**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**







**x**
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934.**




**For
      the quarterly period ended December 31, 2006.**


**or**




**o**
            **Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934.**





**For
      the transition period from ______to______.**




**Commission
      file number 333-123735**




**STONE
      MOUNTAIN RESOURCES, INC.**


(Exact
      name of registrant as specified in its charter)




**Delaware**
            **87-0700927**(State
                or other jurisdiction of
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)**701
                North Green Valley Parkway #200 Henderson, Nevada**
            **89074**(Address
                of principal executive offices)
            (Zip
                Code)




**(702)
      990-3489**


(Registrant’s
      telephone number, including area code)




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




Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
      period that the issuer 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 shell company as defined in Rule
      12b-2
      of the Exchange Act.


Yes x No o





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of February 12, 2007: 19,961,000 shares of common stock.



























**STONE
      MOUNTAIN RESOURCES, INC.**


**FINANCIAL
      STATEMENTS**




**INDEX**




**PART
      I-- FINANCIAL INFORMATION**





Item
                1.
            Financial
                StatementsItem
                2.
            Management’s
                Discussion and Analysis of Financial ConditionItem
                3.
            Control
                and Procedures




**PART
      II-- OTHER INFORMATION**




Item
                1.
            Legal
                ProceedingsItem
                2.
            Changes
                in SecuritiesItem
                3.
            Defaults
                Upon Senior SecuritiesItem
                4.
            Submission
                of Matters to a Vote of Security HoldersItem
                5.
            Other
                InformationItem
                6.
            Exhibits
                and Reports on Form 8-K






**SIGNATURE**




**Item
      1. Financial Information**




BASIS
      OF
      PRESENTATION




The
      accompanying reviewed financial statements are presented in accordance with
      generally accepted accounting principles for interim financial information
      and
      the instructions to Form 10-QSB and item 310 under subpart A of Regulation
      S-B.
      Accordingly, they 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 (consisting only of normal
      occurring accruals) considered necessary in order to make the financial
      statements not misleading, have been included. Operating results for the nine
      months ended December 31, 2006 are not necessarily indicative of results that
      may be expected for the year ending March 31, 2007. The financial statements
      are
      presented on the accrual basis.









**STONE
        MOUNTAIN RESOURCES, INC.**
 **(an
        exploration stage company)**
 
 **FINANCIAL
        STATEMENTS**
 **(Unaudited)**
 
 **As
        Of December 31, 2006**
 
 
 
 
 
 BALANCE
                  SHEET
              F-1STATEMENT
                  OF OPERATIONS
              F-2
                  -F-3STATEMENT
                  OF STOCKHOLDERS' EQUITY
              F-4STATEMENT
                  OF CASH FLOWS
              F-5FINANCIAL
                  STATEMENT FOOTNOTES
              F-6















**STONE
                  MOUNTAIN RESOURCES, INC.****(an
                  exploration stage company)****BALANCE
                  SHEET****(Unaudited)****As
                  of December 31, 2006 and March 31, 2006****ASSETS****CURRENT
                  ASSETS**
              
              **12/31/2006**
              
              **3/31/2006**Cash
              
              $
              418
              
              $
              486Prepaid
                  Rent
              
              
              -
              
              
              -Total
                  Current Assets
              
              
              418
              
              
              486**TOTAL
                  ASSETS**
              
              $
              418
              
              $
              486**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              -
              
              $
              -Accrued
                  expenses
              
              
              7,250
              
              
              6,200Total
                  Current Liabilities
              
              
              7,250
              
              
              6,200**LONG-TERM
                  LIABILITIES**None
              
              
              -
              
              
              -**TOTAL
                  LIABILITIES**
              
              
              7,250
              
              
              6,200**STOCKHOLDERS'
                  EQUITY**Preferred
                  stock, $.001 par valueAuthorized:
                  10,000,000 Issued: None
              
              
              -
              
              
              -Common
                  Stock, $.001 par valueAuthorized:
                  100,000,000Issued:
                  19,961,000 and 19,961,000, respectively
              
              
              19,961
              
              
              19,961Additional
                  paid in capital
              
              
              91,289
              
              
              91,289Accumulated
                  deficit during development stage
              
              
              (118,082
              )
              
              (116,964
              )Total
                  Stockholders' Equity
              
              
              (6,832
              )
              
