**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**Form
      10-QSB**








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


**For
      the
      quarter ended August 31, 2006**





_
      TRANSITION REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For
      the transition
      period from ____ to _____




**MEXORO
      MINERALS LTD.**


**(Formerly
      Sunburst Acquisitions IV, Inc.)**


(Name
      of small
      business in its charter)





Colorado
            0-23561
            84-1431797(State
                or
                other jurisdiction of incorporation)
            (Commission
                File Number)
            (IRS
                Employer
                Identification Number)609
                Granville
                Street, Suite 880
              Vancouver,
                British Columbia
              Canada
            V7Y
                1G5(Address
                of
                principal executive offices)
            (Zip
                Code)





Registrant’s
      telephone number, including area code: (800) 661-7830





Check
      whether the
      issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
      the
      Securities Exchange Act during the past 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
      ____





Applicable
      only to
      issuers involved in bankruptcy proceedings during the past five
      years:





Check
      whether the
      issuer has filed all documents and reports required to be filed by Section
      12,
      13 or 15(d) of the Exchange Act after the distribution of securities under
      a
      plan confirmed by a court. Yes ____ No ____





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





Applicable
      only to
      corporate issuers:


State
      the number of
      shares outstanding of each of the issuer's classes of common equity, as of
      the
      latest practicable date: 21,036,102 at October 13, 2006.





Transitional
      Small
      Business Disclosure Format (Check one): Yes __ No X




-1-




**MEXORO
      MINERALS LTD.**


**(Formerly
      Sunburst Acquisitions IV, Inc.)**


**(An
      Exploration Stage Company)**




**Consolidated
      Financial Statements**


**August
      31,
      2006**


**(Unaudited)
      (U.S. Dollars)**

















**INDEX**
            **Page****Consolidated
              Financial Statements**Consolidated
              Balance Sheets
            3Consolidated
              Statements of Operations and Retained
              Deficit
            4Consolidated
              Statements of Cash Flows
            5Notes
              to Consolidated Financial Statements
            6
                -
                20




-2-




**MEXORO
        MINERALS LTD.**
 **(Formerly
        Sunburst Acquisitions IV, Inc.)**
 **(An
        Exploration Stage Company)**
 **Consolidated
        Balance Sheets**
 **(Unaudited)
        (U.S. Dollars)**


**August
                    31,**
                **February
                    28,****2006**
                **2006****(Unaudited)**
                **(Audited)****Assets****Current**Cash
                    and cash
                    equivalents
                $
                1,534,113
                $
                479,530Amounts
                    receivable
                
                97,953
                
                10,069Prepaid
                    expenses
                
                -
                
                48,2691,632,067
                
                537,868**Equipment
                    (note 5)**
                
                91,188
                
                880**Total
                    assets**
                **$**
                1,723,255
                $
                538,748**Liabilities****Current**Accounts
                    payable and accrued liabilities
                **$**
                181,633
                $
                79,124Promissory
                    notes (note 7)
                
                -
                
                412,800181,633
                
                491,924**Convertible
                    debentures (note 8)**
                
                -
                
                652,000**Total
                    liabilities**
                
                181,633
                
                1,143,924**Stockholders’
                    equity (deficiency)****Capital
                    stock**Preferred
                    stockAuthorized:
                    20,000,000 shares without par value (note 9)Issued:
                    nil
                
                **-**
                
                **-**Common
                    stockAuthorized:
                    200,000,000 shares without par valueIssued:
                    21,036,102 (2006 - 12,799,902) (note 10)
                
                19,314,277
                
                15,583,977Additional
                    paid-in capital
                
                9,915,846
                
                7,402,346Stock
                    subscriptions
                
                -
                
                170,000Accumulated
                    deficit from prior operations
                
                (2,003,427)
                
                (2,003,427)Accumulated
                    deficit during the exploration stage
                
                (25,698,977)
                
                (21,759,123)Other
                    comprehensive income
                
                13,903
                
                1,051**Total
                    stockholders’ equity (deficiency)**
                
                1,541,622
                
                (605,176)**Total
                    liabilities and stockholders’ equity (deficiency)**
                **$**
                1,723,255
                $
                538,748


Going
      concern (note 4)


Commitments
      (note 6)


Contingent
      liability (note 14)


Subsequent
      events (note 15)





The
          accompanying notes are an integral part of these financial
          statements.
 -3-
 Table
          of Contents




**MEXORO
          MINERALS LTD.**
 **(Formerly
          Sunburst Acquisitions IV, Inc.)**
 **(An
          Exploration Stage Company)**
 **Consolidated
          Statements of**
 Operations
          and
          Retained Deficit
 **(Unaudited)
          (U.S. Dollars)**


**Period
                from****Inception
                of****Exploration
                Stage****Three
                Months Ended**
            
            **Six
                Months Ended**
            
            **(March
                1, 2004)****August
                31,**
            
            **August
                31,**
            
            **August
                31,**
            
            **August
                31,**
            
            **To****August 31****,****2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006****Expenses**General
                and
                administrative
            $
            227,472
            
            70,812
            
            797,760
            $
            83,864
            $
            1,504,507Stock-based
                compensation
            
            248,000
            
            -
            
            248,000
            
            -
            
            4,480,955Mineral
                exploration
            
            352,237
            
            -
            
            604,498
            
            -
            
            604,498Acquisition
                of resource properties
            
            -
            
            150,000
            
            -
            
            150,000
            
            15,306,422**Operating
                loss**
            
            (827,709)
            
            (220,812)
            
            (1,650,258)
            
            (233,864)
            
            (21,896,382)**Other
                income (expenses)**Interest
                expense
            
            (15,532)
            
            (400)
            
            (2,320,973)
            
            (1,690)
            
            (3,967,157)Interest
                income
            
            18,063
            
            -
            
            24,118
            
            -
            
            24,118Gain
                on
                settlement of debt (notes 7 & 8)
            
            -
            
            -
            
            7,259
            
            -
            
            140,444**Net
                loss**
            
            (825,178)
            
            (221,212)
            
            (3,939,854)
            
            (235,554)
            
            (25,698,977)**Accumulated
                deficit during the****exploration
                stage, beginning (note 2)**
            
            (24,873,799)
            
            (13,926,830)
            
            (21,759,123)
            
            (13,912,488)
            
            -**Accumulated
                deficit during the****exploration
                stage, ending**
            $
            (25,698,977)
            $
            (14,148,042)
            
            (25,698,977)
            $
            (14,148,042)
            $
            (25,698,977)**Other
                comprehensive income**Foreign
                exchange gain (loss) on translation
            
            1,707
            
            (1,578)
            
            (30,905)
            
