was $0.07. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current prices and volume information with respect to transactions in such securities is provided by the exchange or system). The Penny Stock Rules require a broker-dealer, prior to effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level of risks in the penn y 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 such rules, the broker-dealer must 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 a stock that is subject to the Penny Stock Rules. At any time when the Company's common stock is subject to the Pe nny Stock Rules, shareholders may find it more difficult to sell their shares.

ITEM 4.

Information on the Company

A.

History and Development of the Company

Historical Overview

The Company was incorporated as a federal company pursuant to the laws of Canada under theCanada Business Corporations Act (the “Act”) on October 30, 1997, under the name 3430502 Canada Ltd. Since that time, the Company has changed its name four times: (1) On or about December 4, 1997, the Company changed its name to Four Crown Foods Inc.; (2) On or about June 5, 2000, the Company changed its name to Universal Domains Incorporated; (3) On or about September 20, 2004, the Company changed its name to Pure Capital Incorporated; and (4) On or about February 6, 2007, the Company changed its name to Tombstone Exploration Corporation.

Prior to current operations, the Company most recently operated as an independent energy company engaged in the exploration, development, production, and acquisition of crude oil and natural gas. Although the Company acquired a 75% working interest in the Puckett Field located in the State of Mississippi, and became partnered with Hawkeye Drilling Co. in March 2003, this relationship was abandoned in 2003 as the drilling was unsuccessful. Then, in January 2004, Hawkeye Drilling obtained a Court Order for the return of the Company’s interest in the Puckett Field. Subsequently, and upon information and belief, Hawkeye Drilling has sold its interest in the Puckett Field to a third-party.

Until March 2003, the Company, through its wholly-owned subsidiary VCL Communications Corp. (“VCL”), was in the business of providing teleconferencing services to clients in North America. In March 2003, the Company decided to discontinue providing teleconferencing services in order to focus on the oil and gas business.

Prior to the Company’s central operation model shifting to the oil and gas industry, the Company was involved in the food and beverage retail business (the “Food Retail Business”). Prior to December 31, 2001 the Company discontinued its Food Retail Business operations. The Company commenced a domain registration business upon the acquisition on April 12, 2000 of the license rights to a domain registration agreement for the “.cc” Internet registration domain. The Company withdrew from the domain registration business during fiscal 2001. In October, 2001 the Company acquired 100% of the issued and outstanding shares of VCL, a teleconferencing services company targeting clients throughout North America.

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In November 2003, the Company ceased all operations. From that time until November 1, 2006, the Company’s goals were to continue to reduce the liabilities of the Company in an effort to obtain additional financing and explore the possibilities of starting a new operating business, and/or merge with or become acquired by another company or entity.

On November 1, 2006, the Company began negotiations with Redhawk for the acquisition of several mining and mineral right claims located in the State of Arizona. On November 27, 2006, the Company and Redhawk, pursuant to the terms and conditions of the Agreement, finalized the transaction, which closed on December 4, 2006.

Pursuant to the terms of the Agreement, at closing, the Company issued to Redhawk Eight Million (8,000,000) restricted shares of the Company’s Common Stock valued at Ten Cents ($0.10) per share (“Acquisition Shares”) and cash in the amount of One Hundred Thousand ($100,000) dollars (“Acquisition Cash”).

In exchange for the aforementioned Acquisition Shares and Acquisition Cash, the Company received from Redhawk full rights and title to certain mining and exploration claims (the “Mining Claims”) located in the State of Arizona, along with other equipment and property.

A more detailed discussion of the Company’s business and properties are set forth below, and incorporated herein by reference.

Tombstone Exploration holds 100% of the mineral rights to approximately 13,500 acres in the historical western Tombstone silver mining district. The center of the property is Section 16, 2 miles southwest of the Tombstone town, Cochise County, Arizona. Section 16 comprises many of the historical silver producers in the district including: San Pedro group (Fox claims), State of Maine, Merrimac, Free Coinage, Chance, Bonanza, Santa Ana, Solstice, Annex 40 and 41 (Ace-in-the-Hole), Black Horse, the Joseph group, Mamie, Sailor, Randolph, and Groundhog. The total strike length extension of these structures is estimated to be in excess of 7,000 meters.

Mineralized structures are deep seated fracture/fault zones are considered to be the mineralizing conduits in the district. They trend north-northeast and dip steeply to west. Other than the fracture filling ore type, manto-type (lensoid, strata-bound) mineralization has been also recognized in the district. The main host rocks are quartzites, and limestones of the Bisbee Group intruded by the Uncle Sam porphyry complex, also a host rock. In general, the fracture filling mineralized structures are mostly associated with the quartzites and Uncle Sam rock units, while the manto-type mineralized structures are predominantly associated with limestones and limey siltstones.

These ore deposits are of polymetallic character, and are predominantly silver-rich, with significant mineralization of gold, lead, zinc and copper. Manganese oxides which are ore carriers and mineral hosts are observed at the upper sectors of the structures.

Two drilling programs have been completed during the field sessions of 2007 and 2008 consisting of 15 drill holes totaling 3,051 m (10,160 ft). 12 out of 15 drill holes were designed to test the central zone of the Bonanza structure. Three drill holes were located at Ace-in-the Hole and Black Horse area to test these structures. The 2007 drilling program was done by reverse circulation and the 2008 drilling was done by core diamond drilling, using HQ diameter and triple tube technology for better recovery.

The primary focus of operations will be to generate revenue from the production of silver, gold and manganese as well as additional base minerals such as copper, lead and zinc. Through expansion, we will acquire new properties, as well as integrate the extraction of precious metals, rare earth and other minerals. The goal is to produce metals and minerals at or below standard industry costs. The historical nature of mining activities of our present holdings and the acceptance of governmental agencies will enable easier startup here than in non-mining oriented locations.

The significant potential for silver recovery will likely draw considerable interest from major silver producing companies, as well as precious metals mining concerns. With the variety of the metals projected for extraction, the Company expects to attract major attention and support from the state, local and federal governments

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Following identification of suitable areas during our drilling programs, which we anticipate will continue in the future, the Company may initiate mineral extraction if sufficient funding and permitting are secured. These efforts will provide an operating financial base from which to expand. Continuing geological research, testing and drilling is planned based on the initial geological report. This will assist in the identification of key target areas, as well as establish reserve categories.

Discussions with precious metal processing and consulting companies to assist in the design of the overall operation of the Tombstone property have been initiated. Relationships have already been established with refineries, assay companies and engineering firms supporting worldwide mineral processing operations.

To the best of our knowledge, we now control more mining acreage in the mineral rich Tombstone district than any other company. Management has structured and positioned the Company to capitalize on today's increasing demand and prices for precious metals and base metals such as copper, lead and zinc. Accordingly, we have acquired the mineral rights to approximately 13,500 acres of historical mining land in the areas around Tombstone, Arizona. The Company is the largest land holder in the Tombstone mining district. Through expansion, Tombstone Exploration will acquire new properties, as well as integrate the extraction of precious and base metals. The goal is to produce metals and minerals below standard industry costs.

B.

Business Overview

We are in the mineral resource business. This business generally consists of three stages: exploration, development and production. We are a mineral resource company in the exploration stage because we 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.

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 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. If minerals are found, 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.

We will focus on the exploration and acquisition of mineral properties in the United States, and specifically, hold a majority of our interests in the State of Arizona. There is no assurance that a commercially viable mineral deposit exists on any of our properties and further exploration work may be required before a final evaluation as to the economic and legal feasibility is determined.

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For further information, see Item 3D – Risk Factors.

Though we have conducted drilling at our Tombstone property in 2007 and 2008, we have not identified the existence of any commercially viable mineral deposits at the Tombstone Property. We are in the process of conducting prospecting and sampling as necessary. We anticipate a Phase 2 drilling program to commence sometime in either September or October 2009, subject to obtaining sufficient financing.

2007 Drilling Program

In early March 2007, we commenced our reverse circulation drill program. On or about March 21, 2007, we completed the first reverse circulation drill hole (RT-1) to a depth of 500 feet and intercepted ore grade silver/gold mineralization when it hit its target at the Tombstone property.

Thirty-five feet averaging 0.0108 opt Au and 2.43 opt Ag was drilled. The RT-1 intercept occurred from 415 feet to 450 feet in a vertical hole. Included within the mineralized zone are two consecutive five foot intervals (from 430-435 and 435-440 feet) that assayed 0.008 opt Au, 6.16 opt Ag and 0.046 Au, 3.30 opt Ag, respectively. This zone was identified as the Bonanza Vein structure and the ore zone was penetrated approximately 185 feet below the lowest level of the Bonanza Mine.

The 2007 Drill Program consisted of distinct drill sites that were designed to intercept extensions of the State of Maine mine, Merrimac zone, Bonanza-Solstice mines and the Ace-in-the-Hole-Black Horse mine sub-parallel trends. These zones are north-easterly trending. Core holes were HQ size and were drilled using triple tube core technology to assure that the most complete core recovery was achieved. Drill hole spacing was approximately 100 meters between drill hole sites. The four mineralized zones were tested over strike lengths ranging from 200 meters to 500 meters. All available historical data indicates that there were no historical mining activities conducted below the water level in the areas covered by the 2007 Drill Program.

Following the 2007 Drill Program, and in January 2008, the Company received assay results for 115 samples taken from its Tombstone Project property within T20S R22E Sections 16 and 17.

It was determined that more detailed sampling would be required to further assess the Santa Ana Mine workings. The Joseph Vein is a steeply dipping mineralized shear zone in the Bisbee Group rocks where it is exposed in the Santa Ana mine.

2008 Drill Program – Phase 1

On or about April 1, 2009, the Company began to conduct geological mapping and sampling that, combined with historical data, provided the basis for 2008 core drilling program.

On May 29, 2008, the Company engaged Layne Christensen Company (NASDAQ: LAYN) of Mission Woods, Kansas to conduct its 2008 drilling program, which commenced on June 17, 2008 and continued through September 2008.

On October 9, 2008, the Company announced the completion of its 2008 Drill Program which consisted of 2,593 feet of core drilling at its silver project in Tombstone. Six diamond drill holes (DDH) were drilled, TEMC 101,102,103,104,105 and 106, to test the extension of the mineralization zones of the Bonanza and Santa Ana structures, both of which possess historical data from within the mining district. Both structures exhibit open ends at the south and north, as well down dip.

Holes were drilled as HQ diameter and using triple-tube technology, yielding a recovery over 90% in most instances. RQD is estimated at 45%, average.

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Five out of the six DD holes intersected the projected targets at different levels at the south, central and north of the structures, while DDH TEMC 101 provided a great deal of information regarding the Bonanza structure which seems to be bent in an opposite direction in depth. This particular piece of information has been physically confirmed in the Bonanza mine workings where the structure becoming sub-vertical at 200 feet approximately, and then switches the dip to east, rather than dipping west as observed at the upper sectors of the shafts.

The 2008 Drill Program revealed a new mineralized structural corridor between the State of Maine and Merrimac veins at the southern portion of the property. The corridor extends for over one mile, and locally exhibits 80-100' width with some feldspar porphyry dikes in between.

The results of this Phase 1 drill program have resulted in identifying a very mineral rich zone that Tombstone management believes is a significant precious metals and base metals discovery. The Company intends an aggressive exploration and comprehensive drilling program, which is planned for 2009.

Following the completion of the Phase 1 Drill Program in 2008, the Company, on April 17, 2009, received assay results from rock chip samples on its Tombstone properties.

Outcrop samples taken from horizontal projections of mineralized structures away from historical mine workings indicate continuity of silver, gold, lead, zinc, copper and manganese enrichment along these structural corridors through the property package. Samples from two structures were collected and taken to Copper States Analytical Lab in Prescott, AZ for gold, silver, lead, zinc, copper and manganese assays.

National Instrument 43-101 Technical Report

In May 2008, we filed our initial National Instrument 43-101 Technical Report. SRK Consulting of Tucson, Arizona has completed the NI 43-101 technical report. SRK is an independent, international consulting group, employing leading specialists in environmental science and mineral engineering. Its seamless integration of services, and global base, has made the company a significant international practice in due diligence, feasibility studies and confidential internal reviews. SRK's global experience and reputation for excellence is widely recognized among the major financial institutions and are repeatedly called upon to advise on and evaluate projects for all types of market transactions. Formed in 1974, SRK employs more than 600 professionals internationally in 31 permanent offices on 6 continents.

