UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended April 30, 2014

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

For the transition period from ______ to _______

Commission File Number 000-54840

SOURCE GOLD CORP.

(Name of small business issuer in its charter)

200 S. Virginia Street, 8th FloorReno, Nevada 89501

(Address of principal executive offices)

(775) 398-3134

 (Registrant ’ s telephone number)

1155 Camino Del Mar #162

Del Mar, CA 92014

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

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

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

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

As of May 21, 2014, there were 343,848,674 shares of the registrant ’ s $0.001 par value common stock issued and outstanding.

SOURCE GOLD CORP.*

TABLE OF CONTENTS

Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ( “ Securities Act ” ), and Section 21E of the Securities Exchange Act of 1934, as amended ( “ Exchange Act ” ). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Source Gold Corp. (the “ Company ” ), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “ may, ” “ will, ” “ should, ” “ expect, ” “ anticipate, ” “ estimate, ” “ believe, ” “ intend, ” or “ project ” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

* Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," ” SRGL, ” "our," "us," the "Company," refers to Source Gold Corp.

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

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 1

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for financial information and with the instructions to Form 10-Q of Regulation S-K. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements.  However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended July 31, 2013 included in the Company ’ s Annual Report on Form 10-K filed with the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal and recurring adjustments have been made. Operating results for the nine months ended April 30, 2014 are not necessarily indicative of the results that may be expected for the year ending July 31, 2014.

The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are presented in United States dollars.  

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary companies IRC Exploration Ltd., ( ‘ IRC ” ) a company incorporated in Alberta, Canada on August 1, 2008; Northern Bonanza Inc, ( ‘ NBI ” ) a company incorporated in Ontario, Canada on June 30, 2010; Source Bonanza LLC, ( “ SB ” ) a Limited Liability Company incorporated in Nevada, USA on June 18, 2010; and Vulture Gold LLC ( “ Vulture ” ), a Nevada Limited Liability Company which was acquired on August 7, 2010.

All significant inter-company transactions and balances have been eliminated.

Note 2

Nature of Operations and Going Concern

The Company was incorporated in the state of Nevada, United States of America on June 4, 2008.  The Company is an exploration stage company and was formed for the purpose of acquiring exploration and development stage mineral properties.  The Company ’ s year-end is July 31. On August 31, 2009, the Company changed its name to Source Gold Corp. in order to reflect the current focus of the Corporation.

On January 24, 2013, the Company increased the number of authorized common shares of the Company from 180,000,000 to 900,000,000 shares.

During the year ended July 31, 2009, the Company acquired via its subsidiary company IRC Exploration Ltd. ( “ IRC ” ), a mineral claim located in British Columbia, Canada. During the year ended July 31, 2010, the mineral property option agreement for the claim in British Columbia was abandoned.

During the year ended July 31, 2010, the Company acquired two additional mineral properties located in Ontario, Canada.  The Company also incorporated two new subsidiary companies, Northern Bonanza Inc. ( “ NBI ” ) to hold its mineral properties located in Ontario, Canada, and Source Bonanza LLC ( “ SB ” ) to hold its mineral properties located in the USA.  The Company also transferred its Ontario mineral properties to NBI during the year ended July 31, 2010.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 2

Natures of Operations and Going Concern - (Cont ’ d)

On August 7, 2010, the Company acquired a 100% interest in Vulture Gold LLC, ( “ Vulture ” ) a Nevada Limited Liability Company.  (Note 8c)

On March 28, 2012, the Company entered into a property option agreement to acquire a 100% undivided right in three tenures comprising 2,785 acres in northern British Columbia, Canada. (Note 8d)

The Company intends on exploring its mineral properties and has not yet determined the existence of economically recoverable reserves.  The recoverability of amounts incurred on its mineral properties is dependent upon the existence of economically recoverable reserves in the property, confirmation of the Company ’ s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to complete their development, and the attainment and maintenance of future profitable production or disposition thereof.

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

The Company has yet to achieve profitable operations, has accumulated losses of $15,400,146 since inception, has working capital deficiency of $810,436, has no source of recurring revenues, and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company ’ s ability to continue as a going concern.  The Company ’ s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due.

Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence .

Note 3

Summary of Significant Accounting Policies

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and are stated in US dollars.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgment. Actual results may vary from these estimates.

Principles of Consolidation

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary companies IRC Exploration Ltd., ( ‘ IRC ” ) a company incorporated in Alberta, Canada on

August 1, 2008; Northern Bonanza Inc., ( ‘ NBI ” ) a company incorporated in Ontario, Canada on June 30, 2010; Source Bonanza LLC, ( “ SB ” ) a Limited Liability Company incorporated in Nevada, USA on June 18, 2010 and Vulture Gold LLC, ( “ Vulture ” ) a Nevada Limited Liability Company which was acquired on August 7, 2010.

All significant inter-company transactions and balances have been eliminated.

Cash and Cash Equivalents

For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.

Exploration Stage Company

The Company has not commenced any significant operations and, in accordance with ASC Topic 915, the Company is considered an exploration stage company.  All losses accumulated since inception have been considered as part of the Company ’ s exploration stage activities.

Mineral Properties

The Company is primarily engaged in the acquisition, exploration, and development of mineral properties.

Mineral property acquisition costs are capitalized in accordance with FASB ASC 930-805, “ Extractive Activities-Mining, ” when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures.  Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met.  In the event that mineral property acquisition costs are paid with Company shares, those shares are recorded at the estimated fair value at the time the shares are due in accordance with the terms of the property agreements.

When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized.

Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis.

Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards.  Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.

To date the Company has not established any proven or probable reserves on its mineral properties.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 5

Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.

The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

The fair value hierarchy for valuation inputs prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.  Each fair value measurement is reported in one of three levels; the level is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 - inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - inputs are generally unobservable and typically reflect management ’ s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

The carrying value of the Company ’ s financial assets and liabilities which consist of cash, and accounts payable and accrued liabilities, in management ’ s opinion approximate their fair value due to the short maturity of such instruments.  These financial assets and liabilities are valued using level 3 inputs, exceptfor cash which is at level 1.  Unless otherwise noted, it is management ’ s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 6

Related Party Transactions

All related party transactions have been recorded at the exchange value which was the amount of consideration established and agreed to by the related parties.

As of April 30, 2014, due to related party includes $10,820(April 30, 2013 - $15,782) owing to Grid Petroleum.

During the year ended July 31, 2010, the former president of the Company granted an option to the current president of the Company to acquire up to 20,000,000 common shares of the Company as detailed in Note 7, common stock.

On November 1, 2009, the Company entered into a Corporate Management Services Agreement with the President of the Company for management services.  Pursuant to the agreement the President would receive a signing bonus of $7,500 (paid November 1, 2009) and $5,000 per month beginning December 1, 2009 for services rendered plus reimbursement of the Company ’ s expenses.  The agreement may be terminated by either party upon 30 days written notice.

On June 21, 2011, the Company amended the agreement by issuing a resolution to reflect a payment of $6,000 per month for services rendered.

On October 31, 2012, the Former President of the Company acquired 10,000,000 common shares of the Company in a private transaction.  As of October 31, 2012 the President holds 16.4% interest in the common stock of the Company.

During the nine month period ended April 30, 2014, the Company recorded management fees of $nil (nine month period ended April 30, 2013 - $36,000) owed to the Company ’ s former president.

On May 15, 2013 the Company entered into an employment agreement with Dhugald Pinchin providing a signing bonus equivalent to $50,000 USD or stock and $7,500 per month salary.

During the nine month period ended April 30, 2014, the Company recorded management fees of $67,500 (nine month period ended April 30, 2013 - $nil) owed to the Company ’ s president.

Promissory Note #2

On March 19, 2012, the Company received $30,000 cash from the issuance of a convertible promissory note in the amount of $30,000.  The promissory note is unsecured, interest free and repayable upon demand.

The note may be converted at the option of the holder into Common stock of the Company.  The fixed conversion price is $0.01 per share.  Accordingly the note may be converted into 3,000,000 common shares of the Company.