            5,133
            
            (15,047)**Total
                comprehensive loss**
            $
            (823,471)
            $
            (222,790)
            $
            (3,970,759)
            $
            (230,421)
            $
            (25,714,024)**Total
                loss per share** - basic and diluted
            $
            (0.04)
            $
            (0.13)
            $
            (0.24)
            $
            (0.14)**Weighted
                average number of shares of****common
                stock** - basic and diluted
            
            18,882,406
            
            1,743,228
            
            16,521,139
            
            1,740,566




The
          accompanying notes are an integral part of these financial
          statements.
 -4-
 Table
          of Contents




**MEXOROMINERALS
            LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Consolidated
            Statements of Cash Flows**
 **(Unaudited)
            (U.S. Dollars)**


**Period
                from****Inception
                of****Six
                Months Ended**
            
            **Exploration
                Stage****(March
                1, 2004)****August
                31,**
            
            **August
                31,**
            
            **to
                August 31,****2006**
            
            **2005**
            
            **2006****Operating
                activities**Net
                loss
            $
            (3,939,854)
            $
            (235,554)
            $
            (25,698,977)Adjustments
                to reconcile net income (loss) to net cash flowsWrite
                off of
                note receivable
            
            -
            
            -
            
            57,500Acquisition
                of resource properties for stock
            
            -
            
            150,000
            
            13,065,000Amortization
            
            3,049
            
            -
            
            3,049Discount
                on
                convertible debenture
            
            -
            
            -
            
            175,000Stock-based
                compensation
            
            248,000
            
            -
            
            6,103,955Beneficial
                conversion feature
            
            2,265,500
            
            -
            
            3,717,500Prepaid
                expense
            
            48,269
            
            -
            
            6,480Amounts
                receivable
            
            (87,884)
            
            (163,008)
            
            (89,747)Customer
                deposits
            
            -
            
            -
            
            (44,809)Accounts
                payable and accrued liabilities
            
            102,509
            
            31,255
            
            159,440**Cash
                used in operating activities**
            
            (1,360,411)
            
            (217,307)
            
            (2,545,609)**Investing
                activity**Purchase
                of
                property and equipment
            
            (90,308)
            
            -
            
            (91,188)**Cash
                used in investing activity**
            
            (90,308)
            
            -
            
            (91,188)**Financing
                activities**Proceeds
                from
                notes payable
            
            -
            
            5,000
            
            562,800Proceeds
                from
                convertible debentures
            
            2,240,500
            
            -
            
            3,692,500Proceeds
                from
                exercise of options
            
            -
            
            25,000
            
            78,000Proceeds
                from
                exercise of warrants
            
            50,000
            
            -
            
            50,000Repayment
                of
                notes payable
            
            -
            
            (23,100)
            
            (178,500)Repayment
                of
                convertible debentures
            
            -
            
            -
            
            (705,000)Stock
                subscriptions
            
            (170,000)
            
            255,500
            
            -Issuance
                of
                common stock
            
            375,000
            
            -
            
            647,109**Cash
                provided by (used in) financing****activities**
            
            2,495,500
            
            262,400
            
            4,146,909**Inflow
                of cash and cash equivalents**
            
            1,044,781
            
            45,093
            
            1,510,112Effect
                of
                foreign currency translation on cash
            
            9,802
            
            3,795
            
            24,001**Cash
                and cash equivalents, beginning**
            
            479,530
            
            35,122
            
            -**Cash
                and cash equivalents, ending**
            $
            1,534,113
            $
            84,010
            $
            1,534,113**Supplemental
                cash flow information**Interest
                paid
            
            55,473
            $
            -
            $
            162,157Common
                stock
                issued on conversion of debt
            
            2,917,500
            
            -
            
            3,217,500Common
                stock
                issued on settlement of notes payable
            
            412,800
            
            -
            
            412,800Shares
                issued
                for services
            $
            -
            $
            -
            $
            100,000





The
          accompanying notes are an integral part of these financial
          statements.
 -5-
 Table
          of Contents


**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**


**1.**
            **BASIS OF
              PRESENTATION**





Mexoro
      Minerals
      Ltd. (formerly Sunburst Acquisitions IV, Inc.) ("Mexoro" or the “Company”) was
      incorporated in the state of Colorado on August 27, 1997 and on February 15,
      2006 its name was changed to Mexoro Minerals Ltd.  The Company was formed
      to seek out and acquire business opportunities.  Between 1997 and 2003, the
      Company engaged in two business acquisitions and one business opportunity,
      none
      of which generated a significant profit or created a sustainable business.
      All
      were sold or discontinued. Currently the main focus of the Company’s operations
      is in Mexico.





The
      Company had
      previously been pursuing various business opportunities and, effective
      March 1, 2004, the Company changed its principal operations to mineral
      exploration. Accordingly, as of March 1, 2004 the Company is considered an
      exploration stage company.





On
      May 25, 2004,
      the Company completed a share exchange transaction with Sierra Minerals and
      Mining, Inc. (“Sierra Minerals”), a Nevada corporation, which caused Sierra
      Minerals to become a wholly-owned subsidiary.  Sierra Minerals held certain
      rights to properties in Mexico that the Company now owns or has an option to
      acquire.  Through Sierra Minerals, the Company entered into an arm’s length
      joint venture agreement with Minera Rio Tinto, S.A. De C.V. (“MRT”), a company
      duly incorporated pursuant to the laws of the United Mexican States, which
      is
      controlled by an officer and director of the Company. In August 2005, the
      Company cancelled the joint venture agreement in order to pursue directly the
      mineral exploration opportunities through a wholly-owned Mexican subsidiary,
      Sunburst de Mexico, S.A. de C.V. (“Sunburst de Mexico”).  On August 25,
      2005, Sunburst de Mexico, Mexoro and MRT entered into agreements providing
      Sunburst de Mexico the right to explore and exploit certain properties in
      Mexico. In December 2005, the Company and Sunburst de Mexico entered into a
      new
      agreement with MRT (the “New Agreement”) (note 6). On January 20, 2006, Sierra
      Minerals was dissolved.





**2.**
            **RESTATEMENT**





Management
      has
      determined that, in the year ending February 28, 2005, previous management
      used
      a nominal value to record the issuance of 860,000 shares of common stock
      (43,000,000 pre-split) pursuant to a share exchange agreement, and 120,000
      options (6,000,000 pre-split) issued as finders’ fees with respect to the share
      exchange agreement. Current management believes that a fair value should have
      been used and has restated each of these amounts. Management has also determined
      that in the year ending February 28, 2005, the Company should have recorded
      a
      beneficial conversion feature on convertible debentures that included conversion
      to common shares, warrants and additional investment rights. Management has
      also
      reclassified stock-based compensation expense from general and administrative
      to
      stock-based compensation.