National Instrument 43-101 (NI 43-101) is a rule developed by the Canadian Securities Administrators (CSA) and administered by the provincial securities commissions that govern how issuers disclose scientific and technical information about their mineral projects to the public. It covers oral statements as well as written documents and websites. It requires that all disclosure be based on advice by a “qualified person” and in some circumstances that the person be independent of the issuer and the property.

SRK Consulting made the following recommendations:

It is strongly recommended that an extended program of vertical and inclined core drilling be conducted at the Tombstone Property. Drilling would be aimed at determining mineralization grades and fissure vein characteristics such as horizontal and vertical extent, relationships to other veins, widths and depths below the water table. It would also provide geotechnical information, samples for bulk density measurements, and samples for preliminary metallurgical testing. It is difficult to say how many drill holes would be indicated. A program is suggested that would include a minimum of five 1000-foot core holes along existing mineralized structural zones to define depth potential below the water table. A program of twenty 500-ft drill holes (RC) can be used to explore along strike of mapped extensions to known structures.

1.

Conduct additional inclined and vertical drilling for the following purposes:

·

Evaluate the width of structural targets such as dikes, fissures, and veins;

·

Confirm silver mineralization across the targets;

·

Evaluate potential mineralization below the water table in the target areas;

·

Provide fresh samples for mineralogical and metallurgical testing; and,

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·

Conduct in-fill and/or extension drilling where necessary.

Any additional drilling should be by the core drilling methods with HQ size core. The drilling should include some oriented drillcore, targeting the northeast-trending fissures, to intercept the greatest possible thickness and depth of mineralized rock. Additional drilling should be directed toward evaluating mineralization below the water table.

The recommended drilling will provide additional structural and assay information to allow for possible delineation of mineralized zones, and will provide additional geotechnical information. Closer spaced drillhole definition of higher grade and thicker mineralization should be the goal.

2.

Conduct down-hole surveys to measure drill-hole deviation, particularly for drill holes in excess of 100 m.

3.

Devise a suitable numerical drill log that will allow inclusion of detailed lithology, alteration and mineralization information, in numeric form, in addition to assay data, to allow for digital drill logs.

4.

Convert historical hard copy drill logs to digital format logs.

Revenues

To date we have not generated any revenues from the Tombstone Property.

Principal Market

We do not currently have any market, as we have not yet identified any mineral resource on the Tombstone Property that is of a commercially exploitable quantity. If we succeed in identifying a mineral resource in commercially exploitable quantities, our principal markets should consist of metals refineries and base metal traders and dealers.

Seasonality of our Business

Our mineral exploration activities are not subject to extreme seasonal variation since the Tombstone Property is located in Arizona. Field work, however, is best carried out in temperatures averaging 10 to 15 degrees Celsius. Our other operations, such as metallurgical review and analysis of geochemical survey results, can be carried out all year round.

Sources and Availability of Raw Materials

The Tombstone Property is easily accessible by major highways and roads. The closest suitable source of power for development is the transmission line between Tombstone and Sierra Vista, which runs parallel to the highway and through the property. If a mineral resource is found on our Tombstone Property, power generation would be required.

Patents and Licenses; Industrial, Commercial and Financial Contracts; and New Manufacturing Processes

In conducting our business operations, we are not dependent on any patented or license processes, technology, industrial, commercial or financial contract or new manufacturing processes.

Competitive Conditions

We compete with other mining companies, some of which have greater financial resources and technical facilities, for the acquisition of mineral interests, as well as for the recruitment and retention of qualified employees.

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The mineral property exploration business, in general, is intensively competitive and there is not any assurance that even if commercial quantities of ore are discovered, a ready market will exist for sale of same. Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations; the proximity and capacity of natural resource markets and processing equipment; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of mineral and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may make it difficult for us to receive an adequate return on investment.

We compete with many companies possessing greater financial resources and technical facilities for the acquisition of mineral concessions, claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees. Low metal prices and an instable market, even among competition, leads us to assume that we will not face any difficulties retaining geologists or other consultants compared to our competition.

Competition in the usual context, and as experienced by manufacturers of automobiles, durable goods, clothing, electronics, and the providers of most services simply is not a factor in the minerals market. The demand for minerals always exceeds supply, and historically prices have consistently risen. The only major factor for competition is the cost of production.

Although, competition over cost of production exists, there is little competition in the marketplace for the company’s products. The market absorbs all precious metals and most base metals produced at prevailing prices. Larger producers can hedge future production to enable easier management of expected revenue in times of price fluctuation, whereas junior companies usually sell at market prices. In today’s market larger producers have pulled back from hedging.

The primary competition in the precious metals market is for talent in the workforce. As prices have risen many new companies have started operations or are in the midst of exploration and proving of reserves. It is in this area that competition exists for experienced geologists, project managers, and mining executives. In many areas there also is a shortage of mining labor.

Tombstone Exploration believes it can overcome this competition due to its location in a historical mining area, year-round working conditions and nearness to major population centers of Tucson and Phoenix, AZ. Additionally, experienced mining professionals have assisted in developing the corporation and have many contacts in the industry.

In the local area of Tombstone, there is essentially no competition. Several small companies and a junior Canadian firm (Southern Silver Exploration) hold small parcels of land. To our knowledge, we are the largest individual holder of land. Pure Capital controls land from approximately the city limits to the protected San Pedro River Basin area.

Environmental Regulations

Mineral property exploration in Arizona is governed by the State of Arizona Office of Mine Inspector as well as Title 30 of the Code of Federal Regulations, both seek to regulate and promote the development of safe and environmentally conscious mining operations.

Governmental Regulations

Mining operations are subject to a wide range of government regulations such as restrictions on production, price controls, tax increases, expropriation of property, environmental protection, protection of agricultural territory or changes in conditions under which minerals may be marketed. Mining operations may also be affected by claims of native peoples, any of which could have the effect of reducing or preventing us from exploiting any of our properties.

We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the State of Arizona and in the United States generally.

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Our mineral claims entitle our company to continue exploration activities on our properties, subject to our compliance with various United States federal and state laws governing land use, the protection of the environment and related matters.

C.

Organizational Structure

We have a wholly owned subsidiary, Tombstone Exploration and Mining Corporation (“TEMC”), a Nevada corporation that is qualified to do business in the State of Arizona. All of our operations are conducted through TEMC.

D.

Property, Plant and Equipment

Our principal executive office is located at 1515 Red Top Rd. P.O. Box 1280, Tombstone, AZ. 85638. We operate out of a mobile facility that is approximately 1,200 square feet and accommodates all operating needs. The facility is equipped with five (5) offices, a reception area and a conference room. We own the mobile facility, which is adequate for our current operations. Additionally, we share this space with our wholly owned subsidiary, TEMC. Should we require additional space, we believe that such space can be secured on commercially reasonable terms by securing other mobile facilities.

This space accommodates all of our executive and administrative offices. We believe that this existing space is adequate for our current needs. Should we require additional space, we believe that such space can be secured on commercially reasonable terms.

Our property consists of mineral rights to approximately 13,500 acres of historical mining land southwest, south and southeast of Tombstone, Arizona. We control one of the largest mining properties in Arizona.

The Tombstone Project is located approximately 65 miles southeast of Tucson, AZ and is easily accessible by major highways and roads. An overview map is shown below, followed by a detailed look at the magnitude of the property size compared to the city of Tombstone.

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The Tombstone Project consists of the following claims:

Arizona Mining Claims Township 20 S Range 22E:

AMC364521 - AMC364556: Silver Bullet #1 thru #36 – Sec. 9

AMC364557 – AMC364572: Silver Bullet #37 thru #52 – Sec. 10

AMC364573 – AMC364576: Silver Bullet Extension #53 thru #56 – Sec. 15

On February 27, 2007, the Company closed a transaction pursuant to which it acquired various mineral rights claims from Donald Heck as Trustee of the Tombstone Silver Mines Secured Creditors Trust. The Purchase Agreement is incorporated by reference herein.

The following is a summary of the claims acquired from Donald Heck:

Subdivision Census Id / Block Group / Block / Suffix: Legal Description: MINERAL RIGHTS 0021003010   PAT MINES TOMBSTONE MNG DIST MINERAL RIGHTS ONLY: MERRIMAC LODE MNG CLAIM MS #53 20.61 AC; CLIPPER LODE MNG CLAIM MS #120 13.41 AC; & RED TOP LODE MNG CLAIM MS #52 20.66 AC ALL IN SEC 16 20 22 TOTAL ACRES MINERAL RIGHTS 54.68 AC

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Subdivision Census Id / Block Group / Block / Suffix: Legal Description:	MINERAL RIGHTS 0021003010 PAT MINES TOMBSTONE MNG DIST MAINE 18.33 AC LESS PCL 109-30-001J & TRIPLE X 15.27 AC SEC 16 20 22 MINERAL RIGHTS ONLY TOTAL 33.60 AC MINERAL RIGHTS ONLY 20P/AC
Subdivision Census Id / Block Group / Block / Suffix: Legal Description:	MINERAL RIGHTS 0021003010 PAT MINES TOMBSTONE MNG DIST MINERAL RIGHTS ONLY BROTHER JONATHAN LODE SEC 16 17.28 AC; LOWEL LODE MS #797 SEC 17 20.59 ACALL IN T20 R22 TOTAL ACRES MINDERAL RIGHTS 37.87 AC
Subdivision Census Id / Block Group / Block / Suffix: Legal Description:	MINERAL RIGHTS 0021003010 PAT MINE TOMBSTONE MNG DIST MINERAL RIGHTS ONLY MAY PAT MINE MS #317 SEC 16 20 22 TOTAL ACRES MINERAL RIGHTS 19.43 AC SITE VAL

In April 2007, the Company was granted permits giving the Company the exclusive right to explore 3,070 acres of prospective Arizona State lands (the ``Parcels''), which were approved by the Arizona State Lands Department. Upon exploration and verification of mineable minerals and base metals, the Company will then immediately seek to obtain state mineral leases on these Parcels. The Parcels include a 100 acre area that was evaluated by Interstat Resources, Inc. for its open pit silver potential in 1985. The Interstat report assay records show values ranging up to 220.07 opt Ag and 0.980 opt Au were encountered across narrow structures. In 1986, the state issued a recommendation that Interstat be granted a mineral lease to mine a 50,000 ton deposit of +1.5 opt Ag (Au values were not noted) by open pit methods from surface to 100 feet in depth. Much of this resource appears to be in the mineralized hangwall of the State of Maine mine.

On December 11, 2007, the Company applied for the additional exploration permits from the State of Arizona Land Department. The application encompassed approximately 2,730 acres in the Tombstone Mining District, principally the Bisbee Group sediments and metasediments that have been highly productive in both the Tombstone Mining District and in the Warren (Bisbee) Mining District, Arizona. This application was conditionally approved in February 2008.

The Company has continued to submit all necessary documentation to renew BLM claims, leases and mineral rights to property totaling approximately 13,500 acres.

The map below details the Company’s holdings in the Tombstone district:

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Industry of Interest

The precious metals and base metals industry produces over $100B in metal production per year. The industry is essentially two sectors: the major producers and the junior exploration and mining companies.

The major producers such as Barrick, Newmont and Phelps Dodge, produce the majority of precious and base metals from large scale, geologically scattered operations. Property expansion by the majors typically comes from joint venture, consolidation or acquisition with junior exploration and mining companies. This occurs usually because a junior finds it difficult to initiate full scale operations due to the significant front end development costs. The majors can absorb and develop the newly discovered fields with little impact to overhead operations and can fund direct operations through forward sale of metals.

Juniors typically spend the majority of their money locating new potentially rich areas, proving up a portion of reserves through geological studies, analyses and drilling, and then initialing small scale operations. During that period most successful juniors draw the attention of and team in some way with a major producer.

Cost of operations/production is the driver in the industry. All product produced, particularly in the precious metals industry, is absorbed by the market. Demand exceeds supply. The most profitable companies have the lowest per ounce/pound cost of production. The highest return to investors, however, comes from junior companies, when successful, where per share prices are lower until a viable project is proven. Risk, though, is often higher with junior companies, unless and until they locate and acquire viable projects and adequate funding.