              (5,714
              )**TOTAL
                  LIABILITIES AND EQUITY**
              
              $
              418
              
              $
              486





The
        accompanying notes are an integral part of these financial
        statements




F-1




**STONE
                  MOUNTAIN RESOURCES, INC.****(an
                  exploration stage company)****STATEMENT
                  OF OPERATIONS****(Unaudited)****For
                  the nine months ending December 31, 2006 and 2005,
                  and****from
                  inception (March 31, 2004) through December 31,
                  2006****9
                  MONTHS**
              
              **9
                  MONTHS****ENDING**
              
              **ENDING**
              
              **FROM****12/31/2006**
              
              **12/31/2005**
              
              **INCEPTION****REVENUE**
              
              $
              -
              
              $
              -
              
              $
              -**COST
                  OF SERVICES**
              
              
              -
              
              
              -
              
              
              -**GROSS
                  PROFIT OR (LOSS)**
              
              
              -
              
              
              -
              
              
              -**GENERAL
                  AND ADMINISTRATIVE EXPENSES**
              
              
              1,118
              
              
              5,265
              
              
              42,082**GENERAL
                  EXPLORATION**
              
              
              -
              
              
              -
              
              
              76,000**NET
                  INCOME**
              
              
              (1,118
              )
              
              (5,265
              )
              
              (118,082
              )**ACCUMULATED
                  DEFICIT BEGINNING BALANCE**
              
              
              (116,964
              )
              
              (110,826
              )
              
              -**ACCUMULATED
                  DEFICIT**
              
              $
              (118,082
              )
              $
              (116,091
              )
              $
              (118,082
              )**Earnings
                  (loss) per share, basic**
              
              $
              (0.00
              )
              $
              (0.00
              )**Weighted
                  average number of common shares**
              
              
              19,961,000
              
              
              19,961,000


The
          accompanying notes are an integral part of these financial
          statements
   F-2
   **STONE
                      MOUNTAIN RESOURCES, INC.****(an
                      exploration stage company)****STATEMENT
                      OF OPERATIONS****(Unaudited)****For
                      the three months ending December 31, 2006 and
                      2005****3
                      MONTHS**
                  
                  **3
                      MONTHS****ENDING**
                  
                  **ENDING****12/31/2006**
                  
                  **12/31/2005****REVENUE**
                  
                  $
                  -
                  
                  $
                  -**COST
                      OF SERVICES**
                  
                  
                  -
                  
                  
                  -**GROSS
                      PROFIT OR (LOSS)**
                  
                  
                  -
                  
                  
                  -**GENERAL
                      AND ADMINISTRATIVE EXPENSES**
                  
                  
                  373
                  
                  
                  373**GENERAL
                      EXPLORATION**
                  
                  
                  -
                  
                  
                  -**NET
                      INCOME/(LOSS)**
                  
                  $
                  (373
                  )
                  $
                  (373
                  )
   The
            accompanying notes are an integral part of these financial
            statements
    F-3
   **STONE
                        MOUNTAIN RESOURCES, INC.****(an
                        exploration stage company)****(Unaudited)****STATEMENT
                        OF STOCKHOLDERS' EQUITY****As
                        of December 31, 2006****ADDITIONAL****COMMON**
                    
                    **PAR**
                    
                    **PAID
                        IN**
                    
                    **ACCUM.**
                    
                    **TOTAL****STOCK**
                    
                    **VALUE**
                    
                    **CAPITAL**
                    
                    **DEFICIT**
                    
                    **EQUITY**Common
                        stock issued as officers'compensation
                        on company formation
                    
                    
                    23,000,000
                    
                    $
                    23,000
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    23,000March
                        31, 2004 at $0.001 per shareNet
                        income (loss)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (23,500
                    )
                    
                    (23,500
                    )Balance,
                        March 31, 2004
                    
                    
                    23,000,000
                    
                    $
                    23,000
                    
                    $
                    -
                    
                    $
                    (23,500
                    )
                    $
                    (500
                    )Common
                        stock issued for cash
                    
                    
                    4,800,000
                    
                    
                    4,800
                    
                    
                    43,200
                    
                    
                    
                    
                    
                    48,000August
                        31, 2004 at $0.01per
                        share on private placementCommon
                        stock issued for cash
                    
                    
                    161,000
                    
                    
                    161
                    
                    
                    40,089
                    
                    
                    
                    
                    
                    40,250February
                        28, 2005 at $0.25per
                        share on private placementNet
                        income (loss)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (87,326
                    )
                    