In
      the year ending
      February 28, 2006, management has corrected a calculation error in the recording
      of a beneficial conversion feature on warrants issued with the convertible
      debentures. Management has also reclassified accrued interest from promissory
      notes to accounts payable and accrued interest. After further review, management
      has determined that, in the year ending February 28, 2006, compensation expense
      recorded in the amount of $8,680,000 relating to the issuance of 7 million
      common shares was incorrect. Accordingly, these shares were issued as
      consideration for receiving cash proceeds of $70,000.





Management
      has
      accordingly restated the Company’s consolidated financial statements as at May
      31, 2006 and for the three-months ended May 31, 2006, and as at February 28,
      2006 and for the year ended February 28, 2006.




-6-
 Table
          of Contents




**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**


**2.**
            **RESTATEMENT
              (Continued)**





Accordingly,
      the
      accumulated deficit during the exploration stage in the Consolidated Balance
      Sheets and Consolidated Statement of Operations and Deficit have been restated.
      Please refer to the February 28, 2006 restated audited consolidated financial
      statements for additional information.




**3.**
            **SIGNIFICANT ACCOUNTING
              POLICIES**




(a)
            Principles
                of
                consolidation





The
      accompanying
      financial statements include the accounts and activities of Mexoro Minerals
      Ltd.
      and its wholly-owned subsidiary, Sunburst de Mexico S.A. de C.V (“Sunburst de
      Mexico”). All intercompany transactions have been eliminated in
      consolidation.





(b)
            Financial
                instruments





(i)
            Fair
                value





The
      carrying values
      of cash and cash equivalents, accounts receivable, and accounts payable and
      accrued liabilities approximate their fair values because of the short-term
      maturity of these financial instruments. The carrying value of convertible
      debentures approximates their fair value because these instruments earn interest
      at the market rate.





(ii)
            Interest
                rate
                risk





The
      Company is not
      exposed to significant interest rate risk due to the short-term maturity of
      its
      monetary current assets and current liabilities. The convertible debentures
      are
      not exposed to interest rate risk because the interest rate is fixed to
      maturity.





(iii)
            Credit
                risk





The
      Company's
      financial assets that are exposed to credit risk consist primarily of cash
      that
      is placed with major financial institutions.





(iv)
            Translation
                risk





The
      Company
      translates the results of non-U.S. operations into U.S. currency using rates
      approximating the average exchange rate for the year. The exchange rate may
      vary
      from time to time. Accordingly, there is a risk, as most of the Company’s
      exploration expenditures are in non-U.S. currency.




-7-
 Table
          of Contents




**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**


**3.**
            **SIGNIFICANT ACCOUNTING
              POLICIES
              (Continued)**





(c)
            Equipment





Equipment
      is
      recorded at cost. Depreciation is provided on a declining-balance basis at
      30%
      on computer equipment, 25% on vehicles and 10% on office equipment.





(d)
            Cash
                and cash
                equivalents





The
      Company
      considers all highly liquid debt instruments purchased with an original maturity
      of three months or less to be cash equivalents.





(e)
            Basic
                and
                diluted income (loss) per share





The
      Company
      computes income (loss) per share in accordance with SFAS No. 128, "*Earnings
      per Share*", which requires presentation of both basic and diluted earnings
      per share (EPS) on the face of the statement of operations and deficit. Basic
      EPS is computed by dividing income (loss) available to common shareholders
      (numerator) by the weighted average number of shares outstanding (denominator)
      during the period. Diluted EPS gives effect to all dilutive potential common
      shares outstanding during the period using the treasury stock method and
      convertible preferred stock using the if-converted method. In computing diluted
      EPS, the average stock price for the period is used in determining the number
      of
      shares assumed to be purchased from the exercise of stock options or warrants.
      Diluted EPS excludes all dilutive potential shares if their effect is
      anti-dilutive. All previously stated share and per share balances have been
      restated to give retroactive effect to the 1:50 share consolidation that
      occurred on February 15, 2006.





(f)
            Impairment
                or
                disposal of long-lived assets





In
      August 2001, the
      FASB issued Statement No. 144, *“Accounting for the Impairment or Disposal of
      Long-Lived Assets”* (“FAS 144”). FAS 144 clarifies the accounting for the
      impairment of long-lived assets and for long-lived assets to be disposed of,
      including the disposal of business segments and major lines of business. The
      Company has implemented FAS 144. Long-lived assets are reviewed when facts
      and
      circumstances indicate that the carrying value of the asset may not be
      recoverable. When necessary, impaired assets are written down to estimate fair
      value based on the best information available. Estimated fair value is generally
      based on either appraised value or measured by discounting estimated future
      cash
      flows. Considerable management judgment is necessary to estimate discounted
      future cash flows. Accordingly, actual results could vary significantly from
      such estimates.





(g)
            Use
                of
                estimates





The
      preparation of
      financial statements in conformity with US generally accepted accounting
      principles requires management to make estimates and assumptions that affect
      the
      reported amounts of assets and liabilities and disclosures of contingent assets
      and liabilities at the date of the financial statements and the reported amounts
      of revenues and expenses during the reporting period. Actual results could
      differ from those estimates and would impact future results of operations and
      cash flows.





-8-
 Table
          of Contents




**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**


**3.**
              **SIGNIFICANT
                ACCOUNTING
                POLICIES
                (Continued)**


(h)
            Consideration
                of other comprehensive income items





SFAS
      No. 130 -
*“Reporting Comprehensive Income”*, requires companies to present
      comprehensive income (consisting primarily of net loss plus other direct equity
      changes and credits) and its components as part of the basic financial
      statements.





(i)
            Stock-based
                compensation





Prior
      to March 1,
      2004, the Company accounted for stock-based awards under the recognition and
      measurement provisions of Accounting Principles Board Opinion (“APB”) No. 25,
“Accounting for Stock Issued to Employees” using the intrinsic value method of
      accounting, under which compensation expense was only recognized if the exercise
      price of the Company’s employee stock options was less than the market price of
      the underlying common stock on the date of grant.





Effective
      year
      ending February 28, 2005, the Company adopted the fair value recognition
      provisions of SFAS No. 123R “Share Based Payments”, using the modified
      prospective transition method. Under that transition method, compensation cost
      is recognized for all share-based payments granted prior to, but not yet vested
      as of March 1, 2004, based on the grant date fair value estimated in accordance
      with the original provisions of SFAS No. 123, and compensation cost for all
      share-based payments granted subsequent to March 1, 2004, based on the
      grant-date fair value estimated in accordance with the provisions of SFAS 123R.
      Results for prior periods have not been restated. As of March 1, 2004, there
      were no unvested options; and therefore, there was no effect on the Company’s
      reported loss from operations, cash flows or loss per share as a result of
      adopting SFAS No. 123R.