The prime customers for the precious metals sector of the industry are the refiners such as Englehart, Johnson Maffey, etc. These companies serve as the distributor of product between the producers and the consumers. The majority of precious metals produced are utilized by the industrial and electronics industry, the automotive industry, the jewelry industry and the investment community.

As metals prices have risen, so too has the interest in new areas for exploration and eventual production. The past two decades has seen a significant expansion of interest into Central and South America, as well as developing third world countries. Today’s price levels combined with the political uncertainties of many foreign projects, and the inability for year-round operations in portions of Alaska and northern Canada, has produced a resurgence of junior companies in the mainland United States. However, many juniors target only one or two categories of metals. This model of operation limits their chance for success for production or buyout.

The keys to success for today’s junior exploration and mining companies are four: 1. Property holdings and potential; 2. location; 3. metal diversity; and 4. cost of development and operation.

The Tombstone Property

The Tombstone District sits astride a regional NE trending structure. This structure is visible on topographic maps as well as satellite images of the American Southwest. It is a northeast trending rift structure or shear traceable from southwest of the Huachuca Mountains of Arizona northeast to Silver City, New Mexico.

The majority of veins and mineralized structures within the Tombstone District and neighboring districts exhibit the same northeast alignment as the above noted structure. In neighboring districts along the NE rift, silver and gold mineralization occur in igneous and sedimentary rocks, suggesting ore mineralization is pervasive and of considerable extent along this northeast trending, regional rift.

This structural trend of mineralization presents an exploration potential of tremendous magnitude, with precious metals and base metals distributed along and adjacent to the structure.

Geologic evaluation of ore-bearing structures within the Tombstone basin suggest that mineralization similar to that historically mined, could support an open pit heap leach operation such as that conducted by Tombstone Exploration, Inc., circa 1980 to 1985.

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Mesothermal replacement deposits primarily of silver, gold, zinc and lead in the upper Paleozoic section and copper in the lower Paleozoic section below Tombstone are thought to continue at depth.

Copper replacement deposits in The Abrigo and Martin Formations as seen at Bisbee may be similar to those suspected beneath the West Tombstone/Charleston areas.

Multiple porphyry copper centers are known to occur elsewhere associated with Laramide-age granodiorite and quartz monzonite plutons. One such center, confirmed by deep drilling by ASARCO in 1973-74, occurs near the Robbers Roost, on Company property, where intense argillic alteration and mineralized breccia pipe emplacement are exposed by erosion.

Surface examination of the West Tombstone area reveals there are numerous veins and structures that have not been mined or explored. The close proximity of many of these structures and veins may allow for Slot or Open Pit mining methods if sufficiently high silver-gold values are carried between.

The high degree of vein wall rock alteration indicates the silver and gold mineralization should extend away from the veins into the wall rocks. Most of the veins observed appear to be fissure fillings within fractured intrusive dikes and sills. Aplite and Andesite porphyry dike rocks appear in fissure veins of the West Tombstone-Solstice area.

Skarn mineralization appears to underlie a portion of the project area. Observed locally, the Skarn mineralization appears to be contained beneath a series of low angle or thrust faults as seen on the face of the Ground Hog hill and constituting the Limestone-volcanic contact at the western end of the Carbonate patented lode claim.

Most prominent structures are veins occupying N-NE trending fault zones and shears. Ore appears to have been mined where highly manganiferous vein material is present in the NE structures.

In the west portions of the property, the limestone is altered into rocks typically identified with Carlin-Type Gold deposits. The limestone is intensely silicified and is locally jasperoidal.

This intense alteration was observed to occur in the footwall of a low angle, reverse fault. This is a typical location for the deposition of Carlin-Type mineralization as ore bearing fluids tend to pond or be trapped beneath impermeable rocks or clays associated with these faults.

Stratigraphy

The rocks composing the Tombstone district range from pre-Cambrian to Quaternary in age.

The oldest rock in the district is a fine-grained, greenish-grey schist, evidently pre-Cambrian and correlated with the Pinal schist of Bisbee. Granitic and porphyritic rocks that have been tentatively aged as pre-Cambrian intrude the Pinal schist.

The Bolsa quartzite lies unconformably over the pre-Cambrian, and locally is about 450 feet thick. This is succeeded by about 700 feet of the Cambrian Abrigo Limestone. Overlying the Abrigo is 350 feet of the Devonian Martin Limestone, followed by the Mississippian Escabrosa Limestone of about 500 feet thickness.

The Escabrosa Limestone is not easily distinguishable from the overlying Naco Limestone of Pennsylvanian and Permian age. Up to 3,000 feet of Naco Limestone is known. The Naco Limestone, intruded by dikes and sills of quartz latite porphyry, possibly erupted prior to deposition of the Mesozoic sedimentary units.

Unconformably overlying the Naco is the Bisbee group consisting of conglomerate, sandstone, quartzite, shale and limestone. Fossils in these beds indicate a Mesozoic age. The thickness of the Bisbee group is unknown. Following the deposition of sediments, The Schieffelin granite and the Uncle Sam porphyry were emplaced.

Last emplaced were the porphyritic andesite dikes, which occupy the NE trending shear zone structures.

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Description of Claims

Our Tombstone Property consists of hundreds of contiguous mineral claims. The Company owns a 100% interest in all of these mineral claims, estimated at approximately 13,500 acres.

Permitting

Preparation of the Arizona Department of Water Resources Notice of Intent to Drill and Abandon an Exploration/Specialty Well permit documents is complete.

Development Strategy & Plan of Operations for the Next Twelve Months

The Company’s development strategy is to focus on and solidity the fundamental keys to success for a junior exploration and mining concern. These keys were identified in the Industry discussion.

1.

Property holdings and potential.

Plan: Continue geological analyses including mapping, and identification of drill targets. Focus on these targets for drilling, sampling and identifying potential reserves. Expand target areas as drilling progresses and studies expand knowledge of properties.

2.

Location

Plan: The Company’s property location in a known metal and mineral rich area with easy access, historical production, mining friendly community and ease of permitting puts Pure Capital in position for success. The Company will continue to identify areas on the property for mill site operation, improve off-road access and work closely with the city of Tombstone and the community at large to offer employment opportunities. The Company will also interface with the state levels in Arizona to establish itself as a significant contributor to the state economy.

3.

Metal diversity

Plan:A significant number of metals and minerals have already been identified on the company property including silver and gold, as identified in the geological report. The Company, with the help of consulting organizations, will further explore the range of metals and minerals, and the ability to extract/produce product for market. In the non precious metals areas, the Company will likely seek joint venture partners who will add to the success and financial returns for our shareholders.

4.

Cost of development and operation

Plan:The Company may establish a small production operation, subject to permitting, financing and sufficient resources, to begin silver and gold production with material from existing known sites. As drill targets identify key areas for metal bearing ore, the operation will be expanded to two large scale mill sites. The Company firmly believes from the geological report, sampling and historical production in the area, that a low cost / high profit operation will be developed.

ITEM 4A - Unresolved Staff Comments

This item is not applicable as we are not an accelerated filer or a large accelerated filer or a well-seasoned issuer.

ITEM 5.

Operating and Financial Review and Prospects

The following discussion and analysis of our financial condition and results of operations for the fiscal years ended December 31, 2008 and 2007 should be read in conjunction with our financial statements and related notes included in this Report. Our financial statements included in this Report were prepared in accordance with United States generally accepted accounting principles.

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A. Operating Results

Our results of operations have been, and may continue to be, affected by many factors of a global nature, including economic and market conditions, the availability of capital, the level and volatility of prices and interest rates, currency values, commodities prices and other market indices, technological changes, the availability of credit, inflation and legislative and regulatory developments. Factors of a local nature, which include the political, social, financial and economic stability, the availability of capital, technology, workers, engineers and management, geological factors and weather conditions, also affect our results of operations. See “Key Information – Risk Factors”. As a result of the economic and competitive factors discussed above, our results of operations may vary significantly from period to period.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

For the years ended December 31, 2008 and 2007, we did not receive any revenue from various mining claims and properties.

During the year ended December 31, 2008 we had a net loss of $2,676,172 ($0.07 per share) compared to $3,213,209 ($0.11 per share) for the year ended December 31, 2007. The net loss for the year ended December 31, 2008 was attributed to $522,287 of general and administrative expenses, $120,000 of management fees, $1,200,194 of consulting expense, professional fees of $477,970 and mineral property exploration costs of $355,721. The decrease in net loss was attributed to overall declines in management fees of $380,000 and general and administrative costs of $612,504 based on lower amounts of stock-based compensation for services incurred by management and consultants to the Company, but was offset by increases in consulting expense of $644,546 due to the value of common shares authorized and issued for consulting services incurred on behalf of the Company. Furthermore, during the year ended December 31, 2007, the Company recognized a valuation impairment of $900,000 on their mineral properties compared with $355,721 of mineral property exploration costs during the year ended December 31, 2008.

B.

Liquidity and Capital Resources

Since our incorporation, we have financed our operations almost exclusively through the sale of our common shares to investors. As we are now focusing on mining exploration with no producing resource properties, we do not generate operating income or cash flow from our business operations. Until a significant body of ore is found, our working capital requirements are not significant, and we expect to continue to finance operations through the sale of equity in fiscal 2008. There is no guarantee that we will be successful in arranging financing on acceptable terms.

To a significant extent, our ability to raise capital is affected by trends and uncertainties beyond our control. These include the market prices for base and precious metals and results from our exploration programs. Our ability to attain our business objectives may be significantly impaired if prices for metals such as gold and uranium fall or if results from our intended exploration programs on our properties are unsuccessful.

At December 31, 2008, we had cash on hand of $8,625 compared with $252,718 as at December 31, 2007. The decrease in cash was attributed to the fact that the Company issued private placements for $800,000 and received net financing of $66,748 from our President and Chief Executive Officer compared with net cash use from operations of approximately $1,100,000. Liabilities consisted of accounts payable and related party payables totaling $184,170 compared with $122,199 as at December 31, 2007, and the increase is attributed to the fact that the Company had limited cash flows and are retaining its cash reserves which results in longer lead times for payment of liabilities. The Company has not incurred any interest penalties with respect to its accounts payable and there are no known or threatened credit claims against the Company for its outstanding liabilities.

During the year ended December 31, 2008, the Company issued 5,165,000 common shares including 4,000,000 common shares as part of two private placement financings for proceeds of $800,000, 1,025,000 common shares for consulting services with a value of $149,000, and 140,000 common shares as part of the finders’ fees for the private placements with a value of $28,000. Furthermore, during the year ended December 31, 2008, the Company also authorized the issuance of 5,450,000 common shares for professional fees and consulting services valued at $1,403,500 which has been recorded as common stock subscribed and were issued in February 2009.

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Application of Critical Accounting Policies

The preparation of financial statements in conformity with applicable generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex. Our significant accounting policies are disclosed in Note 2 to our financial statements included in this Report.

C.

Research and Development, Patents and Licenses, etc.

We do not currently, and did not previously, have research and development policies in place. Over the past three fiscal years, we have not expended any material amounts on research or development.

D.

Trend Information

Our business is the exploration for and development of mineral deposits, so the commodity price of precious metals has a direct impact on our revenue prospects and our ability to raise capital. Although there is no assurance that this trend will continue, management is optimistic that the current price level will continue for the foreseeable future.

E.

Off-Balance Sheet Arrangements

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

F.

Tabular Disclosure of Contractual Obligations

We do not have any contractual obligations and commitments as of December 31, 2008 that will require significant cash outlays in the future.

G.

Safe Harbor

Certain statements contained in this report may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual events, and/or the actual performance, financial condition or results of operations of our company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in this form 20-F under Item 3D and such other documents that we may file with the US SEC from time to time.

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ITEM 6.

Directors, Senior Management and Employees

A.

Directors and Senior Management

The following table sets forth the names, business experience and function/areas of expertise of each of our directors and officers:

NameOffice HeldAge	Area of Experience and Functions in Our Company
Alan M. Brown CEO, CFO, Director & President 45	As President, Chief Executive Officer, Chief Financial Officer and director, Mr. Brown is responsible for the development of our strategic direction and the management and supervision of our overall business.