                    (87,326
                    )Balance,
                        March 31, 2005
                    
                    
                    27,961,000
                    
                    $
                    27,961
                    
                    $
                    83,289
                    
                    $
                    (110,826
                    )
                    $
                    424Common
                        stock returned to treasury
                    
                    
                    (8,000,000
                    )
                    
                    (8,000
                    )
                    
                    8,000
                    
                    
                    -
                    
                    
                    -and
                        cancelled as of July 2005at
                        $0.001 per shareNet
                        income (loss)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (6,138
                    )
                    
                    (6,138
                    )Balance,
                        March 31, 2006
                    
                    
                    19,961,000
                    
                    $
                    19,961
                    
                    $
                    91,289
                    
                    $
                    (116,964
                    )
                    $
                    (5,714
                    )Net
                        income (loss)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (1,118
                    )
                    
                    (1,118
                    )Balance,
                        December 31, 2006
                    
                    
                    19,961,000
                    
                    $
                    19,961
                    
                    $
                    91,289
                    
                    $
                    (118,082
                    )
                    $
                    (6,832
                    )
  The
                accompanying notes are an integral part of these financial
                statements
  F-4
  **STONE
                      MOUNTAIN RESOURCES, INC.****(an
                      exploration stage company)****(Unaudited)****STATEMENTS
                      OF CASH FLOWS****For
                      the nine months ending December 31, 2006 and 2005,
                      and****from
                      inception (March 31, 2004) through December 31,
                      2006****FROM****CASH
                      FLOWS FROM OPERATING ACTIVITIES**
                  
                  **12/31/2006**
                  
                  **12/31/2005**
                  
                  **INCEPTION**Net
                      income (loss)
                  
                  $
                  (1,118
                  )
                  $
                  (5,265
                  )
                  $
                  (118,082
                  )Adjustments
                      to reconcile net income to net cashprovided
                      by (used in) operating activities:Stock
                      issued as compensation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  23,000(Increase)
                      Decrease in prepaid expense
                  
                  
                  -
                  
                  
                  823
                  
                  
                  -Increase
                      (Decrease) in accrued expenses
                  
                  
                  1,050
                  
                  
                  1,050
                  
                  
                  7,250Total
                      adjustments to net income
                  
                  
                  1,050
                  
                  
                  1,873
                  
                  
                  30,250Net
                      cash provided by (used in) operating activities
                  
                  
                  (68
                  )
                  
                  (3,392
                  )
                  
                  (87,832
                  )**CASH
                      FLOWS FROM INVESTING ACTIVITIES**None
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Net
                      cash flows provided by (used in) investing activities
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -**CASH
                      FLOWS FROM FINANCING ACTIVITIES**Proceeds
                      from stock issuance
                  
                  
                  -
                  
                  
                  -
                  
                  
                  88,250Net
                      cash provided by (used in) financing activities
                  
                  
                  -
                  
                  
                  -
                  
                  
                  88,250**CASH
                      RECONCILIATION**Net
                      increase (decrease) in cash
                  
                  
                  (68
                  )
                  
                  (3,392
                  )
                  
                  418Cash
                      - beginning balance
                  
                  
                  486
                  
                  
                  3,901
                  
                  
                  -**CASH
                      BALANCE END OF PERIOD**
                  
                  $
                  418
                  
                  $
                  509
                  
                  $
                  418
   The
            accompanying notes are an integral part of these financial
            statements
    F-5
  **STONE
            MOUNTAIN RESOURCES, INC.**
 (an
            exploration stage company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 (Unaudited)
 
 As
            Of
            December 31, 2006
 
 
 NOTE
            1 - OPERATIONS
            AND BASIS OF PRESENTATION
 
 
 Stone
            Mountain Resources, Inc. (the Company), an exploration stage company,
            was
            incorporated on March 31, 2004 in the State of Delaware. The Company
            is an
            exploration stage mining company. On October 11, 2004 the Company became
            actively engaged in acquiring mineral properties, raising capital, and
            preparing
            properties for production. The Company did not have any significant mining
            operations or activities from inception; accordingly, the Company is
            deemed to
            be in the exploration stage.
 
