UNITED STATES



SECURITIES AND EXCHANGE COMMISSION



WASHINGTON, D.C. 20549



FORM 10-Q



(Mark One)



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

For the quarterly period ended July 31, 2008

OR



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

For the transition period ___________________ to ___________________



Commission File Number: 000-28915



Sonoran Energy, Inc.

(Exact name of registrant as specified in its charter)



Washington, United Sates

(State or other jurisdiction of incorporated organization)



13-4093341

(I.R.S. Employer ID Number)



14180 Dallas Parkway, Ste. 400, Dallas, TX, 75224

(Address of principal executive offices) (Zip Code)



214-389-3480

(Issuers telephone number)





N/A

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



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



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



|Large accelerated Filer    o |                                               | Accelerated Filer    o      
|---------------------------- | --------------------------------------------- | ----------------------------
|Non-accelerated Filer    o   | (Do not check if a smaller reporting company) | Smaller reporting company  x



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



The number of shares of the Registrant's Common Stock, par value npv, outstanding at September10, 2008 was 188,588,380.









1

---



SONORAN ENERGY, INC.



CONTENTS



PART 1.  FINANCIAL INFORMATION



Item 1.   Financial Statements



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



Item 3.   Quantitative and Qualitative Disclosures About Market Risk



Item 4.  Controls and Procedures



Item 4T. Controls and Procedures





PART II.  OTHER INFORMATION



Item 1.   Legal Proceedings



Item 1A.  Risk Factors



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



Item 3. Defaults Upon Senior Securities



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



Item 5.   Other Information



Item 6.   Exhibits





2

---





PART 1  FINANCIAL INFORMATION



Item 1.  Financial Statements



SONORAN ENERGY, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For the Periods Ended July 31, 2008 and 2007



TABLE OF CONTENTS





PAGE



Condensed Consolidated Balance Sheet (Unaudited)

3



Condensed Consolidated Statements of Operations (Unaudited)

4



Condensed Consolidated Statements of Changes in Shareholders Equity (Unaudited)

5



Condensed Consolidated Statements of Cash Flows (Unaudited)

6



Notes to Unaudited Condensed Consolidated Financial Statements

7





3

---





SONORAN ENERGY, INC. AND SUBSIDIARIES

Consolidated Balance Sheet

(Unaudited)



|                                                                                                                                                        | July 31, 2008      | April 30, 2008     
|------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | -------------------
|Assets                                                                                                                                                  |                    |                    
|Current assets:                                                                                                                                         |                    |                    
|Cash and cash equivalents                                                                                                                               | $          286,339 | $           612,998
|Accounts receivable, net of allowance of $ 169,817 and $70,815, respectively                                                                            | 852,440            | 798,195            
|Prepaid expenses and other current assets                                                                                                               | 263,311            | 371,927            
|Total current assets                                                                                                                                    | 1,402,090          | 1,783,120          
|                                                                                                                                                        |                    |                    
|Oil and gas properties  full cost method:                                                                                                              |                    |                    
|Proved, net of accumulated depletion amortization of $2,166,056 and
$1,858,383, respectively                                                            | 32,262,376         | 31,481,268         
|Unproved                                                                                                                                                | 10,598,674         | 11,334,169         
|Fixed assets, net of accumulated depreciation of $219,185 and $190,449, respectively                                                                    | 203,607            | 232,344            
|Total capital assets                                                                                                                                    | 43,064,657         | 43,047,781         
|Other assets :                                                                                                                                          |                    |                    
|Oil and gas put options                                                                                                                                 | -                  | 2,290              
|Loan fees                                                                                                                                               | 1,640,058          | 1,673,534          
|Intangible assets, net of accumulated amortization of $94,500 and $ 84,000,
respectively                                                                | 115,500            | 126,000            
|Total other assets                                                                                                                                      | 1,755,558          | 1,801,824          
|Total assets                                                                                                                                            | $  46,222,305      | $ 46,632,725       
|Liabilities and Shareholders Equity                                                                                                                    |                    |                    
|Current liabilities:                                                                                                                                    |                    |                    
|Accounts payable                                                                                                                                        | $      6,198,891   | $    5,752,233     
|Accrued liabilities                                                                                                                                     | 1,803,996          | 3,293,087          
|Accrued liability-interest rate collar                                                                                                                  | 71,536             | 106,020            
|Note payable regarding legal settlement                                                                                                                 | 446,306            | 464,641            
|Senior secured credit facility, current, net of discount of $500,170 and $553,760,
respectively                                                         | 11,499,830         | 11,446,240         
|Convertible debentures, current portion, net of discount of  $ 8,463 and $29,857,
respectively                                                          | 548,037            | 876,643            
|Notes payable, current portion                                                                                                                          | 201,862            | 313,746            
|Total current liabilities                                                                                                                               | 20,770,458         | 22,252,610         
|                                                                                                                                                        |                    |                    
|Long-term liabilities:                                                                                                                                  |                    |                    
|Deferred rent                                                                                                                                           | 52,321             | 56,559             
|Convertible debentures, net of current portion                                                                                                          | 1,456,081          | -                  
|Notes payable, net of current portion                                                                                                                   | 104,551            | 112,298            
|Asset retirement obligation                                                                                                                             | 1,346,584          | 1,317,497          
|Total liabilities                                                                                                                                       | 23,729,995         | 23,738,964         
|                                                                                                                                                        |                    |                    
|Shareholders equity:                                                                                                                                   |                    |                    
|Series A convertible preferred stock, no par value, 25,000,000 shares authorized,
3,500,000 and 3,000,000 shares issued and outstanding, respectively | 645,312            | 436,910            
|Common stock, no par value, 250,000,000 shares authorized                                                                                               |                    |                    
|188,338,380 and 184,744,904 shares issued and outstanding, respectively                                                                                 | 70,333,204         | 70,030,874         
|Paid in capital                                                                                                                                         | 8,082,655          | 7,794,273          
|Accumulated deficit                                                                                                                                     | (56,568,861)       | (55,368,296)       
|Total shareholders equity                                                                                                                              | 22,492,310         | 22,893,761         
|Total liabilities and shareholders equity                                                                                                              | $ 46,222,305       | $ 46,632,725       