All
      transactions in
      which goods or services are the consideration received for the issuance of
      equity instruments are accounted for based on the fair value of the
      consideration received or the fair value of the equity instrument issued,
      whichever is more reliably measurable. Equity instruments issued to employees
      and the cost of the services received as consideration are measured and
      recognized based on the fair value of the equity instruments issued (see note
      11).





(j)
            Income
                taxes





The
      Company
      accounts for income taxes in accordance with SFAS No. 109 - *“Accounting for
      Income Taxes”*. Deferred tax assets and liabilities are recognized with
      respect to the tax consequences attributable to differences between the
      financial statement carrying values and tax basis of existing assets and
      liabilities. Deferred tax assets and liabilities are measured using enacted
      tax
      rates expected to apply to taxable income in the years in which these temporary
      differences are expected to be recovered or settled. Further, the effect on
      deferred tax assets and liabilities of changes in tax rates is recognized in
      income in the period that includes the enactment.





-9-
 Table
          of Contents




**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**


**3.**
              **SIGNIFICANT
                ACCOUNTING
                POLICIES
                (Continued)**


(k)
            Foreign
                currency translation





Mexoro
      and its
      subsidiary, Sunburst de Mexico, maintain accounting records in their functional
      currencies, U.S. dollars and Mexican pesos, respectively.





Mexoro
      and Sunburst
      de Mexico translate foreign currency transactions into the respective functional
      currencies in the following manners: at the transaction date, each asset,
      liability, revenue and expense is translated into the functional currency by
      the
      use of the exchange rate in effect at that date; at the period end, foreign
      currency monetary assets and liabilities are re-evaluated into the functional
      currency by using the exchange rate in effect at the balance sheet date. The
      resulting foreign exchange gains and losses are included in
      operations.





In
      preparing
      consolidated financial statements, the Company translates the assets and
      liabilities of its subsidiary into U.S. dollars at the exchange rate in effect
      at the balance sheet date. Revenue and expenses are translated into U.S. dollars
      at the average exchange rate for the applicable period. Any gain or loss from
      such translations are included in stockholders’ equity as a component of other
      comprehensive income.





(l)
            Recent
                accounting pronouncements





(i)
            In
                December
                2004, FASB issued a revision of Statement No. 123(R), *“Accounting for
                Stock-Based Compensation”*. This statement supersedes APB 25 and its
                related implementation guidance. The revised pronouncement requires
                that
                all stock options and warrants be accounted for using the fair value
                method. This pronouncement does not impact the Company, as the Company
                has
                no employees and currently accounts for all options and warrants
                using the
                fair value method.





(ii)
            In
                December
                2004, the FASB issued SFAS Statement No. 153, “Exchanges of Non-Monetary
                Assets.” The statement is an amendment of APB Opinion No. 29 to eliminate
                the exception for non-monetary exchanges of similar productive assets
                and
                replaces it with a general exception for exchanges of non-monetary
                assets
                that do not have commercial substance. The Company believes that
                the
                adoption of this standard will have no material impact on its financial
                statements. The Company accounts for income taxes in accordance with
                SFAS
                No. 109 - *“Accounting for Income Taxes”*. Deferred tax assets and
                liabilities are recognized with respect to the tax consequences
                attributable to differences between the financial statement carrying
                values and tax basis of existing assets and
                liabilities





(iii)
            In
                March
                2005, FASB issued Interpretation No. 47 (“FIN 47”), *“Accounting for
                Conditional Asset Retirement Obligations”*. FIN 47 clarifies that the
                term “conditional asset retirement obligation” as used in FASB Statement
                No. 143, *“Accounting for Asset Retirement Obligation”*, refers to
                a legal obligation to perform an asset retirement activity in which
                the
                timing and/or method of settlement are conditional on a future event
                that
                may or may not be within the control of the entity. Accordingly,
                an entity
                is required to recognize a liability for the fair value of a conditional
                asset retirement obligation if the fair value of the liability can
                be
                reasonably estimated. FIN 47 is effective no later than the end of
                fiscal
                years ending after December 15, 2005. This pronouncement does not
                impact the Company for the current
                year.




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**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**


**3.**
              **SIGNIFICANT
                ACCOUNTING
                POLICIES
                (Continued)**


(iv)
            In
                May 2005,
                FASB issued SFAS No. 154 “*Accounting Changes and Error Corrections - a
                replacement of APB Opinion No. 20 and FASB Statement No. 3”*. This
                Statement replaces APB Opinion No. 20, “*Accounting Changes”*, and
                FASB Statement No. 3, “*Reporting Accounting Changes in Interim
                Financial Statements”*, and changes the requirements for the
                accounting for and reporting of a change in accounting principles.
                This
                statement applies to all voluntary changes in accounting principles.
                It
                also applies to changes required by an accounting pronouncement in
                the
                unusual instance that the pronouncement does not include specific
                transition provisions. When a pronouncement includes specific transition
                provisions, those provisions should be followed. This statement is
                effective for accounting changes and corrections of errors made in
                fiscal
                years beginning after December 15,
                2005.





(v)
            In
                February
                2006, the FASB issued SFAS No. 155, “*Accounting for Certain Hybrid
                Financial Instruments, an amendment of FASB Statements No. 133 and
                140”.* This statement permits fair value re-measurement for any hybrid
                financial instrument that contains an embedded derivative that otherwise
                would require bifurcation. It establishes a requirement to evaluate
                interests in securitized financial assets to identify interests that
                are
                freestanding derivatives or that are hybrid financial instruments
                that
                contain an embedded derivative requiring bifurcation. In addition,
                SFAS
                No. 155 clarifies which interest-only strips and principal-only strips
                are
                not subject to the requirements of Statement 133. It also clarifies
                that
                concentrations of credit risk in the form of subordination are not
                embedded derivatives. SFAS 155 amends Statement 140 to eliminate
                the
                prohibition on a qualifying special purpose entity from holding a
                derivative financial instrument that pertains to a beneficial interest
                other than another derivative financial instrument. This statement
                is
                effective for all financial instruments acquired or issued after
                the
                beginning of an entity’s first fiscal year that begins after September 15,
                2006. The adoption of this standard is not expected to have a material
                effect on the Company’s results of operations or financial
                position.





(vi)
            FIN
                48,
                *“Accounting for Uncertainty in Income Taxes”* (Interpretation of
                FASB statement 109). This Interpretation clarifies the accounting
                for
                uncertainty in income taxes recognized in an enterprise's financial
                statements in accordance with FASB Statement No. 109, *“Accounting for
                Income Taxes”*. This Interpretation prescribes a recognition threshold
                and measurement attribute for the financial statement recognition
                and
                measurement of a tax position taken or expected to be taken in a
                tax
                return. This Interpretation also provides guidance on derecognition,
                classification, interest and penalties, accounting in interim periods,
                disclosure, and transition. The Company will adopt this interpretation
                effective March 1, 2007.