The Company determined that this Promissory note should be accounted for in accordance with FASB ASC 470-20 which addresses “ Accounting for Convertible Securities with Beneficial Conversion Features".  The beneficial conversion feature is calculated at its intrinsic value (that is, the difference between the conversion price $0.01 and the fair value of the common stock into which the debt is convertible at the commitment date (per share being $0.08), multiplied by the number of shares into which the debt is convertible. The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Promissory Note #4

On October 5, 2012, the Company received funding pursuant to a convertible promissory note in the amount of $42,500.    The promissory note is unsecured, bears interest at 8% per annum, and matures on July 10, 2013.  During the nine month period ended April 30, 2014 the Company accrued $503 (nine month period ended April 30, 2013 - $1,928) in interest expense.

After 180 days from issuance, the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price is defined as “ the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date ” .

On April 4, 2013, the Company recorded an initial derivative liability of $79,440 being the fair value of the conversion feature which was determined using the Black-Scholes valuation method.

On November 14, 2013, the Company was charged a late filing penalty and $4,650 was credited to the principal balance with a corresponding debit to the statement of operations.

During the nine month period ended April 30, 2014, the Company recorded a loss of $21,227 (April 30, 2013 - $968) due to the change in value of the derivative liability during the period.

During the nine month period ended April 30, 2014, the Company issued 74,458,397 common shares upon the conversion of $29,550 of the principal balance and $1,700 of interest into common stock, and $67,031 of the derivative liability was re-classified as additional paid in capital upon conversion.

As of April 30, 2014, principal balance of $nil (April 30, 2013 - $42,500) accrued interest of $1,426 (April 30, 2013 - $1,928) and a derivative liability of $nil (April 30, 2013 - $51,886) was recorded.

Promissory Note #5

On October 30, 2012, the Company received funding pursuant to a convertible promissory note in the amount of $12,000. The promissory note is unsecured; bears interest at 8% per annum, and matured on April 30, 2013.  During the nine month period ended April 30, 2014, the Company accrued $718 (April 30, 2013 - $476) in interest expense.

After 180 days from issuance, the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price is defined as “ the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date ” .

On April 29, 2013, the Company recorded an initial derivative liability of $13,844 being the fair value of the conversion feature which was determined using the Black-Scholes valuation method.

During the nine month period ended April 30, 2014, the Company recorded a gain of $1,223 (April 30, 2013 - $nil) due to the change in value of the derivative liability during the period.

As of April 30, 2014, principal balance of $12,000 (April 30, 2013 - $12,000) accrued interest of $1,439 (April 30, 2013 - $476) and a derivative liability of $17,742 (April 30, 2013 - $13,844) was recorded.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Promissory Note #6

On December 18, 2012, the Company converted a loan payable of $11,774 to a convertible promissory note.  The promissory note is unsecured, bears interest at 8% per annum, and matures on June 18, 2013. During the nine month period ended April 30, 2014, the Company accrued $704 (April 30, 2013 - $343) in interest expense.

After 180 days from issuance the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price is defined as “ the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date ” .

On June 17, 2013, the Company recorded an initial derivative liability of $19,145 being the fair value of the conversion feature which was determined using the Black-Scholes valuation method.

During the nine month period ended April 30, 2014, the Company recorded a gainof $1,199(April 30, 2013 - $nil) due to the change in value of the derivative liability during the period.

As of April 30, 2014, principal balance of $11,774 (April 30, 2013 - $11,774) accrued interest of $1,285 (April 30, 2013 - $343) and a derivative liability of $17,408 (April 30, 2013 - $nil) was recorded.

Promissory Note #7

On January 23, 2013, the Company received funding pursuant to a convertible promissory note in the amount of $27,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on October 25, 2013.  During the nine months ended April 30, 2014, the Company accrued $2,031 (April 30, 2013 - $464) in interest expense.

After 180 days from issuance the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price is defined as “ the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date ” .

On July 23, 2013, the Company recorded an initial derivative liability of $48,150 being the fair value of the conversion feature which was determined using the Black-Scholes valuation method.

During the nine month period ended April 30, 2014, the Company recorded a loss of $22,865 (April 30, 2013 - $nil) due to the change in value of the derivative liability during the period.

On November 14, 2013, the Company was charged a late filing penalty and $13,750 was credited to the principal balance with a corresponding debit to the statement of operations.