See accompanying notes to unaudited consolidated financial statement



4

---





SONORAN ENERGY, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)







|                                                      | For the periods ended July 31,
|----------------------------------------------------- | ------------------------------
|                                                      |                               
|                                                      |                               
|Revenue:                                              |                               
|Oil and gas sales                                     |                               
|Other                                                 |                               
|Total revenue                                         |                               
|                                                      |                               
|Operating costs and expenses:                         |                               
|Oil and gas production costs                          |                               
|Ad valorem and other taxes                            |                               
|Accretion of discount on asset retirement obligations |                               
|Depletion, depreciation and amortization              |                               
|Legal settlement expense                              |                               
|General and administrative expense                    |                               
|Total operating costs and expenses                    |                               
|                                                      |                               
|Loss from operations                                  |                               
|                                                      |                               
|Other income/(expense)                                |                               
|Other income/expense                                  |                               
|Gain on asset sale                                    |                               
|Interest expense                                      |                               
|Total other expense                                   |                               
|                                                      |                               
|Net loss                                              |                               
|                                                      |                               
|                                                      |                               
|Net loss per common share:                            |                               
|Basic and diluted                                     |                               
|                                                      |                               
|Weighted average common shares outstanding:           |                               
|Basic and diluted                                     |                               
|                                                      |                               
|                                                      |                               







See accompanying notes to unaudited consolidated financial statements



5

---





SONORAN ENERGY, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders Equity/ (Deficit)

For the Period May 1 to July 31, 2008

(Unaudited)



|                                                                |                 |              |             |             | Additional |               |            
|--------------------------------------------------------------- | --------------- | ------------ | ----------- | ----------- | ---------- | ------------- | -----------
|                                                                | Preferred Stock | Common Stock | Paid in     | Retained    |           
|                                                                | Shares          | Amount       | Shares      | Amount      | Capital    | Deficit       | Total      
|Balance at May 1, 2008                                          | 3,000,000       | $   436,910  | 184,744,904 | $70,030,874 | $7,794,273 | $(55,368,296) | $22,893,761
|                                                                |                 |              |             |             |            |               |            
|Issuance of common stock , net of
costs                         | -               | -            | 356,894     | 20,700      | -          | -             | 20,700     
|Issuance of preferred stock and
warrants, net of costs          | 500,000         | 208,402      | -           | -           | 291,598    | -             | 500,000    
|Issuance of common stock to
Directors for services              | -               | -            | 1,382,882   | 80,207      | -          | -             | 80,207     
|Common stock issued for payment of
legal settlement             | -               | -            | 300,000     | 19,500      | -          | -             | 19,500     
|Common stock issued for payment of
services                     | -               | -            | 431,034     | 25,000      | -          | -             | 25,000     
|Common stock issued for payment of
debt and current liabilities | -               | -            | 1,000,000   | 140,000     | -          | -             | 140,000    
|Common stock grants                                             | -               | -            | 122,666     | 16,923      | (3,216)    | -             | 13,707     
|Net loss, period ended July 31, 2008                            | -               | -            | -           | -           | -          | (1,200,565)   | (1,200,565)
|Balance as at July 31, 2008                                     | 3,500,000       | $645,312     | 188,338,380 | $70,333,204 | $8,082,655 | $(56,568,861) | $22,492,310







See accompanying notes to consolidated financial statements



6

---



SONORAN ENERGY, INC. AND SUBSIDIARIES

Consolidated Statement of Cash Flows

(Unaudited)

|                                                                         
|-------------------------------------------------------------------------
|                                                                         
|                                                                         
|Cash flows from operating activities:                                    
|Net loss                                                                 
|Adjustment to reconcile net loss to net cash used in operating activities
|Accretion expense                                                        
|Amortization of loan fees                                                
|Amortization of discount on 10/12 % notes                                
|Amortization of premium on new 10 % notes                                
|Depletion, depreciation and amortization                                 
|Stock compensation expense                                               
|Legal expense settlement                                                 
|Put option valuation adjustment                                          
|Interest collar valuation                                                
|Bad debt expense                                                         
|Changes in operating assets and liabilities:                             
|Accounts receivable, prepaids and deferred other                         
|Accounts payable, accrues expenses and other
liabilities                 
|Net cash used in operating activities                                    
|                                                                         
|Cash flows from investing activities:                                    
|Additions to property and equipment                                      
|Redemption of certificate of deposit                                     
|Net cash used in investing activities                                    
|                                                                         
|Cash flows from financing activities:                                    
|Repayment of loans and advances                                          
|Payment of debt issuance costs                                           
|Proceeds from issuance of convertible debt                               
|Proceeds from sale of convertible preferred stock                        
|Proceeds from sale of common stock and warrants                          
|Net cash provided by financing activities                                
|                                                                         
|Net change in cash and cash equivalents                                  
|Cash and cash equivalents, beginning of period                           
|Cash and cash equivalents, end of period                                 
|                                                                         
|Supplemental disclosure of cash flow information:                        
|Cash paid for income taxes                                               
|Cash paid for interest                                                   
|                                                                         
|Non-cash investing and financing activities:                             
|Common stock issued for payment of debt and current
liabilities          
|Common stock issued to directors for services                            
|Common stock issued for payment of legal expense                         







See accompanying notes to consolidated financial statements



7

---





SONORAN ENERGY, INC. AND SUBSIDIARIES



Notes to Unaudited Condensed Consolidated Financial Statements

July 31, 2008



General Information



The accompanying unaudited condensed consolidated balance sheet of Sonoran Energy, Inc. and Subsidiaries as of July 31, 2008 and the related results of operations and cash flows for the three months ended July 31, 2008 and July 31, 2007 have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.



In the opinion of management, all adjustments considered necessary for a fair presentation of the unaudited consolidated condensed financial statements have been included. Operating results for any interim period are not necessarily indicative of the results that may be expected for the entire fiscal year. You should read the consolidated financial statements and notes thereto for the year ended April 30, 2008 included in the Company's report in Form 10-K as filed with the Securities and Exchange Commission in conjunction with these statements.



Note 1:   Liquidity



These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The general business strategy of the Company is to develop and operate its existing oil and gas properties, and to acquire additional properties.   As of July 31, 2008, the Company has a working capital deficit of approximately $19.4 million, accumulated shareholders deficit of $56.6 million, has incurred continued operating losses, and requires additional capital to fund development activities, meet its obligations and maintain its operations. These conditions raise significant doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the uncertainty around continuance of operations.



The Company had cash and cash equivalents of $286,339 at July 31, 2008 for a decrease of $326,659 when compared to April 30, 2008. The components of the changes in cash for the three months ended July 31, 2008 are more fully described in the Statements of Cash Flows included in Item 1 of this Form 10-Q.