B.

Compensation

During the fiscal year ended December 31, 2008, the aggregate remuneration paid to directors in their capacity as directors of our company was $NIL. Consulting fees totaling $NIL worth of our securities were paid to directors and officers.

Executive Compensation

The following table provides a summary of compensation paid by us during the fiscal year ended December 31, 2008 to our executive officers who received a salary:

SUMMARY COMPENSATION TABLE
Name and PrincipalPosition	Year	Annual Compensation			Long Term Compensation		All otherCompensation
		Salary	Bonus	OtherAnnualCompen-sation	Securities UnderOptions/SARsGranted	Shares or unitssubject toresalerestrictions.
Alan M. Brown CEO and Director	2008 2007 2006	$120,000 $120,000 $120,000	NIL NIL NIL	NIL NIL NIL	NIL NIL NIL	NIL NIL NIL	NIL $500,000(1) $4,952,286(2)(3)

(1)

Represents bonus of 5,000,000 shares of restricted common stock issued to Mr. Brown in May 2007 which was due as part of his Employment Agreement.

(2)

Represents 8,000,000 common stock purchase warrants issued to Mr. Brown in November 2006. Reflects dollar amount expensed by the company during applicable fiscal year for financial statement reporting purposes pursuant to FAS 123R. FAS 123R requires the Company to determine the overall value of the warrants as of the date of issuance based upon the Black-Scholes method of valuation.

(3)

These warrants were cancelled in November 2008.

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C.

Board Practices

All of the directors of the Company are elected annually by the shareholders and hold office until the next annual general meeting of shareholders or until their successors are duly elected and qualified, unless they sooner resign or cease to be directors in accordance with the Registrant's Articles. The Company's last annual regular general meeting was held on September 6, 2001. The Company's executive officers are appointed by and serve at the pleasure of the Board of Directors.

Members of the Board of Directors are elected by the holders of the Company's shares to represent the interests of all shareholders. The Board of Directors meets periodically to review significant developments affecting the Company and to act on matters requiring Board approval. Although the Board of Directors delegates many matters to others, it reserves certain powers and functions to itself. The only standing committee of the Board of Directors of the Company is the Audit Committee. The Audit Committee of the Company's Board of Directors currently consists of Colleen Garner and Alan Brown. This committee is directed to review the scope, cost and results of the independent audit of the Company's books and records, the results of the annual audit with management and the adequacy of the Company's accounting, financial and operating controls; to recommend annually to the Board of Directors the selection of the independent auditors; to consider proposals made by the Company' s independent auditors for consulting work; and to report to the Board of Directors, when so requested, on any accounting or financial matters. The Company does not have an Executive Committee.

D.

Employees

As of June 26, 2009, we have five (5) employees. We do not have any relationship with any labor unions.

E.

Share Ownership

There were 54,944,198 Common Shares issued and outstanding as of June 26, 2008. Of the shares issued and outstanding, our directors and officers owned the following Common Shares:

Name	Number of Common SharesBeneficially Owned as ofJune 26, 2009 (1) (2)	Percentage
Alan M. Brown	7,023,051	12.78%

(1)

Based on 54,944,198 Common Shares Issued and Outstanding as at June 26, 2009.

The voting rights attached to the Common Shares owned by our officers and directors do not differ from those voting rights attached to shares owned by people who are not officers or directors of our company.

Stock Option Plan

In January 2007, the Company adopted a stock option plan which was approved by majority written consent of its shareholders and Board of Directors. Under the plan, options of the Company may be granted to directors, officers, employees and consultants of the Company. Please refer to the Company’s Form S-8 filed on February 2, 2007, which is incorporated by reference herein.

ITEM 7.

Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth, as of June 26, 2009, the following are known to us to be the beneficial owner of more than five (5%) of our Common Shares:

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Name of Shareholder	No. of Common SharesOwned	Percentage ofOutstandingCommon Shares(1)
Alan M. Brown	7,023,051	12.78%

(1)

Based on 54,944,189 Common Shares issued and outstanding as at June 26, 2009.

The voting rights of our major shareholders do not differ from the voting rights of holders of our common shares who are not major shareholders. To the best of our knowledge, our company is not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other natural or legal person.

There are no arrangements known to us, the operation of which may at a subsequent date result in a change in the control of our company.

B.

Related Party Transactions

To the best of our knowledge, there have been no material transactions since formation of our company to which we were or are a party and in which any of our directors or officers, any relative or spouse of any director or officer, or any individual owning, directly or indirectly, an interest in our voting power that gives it significant influence over us, has or will have a direct or indirect material interest nor were any of our directors or officers, any relatives or spouses of such directors or officers, or any individuals owning, directly or indirectly, an interest in our voting power that gives them significant influence over us, indebted to us during this period, other than those transactions set forth elsewhere in this Annual Report, in the Financial Statements filed herewith, and in our filings with the SEC.

C.

Interests of Experts and Counsel

Not Applicable

ITEM 8.

FINANCIAL INFORMATION

A.

Financial Statements And Other Financial Information

The Company's financial statements, included as an exhibit to this Report, are incorporated into this Report by reference.

Legal Proceedings

There are no material legal proceedings in progress or, to the knowledge of the Company, pending or threatened to which the Company is a party or to which any of its property is subject.

Dividends

The Company has not and does not currently intend to pay any dividends on any of its shares. The Company intends to follow a policy of retained earnings to finance the growth of the business. Any future determination to pay dividends will be at the discretion of the Board of Directors of the basis of earnings, financial requirements and other relevant factors.

B.

Significant Changes

Except as otherwise disclosed in this annual report or in the reports filed on Form 6-K filed to date in 2009, no significant change has occurred since December 31, 2008.

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ITEM 9.

The Offer and Listing

The following table lists the high and low closing sale prices for the Company's common stock for the periods indicated as reported by the NASD over the counter Bulletin Board.

The following is a table indicating the price history of Company's Common Stock:

Year	High	Low
2003	1.35	.15
2004	6.75	.39
2005	3.55	.20
2006	1.00	.12
2007	.75	.16

Period	High	Low
First Quarter 2007	.75	.34
Second Quarter 2007	.55	.27
Third Quarter 2007	.34	.20
Fourth Quarter 2007	.45	.20
First Quarter 2008	.43	.20
Second Quarter 2008	.48	.15
Third Quarter 2008	.43	.10
Fourth Quarter 2008	.19	.05

Month	High	Low
Jan. 2009	.25	.13
Feb. 2009	.26	.10
March 2009	.13	.06
April 2008	.11	.05
May 2008	.09	.06
Through June 13, 2008	.09	.07

The shares of the Company commenced trading on the NASD over the counter Bulletin Board on July 14, 1999.

Markets

The Company's Common Shares are listed for trading on the NASD Over the Counter Bulletin Board.

ITEM 10.

Additional Information

A.

Share Capital

Not Applicable.

B.

Articles of Incorporation & By-Laws

Directors

A director who is, in any way, directly or indirectly interested in a proposed contract or transaction with shall disclose the nature and extent of his interest at a meeting of the directors in accordance with the provisions of the Canada Business Corporations Act (“CBCA”). A director shall not vote in respect of any contract or transaction with our company in which he is interested, and any such proposed contract or transaction shall be referred to the Board of Directors or shareholders for approval even if such contract or transaction is one that the ordinary course of the Company's business would not require approval by the Board of Directors or shareholders.

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(1)	Subject to the provisions of any unanimous shareholder agreement, the remuneration of the directors may from time to time be determined by the directors themselves, and such remuneration may be in addition to any reimbursement for travel and other expenses.
(2)	The directors may, at their discretion and subject to the provisions of any unanimous shareholder agreement or By-Laws or the CBCA, authorize the Company to borrow any sum of money or incur indebtedness for the purpose of the Company and may raise or secure the repayment of such sum of money in such manner and upon such terms and conditions as the directors think fit.
(3)	There are no provisions with respect to the retirement of a director or the non-retirement of a director under an age requirement.
(4)	A director is not required to hold a share in the capital of our Company as qualification for his office.

With respect to the above noted matters, there are generally no significant differences between Canadian and U.S. law.

Objects and Purposes of the Company

Our Articles of Incorporation place no restrictions upon our objects and purposes.

Rights, Preference and Restrictions

Common Shares

All of the authorized common shares of the Company, once issued, rank equally as to dividends, voting powers, and participation in assets. Holders of common shares are entitled to one vote for each common share held of record on all matters to be acted upon by the shareholders. Holders of common shares are entitled to receive such dividends as may be declared from time to time by the board of directors, in its discretion, out of funds legally available therefore. The Company's By-Laws do not provide for cumulative voting.

Upon liquidation, dissolution or winding up of the Company, holders of common shares are entitled to receive pro rata our assets, if any, remaining after payments of all debts and liabilities. No common shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds. There are no restrictions on the repurchase or redemption of common shares by our company while there is any arrearage in the payment of dividends or sinking fund installments.

With respect to the rights, preferences and restrictions attaching to the Company's common shares, there are generally no significant differences between Canadian and United States law as the board of directors, or the applicable corporate statute, will determine the rights, preferences and restrictions attaching to each class of a company's shares.

Changes to Common Shares

Provisions as to the modification, amendment or variation of the rights attaching to the common shares are contained in the CBCA. The CBCA requires approval by a special resolution (i.e. approved by at least two-thirds of the votes cast at a meeting of the shareholders of our company or consented to in writing by each of our shareholders) of our company's shareholders in order to effect any of the following changes:

(1)

change any maximum number of shares that the Company is authorized to issue;

(2)

create new classes of shares;

(3)

reduce or increase its stated capital, if its stated capital is set out in the articles;

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(4)

change the designation of all or any of its shares and add, change or remove any rights, privileges, restrictions and conditions, including rights to accrued dividends, in respect of all or any of its shares, whether issued or unissued;

(5)

change the shares of any class or series, whether issued or unissued, into a different number of shares of the same class or series or into the same or a different number of shares of other classes or series;

(6)

divide a class of shares, whether issued or unissued, into series and fix the number of shares in each series and the rights, privileges, restrictions and conditions thereof;

(7)

authorize the directors to divide any class of unissued shares into series and fix the number of shares in each series and the rights, privileges, restrictions and conditions thereof;

(8)

authorize the directors to change the rights, privileges, restrictions and conditions attached to unissued shares of any series;

(9)

revoke, diminish or enlarge any authority conferred under paragraphs (g) and (h); and

(10)

add, change or remove restrictions on the issue, transfer or ownership of shares.

Generally, there are no significant differences between Canadian and United States law with respect to changing the rights of shareholders as most state corporation statutes require shareholder approval (usually a majority) for any such changes that affect the rights of shareholders.

Annual General Meetings and Extraordinary General Meetings

Annual General Meetings (an “AGM”) must be held once every fiscal year, within 15 months of the previous AGM. If the Company fails to hold an AGM, the Supreme Court of British Columbia may, on the application of a director or shareholder of the Company, call or direct an AGM. Under the CBCA, we must give our shareholders written notice of an AGM not less than 21 days before the AGM is to be held.

Our directors may, whenever they think fit, convene an Extraordinary General Meeting (an “EGM”).

An AGM or EGM may also be requisitioned by one or more shareholders of our company so long as such shareholders own not less than 5% of the issued and outstanding shares at the date such shareholders requisition an EGM. After receiving such requisition, our directors must within 21 days call the meeting.

All shareholders entitled to attend and vote at an AGM or an EGM will be admitted to the meeting.

Most state corporation statutes require a public company to hold an annual meeting for the election of directors and for the consideration of other appropriate matters. The state statutes also include general provisions relating to shareholder voting’s and meetings. Apart from the timing of when an AGM must be held and the percentage of shareholders required to call a AGM or EGM, there are generally no material differences between Canadian and United States law respecting AGMs and EGMs.

Rights to Own Securities

There are no limitations on the rights of non-resident or foreign shareholders to hold or exercise voting rights.

Except as provided in the Investment Canada Act, there are no limitations under the applicable laws of Canada or by the Company's charter or other constituent documents of the Company on the right of foreigners to hold or vote common shares or other securities of the Company.