 The
            Company's financial statements have been presented on the basis that
            it is a
            going concern, which contemplates the realization of the mineral properties
            and
            other assets and the satisfaction of liabilities in the normal course
            of
            business. The Company has incurred losses of from inception. These factors
            raise
            substantial doubt about the Company's ability to continue as a going
            concern.
            Management continues to actively seek additional sources of capital to
            fund
            current and future operations. There is no assurance that the Company
            will be
            successful in continuing to raise additional capital, establishing probable
            or
            proven reserves, or determining if the mineral properties can be mined
            economically. These financial statements do not include any adjustments
            that
            might result from the outcome of these uncertainties.
 
 The
            fiscal year end of the Company is March 31.
 
 NOTE
            2 - SUMMARY
            OF SIGNIFICANT ACCOUNTING POLICIES
 
 Revenue
            and Cost Recognition
 
 The
            Company uses the accrual basis of accounting for financial statement
            reporting.
            Revenues and expenses are recognized in accordance with Generally Accepted
            Accounting Principles for the industry. Certain period expenses are recorded
            when obligations are incurred.
 
 Use
            of
            Estimates
 
 The
            preparation of the financial statements in conformity with generally
            accepted
            accounting principles requires management to make estimates and assumptions
            that
            affect the reported amount of assets and liabilities, and disclosure
            of
            contingent liabilities at the date of the financial statements, and the
            reported
            amount of revenues and expenses during the reporting period. Actual results
            could differ from those results.
   F-6
   **STONE
            MOUNTAIN RESOURCES, INC.**
 (an
            exploration stage company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 (Unaudited)
 
 As
            Of
            December 31, 2006
 
 Accounts
            Receivable, deposits, Accounts Payable and accrued Expenses
 
 Accounts
            receivable have historically been immaterial and therefore no allowance
            for
            doubtful accounts has been established. Normal operating refundable Company
            deposits are listed as Other Assets. Accounts payable and accrued expenses
            consist of trade payables created from the normal course of
            business.
 
 
 Non-mining
            Property and Equipment
 
 Property
            and equipment purchased by the Company are recorded at cost. Depreciation
            is
            computed by the straight-line method based upon the estimated useful
            lives of
            the respective assets. Expenditures for repairs and maintenance are charged
            to
            expense as incurred as are any items purchased which are below the Company's
            capitalization threshold of $1,000.
 
 For
            assets sold or otherwise disposed of, the cost and related accumulated
            depreciation are removed from accounts, and any related gain or loss
            is
            reflected in income for the period.
 
 Income
            Taxes
 
 The
            Company accounts for income taxes using the liability method which requires
            recognition of deferred tax liabilities and assets for the expected future
            tax
            consequences of events that have been included in the financial statements
            or
            tax returns. Deferred tax assets and liabilities are determined based
            on the
            difference between the financial statements and tax basis of assets and
            liabilities using enacted tax rates in effect for the year in which the
            differences are expected to reverse.
 
 The
            Company's management determines if a valuation allowance is necessary
            to reduce
            any tax benefits when the available benefits are more likely than not
            to expire
            before they can be used.
 
 Stock
            Based Compensation
 
 In
            October 1995, the Financial Accounting Standards Board issued Statement
            of
            Financial Accounting Standards No. 123, "Accounting for Stock-Based
            Compensation," (SFAS 123), which is effective for periods beginning after
            December 15, 1995. SFAS 123 requires that companies either recognize
            compensation expense for grants of stock, stock options, and other equity
            instruments based on fair value or provide pro-forma disclosure of the
            effect on
            net income and earnings per share in the Notes to the Financial Statements.
            The
            Company has adopted SFAS 123 in accounting for stock-based
            compensation.
   F-7
  **STONE
            MOUNTAIN RESOURCES, INC.**
 (an
            exploration stage company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 (Unaudited)
 
 As
            Of
            December 31, 2006
 
 Cash
            and Cash Equivalents, and Credit Risk
 
 For
            purposes of reporting cash flows, the Company considers all cash accounts
            with
            maturities of 90 days or less and which are not subject to withdrawal
            restrictions or penalties, as cash and cash equivalents in the accompanying
            balance sheet.
 
 The
            portion of deposits in a financial institution that insures its deposits
            with
            the FDIC up to $100,000 per depositor in excess of such insured amounts
            are not
            subject to insurance and represent a credit risk to the Company.
 
 Foreign
            Currency Translation and Transactions
 
 The
            Company's functional currency is the US dollar. No material translations
            or
            transactions have occurred. Upon the occurrence of such material transactions
            or
            the need for translation adjustments, the Company will adopt Financial
            Accounting Standard No. 52 and other methods in conformity with Generally
            Accepted Accounting Principles.
 