During the third quarter of fiscal 2008, the Company obtained additional funding from Standard Bank under a new $15,000,000 credit facility (the Facility), which closed on November 29, 2007.  The Company borrowed a total of $12,000,000 under this facility which was used to repay the NGPC facility, repurchase an override from NGPC, and to partially fund its Louisiana work over program.  The remaining $3 million dollars is not currently available, as the Company is in default of several covenants of the Facility.   The Company is currently negotiating a restructuring of the Facility.  Accordingly, the full amount outstanding under the Facility is reported as a current liability.  If an agreement is not reached, the company could be forced to seek protection from creditors.  The Company expects to reach an agreement that will reduce cash requirements to an acceptable level.



Current production levels are sufficient to cover operating expenses and provide sufficient funding for interest payments.  However, the Company needs to obtain additional debt or equity to fund debt service requirements and continue to develop its assets. Over the past six months the Company has obtained approximately $4.5 million from two large shareholders to support its operations.   While the two large shareholders have provided funds for development over the past year, there is no assurance that they will continue to support the Companys activities.  However, the company believes that it will be able to obtain additional funding as needed to continue to meet the anticipated liquidity and capital resource needs of the Company for the fiscal year ending April 30, 2009.



The Company is not a party to off-balance sheet arrangements and does not engage in trading activities involving non-exchange traded contracts. In addition, the Company has no financial guarantees, debt or lease agreements or other arrangements that could trigger a requirement for an early payment or that could change the value of the



8

---





Company's assets. Management continues to examine various alternatives for increasing capital resources including, among other things, participation with industry and/or private partners and specific rework of existing properties to enhance production and expansion of its sales of crude oil and natural gas.



Note 2:    Note Payable - Legal Settlement



The legal settlement relates to the following two cases that were settled in June and September 2006.



Longbow, LLC v. Sonoran Energy, Inc. - Superior Court of California, County of Kern, Metropolitan Division Case No. S-1500-CV-25398-SPC



In March, 2004, a complaint was filed by Longbow, LLC against the Company alleging that Sonoran failed to provide timely notice related to an option for right of first refusal on the sale of our interest in the Emjayco Glide #33 Property, the Keystone-Deer Creek Property and the Deer Creek-Merzonian Property.  Subsequently, Sonoran had entered into an agreement to sell those properties to a third party, Harvest Worldwide, LLC.



During September, 2006, an out of court settlement was reached to allow Longbow to purchase the properties in question subject to Sonoran arranging for the removal of liens held by Ironwood and assuming partial responsibility for the retirement of certain obligations.  We agreed to pay down a note on the three properties with shares of our stock that were held in trust after being recovered from Mark Anderson.  In addition, we agreed to issue shares of our common stock, pay cash, and issue convertible notes to settle the balance of the assumed liabilities.  Based on the settlement of this matter, we believed that we had fully completed the sale of these properties and a gain of $484,046 was included as a reduction to litigation settlement expense on our statement of operations for the year ended April 30, 2007. The liens were removed during the quarter ended July 31, 2007.



Sonoran Energy, Inc v. Mark Roy Anderson et al



Mark Anderson was sued, individually and in the form of his corporate alter egos, by Sonoran seeking rescission of all shares issued to these entities, with additional compensation due for various timing failures and legal exposures resulting from Anderson's various shortcomings. The final settlement was dependant upon the resolution of the Longbow case (above) and included the assumption of certain obligations and payment of certain outstanding legal fees.  These payments were partially offset by the cancellation of a commission payable of $250,000 and a loan payable of $48,476.



Through April 30, 2008, we paid settlement expenses in the form of cash, issuance of shares, and issuance of convertible debentures. Additionally, a portion of Andersons shares were used to satisfy certain outstanding legal fees. We computed the value of our obligations under the note payable and other liabilities by subtracting our estimate of the value of the shares surrendered by Anderson.  At April 30 2008, approximately 2,023,000 of Andersons shares were held in trust by attorneys or by the holder of the note payable to settle our liabilities. We computed the value of these shares using the closing price of our common stock on April 30, 2008 less an estimate of costs to sell those shares. The net amount of our obligations less the value of shares of our common stock pledged to settle those obligations was recorded on our consolidated balance sheet under current liabilities in the amount of $464,641.



During the three months ended July 31, 2008, we issued 300,000 shares of common stock in payment of the note. Due to the low market price no shares were sold to reduce the debt but are being held by the note holder.  At July 31, 2008, approximately 2,324,000 shares were still being held in trust by attorneys or by the holder of the note payable.  We computed the value of these shares using the closing price of our common stock on July 31, 2008 less an estimate of costs to sell those shares.





9

---





The net change in our obligations less the value of shares of common stock previously pledged to settle those obligations was recorded as a reduction in current liabilities and is shown in our Condensed Consolidated Statements of Operations as a charge of $1,165 in Legal settlement expense.  The remaining liability which is shown in our Consolidated Balance Sheet as Note payable re legal settlement has been reduced to $446,306 to reflect additional shares being held at July 31, 2008.



Note 3:    Credit Agreement



Standard Bank PLC and Nordkap



On November 29, 2007, the Company entered into a Credit Agreement with Standard Bank PLC and Nordkap (Standard Agreement), granting the Company a credit facility of up to $15 million, over a three-year period, with an initial availability of $12 million.  The lenders received 6,119,750 warrants priced at 3 tiers above market price on the date of closing, with maturities ranging from 4 to 6 years.  As lead bank, Standard Bank PLC also has an overriding royalty of 2% in all of our oil and gas properties. Payments for the overriding royalty are deferred until the earlier of November 29, 2010 or the date on which the loan is repaid. The value of the override as of the closing date was $868,902 and was recorded as a reduction to the full cost pool and as an increase in deferred loan fees.



The Standard Agreement is secured by first liens on substantially all of our properties and requires quarterly interest payments, at LIBOR plus 5.50 % plus and additional 2.0% incremental default rate since the company is not currently in compliance as discussed below (10.39 % as at July 31, 2008).  The Company recorded interest charges related to the Standard Agreement of $ 277,581 for the three months ending July 31, 2008.



The Standard Agreement requires us to maintain certain financial ratios and other negative covenants, the most restrictive of which are:



a current ratio of at least 1.10 : 1.00;



a debt coverage ratio of no more than 2.00:1.00;

an interest coverage ratio of at least 3.00:1.00;

and a present value ratio 1.25:1.00.



The Company is not currently in compliance and must make significant improvements to achieve compliance. Any default on the restrictive covenants could result in the termination of future loans and the acceleration of the debt outstanding.  The Company is currently negotiating a restructuring of the Facility.  Accordingly, the full amount outstanding under the Facility is reported as a current liability.  If an agreement is not reached, the company could be forced to seek protection from creditors.  The Company expects to reach an agreement that will reduce cash requirements to an acceptable level.