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The Investment Canada Act will prohibit implementation, or if necessary, require divestiture of an investment deemed “reviewable” under the Investment Canada Act by an investor that is not a “Canadian” as defined in the Investment Canada Act (a “non-Canadian”), unless after review the Minister responsible for the Investment Canada Act (“the Minister”) is satisfied that the “reviewable” investment is likely to be of net benefit to Canada. An investment in our common shares by a non-Canadian would be reviewable under the Investment Canada Act if it was an investment to acquire control of our company and the value of our assets was $5 million or more. A non-Canadian would be deemed to acquire control of our company for the purposes of the Investment Canada Act if the non-Canadian acquired a majority of our outstanding common shares (or less than a majority but controlled our company in fact through the ownership of one-third o r more of our outstanding common shares) unless it could be established that, on the acquisition, our company was not controlled in fact by the acquirer through the ownership of such common shares. Certain transactions in relation to our common shares would be exempt from review under the Investment Canada Act, including, among others, the following:

(1)	acquisition of common shares by a person in the ordinary course of that person's business as a trader or dealer in securities;
(2)	acquisition of control of our company in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Canada Act; and

(3) acquisition of control of our company by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control of our company, through the ownership of voting interests, remains unchanged.

The Investment Canada Act was amended with the World Trade Organization Agreement to provide for special review thresholds for “WTO Investors” of countries belonging to the World Trade Organization, among others, nationals and permanent residents (including “WTO Investor controlled entities” as defined in the Investment Canada Act). Under the Investment Canada Act, as amended, an investment in our common shares by WTO Investors would be reviewable only if it was an investment to acquire control of our company and the value of our assets was equal to or greater than a specified amount (the “Review Threshold”), which published by the Minister after its determination for any particular year. The Review Threshold is currently $192 million for the year 2000.

Change in Control

There are no provisions in the Company's By-Laws that would have the effect of delaying, deferring or preventing a change in control of our company, and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company.

The CBCA does not contain any provisions that would have the effect of delaying, deferring or preventing a change of control of the Company. Generally, there are no significant differences between Canadian and United States law in this regard, as many state corporation statutes also do not contain such provisions and only empower a company's board of directors to adopt such provisions.

Ownership Threshold

There are no provisions in our Articles or Bylaws or in the CBCA governing the threshold above which shareholder ownership must be disclosed. The Securities Act (British Columbia) requires that the Company disclose, in its annual general meeting proxy statement, holders who beneficially own more than 10% of the Company's issued and outstanding shares. Most state corporation statutes do not contain provisions governing the threshold above which shareholder ownership must be disclosed. United States federal securities laws require a company to disclose, in its Annual Report on Form 20-F, holders who own more than 5% of a company's issued and outstanding shares.

Changes in the Capital of our Company

There are no conditions imposed by our By-Laws which are more stringent than those required by the CBCA.

34

C.

Material Contracts

With the exception of the contracts listed below, or those described elsewhere in this Form 20-F or in the Company’s Form 6-K filings, we have not entered into any material contracts during the last twenty-four months other than those in the ordinary course of business.

(1)

Employment Agreement by and between the Company and Alan M. Brown, executed May 31, 2007 with an effective date of May 1, 2007.

(2)

On October 10, 2007, the Company issued 2,500,000 units (each a “Unit”) to 25 individuals/entities due to the closing of the Company's private placement at $0.20 per Unit for total gross proceeds of $500,000. Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of common stock of the Company at $0.40 per warrant share for a period of three years. The Company believes that the issuances are exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended (the “Act”), as such securities were issued to the individuals/entities through an offshore transaction which was negotiated and consummated outside of the United States.

(3)

On June 27, 2008, the Company issued 2,000,000 units (each a “Unit”) to 27 individuals/entities due to the closing of the Company's private placement at $0.20 per Unit for total gross proceeds of $400,000. Each Unit consists of one share of common stock of the Company and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of common stock of the Company at $0.40 per warrant share for a period of three years. The Company believes that the issuances are exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended (the “Act”), as such securities were issued to the individuals/entities through an offshore transaction which was negotiated and consummated outside of the United States.

(4)

On June 30, 2008, the Company entered into a non-brokered private placement with a foreign investor for the sale of 2,000,000 shares of the Company’s common stock for $400,000 together with a three-year Warrant for the purchase of an additional 1,000,000 shares of the Company’s common stock at $0.40 per share. The Company believes that the issuances are exempt from registration under Regulation S promulgated under the Securities Act of 1933, as amended (the “Act”), as such securities were issued to the individuals/entities through an offshore transaction which was negotiated and consummated outside of the United States.

(5)

On March 19, 2009, the Company entered into a private placement agreement with a U.S. Accredited Investor, in the form of the Subscription Agreement included herewith as Exhibit 4.22, for the purchase of 833,334 shares of the Company’s common stock for an aggregate purchase price of $50,000 or $0.06 per share. The Company believes that the issuances are exempt from registration under Section 4(2) promulgated under the Securities Act of 1933, as amended (the “Act”).

(6)

On April 7, 2009, the Company entered into a private placement agreement with a U.S. Accredited Investor, in the form of the Subscription Agreement included herewith as Exhibit 4.22, for the purchase of 1,000,000 shares of the Company’s common stock for an aggregate purchase price of $100,000 or $0.10 per share. The Company believes that the issuances are exempt from registration under Section 4(2) promulgated under the Securities Act of 1933, as amended (the “Act”).

D.

Exchange Controls

Except as discussed in Item E below, the Company is not aware of any Canadian federal or provincial laws, decrees, or regulations that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-Canadian holders of Common Shares. The Company is not aware of any limitations on the right of non-Canadian owners to hold or vote Common Shares imposed by Canadian federal or provincial law or by the Company.

35

TheInvestment Canada Act (the “Act”) governs acquisitions of Canadian business by a non-Canadian person or entity. The Act provides, among other things, for a review of an investment in the event of acquisition of control in certain Canadian businesses in the following circumstances:

(1) if the investor is a non-Canadian and is not a resident of a World Trade Organization (“WTO”) country, any direct acquisition having an asset value exceeding $5,000,000 and any indirect acquisition having an asset value exceeding $50,000,000;

(2) if the investor is a non-Canadian and is a resident of a WTO member, any direct acquisition having an asset value exceeding $168,000,000, unless the business is involved in uranium production, financial services, transportation services or a cultural business.

An indirect acquisition of control by an investor who is a resident of a WTO country is not reviewable unless the value of the assets of the business located in Canada represents more than 50% of the asset value of the transaction, or the business is involved in uranium production, financial services, transportation services or a cultural business. The United States has been a member of the WTO since January 1, 1995.

The Act provides that a non-Canadian investor can hold up to 1/3 of the issued and outstanding capital of a Canadian corporation without being deemed a “control person”, and that a non-Canadian investor holding greater than 1/3 but less than 2 of the issued and outstanding capital of a Canadian corporation is deemed to be a control person subject to a reputable presumption to the contrary (i.e. providing evidence of another control person or control group holding a greater number of shares).

The Act requires notification where a non-Canadian acquires control, directly or indirectly, of a Canadian business with assets under the thresholds for reviewable transaction. The notification process consists of filing a notification within 30 days following the implementation of an investment.

E.

 Taxation

Canadian Federal Income Taxation

We consider that the following summary fairly describes the principal Canadian federal income tax consequences applicable to a holder of our common shares who at all material times deals at arm’s length with our company, who holds all common shares as capital property, who is resident in the United States, who is not a resident of Canada and who does not use or hold, and is not deemed to use or hold, his common shares of our company in connection with carrying on a business in Canada (a “non-resident holder”). It is assumed that the common shares will at all material times be listed on a stock exchange that is prescribed for purposes of theIncomeTax Act(Canada) (the “ITA”) and regulations thereunder. Investors should be aware that the Canadian federal income tax consequences applicable to holders of our common shares will change if, for any reason, we cease to be listed on a prescribed stock exchange. Accordingly, holders and prosp ective holders of our common shares should consult with their own tax advisors with respect to the income tax consequences of them purchasing, owing and disposing of our common shares should we cease to be listed on a prescribed stock exchange.

This summary is based upon the current provisions of the ITA, the regulations thereunder, the Canada-United States Tax Convention as amended by the Protocols thereto (the “Treaty”) as at the date of this Report and the currently publicly announced administrative and assessing policies of the Canada Customs and Revenue Agency (the “CCRA”). This summary does not take into account Canadian provincial income tax consequences. This description is not exhaustive of all possible Canadian federal income tax consequences and does not take into account or anticipate any changes in law, whether by legislative, governmental or judicial action. This summary does, however, take into account all specific proposals to amend the ITA and regulations thereunder, publicly announced by the Government of Canada to the date hereof.

This summary does not address potential tax effects relevant to our company or those tax considerations that depend upon circumstances specific to each investor. Accordingly, holders and prospective holders of our common shares should consult with their own tax advisors with respect to the income tax consequences to them of purchasing, owning and disposing of common shares in our company.

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Dividends

The ITA provides that dividends and other distributions deemed to be dividends paid or deemed to be paid by a Canadian resident corporation (such as our company) to a non-resident of Canada shall be subject to a non-resident withholding tax equal to 25% of the gross amount of the dividend of deemed dividend. Provisions in the ITA relating to dividend and deemed dividend payments to and gains realized by non-residents of Canada, who are residents of the United States, are subject to the Treaty. The Treaty may reduce the withholding tax rate on dividends as discussed below.

Article X of the Treaty as amended by the US-Canada Protocol ratified on November 9, 1995 provides a 5% withholding tax on gross dividends or deemed dividends paid to a United States corporation which beneficially owns at least 10% of the voting stock of the company paying the dividend. In cases where dividends or deemed dividends are paid to a United States resident (other than a corporation) or a United States corporation which beneficially owns less than 10% of the voting stock of a company, a withholding tax of 15% is imposed on the gross amount of the dividend or deemed dividend paid. We would be required to withhold any such tax from the dividend and remit the tax directly to CCRA for the account of the investor.

The reduction in withholding tax from 25%, pursuant to the Treaty, will not be available:

(a)	if the shares in respect of which the dividends are paid formed part of the business property or were otherwise effectively connected with a permanent establishment or fixed base that the holder has or had in Canada within the 12 months preceding the disposition, or
(b)	the holder is a U.S. LLC which is not subject to tax in the U.S.

The Treaty generally exempts from Canadian income tax dividends paid to a religious, scientific, literary, educational or charitable organization or to an organization exclusively administering a pension, retirement or employee benefit fund or plan, if the organization is resident in the U.S. and is exempt from income tax under the laws of the U.S.

Capital Gains

A non-resident holder is not subject to tax under the ITA in respect of a capital gain realized upon the disposition of one of our shares unless the share represents “taxable Canadian property” to the holder thereof. Our common shares will be considered taxable Canadian property to a non-resident holder only if-.

(a)	the non-resident holder;
(b)	persons with whom the non-resident holder did not deal at arm’s length- or
(c)	the non-resident holder and persons with whom he did not deal at arm’s length,

owned not less than 25% of the issued shares of any class or series of our company at any time during the five year period preceding the disposition. In the case of a non-resident holder to whom shares of our company represent taxable Canadian property and who is resident in the United States, no Canadian taxes will generally be payable on a capital gain realized on such shares by reason of the Treaty unless:

(a)	the value of such shares is derived principally from real property (including resource property) situated in Canada,
(b)	the holder was resident in Canada for 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition and the shares were owned by him when he ceased to be a resident of Canada,

37

(c)	they formed part of the business property or were otherwise effectively connected with a permanent establishment or fixed base that the holder has or bad in Canada within the 12 months preceding the disposition, or
(d)	the holder is a U.S. LLC which is not subject to tax in the U.S.

If subject to Canadian tax on such a disposition, the taxpayer’s capital gain (or capital loss) from a disposition is the amount by which the taxpayer’s proceeds of disposition exceed (or are exceeded by) the aggregate of the taxpayer’s adjusted cost base of the shares and reasonable expenses of disposition. For Canadian income tax purposes, the “taxable capital gain” is equal to one-half of the capital gain.

United States Federal Income Taxation

The following is a discussion of the material United States Federal income tax consequences, under current law, applicable to a U.S. Holder (as defined below) of our common shares who holds such shares as capital assets. This discussion does not address all potentially relevant Federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local, or foreign tax consequences. (See “Canadian Federal Income Tax Consequences” above.)