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**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**


**4.**
              **GOING-CONCERN**


The
      accompanying
      financial statements have been prepared on a going-concern basis. The Company
      has a history of operating losses and will need to raise additional capital
      to
      fund its planned operations. As at August 31, 2006, the Company had working
      capital of $1,450,434 (February 28, 2006 - $45,944) and a cumulative loss during
      the exploration stage of $25,698,977 (February 28, 2006 - $21,759,123). These
      conditions raise substantial doubt about the Company’s ability to continue as a
      going-concern.





**5.**
            **EQUIPMENT**




**August
                31, 2006**
            
            **February
                28, 2006**AccumulatedCost
            
            Depreciation
            
            Net
            
            NetOffice
                equipment
            $
            3,144
            $
            (54)
            $
            3,092
            $
            880Vehicles
            
            86,642
            
            (2,974)
            
            83,668
            
            -Computers
            
            4,482
            
            (54)
            
            4,428
            
            -$
            94,268
            $
            (3,079)
            $
            91,188
            $
            880


**6.**
            **MINERAL
              PROPERTIES**




On
      May 3, 2004, the
      Company entered into a share exchange agreement with the shareholders of Sierra
      Minerals. Pursuant to the terms of the share exchange agreement, the Company
      issued 860,000 shares of its common stock (43,000,000 pre-split) in exchange
      for
      all of the outstanding shares of Sierra Minerals. As a result, Sierra Minerals
      became a wholly-owned subsidiary of the Company.  After restatements (see
      note 2), the issued common stock was valued at $12.75 per share ($0.255
      pre-split) or $10,965,000; which represents the fair value based on the date
      of
      the share exchange agreement (May 3, 2004).  Finders’ fees of 120,000
      options (6,000,000 pre-split) to purchase the same number of shares of the
      Company’s common stock at $0.50 per share ($0.01 pre-split) were issued to
      non-related parties in connection with this share exchange. After restatements
      (see note 2), the fair value of these options was $1,523,000; this amount was
      determined using the Black-Scholes formula with a 5-year expected life, a
      volatility factor of 191%, a risk-free rate of 5% and no assumed dividend rate.
      Due to the uncertainty of the future revenue to be generated from this property,
      the cost of the acquisition of $10,965.000, compensation expense of $1,523,000,
      and advances totalling $507,500 were charged to operations in the year ended
      February 28, 2005.





Sierra
      Minerals was
      a party to a joint venture agreement, dated April 26, 2004 and amended on June
      1, 2004, by and between Sierra Minerals and MRT, which had interests in
      exploration properties.




-12-
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          of Contents





**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**
 **6.**
                  **MINERAL
                    PROPERTIES
                    (Continued)**





On
      August 25, 2005,
      the joint venture agreement was cancelled and the Company entered into a new
      arrangement with MRT.  Instead of a joint venture, the Company incorporated
      a Mexican wholly-owned subsidiary, Sunburst de Mexico S.A. de C.V, which took
      title to the properties.  The Company entered into additional agreements
      with MRT, which provided Sunburst de Mexico options on the concessions for
      the
      Guazapares properties and additional concessions for the Cienequita properties,
      and the right of first refusal on two additional Encino Gordo properties
      (collectively, the “Property Agreements”). The parties also entered into an
      operating agreement, which gave MRT the sole and exclusive right and authority
      to manage the Cieneguita Property.





On
      December 8,
      2005, the Company and Sunburst de Mexico entered into the New Agreement with
      MRT
      to exercise their option under the August 18, 2005 sale and purchase of mining
      concessions agreement to obtain two mining concessions in the Encino Gordo
      region.





The
      New Agreement
      also provided the Company the option to obtain three additional concessions
      in
      the Encino Gordo region.  These properties are located in the state of
      Chihuahua, Mexico.





The
      following are
      additional material terms of the New Agreement:





(a)
            The
                operator’s agreement with MRT was cancelled;





(b)
            The
                Company
                granted MRT the option to buy all of the outstanding shares of Sunburst
                de
                Mexico for $100 if the Company failed to transfer $1,500,000 to Sunburst
                de Mexico by April 30, 2006. However, in April 2006, the parties
                amended
                the New Agreement to delete both the required transfer of $1,500,000
                to
                Sunburst de Mexico and MRT’s option to purchase shares of Sunburst de
                Mexico;





(c)
            The
                Property
                Agreements were modified to change the net smelter rate to a maximum
                of
                2.5% for all properties covered by the agreements;





(d)
            The
                Company
                agreed to issue 2,000,000 shares of the Company’s common stock to MRT
                within four months of the date of the signing of the New Agreement.
                 These shares were issued to MRT and its assignee at the market value
                of $1.05 per share on February 23, 2006. This issuance fulfilled the
                Company’s payment obligations under the previous Property Agreements; and





(e)
            The
                Company
                agreed to issue 1,000,000 additional shares of the Company’s common stock
                to MRT if and when the Cieneguita Property is put into production
                and
                reaches 85% of production capacity over a 90-day period, as defined
                in the
                New Agreement.




-13-
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**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**
 **7.**
                  **PROMISSORY
                    NOTES**




As
      at August 31,
      2006 the Company had $nil (February 28, 2006 - $412,800) of promissory notes
      outstanding and $nil (February 28, 2006 - $7,259) of accrued interest
      outstanding on the promissory notes.





On
      March 4, 2006,
      the Company agreed to issue 1,651,200 common shares at a price of $0.25 per
      share to settle $412,800 in promissory notes payable. As a condition, to this
      arrangement the promissory note holders waived all accrued interest payable
      on
      the notes. On April 6, 2006, these shares were issued (note 10) and the Company
      recorded a $7,259 gain on settlement of debt.


**8.**
            **CONVERTIBLE
              DEBENTURES**




On
      August 25, 2004,
      the Company entered into a securities purchase agreement (the “Agreement”), with
      Bristol Investment Fund, Ltd., Alpha Capital AG and Stonestreet LP (the
“Purchasers”). Pursuant to the Agreement, the Purchasers agreed to purchase up
      to $1,350,000 in face amount of secured convertible debentures (the
“Debentures”) from the Company.  The Debentures did not bear interest but
      were to be issued at a 26% discount to the face amount. Accordingly, the cash
      purchase price for the full $1,350,000 face amount of the Debentures was
      $1,000,000.   The Debentures were due and payable in full one year
      from the date of issuance.





The
      Purchasers also
      had the right to convert the full-face amount of the Debentures to common stock
      of the Company at a price of $5.00 per share ($0.10 pre-split).  Under the
      Agreement, the Purchasers were also to receive warrants and additional
      investment rights to purchase shares of the Company’s common stock, where the
      warrants were exercisable at a price of $6.00 per share ($0.12 pre-split) for
      a
      period of five years and additional investment rights were exercisable at a
      price of $5.00 per share ($0.10 pre-split).