In addition, there are minimal quarterly production volumes that take effect beginning October 31, 2008.  The Company is not currently in compliance and must make significant improvements to achieve compliance. The minimum quarterly production requirements are expected to be adjusted to conform with current production estimates as part of the Facility restructuring the Company is currently negotiating.



The Company incurred debt issuance costs in connection with the Standard Agreement of $1,182,093 which are included in loan fees as of July 31. A total of 6,119,750 warrants were granted to the lenders in the Standard Agreement. These warrants were valued using the Black Scholes method and resulted in a valuation of $643,076. The debt issuance cost, warrants and the Standard Bank PLC overriding royalty interest total $2,554,556 and are being amortized over 36 months, the term of the facility. Amortization of $172,992 is included in interest expense related to the Standard Agreement for the three months ended July 31, 2008.



Note 4:   Gain on asset sale



On July 16, 2007, the Company entered into a series of agreements forming a joint venture with an industry partner to facilitate exploitation of its interest in the Azraq Production Sharing Arrangement (PSA) with the Kingdom of Jordan. Under the terms of the agreements, the company expects to realize gross proceeds of $1,000,000 in return for the industry partner's entry into the project, and assumption of most of the financial obligation and operating



10

---





risks associated with the PSA.  As of September 10, 2007, the Company had only received $782,691 of the proceeds.  Of this amount, $550,000 was used to pay expenses directly related to the transaction. The remaining $232,691 was used to settle other liabilities in Jordan.



Because the net proceeds received of $232,691 exceeded the $58,774 recorded in our full cost pool for Jordan, we zeroed out the full cost pool and the remaining value received of $173,917 was recognized as a gain.  The Company received additional funds in the amount of $217,309 which were being held by an escrow agent in Jordan.



Note 5:    Transactions with Related Parties



During the three months ended July 31, 2008 a major shareholder of the Company made a private placement of $500,000 to purchase 500,000 preferred shares at $1.00 per share.



During the three months ended July 31, 2008 two major shareholders of the Company each loaned the Company $500,000 by way of 10% Convertible notes due June 30, 2011.



During the three months ended July 31, 2008 the Company issued 356,895 shares to officers and employees as part of the stock purchase plan.



During the three months ended July 31, 2008 the Company issued 1,382,882 shares to directors in payment of fees as part of the stock purchase plan.



During the three months ended July 31, 2008 the Company issued 122,666 shares to officers and employees as part of a stock grant.



Note 6:    Convertible Debentures



Our convertible debentures consist of the following:



|                                                                                                                                                                                                                                                                                                  | July 31, 2008 | April 30, 2008
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | --------------
|10 % Convertible Debentures issued from August 29, 2006 through December 31, 2006, convertible into common stock at $0.23 per share, bearing compound interest at 10% per annum. Outstanding principal and accrued interest are due at maturity, ranging from August 1, 2008 to December 1, 2008. | $    531,500  | $   881,500   
|                                                                                                                                                                                                                                                                                                  |               |               
|12% Convertible Debentures issued March 20, 2007 convertible into common stock at $0.23 per share, bearing compound interest at 12% per annum. Outstanding principal and accrued interest are due at maturity on March 19, 2009.                                                                  | 25,000        | 25,000        
|                                                                                                                                                                                                                                                                                                  |               |               
|10 % Convertible Debentures issued June 30, 2008 convertible into common stock at $0.10 per share, bearing compound interest at 10% per annum. Outstanding principal and accrued interest are due at maturity on June 30, 2011.                                                                   | 1,000,000     | -             
|                                                                                                                                                                                                                                                                                                  |               |               
|10 % Convertible Debentures issued July 25, 2008 convertible into common stock at $0.10 per share, bearing compound interest at 10% per annum. Outstanding principal and accrued interest are due at maturity on July 25, 2011.                                                                   | 456,081       | -             
|Discount                                                                                                                                                                                                                                                                                          | (8,463)       | (29,857)      
|                                                                                                                                                                                                                                                                                                  | $ 2,004,118   | $    876,643  



11

---







|Less current portion | 548,037     | 876,643
|-------------------- | ----------- | -------
|                     | $ 1,456,081 | $   -  
|                     |             |        



In connection with the issuance of the 10% convertible notes between August 29, 2006 and December 31, 2006, we issued 10,000 warrants for each $10,000 of principal amount. A total of 1,030,000 warrants were issued. The warrants are exercisable one year from issuance and expire three years from issuance. Upon issuance, we recorded the warrants as a discount to the 10% convertible debentures and a corresponding increase to additional paid in capital using the Black-Scholes method, using the following assumptions:



Expected life (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 years

Risk-free rate (2). . . . . . . . . . . . . . . . . . . . . . . . . . . .4.43% to 4.79%

Expected Dividends (3). . . . . . . . . . . . . . . . . . . . . . . . . . .  . . 0.00%

Volatility factor (4) . . . . . . . . . . . . . . . . . . . . . . . . .              133.4%



(1) Based on our estimate of time until the warrants will be exercised due to the volatility of our stock

(2) Based on the quotes for U.S. Treasury issues with three year maturities.

(3) We have not historically, nor do we anticipate, paying dividends.

(4)  Based on historic trading prices, measured daily for a period three years prior to issuing the warrants.



In accordance with EITF 00-27, we first allocated proceeds from the issuance of notes between the notes and the detachable warrants. This resulted in an effective conversion ratio that was less than the market price of our stock on certain issuances. We recorded a debt discount equal to the difference between the effective conversion ratio and the market price of our stock on the date of issuance of the notes for which such conversion was beneficial to the holder.



The following summarizes the premium and discount on convertible notes issued during the year ended July 31, 2008:



Discount at April 30, 2008

$   29,857

Less: amortization of discount

21,394

Discount at July 31, 2008

$  8,463



The 10% Convertible Notes due July 25, 2008 were exchanged for $350,000 of the 10% notes issued August 29, 2006 through December 31, 2006 plus accrued interest and the Company granted a 10% premium on the face value of the old note.