The following discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.

The discussion below does not address potential tax effects relevant to our company or those tax considerations that depend upon circumstances specific to each investor. In addition, this discussion does not address the tax consequences that may be relevant to particular investors subject to special treatment under certain U.S. Federal income tax laws, such as, dealers in securities, tax-exempt entities, banks, insurance companies and non-U.S. Holders. Purchasers of the common stock should therefore satisfy themselves as to the overall tax consequences of their ownership of the common stock, including the State, local and foreign tax consequences thereof (which are not reviewed herein), and should consult their own tax advisors with respect to their particular circumstances.

U.S. Holders

As used herein, a “U.S. Holder” includes a beneficial holder of common shares of our company who is a citizen or resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof, any trust if a US court is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust, any entity created or organized in the United States which is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of common shares of our company is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment t rusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of our common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their shares through the exercise of employee stock options or otherwise as compensation.

38

Dividend Distribution on Shares of our Company

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to the common shares of our company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that we have current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be deducted or may be credited against actual tax payable, subject to certain limitations and other complex rules, against the U.S. Holder’s United States Federal taxable income. See “Foreign Tax Credit” below. To the extent that distributions exceed our current or accumulated earnings and profits, they will be treated first as a return of capital to the extent of the shareholder’s basis in the common shares of our company and thereafter as gain from the sale or exchange of the common shares of our company. Preferential tax rates for net long term capital gains may be applicable to a U.S. Holder which is an individual, estate or trust.

In general, dividends paid on our common shares will not be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.

Foreign Tax Credit

A U.S. Holder who pays (or who has had withheld from distributions) Canadian income tax with respect to the ownership of our common shares may be entitled, at the election of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. This election is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or its world-wide taxable income. In determining the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income” and certain other classifications of income. A U.S. Holder who is treated as a domestic U.S. corporation owning 10% or more of our voting stock is also entitled to a deemed paid foreign tax credit in certain circumstances for the underlying foreign tax of our company related to dividends received or Subpart F income received from us. (See the discussion below of Controlled Foreign Corporations). The availability of the foreign tax credit and the application of the limitations on the foreign tax credit are fact specific and holders and prospective holders of our common shares should consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares

If a “U.S. Holder” is holding shares as a capital asset, a gain or loss realized on a sale of our common shares will generally be a capital gain or loss, and will be long-term if the shareholder has a holding period of more than one year. However, gains realized upon sale of our common shares may, under certain circumstances, be treated as ordinary income, if we were determined to be a “collapsible corporation” within the meaning of Code Section 341 based on the facts in existence on the date of the sale (See below for definition of “collapsible corporation”). The amount of gain or loss recognized by a selling U.S. Holder will be measured by the difference between (i) the amount realized on the sale and (ii) his tax basis in our common shares. Capital losses are deductible only to the extent of capital gains. However, in the case of taxpayers other than corporations (U.S.) $3,000 ($1,500 for married individuals filing separately) of capital lo sses are deductible against ordinary income annually. In the case of individuals and other non-corporate taxpayers, capital losses that are not currently deductible may be carried forward to other years. In the case of corporations, capital losses that are not currently deductible are carried back to each of the three years preceding the loss year and forward to each of the five years succeeding the loss year.

39

A “collapsible corporation” is a corporation that is formed or availed principally to manufacture, construct, produce, or purchase prescribed types or property that the corporation holds for less than three years and that generally would produce ordinary income on its disposition, with a view to the stockholders selling or exchanging their stock and thus realizing gain before the corporation realizes two thirds of the taxable income to be derived from prescribed property. Prescribed property includes: stock in trade and inventory; property held primarily for sale to customers in the ordinary course of business; unrealized receivables or fees, consisting of rights to payment for noncapital assets delivered or to be delivered, or services rendered or to be rendered to the extent not previously included in income, but excluding receivables from selling property that is not prescribed; and property gain on the sale of which is subject to the capital gain/ordinary los s rule. Generally, a shareholder who owns directly or indirectly 5 percent or less of the outstanding stock of the corporation may treat gain on the sale of his shares as capital gain.

Other Considerations for U.S. Holders

In the following circumstances, the above sections of this discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Registrant. Our management is of the opinion that there is little, if not, any likelihood that we will be deemed a “Foreign Personal Holding Company”, a “Foreign Investment Company” or a “Controlled Foreign Corporation” (each as defined below) under current and anticipated conditions.

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined voting power or the total value of our outstanding shares is owned, actually or constructively, by five or fewer individuals who are citizens or residents of the United States and 60% or more of our gross income for such year was derived from certain passive sources (e.g., from dividends received from its subsidiaries), we would be treated as a “foreign personal holding company.” In that event, U.S. Holders that hold common shares in our capital would be required to include in income for such year their allocable portion of our passive income which would have been treated as a dividend had that passive income actually been distributed.

Foreign Investment Company

If 50% or more of the combined voting power or total value of our outstanding shares are held, actually or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and we are found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that we might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging our common shares to be treated as ordinary income rather than capital gains.

Controlled Foreign Corporation Status

If more than 50% of the voting power of all classes of stock or the total value of the stock of our company is owned, directly or indirectly, by U.S. Holders, each of whom own after applying rules of attribution 10% or more of the total combined voting power of all classes of stock of our company, we would be treated as a “controlled foreign corporation” or “CFC” under Subpart F of the Code. This classification would bring into effect many complex results including the required inclusion by such 10% U.S. Holders in income of their pro rata shares of “Subpart F income” (as defined by the Code) of our company and our earnings invested in “U.S. property” (as defined by Section 956 of the Code). In addition, under Section 1248 of the Code if we are considered a CFC at any time during the five year period ending with the sale or exchange of its stock, gain from the sale or exchange of common shares of our company by such a 10% U.S. Holder of our common stock at any time during the five year period ending with the sale or exchange is treated as ordinary dividend income to the extent of our earnings and profits attributable to the stock sold or exchanged. Because of the complexity of Subpart F, and because we may never be a CFC, a more detailed review of these rules is beyond of the scope of this discussion.

40

ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES OF OUR COMPANY.

F.

Dividends and Paying Agents

There is no dividend restriction or any special procedure for non-resident holders to claim dividends. However, we have not declared dividends to our shareholders since our inception.

G.

Statement By Experts

The financial statements of our company as of December 31, 2008 and 2007 included in this report have been audited by, M&K CPAS, PLLC, and Moore & Associates, Chartered Accountants, respectively, as stated in their reports appearing in this filing and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

H.

Documents on Display

We are subject to the informational requirements of theSecurities Exchange Act of 1934, as amended, and, as such, we file reports and other information with the SEC. You may read and copy any of our reports and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, DC 20549. In addition, the SEC maintains a web site that contains reports and other information regarding registrants that file electronically with the SEC at HTTP://www.sec.gov. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We will provide without charge to each person, including any beneficial owner, on the written or oral request of such person, a copy of any or all documents referred to above which have been or may be incorporated by reference in this report (not including exhibits to such incorporated information that are not specifically incorporated by reference into such information). Requests for such copies should be directed to us in writing at our address.

I.

Subsidiary Information

We conduct all operations through Tombstone Exploration and Mining Corporation, a Nevada corporation and wholly owned subsidiary.

Item 11.

Quantitative And Qualitative Disclosures About Market Risk

Our Tombstone Property is currently at the exploration stage and our operations are limited to exploring the Tombstone Property. Therefore, our market risks are minimal. We may, however, have future property exploration requirements due in currencies other than United States dollars. As a Canadian company, our cash balances are kept in Canadian funds, and then converted to United States funds for accounting purposes. Therefore, we may become exposed to some interest rate risks. We consider the amount of risk to be manageable and do not currently, nor will we likely in the foreseeable future, conduct hedging to reduce our market risks.

Item 12.

Description of Securities Other Than Equity Securities

Not Applicable.

PART II

Item 13

Defaults, Dividend Arrearages and Delinquencies.

None

41

Item 14

 Material Modifications to the Rights of Security Holders and Use of Proceeds.

Not Applicable

Item 15

Controls and Procedures

(1)

Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15 under the Exchange Act, our management, including Alan Brown, our Chief Executive Officer, Chief Financial Officer, and sole Director, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2008.

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based on that evaluation, we concluded that because of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2008.

(2)

Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2008 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2008, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

1. Certain entity level controls establishing a “tone at the top” were considered material weaknesses. The Company has no audit committee and only one member of the Board of Directors, who is also the President and Chief Financial Officer of the Company. A whistleblower policy is not necessary given the small size of the organization.

2. Due to the significant number and magnitude of adjustments identified during the year-end closing process, management has concluded that the controls over the period-end financial reporting process were not operating effectively. Specifically, controls were not effective to ensure that significant non-routine transactions, accounting estimates, and other adjustments were appropriately reviewed, analyzed, and monitored on a timely basis.

Management is currently evaluating remediation plans for the above control deficiencies.

Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

42

As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2008 based on criteria established inInternal Control—Integrated Frameworkissued by COSO.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report

(3) Changes in Internal Controls. During the period ended December 31, 2008, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

However, subsequent to the year ended December 31, 2008, the Company retained an outside consultant which specializes in Sarbanes Oxley compliance. This consulting firm has assisted the Company in developing a system that should assist in rectifying the material weaknesses described herein.

Item 16

[Reserved]

A.

Audit Committee Financial Expert

Not Applicable

B.

Code of Ethics

The Company has Code of Business Conduct and Ethics that was approved by the Company’s Board of Directors on June 1, 2007. Refer to Exhibit 3.25 for the Code of Business Conduct and Ethics.

C.

Principal Accountant Fees and Services

The aggregate fees billed by the Company’s external auditors in each of the last two fiscal years for audit fees are as follows:

Financial Year Ending		Audit Fees(1)		Audit Related Fees(2)		Tax Fees(3)		All Other Fees(4)
2007	$	6,000	$	0	$	0	$	0
2008	$	6,000	$	0	$	0	$	0

(1)

The aggregate audit fees billed.

(2)

The aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements which are not included under the heading ‘‘Audit Fees’’.

(3)

The aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning.

(4)

The aggregate fees billed for products and services other than as set out under the headings ‘‘Audit Fees’’, ‘‘Audit Related Fees’’ and ‘‘Tax Fees’’.

The Board of Directors must approve in advance any non-audit related services provided by the auditor to the Company, and the fees for such services, with a view to ensure independence of the Auditor, and in accordance with applicable regulatory standards, including applicable stock exchange requirements with respect to approval of non-audit related services performed by the auditors; and as necessary, taking or recommending appropriate action to oversee the independence of the auditors.

D.

Exemptions from the Listing Standards for Audit Committees.

Not Applicable

43

E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

Not Applicable

PART III

Item 17.

Financial Statements

Balance sheets of the Company as at December 31, 2008 and 2007, and the Statements of Operations and Stockholders Equity (Deficiency) and Cash Flows for each of the years ended December 31, 2008, and for the period from re-entry into the Development Stage January 1, 2006 to December 31, 2008.

Item 18.

Financial Statements

Not Applicable.

Item 19.

Exhibits

Exhibits Required by Form 20-F

Exhibit
Number	Description
1.	Articles of Incorporation and By-laws:
1.1	Certificate of Incorporation under the Canada Business Corporations Act dated October 30, 1997.*
1.2	Articles of Incorporation.*
1.3	By-Laws.*
1.4	Certificate of Name Change dated September 20, 2004.*
3.25	Code of Ethics*
4.	Material Contracts
4.22	Form of Private Placement Subscription Agreement by and between the Company and various U.S. Accredited Investors.
4.26	Employment Agreement by and between the Company and Alan Brown dated June 29, 2009.
12.1	Certification of Chief Executive Officer of the Company required by rule 13A-14(A) or rule 15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification of Chief Financial Officer of the Company required by rule 13A-14(A) or rule 15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Previously filed.