During the nine month period ended April 30, 2014, the Company issued 52,470,291 common shares upon the conversion of $22,320 of the principal balanceinto common stock, and $45,463 of the derivative liability was re-classified as additional paid in capital upon conversion.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #7 (Cont ’ d)

As of April 30, 2014, principal balance of $18,930 (April 30, 2013 - $27,500) accrued interest of $3,170 (April 30, 2013 - $464) and a derivative liability of $27,988 (April 30, 2013 - $nil) was recorded.

Promissory Note #8

On May 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $44,978.  The promissory note is unsecured, bears interest at 8% per annum, and matures on November 1, 2013.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $2,258 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

On May 1, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $44,978 (April 30, 2013 - $nil) was recorded in the financial statements with a corresponding increase to additional paid in capital.  During the nine month period ended April 30, 2014, debt discount of $27,733 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

On March 17, 2014, a replacement note was issued and the principal balance of $44,978 was transferred LG Capital Funding, LLC.

As of April 30, 2014, principal balance of $nil (April 30, 2013 - $nil), accrued interest of $3,155 (April 30, 2013 - $nil) and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #9

On June 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $11,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on December 1, 2013.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $574 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #9 (Cont ’ d)

On June 1, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $11,000 was recorded in the financial statements with a corresponding increase to additional paid in capital.  During the nine month period ended April 30, 2014, debt discount of $7,393 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

On March 26, 2014, a replacement note was issued and the principal balance of $11,000 was transferred Gel Properties, LLC.

As of April 30, 2014, principal balance of $nil (April 30, 2013 - $nil), accrued interest of $719 (April 30, 2013 - $nil) and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #10

On July 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $11,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on January 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $574 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

On July 1, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $11,000 was recorded in the financial statements with a corresponding increase to additional paid in capital.  During the nine month period ended April 30, 2014, debt discount of $9,207 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

On March 26, 2014, a replacement note was issued and the principal balance of $11,000 was transferred Gel Properties, LLC.

As of April 30, 2014, principal balance of $nil (April 30, 2013 - $nil), accrued interest of $646 (April 30, 2013 - $nil) and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #11

On May 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $57,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on November 30, 2013.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $3,441 (April 30, 2013 - $nil) in interest expense.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #11 (Cont ’ d)

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

On May 31, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $57,500 was recorded in the financial statements with a corresponding increase to additional paid in capital.  During the nine month period ended April 30, 2014, debt discount of $38,333 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $57,500 (April 30, 2013 - $nil), accrued interest of $4,210 (April 30, 2013 - $nil) and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #12

On June 30, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on December 31, 2013.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $448 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

On June 30, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $7,500 was recorded in the financial statements with a corresponding increase to additional paid in capital.  During the nine month period ended April 30, 2014, debt discount of $6,236 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil), accrued interest of $499 (April 30, 2013 - $nil) and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #13

On July 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on January 31, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $448 (April 30, 2013 - $nil) in interest expense.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #13 (Cont ’ d)

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

On July 31, 2013 interest expense relating to the beneficial conversion feature of this convertible note of $5,250 was recorded in the financial statements with a corresponding increase to additional paid in capital.  During the nine month period ended April 30, 2014, debt discount of $5,250 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil), accrued interest of $448 (April 30, 2013 - $nil) and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #14

On August 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $11,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on February 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $656 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $7,700 (April 30, 2013 - $nil) was recorded in the financial statements with a corresponding increase to additional paid in capital, and debt discount of $7,700 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $11,000 (April 30, 2013 - $nil), accrued interest of $656 (April 30, 2013 - $nil), and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #15

On August 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on March 3, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $398 (April 30, 2013 - $nil) in interest expense.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #15 (Cont ’ d)

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $2,250 (April 30, 2013 - $nil) was recorded in the financial statements with a corresponding increase to additional paid in capital, and debt discount of $2,250 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil), accrued interest of $398 (April 30, 2013 - $nil), and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #16

On September 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $11,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on March 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $582 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $3,300 (April 30, 2013 - $nil) was recorded in the financial statements with a corresponding increase to additional paid in capital, and debt discount of $3,300 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $11,000 (April 30, 2013 - $nil), accrued interest of $582 (April 30, 2013 - $nil), and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #17

On September 30, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on March 31, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $348 (April 30, 2013 - $nil) in interest expense.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #17 (Cont ’ d)