Note 7:   Asset Retirement Obligation



Our asset retirement obligation consists of the present value of plugging and abandonment costs of our oil and gas properties.  The following is a summary of our asset retirement obligations at July 31, 2008:



|Balance May 1, 2008                    | $     1,317,497
|-------------------------------------- | ---------------
|Liabilities incurred during the period | -              
|Liabilities settled during the period  | -              
|Accretion expense                      | 29,087         
|Balance July 31, 2008                  | $    1,346,584 



Note 8:    Shareholders' Equity



Preferred Stock



The Company is authorized to issue 25 million shares of no par value Series A preferred stock which may be issued with such preferences, stated values, rights, qualifications or limitations as determined by the Board of Directors. In July 2008, the Company sold 500,000 units (consisting of one share of Series A Preferred Stock and one warrant to purchase one shares of Series A Preferred Stock at an exercise price of $2.00 per share with an exercise period of five years) for a unit price of $1 per unit, for a total of $500,000.  Each share and warrant of the Series A Preferred



12

---





is convertible into 1 share of common stock upon the approval of the shareholders to increase the available common stock outstanding by 500,000,000 shares.



We have assigned a value to the warrants based on an allocation method that reflects the relative value of the preferred shares and warrants resulting in the stock being valued at $208,402 and additional paid in capital being credited with the balance of $291,598.



As of July 31, 2008, the company had issued 3,500,000 shares and as at July 31, 2007, the Company had no preferred stock issued and outstanding.

Common Stock



The company is authorized to issue 250,000,000 shares of common stock with no par value. As of July 31, 2008, the company had issued 188,338,380 shares and 145,173,150 as of July 31, 2007.

Common Stock Dividend and Warrants



The Company did not declare a dividend during the first quarter of 2008 or 2007.

The Company did not grant any warrants during the period ended July 31, 2008.

As part of a several private placements done during the year ended April 30, 2008, investors were granted warrants to purchase additional shares. The exercise price on 3,500,000 warrants was set at $0.25 per share. As part of the Standard Bank and Nordkop Senior Debt Facility the lenders were granted 2,009,916 warrants with an exercise price of $0.19, 2,009,916 warrants at $0.23 and 2,009,916 warrants at $0.30.



Note 9:    Stock based compensation



During the year ended April 30, 2008 the Company has compensated Directors for services by issuing shares of restricted common stock.  In addition, three officers of the Company received stock and option grants and an employee was awarded a stock grant. The total stock based compensation included in General and Administrative expense for the three months ended July 31, 2008 was $13,707 compared to $27,586 for the three months ended July31, 2007.



Common Stock Grants



As required by SFAS 123(R), Stock grants are valued at the grant date market price.



During April and May, 2007 the officers were granted a total of 1,150,000 shares valued at grant date market prices averaging $0.135 for a total cost of $155,000. The grants are to be earned over a 36 month period starting from their employment date and will vest in 24 equal installments beginning on the 1st anniversary of their employment date. The Company has recorded an expense of $12,960 for the three months ended July 31, 2008 leaving a balance of $90,207 to be charged to expense at $12,958 per quarter for future periods.



In March 2007, an employee was granted 48,000 shares valued at the grant date market price of $0.14 for a total cost of $6,720. The grants are to be earned over a 24 month period starting from their employment date and will vest in 12 equal installments of 2,000 shares beginning on the 1st anniversary of their employment date and the balance on the 2nd anniversary of the employment date. The Company has recorded an expense of $747 for the three months ended July 31, 2008 leaving a balance of $2,238 to be charged to expense at $747 per quarter for future periods.



The following is a summary of non-vested restricted shares for the three months ended July 31, 2008:



| | Shares | Weighted average grant-date fair value
| | ------ | --------------------------------------
| |        |                                       

|Non-vested at May 1, 2008    | 1,175,167 | 0.135
|---------------------------- | --------- | -----
|Granted                      | -         | -    
|Vested                       | 149,749   | 0.135
|Forfeited                    | -         | -    
|Non-vested at April 30, 2008 | 1,025,418 | 0.135



13

---



Common Stock Options



The following table summarizes stock option activity related to our employees during the three months ended July 31, 2008:



|                                       |           |  | Weighted average |  | Weighted average |  | Aggregate    
|-------------------------------------- | --------- |  | ---------------- |  | ---------------- |  | -------------
|                                       | Stock     |  | exercise price   |  | remaining terms  |  | intrinsic    
|                                       | Options   |  | per share        |  | (in years)       |  | value        
|Options outstanding at April  30, 2008 | 8,099,997 |  | $      0.33      |  | 2.70             |  | $           -
|Granted                                | -         |  | $           -    |  | -                |  | $           -
|Forfeitures                            | -         |  | $        -       |  | -                |  | $           -
|Exercised                              | -         |  | $  -             |  | -                |  | $           -
|Options outstanding at July 31, 2008   | 8,099,997 |  | $      0.33      |  | 2.67             |  | $           -
|Options exercisable at July 31, 2008   | 8,099,997 |  | $      0.33      |  |                  |  |              



As required by SFAS 123(R), the granting of options are share based payment transactions and are to be treated as compensation expense by us with a corresponding increase to additional paid-in capital.

The option grant to officers and employees in the year ended April 30, 2008 was valued using the Black-Sholes option-pricing model for a total cost of $512,400 which has been charged against expense in the year ended April 30, 2008.

The Company will issue new shares to anyone exercising options.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for the options included in the above table:



|                                       |  | July31, 2008 |  | April 30, 2008 |  
|-------------------------------------- |  | ------------ |  | -------------- | -
|Expected life                          |  | -            |  | 3 to 5 years   |  
|Risk-free rate of return               |  | -            |  | 3.91% - 4.76%  | %
|Volatility                             |  | -            |  | 111.04-133.91  |  
|Dividend yield                         |  | -            |  | 0%             |  
|Weighted average fair  value per share |  | -            |  | .28            |  



The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility



Note 10:  Employee Benefit Plans



Stock Purchase Plan



During the fiscal year ending April 30, 2008 the Company established a stock purchase plan that is available to all full-time employees, directors and long term contractors.  Twice a year on January 31st and July 31st the employee, director, or contractor may make an irrevocable election to purchase up to $25,000 worth of the Companys stock either through payroll deduction or cash payment, or a combination of both.  The stock purchased under this plan is restricted from market trading for 6 months after issuance. The actual number of shares is determined based on the



14

---





average price in the month following the election to participate and the Company matches the amount of shares purchased.  The Company issued 2,170,810 share of restricted common stock in July 2008 under this plan.



Note 11:   Net Loss Per Common Share



Basic net income (loss) per share is computed by dividing the net income attributable to common shareholders by the weighted average number of shares outstanding during the period.



Diluted net income (loss) per share is computed in the same manner, but also considers the effect of the common stock shares underlying the following:



|                             | July 31, 2008 | July 31, 2007
|---------------------------- | ------------- | -------------
|Stock options                | 8,099,997     | 2,249,477    
|Warrants                     | 48,652,712    | 49,076,188   
|Restricted shares            | 1,025,418     | 2,150,000    
|Convertible debt             | 17,559,296    | 4,792,313    
|Preferred stock and warrants | 260,000,000   | -            



The shares of the common stock underlying the stock options, warrants, restricted shares, convertible debt and preferred stock and warrants, shown in the preceding table, are not included in weighted average shares outstanding for the three months ended July 31, 2008 and 2007 as their effects would be anti-dilutive.