44

SIGNATURES

The Company certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

TOMBSTONE EXPLORATION CORPORATION

(Company)

/s/ ALAN BROWN       

ALAN BROWN

President and Director

DATED on the 9th day of July, 2009

45

Tombstone Exploration Corporation

(An Exploration Stage Company)

December 31, 2008

Index

Report of Independent Registered Public Accounting Firm

F-2

Balance Sheets

F-4

Statements of Operations

F-5

Statements of Cash Flows

F-6

Statement of Stockholders’ Equity (Deficit)

F-7

Notes to the Financial Statements

F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Tombstone Exploration Corporation

(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheet of Tombstone Exploration Corporation and Subsidiary, as of December 31, 2008, and the related statements of operations, changes in stockholders' equity, and cash flows for the year then ended. The financial statements for the period from January 1, 2006 (inception) through December 31, 2007, were audited by other auditors whose reports expressed unqualified opinions on those statements. The financial statements for the period January 1, 2006 (inception) through December 31, 2007, include total revenues and net loss of $0 and $16,049,337, respectively. Our opinion on the statements of operations, shareholders' deficit, and cash flows for the period January 1, 2006 (inception) through December 31, 2008, insofar as it relates to amounts for prior periods through December 31, 2007, is based solely on the report of other auditors.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tombstone Exploration Corporation and Subsidiary, as of December 31, 2008, and the results of its operations, changes in stockholders' equity, and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered reoccurring losses and negative cash flow from operations, both of which raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC

www.mkacpas.com

Houston, Texas

July 6, 2009

F-2

MOORE & ASSOCIATES, CHARTERED

           ACCOUNTANTS AND ADVISORS

PCAOB REGISTERED

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Tombstone Exploration Corporation

(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of Tombstone Exploration Corporation (An Exploration Stage Company) as of December 31, 2007 and December 31, 2006, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended December 31, 2007 December 31, 2006 and from inception on January 1, 2006 through December 31, 2007. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.  

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tombstone Exploration Corporation (An Exploration Stage Company) as of December 31, 2007 and December 31, 2006, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended December 31, 2007 December 31, 2006 and from inception on January 1, 2006 through December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has an accumulated deficit of $16,029,547, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 10, the accompanying 2007 and 2006 consolidated financial statements have been restated.

/s/ Moore & Associates, Chartered

Moore & Associates Chartered

Las Vegas, Nevada

February 3, 2009 Restated

6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501

F-3

Tombstone Exploration Corporation

(An Exploration Stage Company)

Consolidated Balance Sheets

(expressed in U.S. dollars)

	December 31, 2008 $	December 31, 2007 $
ASSETS
Current Assets
Cash	8,625	252,718
Total Current Assets	8,625	252,718
Property and Equipment (Note 3)	68,318	85,626
Total Assets	76,943	338,344
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts Payable	21,464	31,621
Accrued Liabilities	5,680	–
Due to Related Parties (Note 6)	157,326	90,578
Total Liabilities	184,470	122,199
Stockholders’ Equity (Deficit)
Common Stock Authorized: unlimited common shares, with no par value Issued and outstanding: 41,810,865 and 36,645,865 common shares, respectively	11,868,522	11,250,850
Common Stock Subscribed (Notes 4 and 8)	1,403,500	–
Additional Paid-In Capital	5,326,170	4,994,842
Accumulated Deficit	(8,538,759)	(8,538,759)
Accumulated Deficit During the Exploration Stage	(10,166,960)	(7,490,788)
Total Stockholders’ Equity (Deficit)	(107,527)	216,145
Total Liabilities and Stockholders’ Equity (Deficit)	76,943	338,344

(The accompanying notes are an integral part of these financial statements)

F-4

Tombstone Exploration Corporation

(An Exploration Stage Company)

Consolidated Statements of Operations

(expressed in U.S. dollars)

	For the Year Ended December 31, 2008	For the Year Ended December 31, 2007	Accumulated from January 1, 2006 (Date of Re-Entering Exploration Stage) to December 31, 2008
	$	$	$
Revenue	–	–	–
Expenses
Consulting Services	1,200,194	555,648	1,815,842
General and Administrative	522,287	1,134,791	6,683,255
Management Fees	120,000	500,000	620,000
Mineral Properties	355,721	900,000	1,255,721
Professional Fees	477,970	119,217	622,979
Total Expenses	2,676,172	3,209,656	10,997,797
Other Income (Expenses)
Gain (Loss) on Forgiveness of Debt	–	–	834,390
Interest Expense	–	(3,553)	(3,553)
Loss from Continuing Operations	(2,676,172)	(3,213,209)	(10,166,960)
Discontinued Operations	–	–	(8,538,759)
Net Loss	(2,676,172)	(3,213,209)	(18,705,719)
Net Loss Per Share – Basic and Diluted	(0.07)	(0.11)
Weighted Average Shares Outstanding	40,353,975	29,770,000

(The accompanying notes are an integral part of these financial statements)

F-5

Tombstone Exploration Corporation

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(expressed in U.S. dollars)

	For the Year Ended December 31, 2008	For the Year Ended December 31, 2007	Accumulated from January 1, 2006 (Date of Inception) to December 31, 2008
Operating Activities
Net Loss For The Year	(2,676,172)	(3,213,209)	(10,166,960)
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization Expense	17,308	21,402	38,710
Common stock issued for services	149,000	774,300	955,718
Common stock subscribed for services	1,403,500	–	1,403,500
Common stock issued for management fees	–	500,000	500,000
Impairment of Mineral Properties	–	900,000	900,000
Gain on Forgiveness of Debt	–	–	(834,390)
Stock-Based Compensation	–	–	4,952,286
Changes in operating assets and liabilities:
Prepaid Expenses	–	76,222	76,222
Accounts Payable and Accrued Liabilities	(4,477)	19,962	(142,143)
Net Cash Used In Operating Activities	(1,110,841)	(921,323)	(2,317,057)
Investing Activities
Acquisition of Mineral Properties	–	–	(100,000)
Purchase of property and equipment	–	(107,028)	(107,028)
Net Cash Used in Investing Activities	–	(107,028)	(207,028)
Financing Activities
Proceeds from issuance of common shares	800,000	885,000	1,785,000
Proceeds from related parties, net	66,748	353,088	747,594
Net Cash Provided By Financing Activities	866,748	1,238,088	2,532,594
Increase (Decrease) in Cash	(244,093)	209,737	8,509
Cash – Beginning of Period	252,718	42,981	116
Cash – End of Period	8,625	252,718	8,625
Supplemental Disclosures
Interest paid	–	–	–
Income tax paid	–	–	–
Non-Cash Investing and Financing Activities
Cancellation of common shares	–	(400,000)	(420,756)
Common shares issued to acquire mineral properties	–	–	800,000
Common shares issued to settle debt	–	300,000	600,378
Common shares issued for finders fees	28,000	35,000	63,000
Common shares issued for prepaid services	–	–	476,222

(The accompanying notes are an integral part of these financial statements)

F-6

Tombstone Exploration Corporation

(An Exploration Stage Company)

Consolidated Statement of Stockholders’ Equity (Deficit)

From January 1, 2006 to December 31, 2008

(expressed in U.S. dollars)

	Common Stock		Additional Paid-In Capital	Common Stock Subscribed	Accumulated Deficit	Accumulated Deficit During the Development Stage	Total
	Shares	Par Value
	#	$	$	$	$	$	$
Balance – January 1, 2006 (Date of Re-entering Exploration Stage)	1,568,324	7,468,288	56,800	–	(8,538,759)	–	(1,013,671)
Cancellation of common shares	(207,562)	(20,756)	20,756	–	–	–	–
Issuance of common shares for cash	1,000,000	100,000	–	–	–	–	100,000
Issuance of common shares for acquisition of mineral properties	8,000,000	800,000	–	–	–	–	800,000
Issuance of common shares for services	8,017,103	809,018	–	–	–	–	809,018
Issuance of share purchase warrants	–	–	4,952,286	–	–	–	4,952,286
Net loss for the year	–	–	–	–	–	(4,277,579)	(4,277,579)
Balance – December 31, 2006	18,377,865	9,156,550	5,029,842	–	(8,538,759)	(4,277,579)	1,370,054
Cancellation of common shares	(4,000,000)	(400,000)	–	–	–	–	(400,000)
Issuance of common shares for services	15,743,000	1,574,300	–	–	–	–	1,574,300
Issuance of common shares for cash at $0.10 per common share	3,850,000	385,000	–	–	–	–	385,000
Issuance of common shares for cash at $0.20 per common share	2,500,000	500,000	–	–	–	–	500,000
Issuance of common shares for finders fee	175,000	35,000	(35,000)	–	–	–	–
Net loss for the year	–	–	–	–	–	(3,213,209)	(3,213,209)
Balance – December 31, 2007	36,645,865	11,250,850	4,994,842	–	(8,538,759)	(7,490,788)	216,145
Issuance of common shares for services	1,025,000	149,000	–	–	–	–	149,000
Issuance of common shares for cash at $0.20 per common share	4,000,000	440,672	359,328	–	–	–	800,000
Issuance of common shares for finders’ fees	140,000	28,000	(28,000)	–	–	–	–
Common stock subscribed	–	–	–	1,403,500	–	–	1,403,500
Net loss for the year	–	–	–	–	–	(2,676,172)	(2,676,172)
Balance – December 31, 2008	41,810,865	11,868,522	5,326,170	1,403,500	(8,538,759)	(10,166,960)	(107,527)

(The accompanying notes are an integral part of these financial statements)

F-7

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

1.

Nature of Operations and Continuance of Business

Tombstone Exploration Corporation (the “Company”) was incorporated under the Canada Business Corporations Act on October 30, 1997 as 3430502 Canada Ltd.  On December 4, 1997, the Company changed its name to Four Crown Foods Inc., with its principal operations focused on the food and beverage retail business.  In April 2000, the Company upon acquisition of the license rights to a domain registration, the Company discontinued its operations in the food and beverage retail industry and formally changed its name to Universal Domains Incorporated on June 5, 2000.  In 2001, the Company withdrew from the domain registration business and acquired 100% of the issued and outstanding common shares of VCL Communications Corp. (“VCL”), a teleconferencing services company that targeted clients throughout North America.  In November 2003, given the Company’s liabilities and the lack of profitability, the Company ceased all o perations.

On September 20, 2004, the Company focused its operations on the exploration, development, production, and acquisition of crude oil and natural gas properties, changing its name to Pure Capital Incorporated.  On November 1, 2006, the Company commenced negotiations to acquire several mining and mineral right claims which was closed on December 4, 2006 where the Company acquired 100% of the mineral claims located in Tombstone, Arizona in exchange for $100,000 and the issuance of 8,000,000 common shares of the Company.  Effectively, on February 6, 2007, the Company changed its name to Tombstone Exploration Corporation to better reflect the Company’s current business objective and strategies.  The Company is an Exploration Stage Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No.7,Accounting and Reporting by Development Stage Enterprises.  

These consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated no revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future.  As of December 31, 2008, the Company did not record any revenues, had a working capital deficit of $175,845, and an accumulated deficit of $18,705,719. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not incl ude any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 

The Company’s plan of action over the next twelve months is to raise capital financing to conduct exploration and drilling on its mineral property claims held in Tombstone, Arizona as well as exploring for new mineral property claims in the United States.  

2.

Summary of Significant Accounting Policies

a)

Basis of Presentation and Principles of Consolidation

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. The consolidated financial statements include the accounts of the Company and its subsidiary, Tombstone Mining and Exploration Corporation.  All inter-company accounts and transactions have been eliminated.  The Company’s fiscal year-end is December 31.