The
      Purchasers
      purchased a total of $675,000 in face amount for cash proceeds of $500,000
      and
      the $175,000 discount was charged as interest over the term of the debenture;
      $87,500 in the year ending February 28, 2005 and the $87,500 in the year ending
      February 28, 2006. The Company paid $20,000 in legal fees and $50,000
      administration fees.





A
      beneficial
      conversion feature expense of $500,000 resulting from the anticipated conversion
      of the debentures, and the exercise of the associated warrants and additional
      investment rights of the above debentures was recorded as interest expense
      for
      the year ending February 28, 2005.





On
      August 10, 2005,
      the Company and the Purchasers agreed to retire the Debentures including all
      associated principal, terms, warrants and rights for the amount of $500,000
      plus
      8% interest. On September 21, 2005, the Company repaid in full $500,000 plus
      interest charges of $41,815 to the Purchasers. As a result of this payment,
      the
      Debentures were terminated and the associated warrants and additional investment
      rights were cancelled. A gain of $133,185 was recorded for settlement of this
      debt.





Another
      convertible
      debenture in the amount of $30,000 was issued on January 15, 2004. The
      conversion of principal and accrued interest (8% per year) was at the rate
      of
      $1.00 ($0.02 pre-split) per share of common stock. On December 21, 2005, the
      Company repaid the $30,000 convertible debenture plus accrued interest of
      $4,645.




-14-
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          of Contents




**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**
 **8.**
                  **CONVERTIBLE
                    DEBENTURES
                    (Continued)**




In
      December 2005,
      the Company issued $300,000 in convertible debentures to three lenders with
      a
      maturity date of December 8, 2006, accrued interest at 7% per year, and
      convertible at the option of the holder into shares of common stock at $0.15
      per
      share. On January 6, 2006, these debentures were converted and the Company
      issued 2,000,000 common shares (100,000,000 pre-split). A beneficial conversion
      feature of $300,000 was recorded in interest expense as to the anticipated
      conversion of these debentures, with a corresponding increase in additional
      paid
      in capital.




In
      January and
      February 2006, the Company issued convertible debentures, with principal and
      accrued interest at 7% per year, convertible into units at the option of the
      holder.  Each unit consists of a warrant to purchase 25,000 common shares
      at $1.00 per share and $25,000 of debt, which at the option of the holder,
      may
      be converted to common shares at $0.50 per share until April 30, 2008.  As
      at February 28, 2006, the Company had issued convertible debentures in the
      amount of $652,000




A
      beneficial
      conversion feature of $489,000 was recorded in interest expense as to the
      anticipated conversion of these debentures. Also included in interest expense
      was $163,000 representing the relative fair value of the warrants (immediately
      exercisable) in relation to the convertible debt.




During
      the quarter
      ended May 31, 2006, the Company issued an additional $2,265,500 of convertible
      debentures, with principal and accrued interest at 7% per year, convertible
      into
      units at the option of the holder. Each unit consisted of a warrant to
      purchase 25,000 common shares at $1.00 per share and $25,000 of debt, which
      at
      the option of the holder, may be converted to common shares at $0.50 per share
      until April 30, 2008. A beneficial conversion feature of $1,359,300 was recorded
      in interest expense as to the anticipated conversion of these debentures. Also
      included in interest expense was $906,200 representing the relative fair value
      of the warrants (immediately exercisable) in relation to the convertible debt,
      and as a result, the aggregate sum of $2,265,500 was offset as additional paid
      in capital. As at May 31, 2006 there was $2,917,500 of convertible debentures
      outstanding.




During
      the quarter
      ended August 31, 2006, all of the $2,917,500 convertible debentures were
      converted into 5,835,000 shares of the Company’s common stock at $0.50 per
      share. As at August 31, 2006 there were no convertible debentures
      outstanding.




The
      fair value of
      the warrants attached to the convertible debentures as discussed above was
      estimated at the date of grant using the Black-Scholes option pricing model
      using the following weighted average assumptions:






112,500
                Warrants - attached to $675,000 Convertible Debenture
            135,000
                Additional Rights Warrants - attached to $675,000 Convertible
                Debenture
            2,917,500
                WarrantsExpected
              life
            5
                years
            5
                years
            107%Expected
              volatility
            107%
            107%
            2
                yearsRisk
              free
              interest rate
            5%
            5%
            5%Expected
              dividends
            -
            -
            -Weighted
              average fair value of warrant
            $6.00
            $5.00
            $1.00Stock
              price
              at date of grant
            $6.50
            $6.50
            $1.45




-15-
 Table
          of Contents




**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Years
            Ended February
            28, 2006 and 2005
 **(Unaudited)
            (U.S. Dollars)**
 **9.**
                  **PREFERRED
                    STOCK**





The
      Company is
      authorized to issue 20,000,000 shares of preferred stock. The Company’s board of
      directors is authorized to divide the preferred stock into series, and with
      respect to each series, to determine the preferences and rights and
      qualifications, limitations or restrictions thereof, including the dividend
      rights, conversion rights, voting rights, redemption rights and terms,
      liquidation preferences, sinking fund provisions, and the number of shares
      constituting the series and the designations of such series. The board of
      directors could, without stockholder approval, issue preferred stock with voting
      and other rights that could adversely affect the voting rights of the holders
      of
      common stock, which issuance could have certain anti-takeover
      effects.


**10.**
            **COMMON
              STOCK**





**Number**
              **of
                Shares**
            **Amount**Balance,
                February 28, 2006
            12,799,902
            $15,583,977Issued
                pursuant to private placement
            550,000
            275,000Issued
                pursuant to settlement of promissory notes
            1,651,200
            412,800Issued
                pursuant to private placement
            200,000
            100,000Issued
                pursuant to exercise of convertible debt
            5,835,000
            2,917,500Issued
                pursuant to exercise of warrants
            50,000
            50,000Shares
                returned to treasury
            (50,000)
            (25,000)Balance,
                August 31, 2006
            21,036,102
            $19,314,277





On
      April 3, 2006
      and May 31, 2006 the Company issued 550,000 and 200,000 common shares
      respectively pursuant to a private placement unit offering. Units consisted
      of
      one share of common stock and one-half of one warrant. Each full warrant
      entitles the investor to purchase an additional share of the Company’s common
      stock at a price of $1.00 per share and is exercisable until April 30,
      2008.





On
      March 4, 2006,
      the Company agreed to issue 1,651,200 common shares at a price of $0.25 per
      share to settle $412,800 in promissory notes payable (note 7). On April 6,
      2006,
      these shares were issued.