 Earnings
            Per Share
 
 In
            February 1997, the Financial Accounting Standards Board (FASB) issued
            Statement
            of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share".
            SFAS
            128 replaces the presentation of primary earnings per share with a presentation
            of basic earnings per share based upon the weighted average number of
            common
            shares for the period.
 
 NOTE
            3 - AFFILIATES
            AND RELATED PARTIES
 
 Significant
            relationships with (1) companies affiliated through common ownership
            and/or
            management, and (2) other related parties are as follows:
 
 The
            Company has compensated officers of the Company with compensation in
            the form of
            stock as described in the equity footnote.
 
 NOTE
            4 - INCOME
            TAXES
 
 The
            Company has available net operating loss carryforwards for financial
            statement
            and federal income tax purposes. These loss carryforwards expire if not
            used
            within 20 years from the year generated. The Company's management has
            decided a
            valuation allowance is necessary to reduce any tax benefits because the
            available benefits are more likely than not to expire before they can
            be used.
   F-8
    **STONE
            MOUNTAIN RESOURCES, INC.**
 (an
            exploration stage company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 (Unaudited)
 
 As
            Of
            December 31, 2006
 
 These
            net
            operating losses expire as the following, $6,138 at 2026, $87,326 at
            2025 and
            $23,500 at 2024.
 
 NOTE
            5 - LONG-TERM
            DEBT
 
 The
            Company has no long-term debt.
 
 NOTE
            6 - SHAREHOLDERS'
            EQUITY
 
 Preferred
            Stock
 
 The
            Company has authorized ten million (10,000,000) shares of preferred stock
            with a
            par value of $.001, none of which have been issued.
 
 Common
            Stock
 
 The
            Company has authorized one hundred million (100,000,000) shares of common
            Stock
            with a par value of $.001. The Company has 19,961,000 shares of common
            stock
            issued and outstanding.
 
 On
            March
            31, 2004 the Company issued 15,000,000 shares of common stock to the
            Company
            President, Peter Dodge, as compensation for the formation of the corporation
            and
            services rendered for a value of $15,000 or $0.001 per share.
 
 On
            March
            31, 2004 the Company issued 8,000,000 shares of common stock to the Company
            Secretary, Scott Young, as compensation for services rendered for a value
            of
            $8,000 or $0.001 per share.
 
 On
            August
            31, 2004 the Company issued 4,800,000 shares of common stock at a price
            of $.01
            per share in an offering exempt from registration at Section 4 (2) of
            the
            Securities Act of 1933 for a total value of $48,000.
 
 On
            February 28, 2005 the Company issued 161,000 shares of common stock at
            a price
            of $.25 per share in an offering exempt from registration at Section
            4 (2) of
            the Securities Act of 1933 for a total value of $40,250.
 
 During
            July of 2005 the Company accepted the resignation of a Company officer
            with the
            return of 8,000,000 shares of stock to treasury at $0.001 per
            share.
    F-9
  
 **STONE
            MOUNTAIN RESOURCES, INC.**
 (an
            exploration stage company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 (Unaudited)
 
 As
            Of
            December 31, 2006
 
 Common
            Stock Recorded as Compensation
 
 The
            Company does not have an employee stock compensation package set up at
            this
            time. The stock compensation that has been granted falls under Rule 144.
            Compliance with Rule 144 is discussed in the following paragraph.
 
 In
            general, under Rule 144 as currently in effect, a person who has beneficially
            owned shares of a company's common stock for at least one year is entitled
            to
            sell within any three month period a number of shares that does not exceed
            the
            greater of:
 
 1.
                  1%
                      of the number of shares of the company's common stock then
                      outstanding.2.
                  The
                      average weekly trading volume of the company's common stock
                      during the
                      four calendar weeks preceding the filing of a notice on form
                      144
                      with****respect
                      to the sale.
 
 Sales
            under Rule 144 are also subject to manner of sale provisions and notice
            requirements and to the availability of current public information about
            the
            company.
 