F-8

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

b)

Use of Estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability 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.

c)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As at December 31, 2008 and 2007, the Company had no cash equivalents.

d)

Property and Equipment

Property and equipment are recorded at the lower of cost or net book value, and are amortized based on the following rates:

Asset Type	Amortization Method
Furniture and Fixtures	20% declining balance
Equipment	20% declining balance

e)

Impairment of Long-Lived Assets

In accordance with SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets”, management tests long-lived assets to be held and used for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

f)

Mineral Properties

The Company has been in the exploration stage since its re-entry as an exploration stage company on January 1, 2006 and has not yet realized any revenues from its planned operations. Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

F-9

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

g)

Stock-Based Compensation

The Company records stock-based compensation in accordance with SFAS No. 123R “Share Based Payments”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

h)

Revenue Recognition

The Company will recognize revenue from referral fees in accordance with Securities and Exchange Commission Staff Bulletin No. 104 (“SAB 104”),“Revenue Recognition in Financial Statements”. Revenue will be recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is provided, and collectibility is assured. For the year ended December 31, 2008, the Company did not record any revenues.

i)

Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109 “Accounting for Income Taxes” as of its inception. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

j)

Comprehensive Loss

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2008, the Company had not items relating to comprehensive loss.

k)

Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

F-10

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

l)

Financial Instruments

SFAS No. 157,“Fair Value Measurements” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure 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. SFAS No. 157 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability 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 3

Level 3 applies to assets or 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 Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, amounts due to related parties, and notes payable to a related party. Pursuant to SFAS No. 157, the fair value of our cash and cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

The Company’s operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

m)

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 “Foreign Currency Translation” using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

F-11

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

n)

Recent Accounting Pronouncements

In June 2009, the FASB issued FAS No. 165 “Subsequent Events” (“FAS 165”). FAS 165 requires companies to recognize in the financial statements the effects of subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. An entity shall disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued.  Companies are not permitted to recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued. Some nonrecognized subsequent events must be disclosed to keep the financial statements from being misleading.  For such events a company must disclose the na ture of the event, an estimate of its financial effect, or a statement that such an estimate cannot be made. This Statement applies prospectively for interim or annual financial periods ending after June 15, 2009. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2009, the Financial Accounting and Standards Board (“FASB”)  issued FSP FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157,Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financial statements. The most significant change the FSP brings is a revision to the amount of other-than-temporary loss of a debt security recorded in earnings. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements..

In November 2008, the FASB issued EITF Issue No. 08-7,Accounting for Defensive Intangible Assets”(EITF 08-7). EITF 08-7 addresses the accounting for assets acquired in a business combination or asset acquisition that an entity does not intend to actively use, otherwise referred to as a ‘defensive asset.’ EITF 08-7 requires defensive intangible assets to be initially accounted for as a separate unit of accounting and not included as part of the cost of the acquirer’s existing intangible asset(s) because it is separately identifiable. EITF 08-7 also requires that defensive intangible assets be assigned a useful life in accordance with paragraph 11 of SFAS 142 and is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

F-12

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

n)

Recent Accounting Pronouncements (continued)

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1,“Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”. FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128,“Earnings per Share”, and is effective for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – An interpretation of FASB Statement No. 60”.  SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise’s risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  It is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133”. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

F-13

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

n)

Recent Accounting Pronouncements (continued)

In December 2007, the FASB issued SFAS No. 160“Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No.51”SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non controlling interest. SFAS No. 160 also requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS No. 160 also requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent’s owners and the interests of the non-controlling owners of a subsidiary. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 1 5, 2008. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007),“Business Combinations”. SFAS No. 141 (revised 2007) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. SFAS No. 141 (revised 2007) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141 (revised 2007) will become effective for the fiscal year beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

o)

Recently Adopted Accounting Pronouncements

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”.  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is no t expected to have a material effect on the Company's financial statements.

p)

Reclassification

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

F-14

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

3.

Property and Equipment

			Net Book Value
	Cost $	Accumulated Amortization $	December 31, 2008 $	December 31, 2007 $
Furniture and Fixtures	69,585	24,125	45,460	55,672
Equipment	37,443	14,585	22,858	29,954
	107,028	38,710	68,318	85,626

4.

Common Shares

Year Ended December 31, 2008

Common Shares Issued

a)

In November 2008, the Company issued 500,000 common shares of the Company for consulting services with a value of $40,000 based on the closing price of the Company’s common stock on the date of issuance.

b)

In September 2008, the Company issued 200,000 common shares of the Company for consulting services with a value of $32,000 based on the closing price of the Company’s common stock on the date of issuance.

c)

In August 2008, the Company issued 2,000,000 units in a private placement at $0.20 per unit for proceeds of $400,000.  Each unit is comprised of one common share of the Company and one-half share purchase warrant, where each full share purchase warrant grants the warrant holder to purchase one additional common share of the Company at $0.40 per common share until August 31, 2011.  

d)

In June 2008, the Company issued 2,000,000 units in a private placement at $0.20 per unit for proceeds of $400,000.  Each unit is comprised of one common share of the Company and one-half share purchase warrant, where each full share purchase warrant grants the warrant holder to purchase one additional common share of the Company at $0.40 per common share until June 30, 2011.  In addition, the Company issued 140,000 units at $0.20 per unit for finders’ fees relating to the private placement.

e)

In May 2008, the Company cancelled 4,000,000 common shares that were previously issued in January 2008.  Refer to Note 4(k).

f)

In January 2008, the Company issued 4,000,000 common shares for consulting and professional services with a fair value of $1,040,000 based on the closing price of the Company’s common stock on the date of issuance.  Refer to Note 4(g).  

g)

In January 2008, the Company issued 75,000 common shares for website services with a fair value of $19,500 based on the closing price of the Company’s common stock on the date of issuance.

h)

Common Shares Subscribed

i)

In January 2008, the Company authorized the issuance of 3,000,000 common shares for consulting services and professional fees with a value of $520,000 and $260,000, respectively based on the closing price of the Company’s common stock on the date of authorization.  These common shares were issued subsequent to year-end.  Refer to Note 8.

F-15

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

4.

Common Shares(continued)

j)

In January 2008, the Company issued 200,000 common shares for website services with a value of $46,000 based on the closing price of the Company’s common stock on the date of issuance. These common shares were issued subsequent to year-end.  Refer to Note 8.

k)

In April 2008, the Company authorized the issuance of 750,000 common shares of the Company for consulting services with a value of $130,000 and professional fees with a value of $65,000 based on the closing price of the Company’s common stock on the date of authorization. These common shares were issued subsequent to year-end.  Refer to Note 8.

l)

In July 2008, the Company authorized the issuance of 750,000 common shares of the Company for consulting services with a value of $180,000 and professional fees with a value of $90,000 based on the closing price of the Company’s common stock on the date of authorization. These common shares were issued subsequent to year-end.  Refer to Note 8.

m)

In October 2008, the Company authorized the issuance of 750,000 common shares of the Company for consulting services with a value of $75,000 and professional fees with a value of $37,500 based on the closing price of the Company’s common stock on the date of authorization.  These common shares were issued subsequent to year-end.  Refer to Note 8.

Year Ended December 31, 2007

n)

In November 2007, the Company cancelled 4,000,000 common shares of the Company with a fair value of $400,000 for the cancellation of the business development agreement signed in November 2006.  Refer to Note 5(i).  

o)

In November 2007, the Company issued 3,043,000 common shares of the Company with a fair value of $304,300 to settle debt of $300,000 and for consulting services valued at $4,300.  

p)

In October 2007, the Company issued 2,500,000 common shares of the Company at $0.20 per common share for gross proceeds of $500,000 in a private placement financing.  In addition, the Company issued 175,000 common shares of the Company valued at $35,000 as finders’ fees.  

q)

In June 2007, the Company issued 5,000,000 common shares of the Company at $0.10 per common share in accordance with the signed management agreement, with a fair value of $500,000 to the President of the Company as part of the management agreement.  

r)

In June 2007, the Company issued 1,700,000 common shares of the Company at $0.10 with a fair value of $170,000 to various consultants to satisfy consulting services and agreements valued at $170,000.  

s)

In May 2007, the Company issued 3,850,000 common shares of the Company to two investors at $0.10 per common share for proceeds of $385,000.  

t)

In March 2007, the Company issued 5,000,000 common shares of the Company at $0.10 per common share with a fair value of $500,000 to consultants for consulting services valued at $400,000 and fair value of professional fees valued at $100,000.  

u)

In March 2007, the Company issued 1,000,000 common shares of the Company with a fair value of $100,000 to consultants for consulting services valued at $100,000.   

F-16

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

5.

Share Purchase Warrants

The following table summarizes the continuity schedule for share purchase warrants:

		Number of Warrants		Exercise Price
Balance – December 31, 2006		8,000,000	$	0.10
	Issued	1,337,500	$	0.40
Balance – December 31, 2007		9,337,500	$	0.14
Issued		2,140,000	$	0.40
Cancelled		(8,000,000)	$	0.10
Balance – December 31, 2008		3,477,500	$	0.40

During the year ended December 31, 2008, the Company issued 2,140,000 share purchase warrants as part of the private placements issued in June and August 2008.  The Company valued the share purchase warrants using the Black Scholes Option Pricing Model using an exercise price of $0.40, expected life of 3 years, volatility of 154-157%, and risk-free rate of 2.62-2.75%.  The weighted average value of the share purchase warrants were $0.31 per warrant and have been recorded as additional paid-in capital.    

In August 2008, the Company cancelled 8,000,000 share purchase warrants that were previously issued to the President and Director of the Company.  

As at December 31, 2008, the following share purchase warrants were outstanding:

Number of Warrants		Exercise Price	Expiry Date
1,337,500	$	0.40	October 3, 2010
1,000,000	$	0.40	June 30, 2011
140,000	$	0.20	June 30, 2011
1,000,000	$	0.40	August 31, 2011
3,477,500

6.

Related Party Transactions

As at December 31, 2008, the Company owed $157,326 (2007 - $90,578) to the President of the Company for financing of day-to-day operations.  The amounts owing are unsecured, non-interest bearing, and due on demand.  

F-17

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

7.

Income Taxes

The Company has $5,110,200 of net operating losses to carryforward to offset taxable income in future years which expire through fiscal 2028. For the years ended December 31, 2008 and 2007, the valuation allowance established against the deferred tax assets increased by $905,000, and $802,000, respectively.

The components of the net deferred tax asset at December 31, 2008 and 2007, the statutory tax rate, the effective tax rate and the amount of the valuation allowance are indicated below:

	2008 $	2007 $
Income (Loss) Before Taxes	(2,676,172)	(3,213,209)
Statutory rate	34%	35%
Computed expected tax recovery	(909,898)	(1,124,623)
Non-deductible expenses	5,884	322,491
Change in valuation allowance	905,014	802,132
Reported income taxes	–	–

	2008 $	2007 $
Deferred tax asset
- Cumulative net operating losses	1,763,035	858,021
- Less valuation allowance	(1,763,035)	(858,021)
Net deferred tax asset	–	–

The Company has incurred operating losses of $5,110,200 which, if unutilized, will expire through to 2028. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance. The following table lists the fiscal year in which the loss was incurred and the expiration date of the operating:

		Expiration
	Net	Date of
	Loss	Operating
Period Incurred	$	Losses
December 31, 2006	159,600	2026
December 31, 2007	2,291,800	2027
December 31, 2008	2,658,800	2028
	5,110,200

F-18

Tombstone Exploration Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)

8.

Subsequent Events

a)

On April 7, 2009, the Company issued 1,000,000 common shares in a private placement financing at $0.10 per common share for proceeds of $100,000.

b)

On March 16, 2009, the Company issued 833,334 common shares at $0.06 per common share for proceeds of $50,000.  

c)

On March 6, 2009, the Company entered into a six-month consulting agreement with a non-related consultant to provide corporate finance services to the Company.  Under the terms of the consulting agreement, the Company will issue 1,000,000 common shares of the Company – payable in two tranches on May 31, 2009 (500,000 shares) and August 31, 2009 (500,000 shares).  

d)

On February 5, 2009, the Company entered into a one-month consulting agreement with a third party company for public relations and communication services on behalf of the Company.  Under the terms of the consulting agreement, the Company will pay $20,000.

e)

On February 4, 2009, the Company entered into a six-month consulting agreement with a third party company for public relations and communication services on behalf of the Company.  Under the terms of the consulting agreement, the Company will pay $50,000 and issue 3,000,000 common shares of the Company.  

f)

On February 3, 2009, the Company entered into a six-month consulting agreement with a third party company for advertising and sponsorship ads on behalf of the Company.  Under the terms of the consulting agreement, the Company will issue 200,000 common shares of the Company.  

g)

On January 1, 2009, the Company entered into a management agreement with the President and Director of the Company.  Under the terms of the management agreement, the Company will pay compensation of $15,000 per month plus $1,000 per month for employee and health benefits for a period of five years from the date of the management agreement.

h)

In February 2009, the Company issued 5,450,000 common shares to settle consulting services that were authorized by the Company during the year ended December 31, 2008.  Refer to Note 4.  

F-19