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $3,750 (April 30, 2013 - $nil) was recorded in the financial statements with a corresponding increase to additional paid in capital, and debt discount of $3,750 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil), accrued interest of $348 (April 30, 2013 - $nil), and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #18

On October 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $11,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on April 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $509 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $5,500 (April 30, 2013 - $nil) was recorded in the financial statements with a corresponding increase to additional paid in capital, and debt discount of $5,500 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $11,000 (April 30, 2013 - $nil), accrued interest of $509 (April 30, 2013 - $nil), and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #19

On October 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on April 30, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $297 (April 30, 2013 - $nil) in interest expense.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #19 (Cont ’ d)

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $750 (April 30, 2013 - $nil) was recorded in the financial statements with a corresponding increase to additional paid in capital, and debt discount of $750 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil), accrued interest of $297 (April 30, 2013 - $nil), and debt discount of $nil (April 30, 2013 - $nil) was recorded.

Promissory Note #20

On November 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $176,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on March 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $6,943 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $176,000 (April 30, 2013 - $nil) and accrued interest of $6,943 (April 30, 2013 - $nil) was recorded.

Promissory Note #21

On November 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $11,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on May 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $434 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the

date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $11,000 (April 30, 2013 - $nil) and accrued interest of $434 (April 30, 2013 - $nil) was recorded.

Promissory Note #22

On November 30, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on May 30, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $248 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil) and accrued interest of $248 (April 30, 2013 - $nil) was recorded.

Promissory Note #23

On December 1, 2013 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $16,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on June 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $526 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $16,000 (April 30, 2013 - $nil) and accrued interest of $526 (April 30, 2013 - $nil) was recorded.

Promissory Note #24

On December 13, 2013, the Company received funding pursuant to a convertible promissory note in the amount of $37,500. The promissory note is unsecured, bears interest at 8% per annum, and matures

on September 17, 2014.  During the nine months ended April 30, 2014, the Company accrued $1,135 (April 30, 2013 - $nil) in interest expense.

After 180 days from issuance the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 51% of the market price, where market price is defined as “ the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date ” .

As of April 30, 2014, principal balance of $37,500 (April 30, 2013 - $nil) and accrued interest of $1,135 (April 30, 2013 - $nil) was recorded.

Promissory Note #25

On December 31, 2013 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on June 30, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $197 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil) and accrued interest of $197 (April 30, 2013 - $nil) was recorded.

Promissory Note #26

On January 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $7,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on July 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $183 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $7,000 (April 30, 2013 - $nil) and accrued interest of $183 (April 30, 2013 - $nil) was recorded.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #27

On January 31, 2014 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on July 31, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $146 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil) and accrued interest of $146 (April 30, 2013 - $nil) was recorded.

Promissory Note #28

On February 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $16,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on August 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $309 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $16,000 (April 30, 2013 - $nil) and accrued interest of $309 (April 30, 2013 - $nil) was recorded.

Promissory Note #29

On February 28, 2014 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on August 28, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common

Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $100 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil) and accrued interest of $100 (April 30, 2013 - $nil) was recorded.

Promissory Note #30

On March 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $16,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on September 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $210 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $16,000 (April 30, 2013 - $nil) and accrued interest of $210 (April 30, 2013 - $nil) was recorded.

Promissory Note #31

On March 17, 2014, the Company received funding pursuant to a convertible promissory note in the amount of $26,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 17, 2015.  During the nine months ended April 30, 2014, the Company accrued $256 (April 30, 2013 - $nil) in interest expense.

After 180 days from issuance the note may be converted at the option of the holder into Common stock of the Company.  The conversion price is 50% of the market price, where market price is defined as “ the lowest closing bid price of the ten prior trading days on the OTCBB including the day upon which a Notice of Conversion is received by the Company. ”

As of April 30, 2014, principal balance of $26,500 (April 30, 2013 - $nil) and accrued interest of $256 (April 30, 2013 - $nil) was recorded.

Promissory Note #32

On March 17, 2014, the Company arranged a debt swap under which Syndication Capital Note #8 for $44,978 was transferred to LG Capital Funding, LLC.  The promissory note is unsecured, bears

interest at8% per annum and matures on March 17, 2015.  The note also contains customary events of default.  During the nine month period ended April 30, 2014, the Company accrued $389 (nine month period ended April 30, 2013 - $nil) in interest expense.