 NOTE
            7 - CONTRACTS
            AND AGREEMENTS
 
 On
            October 11, 2004 the Company entered into a CAB property option agreement
            with
            Midas Mountain, Inc. whereby unpatented mineral claim options located
            in
            sections 22, 23, 26 & 27, T26N, R44E in Lander County, Nevada were purchased
            for an initial investment of $25,000 and then three succeeding annual
            payments
            of $30,000 commencing on February 15, 2005. The Company has satisfied
            the
            initial payment and the February 15, 2005 payment. On December 8, 2005,
            The
            agreement was amended to change the payments to an initial payment of
            $25,000
            and then $30,000 on or before February 15, 2005 with payments of $35,000
            on or
            before October 15, 2006 and 2007. The agreement calls for a production
            royalty
            of three percent to be paid of the Net Smelter Returns from the production
            of
            minerals from the Unpatented Mining Claims as they exist at the execution
            date
            of the agreement and a production royalty of one percent of Net Smelter
            Returns
            from the production of minerals.
 
 The
            Company entered into an agreement with its securities attorney whereby
            the
            Company would pay $7,500 upon execution of the agreement for services
            related to
            private placements, Form SB-2 and Form 15c211 and a payment of $30,000
            when
            these filings have been accepted.
 
  F-10
  **STONE
            MOUNTAIN RESOURCES, INC.**
 (an
            exploration stage company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 (Unaudited)
 
 As
            Of
            December 31, 2006
 
 NOTE
            8 - COMMITMENTS
            AND CONTINGENCIES
 
 Commitments
            of the Company include the responsibility to the registration costs of
            the
            proposed filing.
 
 Management
            is not aware of any contingent matters that could have a material adverse
            effect
            on the Company’s financial condition, results of operations, or
 liquidity.
 
 NOTE
            9 - LITIGATION,
            CLAIMS AND ASSESSMENTS
 
 From
            time
            to time in the normal course of business the Company will be involved
            in
            litigation. The Company’s management has determined any asserted or unasserted
            claims to be immaterial to the financial statements.
 
 NOTE
            10 - GOING
            CONCERN
 
 The
            accompanying financial statements have been prepared assuming that the
            company
            will continue as a going concern. As discussed in the notes to the financial
            statements, the Company has experienced losses from inception. The Company’s
            financial position and operating results raise substantial doubt about
            its
            ability to continue as a going concern. The financial statements do not
            include
            any adjustments that might result from the outcome of this
            uncertainty.
 
 The
            Company lacks an operating history and has losses which we expect to
            continue
            into the future.
 
 The
            Company was incorporated in March 2004 and has not started the proposed
            business
            operations or realized any revenues. The Company has no operating history
            upon
            which an evaluation of our future success or failure can be made. The
            ability to
            achieve and maintain profitability and positive cash flow is dependent
            upon:
 
 -
                ability
                    to locate a profitable mineral property -
                ability
                    to generate revenues -
                ability
                    to raise the capital necessary to continue exploration of the
                    property. 
  F-11
  **STONE
            MOUNTAIN RESOURCES, INC.**
 (an
            exploration stage company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 (Unaudited)
 
 As
            Of
            December 31, 2006
 
 Based
            upon current plans, the Company expects to incur operating losses in
            future
            periods. This will happen because there are expenses associated with
            the
            research and exploration of mineral properties. The Company cannot guarantee
            that it will be successful in generating revenues in the future. Failure
            to
            generate revenues may cause the Company to go out of business.
 
 The
            company intends to generate additional capital from the public markets
            to
            increase its ability to locate profitable mineral property and generate
            revenues. The Company may also consider public or private debt transactions
            and/or private placement, but has no such actions in place at this
            time.





F-12







**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation**




The
      following discussion and analysis provides information which management believes
      is relevant to an assessment and understanding of our financial condition.
      The
      discussion should be read in conjunction with our financial statements and
      notes
      thereto appearing in this prospectus. The following discussion and analysis
      contains forward-looking statements, which involve risks and uncertainties.
      Our
      actual results may differ significantly from the results, expectations and
      plans
      discussed in these forward- looking statements.




**Plan
      of Operations**




The
      following discussion and analysis provides information which management believes
      is relevant to an assessment and understanding of our results of operations
      and
      financial condition. On December 31, 2006, we had $418 cash in the bank. We
      estimate that in order to carry forward to the next 12 months we will need
      $42,200 to pay for office expenses, exploration program and property option
      payment which has been extended to October 15, 2007. Based upon our present
      capital, we do not have sufficient capital to pay our remaining offering
      expenses. In addition, we do not currently have sufficient capital pay the
      additional amounts owed under our property option agreement or the earning
      costs
      mandated by the Midas Agreement.