Note 12:   Contingencies



Wells Land and Cattle Co., Inc., et.al. v. Sonoran Energy, Inc.



On or about May 18, 2007 Wells Land and Cattle Co., Inc., et.al. filed a lawsuit alleging that Sonoran was illegally disposing of saltwater into a saltwater disposal well on their property, that Sonoran routinely trespasses on its land to reach another well which is not located on plaintiffs land, that Sonoran spilled saltwater onto Plaintiffs land, and that an oil well lease covering one well has expired due to lack of production.  Plaintiff claims that damages exceed $2,000,000 and asks the court for a permanent injunction against Sonoran from trespassing on Plaintiffs property for the purpose of reaching the disposal well that is not on its property.  Sonoran intends to vigorously defend its actions in this matter and anticipates that the matter will be eventually settled for an immaterial amount.



Property Liens



We have received notice of various liens totalling approximately $1,850,500 on certain of our oil and gas properties in connection with outstanding accounts payable.  All of our properties are also subject to liens related to our credit Facility.



Other



We are subject to other lawsuits and controversies which are not discussed herein. Management, based on the facts and circumstances, does not believe that any such matter will have a material adverse effect on the results of operations or the financial condition of the Company.



Environmental



As an owner and operator of oil and gas properties we are subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may impose liability on the lessee under an oil and gas lease or concession for the cost of pollution clean-up resulting from operations and also may subject the lessee to liability for pollution damage.



15

---



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words "believes", "anticipates", "plans", "expects" and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Sonoran Energy, Inc. (the "Company", "Sonoran", and sometimes "we", "us", "our" and derivatives of such words) undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. These forward-looking statements should be read in conjunction with the Company's disclosures included in their Form 10-K for the fiscal year ended April 30, 2008.



General:



The Company continues to focus on its field development activities in Central Texas and maintaining existing facilities and preparations for larger scale interventions for East Texas and Louisiana.  The Company also continued discussions with key investors and lenders around the need to improve liquidity and obtain funds needed to properly develop its Louisiana assets.



Operations:



|                     | Central Texas | East Texas | Louisiana | Total  
|-------------------- | ------------- | ---------- | --------- | -------
|Period Ending:       | 7/31/08       | 4/30/08    | Change    | 7/31/08
|Production           |               |            |           |        
|Oil   BBLS           | 129           | 267        | (138)     | 3,495  
|Gas  MCF             | 14,345        | 5,395      | 8,949     | -      
|Plant products BBLS  | 2,634         | 1,347      | 1,287     | -      
|Total BOE            | 5,154         | 2,514      | 2,640     | 3,495  
|                     |               |            |           |        
|Revenue ($M)         |               |            |           |        
|Oil                  | $    17       | $    26    | $     (9) | $   451
|Gas                  | 140           | 47         | 92        | -      
|Plant Products       | 179           | 67         | 112       | -      
|Total Revenue        | $  336        | $  141     | $195      | $   451
|                     |               |            |           |        
|Price per            |               |            |           |        
|Oil  BBL            | $133.19       | $98.50     | $34.69    | $129.09
|Gas  - MCF           | $9.76         | $8.81      | $0.95     | -      
|Plant products  BBL | $67.85        | $49.52     | $18.33    | -      



For the first quarter of Fiscal year 2009, ending on July 31, 2008, revenue has increased by 77% when compared to the quarter ending April 30, 2008 due to both increased production and prices.  The table below illustrates volume and price comparisons by operational area:



Louisiana Properties



The Company operates twelve active wells in Beauregard, Livingston, Rapides, and Vernon Parishes, Louisiana.  During the quarter, the company conducted tests and reviewed various approaches to initiate production from its high potential Louisiana wells.  Near the end of the quarter the Company started a wire line operation designed to mill out an obstruction and allow larger diameter tools to be used to clear an obstruction in one of its production wells.  Although this effort was not successful it allowed the Company to develop information on design



16

---





alternatives that should improve the next phase of operations. A coiled tubing intervention has been designed for the Crosby 25 well, and execution is planned to commence during September.  Production - on an equivalent-barrel basis - declined by 8.8% during this reporting period when compared to the previous quarter.



East Texas Properties



The company operates twelve active wells in Smith and Wood Counties, Texas. Smith County wells operated without incident during the quarter.  Wood county work concentrated on increasing the water injection capacity through the successful clean-out and repair of a crucial salt water disposal well.  Electrical storms in the area damaged some surface power components related to down-hole pump operation, and these items were repaired or replaced to return the wells to operation.  With the producing wells in Wood County carrying high producing fluid wells, an up-sizing of the down-hole pump in one of the producers was planned.  Dependent on results of this trial, up-sizing of the other down-hole pumps may be undertaken in the future.  Compared to the previous quarter, oil production was increased by 37% during this reporting period.

Central Texas Properties



The Company is continuing with re-development for the KWB Field.  The program involves the re-entry, re-activation, and re-completion of wells in the Company's KWB field in Tom Green County in Central Texas.  Re-completions have focused primarily on the Canyon and Cisco sands, plus three additional horizons. Following recent well work, the field production rate was raised to over 600 thousand cubic feet of LNG-rich gas and 9-13 barrels of associated condensate per day.  Compared to the previous quarter, gas production was increased by 165% during this reporting period. Further recompletions, the installation of de-liquification pumps in four gas producers, and a number of well treatments are planned to improve productivity in the next quarter.



Azraq Production Sharing Agreement (PSA)



The Azraq block sits on the same trend as several other productive basins in the Middle East, yet remains relatively under-explored with limited use of modern seismic, drilling and production technology. The PSA covers an area of approximately 11,250 square kilometers offering a number of exploration plays.  A production sharing Agreement has been signed by the King and ratified by the National Assembly of Jordan.  The Company has formed a joint venture with an industry partner to carry out its obligations under the PSA.  The industry partner is responsible for day-to-day management of the operating company and has assumed most of the risk related to the development obligations.  The joint venture is currently in the process of developing plans to carry out the PSAs obligations.