On
      July 5, 2006,
      the Company issued 5,835,000 common shares on the exercise of $2,917,500 of
      convertible debt at a price of $0.50 per share.





On
      August 10, 2006,
      the Company issued 50,000 common shares on the exercise of 50,000 warrants
      where
      each warrants was exercisable into common shares at a price of $1.00 per
      share.





On
      August 15, 2006,
      the Company returned to treasury 50,000 common shares that were issued but
      not
      delivered pending payment with respect to the convertible debt converted into
      common shares on July 5, 2006.




-16-
 Table
          of Contents




**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**
 **11.**
                  **STOCK COMPENSATION
                    PROGRAM**





On
      December 9,
      2005, the Company’s board of directors approved a stock compensation program,
      which was subsequently ratified at an extraordinary meeting of shareholders
      held
      on February 13, 2006. In order to maintain flexibility in the award of stock
      benefits, the program constitutes a single “omnibus” plan, but is composed of
      three parts. The first part is the qualified incentive stock option plan (the
      “ISO Plan”), which provides grants of qualified incentive stock options
      (“ISOs”).  The second part is the non-qualified stock option plan (“NQSO
      Plan”), which provides grants of nonqualified stock options (“NQSOs”).  The
      third part is the restricted shares plan (“Restricted Shares Plan”), which
      provides grants of restricted shares of the Company’s common stock (“Restricted
      Shares”). The maximum number of common shares that may be purchased under the
      plan is 6,000,000. Options granted under the plan include incentive and
      non-qualified stock options as well as actual shares of common stock, with
      vesting determined on the grant date, not to exceed 10 years, and are
      exercisable over a 10-year maximum period at a price to approximate the fair
      market value of the common stock at the date of grant.





On
      February 27,
      2006, the Company granted 800,000 ISOs under the ISO Plan to directors, officers
      and consultants at a price of $0.50 per common stock for a period of ten years.
      The ISOs vest in four equal instalments, at the time of the grant and then
      every
      six months thereafter. Compensation cost, being the fair value of the options,
      is calculated to be $992,000 of which $248,000 is expensed on the date of issue
      and as the remainder vest.





The
      fair value of
      the 800,000 options was determined using the Black-Scholes option pricing model
      using a ten-year expected life of the option, a volatility factor of 152%,
      a
      risk-free rate of 5% and no assumed dividend rate.





On
      August 15, 2006,
      the Company granted 150,000 stock options at $1.04 (a 10% discount to market
      price on the day of acceptance), which vest over a three year period at a rate
      of 25,000 stock options every six months.





The
      options are
      summarized as follows:





Options
            Weighted
              Average
              Exercise
              PriceOutstanding
                at February 28, 2006
            930,000
            $
                0.54Granted
            150,000
            1.04Outstanding
                at February 28, 2006
            1,080,000
            $0.59




-17-
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          of Contents


**MEXORO
          MINERALS LTD.**
 **(Formerly
          Sunburst Acquisitions IV, Inc.)**
 **(An
          Exploration Stage Company)**
 **Notes
          to
          Consolidated Financial Statements**
 Six
          Months Ended
          August 31, 2006
 **(Unaudited)
          (U.S. Dollars)**
 **11.**
                **STOCK COMPENSATION
                  PROGRAM
                  **(Continued)****




The
      following table
      summarizes options outstanding at August 31, 2006:





Exercise
                Price
            
            Number
                of
                Options Issued
            Number
                of
                Options Exercisable
            
            Remaining
                Contractual Life (Years)$0.50
            
            890,000
            490,000
            
            9.06$1.04
            
            150,000
            0
            
            9.95$1.50
            
            40,000
            40,000
            
            3.751,080,000
            530,000





The
      Company has
      reserved 1,080,000 common shares in the event that these options are
      exercised.





For
      the quarter
      ended August 31, 2006, stock-based compensation expenses totalled $248,000
      (2005
      - $nil), with an offsetting amount to additional paid in capital.





**12.**
            **WARRANTS**





As
      at August 31,
      2006, the Company had a total of 8,217,500 (February 28, 2006 - 5,652,000)
      warrants outstanding to purchase common stock. Each warrant entitles the holder
      to purchase one share of the Company’s common stock. The Company has reserved
      8,217,500 common shares in the event that these warrants are
      exercised.





The
      warrants
      include 1,000,000 Series A Warrants exercisable at $0.50 per share, 1,000,000
      Series B Warrants exercisable at $0.75 per share, 1,000,000 Series C Warrants
      exercisable at $1.00 per share, 1,000,000 Series D Warrants exercisable at
      $1.25
      per share, and 1,000,000 Series E Warrants exercisable at $1.50 per share;
      of
      which all are exercisable at the option of the holder. The Series A Warrants
      were fully vested upon issuance. They are exercisable at any time following
      their issuance but will expire on June 30, 2007 to the extent they are not
      exercised. The remaining series of Warrants will each vest and become
      exercisable only at the time that the immediately preceding series has been
      fully exercised.





Unless
      terminated
      earlier as a result of failure to vest, the Series B and Series C Warrants
      will
      each expire on December 31, 2007, and the Series D and Series E Warrants will
      each expire on December 31, 2008. Stock-based compensation of $3,898,000 was
      recorded on these warrants at February 28, 2006.





The
      Company has
      also issued 2,917,500 warrants exercisable at $1.00 each pursuant to the
      issuance of convertible debentures (note 8). These warrants expire on April
      30,
      2008, and are redeemable by the Company, at $.01 per share, in the event the
      Company’s Common Stock closes with a bid price, on average, over $3.00 per share
      for a consecutive 20 day period. On August 10, 2006, 50,000 warrants were
      exercised into 50,000 common shares at a price of $1.00 per share. On August
      15,
      2006, 25,000 warrants were cancelled due to non-payment of funds with respect
      to
      a convertible debt subscription in the amount of $25,000 (note 10).




-18-
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**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**
 **12.**
                  **WARRANTS
                    (Continued)**


The
      fair value of
      the warrants discussed above was estimated at the date of grant using the
      Black-Scholes option pricing model using the following weighted average
      assumptions:






2,917,500
                Warrants
            1,000,000
                Warrants issued to GM Capital - Series A
            1,000,000
                Warrants issued to GM Capital - Series B
            1,000,000
                Warrants issued to GM Capital - Series C
            1,000,000
                Warrants issued to GM Capital - Series D
            1,000,000
                Warrants issued to GM Capital - Series EExpected
              life
              (years)
            2
            1.58
            2.08
            2.08
            3.08
            3.08Expected
              volatility
            107%
            152%
            152%
            152%
            152%
            152%Risk
              free
              interest rate
            5%
            5%
            5%
            5%
            5%
            5%Expected
              dividends
            -
            -
            -
            -
            -
            -Weighted
              average fair value of warrant
            $1.00
            $0.50
            $0.75
            $1.00
            $1.25
            $1.50Stock
              price
              at date of grant
            $1.45
            $1.00
            $1.00
            $1.00
            $1.00
            $1.00




The
      Company has
      also issued 375,000 warrants exercisable at $1.00 each pursuant to a private
      placement unit offering from shares issued on April 3, 2006 and May 31, 2006.
      Each warrant entitles the investor to purchase an additional share of the
      Company’s common stock at a price of $1.00 per share and is exercisable until
      April 30, 2008.