Therefore,
      if we are unable to obtain financing on reasonable terms or negotiate an
      extension for the option payments and Earning Costs from the Vendor we will
      lose
      the CAB claims. We will need to raise additional funds though public or private
      debt or the sale of equities to pay our remaining offering expenses, to make
      the
      payments required under existing agreements and to complete exploration on
      our
      property. We have no present loans or arrangements for these additional funds.
      If we are unable to obtain the additional funding, we will not be able to pay
      the remaining offering expenses owed or the additional amounts owed under our
      property option agreement or the earning costs mandated by the Midas Agreement,
      and we may not be able to implement our business plan.




We
      have
      been unable to carry out any work on the CAB claims due to lack of funds.
      Furthermore due to winter conditions in the Nevada Mountains we do not
      anticipate to be able to carry out our site exploration program until the fall
      of 2006. We met our Option Agreement property Earning Cost requirement for
      the
      December 31, 2005 time period.




The
      accompanying financial statements have been prepared assuming that the company
      will continue as a going concern. As discussed in the notes to the financial
      statements, the Company has experienced losses from inception. The Company’s
      financial position and operating results raise substantial doubt about its
      ability to continue as a going concern. The financial statements do not include
      any adjustments that might result from the outcome of this
      uncertainty.




The
      following discussion and analysis contains forward-looking statements, which
      involve risks and uncertainties. Our actual results may differ significantly
      from the results, expectations and plans discussed in these forward-looking
      statements.




Organization




We
      were
      organized as a Delaware Corporation on March 31, 2004 for the purpose of
      locating and developing gold exploration properties in Nevada.




Overview




We
      searched for many months for available gold mineral exploration properties
      in
      the Battle Mountain/ Eureka Gold trend in north central Nevada. The price of
      gold increased from $380 per ounce when we started our property search to $410
      per ounce in August. It was apparent that we were working in a seller’s property
      market. We could not find a property with encouraging previous exploration
      work
      at a reasonable option price. In July 2004, we requested International Royalties
      Corp. to aid us to find an appropriate available gold exploration property.
      International Royalties approached their contacts and found a property that
      matched our expectations.





We
      entered into an option agreement with Midas Mountain, Inc. (“Midas”) to acquire
      a 100% interest in the twenty-four CAB claims. The CAB claims are situated
      approximately 45 miles south southwest of the Town of Battle Mountain in Lander
      County, Nevada. The option agreement was revised on December 8, 2005. A 100%
      interest in the property can be acquired from Midas by paying over time a total
      of $125,000 option payments and incurring at least $650,000 of Earning Costs
      by
      December 31, 2008. After we have earned our 100% interest in the CAB claims,
      the
      property will be subject to a 3.0% Net Smelter Return (“NSR”) of which 1 1/2%
      can be purchased at the rate of $500,000 per 1/2% of acquired NSR.













Property
      Option Payments




We
      are
      required to pay Midas periodical Option Payments to keep our Agreement in good
      standing. All the Property Option Payments count towards the Earning Costs
      that
      we are required to spend in order to keep the agreement in good standing. We
      must pay Midas a total of $125,000 as part of our requirement to secure our
      100%
      interest in the CAB claims. Midas has granted us a one year extension on the
      October 15, 2006 option payment. The amount and timing of the periodic payments
      are outlined in the table that follows:




Periodical
                Option PaymentsPayment
            
            Amount
            
            Status/Date
                DueInitial
            
            $
            25,000
            
            
            Paid
                1-Sep-04Second
            
            $
            30,000
            
            
            Paid
                11-Feb-05Third
            
            $
            35,000
            
            
            15-Oct-07Fourth
            
            $
            35,000
            
            
            15-Oct-08Total
            
            $
            125,000




Bureau
      of
      Land Management and County Payments




The
      Bureau of Land Management (“BLM”) owns the land and rents it out at an annual
      rate of $125 per claim. In addition, the Lander County charges an annual nominal
      fee of $8.50 per claim. In order to keep the 24 claims in good order, we are
      required under our agreement to pay a total of $3,212.50 by August 31 each
      year
      to the BLM and Lander County. All BLM and County fees count towards the Earning
      Costs that we are required to incur as part of our agreement with
      Midas.