Analysis of Operations



Results of Operations for the Three Months Ended July 31, 2008 and 2007 with comparisons:



|                               |  | 2008    | 2007   
|------------------------------ |  | ------- | -------
|                               |  |         |        
|Oil  Bbls                     |  | 4,511   | 6,528  
|Gas  Mcf                      |  | 15,294  | 19,254 
|Plant products  Bbls          |  | 2,776   | 2,618  
|Total BOE                      |  | 9,836   | 12,355 
|                               |  |         |        
|Oil  Revenue ($M)             |  | 581     | 432    
|Gas  Revenue ($M)             |  | 152     | 138    
|Plant Products  Revenue ($M)  |  | 186     | 117    
|                               |  | 919     | 687    
|                               |  |         |        
|Oil  Price per Bbl            |  | $128.76 | $ 66.13
|Gas  Price per Mcf            |  | 9.95    | 7.16   
|Plant products  Price per Bbl |  | 67.11   | 44.90  

|                                  |  |        |        
|--------------------------------- |  | ------ | -------
|LOE/BOE                           |  | $26.86 | $ 29.46
|Oil and gas production costs ($M) |  | 264    | 364    





17

---



REVENUES



Revenue increased to $923,745 for the three months ended July 31, 2008 from the $691,787 for the three months ended July 31, 2007 due primarily to increased commodity prices for oil, gas and plant products, offset by small declines in volumes.



OIL AND GAS PRODUCTION COSTS



Production costs decreased to $264,193 for the three months ended July 31, 2008 as compared to $364,026 for the three months ended July 31, 2007.  The decrease in cost is primarily due to lower repair and maintenance costs, insurance, and property taxes.



PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION



The provision for depletion, depreciation and amortization was $346,910 for the three months ended July 31, 2008 compared to $227,435 for July 31, 2007. The increase in cost reflects the additions to properties done during the last fiscal year and increased production.



LEGAL SETTLEMENT EXPENSE



The net change, for the three months ended July 31, 2008 in our obligations less the value of shares of common stock previously pledged to settle those obligations was recorded as a reduction in current liabilities and is shown in our Consolidated Statements of Operations as an expense of $1,165 in Legal settlement expense and a balance of $446,306 in Notes payable regarding legal settlement on the Consolidated Balance Sheet.



GENERAL AND ADMINISTRATIVE EXPENSES



General and administrative expenses decreased $264,216 for the three months ended July 31, 2008, when compared to the same period for 2007. The decrease is due primarily to decreased legal expense of $95,765 due to settlement of legal issues, reduced use of consultants for $190,975, reduction in rent costs of $34,882 due to Phoenix sub-lease, reduction in salaries and benefits of $36,135, and a reduction in stock compensation expense of $13,879 partially offset by estimated bad debt expense of $99,000 for the quarter.



OTHER INCOME (EXPENSE)



Interest expense of $658,338 in the three months ended July 31, 2008 increased $145,616 when compared to $512,722 incurred in the three months ended July 31, 2007. The increase in interest expense was primarily due to the increased debt the Company incurred through the entering into the $12.0 million senior secured facility in December 2007 and increased convertible debt.



LIQUIDITY AND CAPITAL RESOURCES



During the quarter, the Company obtained additional funding through the sales of preferred equity and the issuance of convertible debt for $500,000 and $1.0 million respectively.  The funding is being used to support the development of its West Texas operations and for operational activities.  The Company has a $15,000,000 credit facility with Standard Bank., which the Company has borrowed $12.0 million as of July 31, 2008.  The Company is not currently in compliance with its restrictive financial covenants related to the Standard Bank credit facility and does not have any remaining availability to borrow additional funds.  The Company is currently negotiating with Standard Bank to restructure the facility; however, if an agreement is not reached, the Company could be forced to seek protection for creditors.



The Company had capital additions of approximately $564,000 during the quarter primarily due to the additions in the West Texas assets.  The West Texas operations have a lower risk profile, but will take longer to provide the desired increase in production. The Company will seek additional debt or equity funds to continue to develop its assets including seeking a partner for the Louisiana project.



Item 3.  Quantitative and Qualitative Disclosures About
Market Risk



Smaller reporting companies are not required to complete this section.



Item 4.   Controls and Procedures.



Disclosure controls and procedures are controls and other procedures that are designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that



18

---





information required to be disclosed in the reports that a company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.



We maintain disclosure controls and procedures designed to ensure that material information related to our company is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.



Item 4T.   Controls and Procedures.



Evaluation of Disclosure Controls and Procedures



SONORAN ENERGY INC's management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act). Even an effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error and circumvention or overriding of controls and therefore can provide only reasonable assurance with respect to reliable financial reporting. Furthermore, the effectiveness of an internal control system in future periods can change with conditions.



SONORAN ENERGY INC's management, under the direction of the Chief Executive Office and Chief Financial Officer, assessed the effectiveness of SONORAN ENERGY INC's internal controls over financial reporting as of July 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal ControlIntegrated Framework. Based on this assessment, management believes that sufficient evidence exists, as of July 31, 2008, to support a conclusion that SONORAN ENERGY INC's internal controls over financial reporting are effective.



Changes in Internal controls over Financial Reporting



There were no changes in SONORAN ENERGY INC's internal controls over financial reporting that occurred during the fiscal quarter ended July 31, 2008 that have materially affected, or are reasonably likely to materially affect, SONORAN ENERGY INC's internal control over financial reporting.



PART II - OTHER INFORMATION



Item 1.     Legal proceedings



Wells Land and Cattle Co., Inc., et.al. v. Sonoran Energy, Inc.



On or about May 18, 2007 Wells Land and Cattle Co., Inc., et.al. filed a lawsuit alleging that Sonoran was illegally disposing of saltwater into a saltwater disposal well on their property, that Sonoran routinely trespasses on its land to reach another well which is not located on plaintiffs land, that Sonoran spilled saltwater onto Plaintiffs land, and that an oil well lease covering one well has expired due to lack of production.  Plaintiff claims that damages exceed $1,000,000 and asks the court for a permanent injunction against Sonoran from trespassing on Plaintiffs property for the purpose of reaching the disposal well that is not on its property.  A trial date has not been set.  However, Sonoran intends to vigorously defend its actions in this matter and anticipates that the matter will be eventually settled for an immaterial amount.



Korker Diversified Holdings Inc. v. Savings Plus Internet and Sonoran Energy, Inc.



During August 2000, the Company was named as a defendant in a lawsuit filed in British Columbia related to Savings Pluss failure to repay a $35,000 loan that it received from Korker.  During April 2008, the Company agreed to withdraw its appeal and committed to pay a total of $145,000 in 8 monthly installments of $15,000 and a final payment of $25,000.   The cost of this settlement has been fully accrued as of April 30, 2008.