Upon the holder ’ s option to convert becoming active the Company recorded a debt discount and derivative liability of $64,366 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model.  The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value.  Any change in fair value is credited or charged to the statement of operations in the period.

During the nine month period ended April 30, 2014, the Company recorded a loss of $1,760 (nine month period ended April 30, 2013 - $nil) due to the change in value of the derivative liability during the period, and debt discount of $5,422 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

During the nine month period ended April 30, 2014, the Company issued 19,428,571 common shares upon the conversion of $6,800 of the principal balance and $9,679 of the derivative liability was re-classified as additional paid in capital upon conversion.

As ofApril 30, 2014, principal balance of $38,178 (April 30, 2013 - $nil)accrued interest of $389 (April 30, 2013 - $nil), debt discount of $39,556 (April 30, 2013 - $nil) and a derivative liability of $56,447 (April 30, 2013 - $nil) was recorded.

Promissory Note #33

On March 26, 2014, the Company arranged a debt swap under which Syndication Capital Note #9 for $11,000 and Syndication Capital Note #10 for $11,000 wastransferred to Gel Properties, LLC.  The promissory note is unsecured, bears interest at8% per annum and matures on March 26, 2015.The note also contains customary events of default.  During the nine month period ended April 30, 2014, the Company accrued $153 (nine month period ended April 30, 2013 - $nil) in interest expense.

Upon the holder ’ s option to convert becoming active the Company recorded a debt discount and derivative liability of $67,153 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model.  The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value.  Any change in fair value is credited or charged to the statement of operations in the period.

During the nine month period ended April 30, 2014, the Company recorded a loss of $5,153 (nine month period ended April 30, 2013 - $nil) due to the change in value of the derivative liability during the period, and debt discount of $2,110 (nine month period ended April 30, 2013 - $nil) was accreted to the statement of operations.

During the nine month period ended April 30, 2014, the Company issued 24,200,000 common shares upon the conversion of $4,176 of the principal balance and $34,095 of the derivative liability was re-classified as additional paid in capital upon conversion.

As ofApril 30, 2014, principal balance of $17,824 (April 30, 2013 - $nil)accrued interest of $153 (April 30, 2013 - $nil), debt discount of $19,890 (April 30, 2013 - $nil) and a derivative liability of $38,211 (April 30, 2013 - $nil) was recorded.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 7

Convertible Notes Payable – (Cont ’ d)

Promissory Note #34

On March 31, 2014 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on September 30, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $49 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil) and accrued interest of $49 (April 30, 2013 - $nil) was recorded.

Promissory Note #35

On April 1, 2014 the Company entered into a Convertible Promissory Note with Syndication Capital in the sum of $16,000.  The promissory note is unsecured, bears interest at 8% per annum, and matures on October 1, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $102 (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $1,500 (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $16,000 (April 30, 2013 - $nil), accrued interest of $102 (April 30, 2013 - $nil) and debt discount of $1,500 (April 30, 2013 - $nil) was recorded.

Promissory Note #36

On April 30, 2014 the Company entered into a Convertible Promissory Note with Dhugald Pinchin in the sum of $7,500.  The promissory note is unsecured, bears interest at 8% per annum, and matures on October 30, 2014.  The Conversion Price shall mean par .001 multiplied by the number of Common

Stock converted at the time.  The transaction was handled as a private sale exempt from registration under Section 4(2) of the Securities Act of 1933.  During the nine month period ended April 30, 2014, the Company accrued $nil (April 30, 2013 - $nil) in interest expense.

A portion of the proceeds from issuance of the convertible debt, equal to the intrinsic value, is allocated to additional paid-in capital.  Because the debt is due on demand and is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the nine month period ended April 30, 2014 interest expense relating to the beneficial conversion feature of this convertible note of $nil (April 30, 2013 - $nil) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

As of April 30, 2014, principal balance of $7,500 (April 30, 2013 - $nil) and accrued interest of $nil (April 30, 2013 - $nil) was recorded.