Earning
      Costs




Under
      the
      terms of our agreement with Midas, we are required to pay or incur at least
      $650,000 in specified expenditures cumulatively from August 1, 2004 to December
      31, 2008. The specified Earning Costs include Option Payments, BLM and County
      fees and exploration work to be carried out on the property. The exploration
      costs include labor, capital costs, consultants, travel, permits, assays, taxes
      and insurance. The following table summarizes the annual minimum Earning Costs
      that must be expended until we earn our 100% interest in the
      property.




Minimum
                Accumulative Earning CostsPeriod
                Ending
            
            Minimum31-Dec-05
            
            $
            75,00031-Dec-07
            
            $
            150,00031-Dec-08
            
            $
            250,00031-Dec-09
            
            $
            650,000




Exploration
      stage expenses from inception through December 31, 2006 were $76,000 for general
      exploration costs related to the mineral rights of the exploration property
      and
      $42,082 of general and administrative costs for a total expense of $118,082
      as
      captioned in the financial statement’s statement of operations. These fees were
      in furtherance of Phase I to purchase and evaluate a property. Fees were
      incurred in the start-up costs of our company as well as the fees to prepare
      our
      audited financial statements. These fees were included in the general and
      administrative expense as discussed earlier in this paragraph.
















**Critical
      Accounting Policies**




Our
      financial statements and related public financial information are based on
      the
      application of accounting principles generally accepted in the United States
      (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
      subjective interpretations of accounting principles that have an impact on
      the
      assets, liabilities, revenue and expense amounts reported. These estimates
      can
      also affect supplemental information contained in our external disclosures
      including information regarding contingencies, risk and financial condition.
      We
      believe our use if estimates and underlying accounting assumptions adhere to
      GAAP and are consistently and conservatively applied. We base our estimates
      on
      historical experience and on various other assumptions that we believe to be
      reasonable under the circumstances. Actual results may differ materially from
      these estimates under different assumptions or conditions. We continue to
      monitor significant estimates made during the preparation of our financial
      statements.




Our
      significant accounting policies are summarized in Note 1 of our financial
      statements. While all these significant accounting policies impact our financial
      condition and results of operations, we view certain of these policies as
      critical. Policies determined to be critical are those policies that have the
      most significant impact on our financial statements and require management
      to
      use a greater degree of judgment and estimates. Actual results may differ from
      those estimates. Our management believes that given current facts and
      circumstances, it is unlikely that applying any other reasonable judgments
      or
      estimate methodologies would cause effect on our consolidated results of
      operations, financial position or liquidity for the periods presented in this
      report.




**Item
      3. Controls and Procedures**




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of our disclosure controls and procedures, as such term is defined
      under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
      Exchange Act of 1934, as amended (Exchange Act), as of December 31, 2006. Based
      on this evaluation, our principal executive officer and principal financial
      officer have concluded that our disclosure controls and procedures are effective
      to ensure that information required to be disclosed by us in the reports we
      file
      or submit under the Exchange Act is recorded, processed, summarized, and
      reported within the time periods specified in the Securities and Exchange
      Commission’s rules and forms and that our disclosure and controls are designed
      to ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is accumulated and communicated to our
      management, including our principal executive officer and principal financial
      officer, or persons performing similar functions, as appropriate to allow timely
      decisions regarding required disclosure.




There
      were no changes (including corrective actions with regard to significant
      deficiencies or material weaknesses) in our internal controls over financial
      reporting that occurred during the third quarter of fiscal 2006 that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.







**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




The
      Company is currently not a party to any pending legal proceedings and no such
      action by, or to the best of its knowledge, against the Company has been
      threatened.




**Item
      2. Changes in Securities.**




None




**Item
      3. Defaults Upon Senior Securities.**




None





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




No
      matter
      was submitted during the quarter ending December 31, 2006, covered by this
      report to vote of the Company’s shareholders, through the solicitation of
      proxies or otherwise.




**Item
      5. Other Information.**




None




**Item
      6. Exhibits and Reports of Form 8-K.**




(a)   Exhibits





31.1
      Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002





32.1
      Certification pursuant to Section 906 of Sarbanes Oxley Act of
      2002





(b)   Reports
      of Form 8-K





None








**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, there unto duly
      authorized.




**STONE
                MOUNTAIN RESOURCES, INC.**Registrant




Date:
                February 12, 2007
            By:*/s/
                Peter Dodge*Peter
                DodgePresident,
                Chief Executive Officer,Chairman
                of Board of Directors