19

---







Crowell ., et.al. v. Sonoran Energy, Inc.



On or about August 28, 2007, a Louisiana land owner filed a lawsuit alleging that Sonoran contaminated ground water by improper operations of our salt water disposal facilities.  The plaintiff is requesting a fund to be established for environmental studies and related remediation along with punitive damages for failure to plug and abandon the site.  The properties involved have not been active since they were acquired by the Company and any operational issues are related to activities carried out under the former owner and operator.  Since we have already recorded an adequate amount to cover plugging and abandonment activities, we believe that insurance coverage and recoveries from previous operators will limit our exposure in this matter to an immaterial amount.



Item 1A.    Risk Factors



Smaller reporting companies are not required to complete this section.



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



During the quarter the Company issued restricted common stock as follows:



The Company issued 300,000 shares of common stock at $0.065 per share being market price at the end of the quarter, for payment of legal settlement expense amounting to $19,500. These shares were issued to non-U.S. residents under the auspices of Regulation S.



The Company issued 650,122 restricted common shares at $0.058 per share for payment of director fees through the stock purchase plan in the amount of $37,707. These shares were issued under the Rule 4(2) exemption.



The Company issued 732,760 restricted common shares at $0.058 per share for payment of director fees through the stock purchase plan in the amount of 42,500. These shares were issued to non-U.S. residents under the auspices of Regulation S.



The Company issued 431,034 restricted common shares at $0.058 per share for payment of legal fees through the stock purchase plan in the amount of $25,000. These shares were issued under the Rule 4(2) exemption.



The Company issued 356,894 restricted common shares at $0.058 per share to employees for their participation in the stock purchase plan in the amount of $20,700. These shares were issued under the Rule 4(2) exemption.



The Company issued 1,000,000 restricted common shares at $0.14 per share in payment of debt in the amount of $140,000. These shares were issued to non-U.S. residents under the auspices of Regulation S.



The Company issued 122,666 restricted common shares at an average price of $0.14 per share, being market price on the day of the grant, for payment of a stock grant to employees
totaling $16,923. These shares were issued under the Rule 4(2) exemption.



During the quarter the Company issued 500,000 preferred shares at $1.00 per share for a private placement of $500,000. These shares were issued to a non-U.S. resident under the auspices of Regulation S.



20

---



Item 3.  Defaults Upon Senior Securities



There were no defaults on senior securities.



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



No matters were submitted to shareholders



Item 5.    Other Information



Nothing to report.



Item 6.    Exhibits



31.1 - Rule 13a-14a/15d-14(a) Certification by Chief Executive Officer

31.2 - Rule 13a-14a/15d-14(a) Certification by Chief Financial Officer

32.1 - Section 1350 Certification by Chief Executive Officer

32.2 - Section 1350 Certification by Chief Financial Officer





SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Dated: September 12, 2008

SONORAN ENERGY, INC.



/s/ Peter Rosenthal

Peter Rosenthal,

Chief Executive Officer



/s/ Andrew Williams

Andrew Williams

Senior VP/CFO



21

---





Exhibit 31.1



Pursuant to the requirements of Rule 13a-14 of the Securities Exchange Act of 1934, as amended, provides the following certification.



I, Peter Rosenthal, certify that:



1.   I have reviewed this quarterly report on form 10-Q of Sonoran Energy, Inc.;



2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a  material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.



3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material aspects the financial condition, results of operations and cash flows of Sonoran Energy, Inc. as of, and for, the periods presented in this quarterly report.



4.

The other certifying directors and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) for Sonoran Energy, Inc. and have:



a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to Sonoran Energy, Inc., including its consolidated subsidiaries, is made known to us by other within those entities, particularly during the period in which this report is being prepared;



b.

Evaluated the effectiveness of Sonorans disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report on such evaluation; and;



c.

Disclosed in this report any change to Sonorans internal control over financial reporting that occurred during Sonorans third fiscal quarter that has materially affected, or is reasonably likely to materially affect, Sonorans internal control over financial reporting.



5.

The other certifying directors and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Sonorans auditors and the audit committee of our board of directors ( or persons performing the equivalent function):



a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely Sonorans ability to record, process, summarize and report  financial data: and



b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in Sonorans internal control over financial reporting.



Dated:  September 12, 2008



/s/ Peter Rosenthal

Peter Rosenthal

CEO







22

---





Exhibit 31.2



Pursuant to the requirements of Rule 13a-14 of the Securities Exchange Act of 1934, as amended, provides the following certification.



I, Andrew Williams, certify that:



1.   I have reviewed this quarterly report on form 10-Q of Sonoran Energy, Inc.;



2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a  material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.



3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material aspects the financial condition, results of operations and cash flows of Sonoran Energy, Inc. as of, and for, the periods presented in this quarterly report.



4.

The other certifying directors and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) for Sonoran Energy, Inc. and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to Sonoran Energy, Inc., including its consolidated subsidiaries, is made known to us by other within those entities, particularly during the period in which this report is being prepared;



b.

Evaluated the effectiveness of Sonorans disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report on such evaluation; and;



c.

Disclosed in this report any change to Sonorans internal control over financial reporting that occurred during Sonorans third fiscal quarter that has materially affected, or is reasonably likely to materially affect, Sonorans internal control over financial reporting.



5.

The other certifying directors and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Sonorans auditors and the audit committee of our board of directors ( or persons performing the equivalent function):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely Sonorans ability to record, process, summarize and report  financial data: and



b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in Sonorans internal control over financial reporting.



Dated:  September 12, 2008



/s/ Andrew Williams

Andrew Williams

Senior VP/CFO





23

---





Exhibit 32.1



CERTIFICATION PURSUANT TO 18 U.S.C. Section 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In conjunction with the Quarterly Report of Sonoran Energy, Inc. on Form 10-Q for the Quarter ending July 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Peter Rosenthal certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002, that, to the best of my knowledge and belief:

1.

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934

2.

the information contained in the Report fairly presents, in all material aspects, the financial condition and result of operations of the Company.



/s/ Peter Rosenthal

Peter Rosenthal

CEO



Dated:  September 12, 2008



Exhibit 32.2



CERTIFICATION PURSUANT TO 18 U.S.C. Section 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In conjunction with the Quarterly Report of Sonoran Energy, Inc. on Form 10-Q for the Quarter ending July 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Andrew Williams certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002, that, to the best of my knowledge and belief:

1.

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934

2.

the information contained in the Report fairly presents, in all material aspects, the financial condition and result of operations of the Company.



/s/ Andrew Williams

Andrew Williams

Senior VP/CFO



Dated:  September 12, 2008



24