Note 8

Derivative Liabilities

The Company issued financial instruments in the form of convertible notes with embedded conversion features.  The convertible notes payable have conversion rates which are indexed to the market value of the Company ’ s common stock price.

During the nine month period ended April 30, 2014, the Company has a balance of derivative liabilities for embedded conversion features related to convertible notes payable of face value $157,796 (April 30, 2013- $56,394).  During the nine month period ending April 30, 2014, $64,546 (April 30, 2013 - $84,300) of convertible notes payable principal and interest were converted into common stock of the Company.

These derivative liabilities have been measured in accordance with fair value measurements, as defined by GAAP. The valuation assumptions are classified within Level 1 inputs and Level 2 inputs.

The following table represents the Company ’ s derivative liability activity for the embedded conversion features discussed above:

Note 9    Common Stock

The Company is authorized to issue 20,000,000 shares of it $0.001 par value preferred stock and 900,000,000 shares of its $0.001 par value common stock.

During the nine month period ended April 30, 2014, the Company issued 170,557,259common shares upon the conversion of $64,546 principal and interest of promissory notes into common stock.

Warrants and Options

As of April 30, 2014 and July 31, 2013, there were no warrants or options outstanding to acquire any additional shares of the Company ’ s common stock.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 10      Mineral Properties

a)  On October 26, 2009, the Company entered into a property option agreement whereby the Company was granted an option to earn up to a 50% interest in 19 mineral claims (the “ KRK West ” claims) located in the Thunder Bay Mining Division of Ontario.  The option agreement is denominated in Canadian dollars.  

Consideration for the option was the issuance of 2,000,000 common shares of the Company, cash payments totaling $103,718 (CDN$110,000), and aggregate exploration expenditures of $969,268 (CDN$1,000,000) as follows:

i)

Cash payments:

*

$46,640 (CDN$50,000) upon execution of the Option agreement (paid);

*

$57,078(CDN$60,000) on or before December 1, 2009 (paid)

ii)

Exploration expenditures of $484,768 (CDN$500,000) on or before December 31, 2010, and $969,268 (CDN$1,000,000) in aggregate on or before December 31, 2011.

In aggregate to July 31, 2011, the Company incurred exploration expenditures aggregating $32,080 (CDN$32,836) (See below regarding status of the agreement)

iii)

The issuance of 2,000,000 common shares (none issued) to the shareholders of the optionor, as directed by the optionor.

Upon earning its 50% interest in the option, the Company was to enter into a joint venture agreement to develop and operate the property.

Pursuant to the agreement, if commercial production had been achieved and the Company sold or otherwise disposed of metals and minerals that had been produced and removed from the KRK West properties, the Company would pay Thunder Bay a 3% Net Smelter Return royalty.

In the event the Company sold or caused the sale of products other than to a smelter or refinery or otherwise caused the removal of products from the Property, the Company would pay a 2% Net Smelter Return Royalty. Alternatively, the Company could buy back the royalty right for $1,000,000 for each breccia pipe that reached commercial production.

The property option agreement was stated in Canadian dollars.  The US dollar equivalent was converted using the foreign exchange rate at July 31, 2010 for all future commitments.

During the year ended July 31, 2010, the Company learned that the optionor had allowed the underlying claims to lapse, and therefore the option agreement was null and void.

The Company, and a director of the Company (The Company subsequently purchased these claims from the director), purchased the claims from persons who re-staked the claims for an aggregate amount of $27,577.  Subsequent to acquisition, the claims were transferred to the Company ’ s wholly owned subsidiary, Northern Bonanza Inc.  Due to the lapse of the underlying claims the Company impaired a total of $131,295 of acquisition costs incurred as of July 31, 2010 made up of the initial $103,718 payment and the additional payment of $27,577.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 10

Mineral Properties – (Cont ’ d)

The original optionor represents that control of the claims remains with the optionor and that the Company has no right to further explore the property.  The Company disagrees with this assertion and accordingly, ownership to the claims is in dispute.  On January 6, 2011 the Ministry of Northern Development, Mines and Forestry, Canada, was to adjudicate upon the ownership of the claims.  The hearing did not occur as the other party filed for a change of venue.  A determination regarding the change of venue has not yet been made and a date for rendering the decision has not yet been established.  Mediation regarding the matter was deferred until late 2011 and prior to the hearing the optionor cancelled the mediation.  

In October 2011, the Company, as a result of the cancellation of the mediation hearing with William J. Wheeler regarding the Thunder Bay claims, decided the best course of action was to file suit.  Accordingly, a suit was filed against Thunder Bay and Wheeler in Ontario Superior Court of Justice. In the suit we detail the breach of the Agreement by Thunder Bay and Wheeler and request:

*

An order transferring an application regarding mining claims pending before the Office of the Mining and Lands Commissioner to the  Ontario Superior Court of Justice to be consolidated with this action;

*

A declaration regarding our ownership and Thunder Bay and Wheeler ’ s ownership with respect to certain mining claims; and

*

$1,200,000 in damages from Thunder Bay and Wheeler.

b) During the year ended July 31, 2010, the Company entered into a property purchase agreement, which was formalized on May 4, 2010, to acquire a 100% interest in 21 mining claims located in the Northern Ontario for $50,767 (Cdn$51,800).  During the year ended July 31, 2010, the Company incurred an additional $17,741 in staking costs in relation to these claims.  Subsequent to acquisition the claims and exploration costs were transferred to NBI at cost.

During the year ended July 31, 2010, the Company made exploration advances to the operator amounting to $47,806.  As of July 31, 2010 the operator had incurred exploration expenses aggregating $20,118 resulting in net advances held being $26,968.  During the year ended July 31, 2011, the Company made further advances to the operator of $7,040.  

During the year ended July 31, 2011 the operator incurred exploration expenditures of $34,008 and the Company also incurred direct exploration expenditures of $47,335.

As of July 31, 2013, the operator held exploration advances amounting to $nil (2012 - $nil). Due to lack of funding, the Company has no immediate plans to explore these mines to determine resources available and consequently the costs incurred of $68,599 for these mineral properties was deemed to be fully impaired as of July 31, 2011.

c) On August 7, 2010, the Company acquired a 100% interest in Vulture Gold LLC, ( “ Vulture ” ) a Nevada limited Liability Company.  Vulture holds 27 mineral claims in Maricopa County, Arizona, known as the Vulture Mine.  As consideration for the acquisition the Company issued 4,000,000 common shares with a fair value of $2,000,000.

This transaction has been recorded as an asset acquisition and the fair value paid has been allocated to the cost of acquisition of the mineral property.

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 10

Mineral Properties – (Cont ’ d)

Due to lack of funding, the Company has no immediate plans to explore these mines to determine resources available and consequently the costs of $2,000,000 incurred for these mineral properties is deemed to be fully impaired.

During the nine month period ended April 30, 2014, the Company incurred exploration expenditures of $nil (April 30, 2013 - $3,317) on the property.

d) On March 28, 2012, the Company entered into a property option agreement whereby the Company was granted an option to earn a 100% interest in 3 mineral tenures located in Northern British Columbia.  The option agreement is denominated in US dollars.  

Consideration for the option was the issuance of 1,000,000 common shares of the Company on March 28, 2012 valued at $80,000, (issued) and cash payment of $5,000 by April 2, 2012 (paid) and aggregate exploration expenditures of $25,000 by September 15, 2013.

As at April 30, 2014, no exploration expenditures have been incurred on the property.

The Company has net operating losses carried forward of approximately $15,400,146 for tax purposes whichmay be recognized in future periods, not to exceed 20 years.

Note 12  

Commitments

The Company has an ongoing agreement with a director of the company to provide management services for $7,500 per month.  Either party may terminate the agreement with one month ’ s written notice .

Source Gold Corp.

(An Exploration Stage Company)

Notes to the Condensed Consolidated Financial Statements

April 30, 2014

(Unaudited)

Note 13

Subsequent events – (Cont ’ d)

On May 13, 2014, a holder of a convertible note converted a total of $1,120 of principal into 14,000,000 shares of our common stock at a price of $.00008.

On May 14, 2014, a holder of a convertible note converted a total of $11,178 of principal and $149 of interest into 28,317,600 shares of our common stock at a price of $0.0004.

On May 15, 2014, a holder of a convertible note converted a total of $6,590of principal into 14,977,273 shares of our common stock at a price of $0.00044.