**** **13.**
            **RELATED PARTY
              TRANSACTIONS**




For
      the six months
      ended August 31, 2006, the Company paid management fees of $116,000 (2005 -
      $nil) to certain officers and directors and to companies controlled by
      directors. The Company also paid $23,776 (2005 - $nil) to certain officers
      and
      directors and to companies controlled by directors for travel, office and other
      related expenses.





As
      at August 31,
      2006, accounts payable of $4,121 (2005 - $nil) were owing to certain officers
      and directors of the Company and to companies controlled by
      directors.





As
      of August 31,
      2006, the Company had a note payable due to a former related entity in the
      amount of $nil (2005 - $28,500). Interest on this note was imputed at a rate
      of
      6.09% and totalled $nil (2005 - $19,268) cumulatively at August 31,
      2006.





All
      related party
      transactions are in the normal course of business at the exchange amount agreed
      to by each party.




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**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 Six
            Months Ended
            August 31, 2006
 **(Unaudited)
            (U.S. Dollars)**


**14.**
            **CONTINGENT
              LIABILITY**





On
      August 31, 2006,
      the Company entered into an Amended Consulting Agreement with G.M. Capital.
       This agreement replaces the agreement signed with G.M. Capital in January
      2006, which contained registration rights which requires the Company to use
      best
      efforts to file a registration statement registering the warrant shares within
      45 days upon demand of 50% of the warrant holders and thereafter to use best
      efforts to cause such registration statement to be declared effective as soon
      as
      reasonably possible. Otherwise, the Company is obligated to sell to GM Capital
      as liquidated damages payment comprising of 1,000 shares per day at $0.001
      per
      share until the default is cured. As at August 31, 2006, GM Capital had not
      demanded the Company to file a registration statement, and, in the Company’s
      opinion, best efforts have been made to effect the registration of the warrant
      shares. Accordingly, the Company believes a liability did not and does not
      exist
      and accordingly no provision was made in the financial statements in this
      regard.





The
      Amended
      Consulting Agreement dated August 31, 2006, in part, removed the provision
      for
      the liquidated damages provision relating to the registration rights of the
      holders of the Warrants.




**15.**
            **SUBSEQUENT
              EVENTS**




(a)
            Promissory
                Notes




Subsequent
      to
      August 31, 2006, the Company shall offer Notes, up to $2,000,000 in principal
      amount together with warrants, where every $5.00 of principal amount can be
      converted into one warrant. The Notes shall require quarterly payments of
      interest at 12% and shall be due and payable in full in one year. In addition,
      the Company shall be required to apply all net operating income from the
      Cieneguita Property to repayment of the Notes until they are paid in full.
      The
      Company also must apply the net proceeds of any funds received from the issuance
      of new equity or debt instruments until the Notes are repaid in full. The
      Warrants will be exercisable for a period of one year beginning one year after
      the date of the offering and will give the holder the right to buy one share
      of
      common stock for $1.00 for a period of one year. The Company will pay a
      commission of 7% on the funds raised.




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**ITEM
              2.** **MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
              OPERATIONS**





**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**





Certain
      statements
      contained in this Form 10-QSB constitute "forward-looking statements". These
      statements, identified by words such as “plan”, "anticipate", "believe",
      "estimate", "should", "expect" and similar expressions include our expectations
      and objectives regarding our future financial position, operating results and
      business strategy. These statements reflect the current views of management
      with
      respect to future events and are subject to risks, uncertainties and other
      factors that may cause our actual results, performance or achievements, or
      industry results, to be materially different from those described in the
      forward-looking statements. Such risks and uncertainties include those set
      forth
      under this Item 2. "Management's Discussion and Analysis or Plan of Operation"
      and elsewhere in this Form 10-QSB. We do not intend to update the
      forward-looking information to reflect actual results or changes in the factors
      affecting such forward-looking information. We advise you to carefully review
      the reports and documents we file from time to time with the Securities and
      Exchange Commission (the “SEC”), particularly our annual reports on Form 10-KSB,
      our quarterly reports on Form 10-QSB and our current reports on Form
      8-K.





**Overview**




We
      are a start-up,
      exploration stage company and have not yet generated or realized any revenues
      from our exploration projects, which we commenced in May 2004. We have
      sufficient cash to maintain our operations until April 2007, unless our
      exploration is successful, of which there is no guarantee. If our exploration
      is
      successful, we will need to raise additional funds to meet our needs for
      additional exploration and/or production.





Our
      continued
      existence and plans for future growth depend on our ability to obtain the
      additional capital necessary to operate either through the generation of revenue
      or the issuance of additional debt or equity. While we believe that we raised
      sufficient funds in our recent private placement offerings to allow us to
      continue in business until April 2007, we may not be able to continue in
      business beyond that date unless we obtain additional capital. We have not
      generated any revenues, and no revenues are anticipated unless and until
      mineralized material is discovered on the properties in which we have an
      interest.





We
      are in the
      planning stages for a mine design for our Cieneguita Property. We are preparing
      this design with a view that if our exploration of Cieneguita is successful
      we
      will be able to put the property into production without delay. In the event
      that our exploration is successful on our Cieneguita Property, we anticipate
      spending approximately $2,000,000 on equipment and building a plant to put
      that
      property into production over the next six months. The ability to buy such
      equipment would be dependent upon our cash position at that time and our ability
      to raise additional capital. Currently, though, the Cieneguita Property has
      no
      known ore reserves.





**P****lan
      of Operatio****n**




Our
      business plan
      is to proceed with the exploration of our Mexican mineral properties to
      determine whether they contain commercially exploitable reserves of gold, silver
      or other metals. We believe that we have sufficient funds to fund our current
      exploration plans and meet our monthly general and administrative costs until
      April 2007 without the need to raise additional funds. In the event that our
      exploration program should find exploration targets that warrant additional
      exploration work, including exploration by drilling, we may not have enough
      cash
      available to fund an expanded program. If we do plan to expand our exploration,
      we would need to raise additional capital to meet these needs. We currently
      do
      not have any sources of additional capital available to us and we may not have
      any in the future.





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We
      are not involved
      in any research and development on our exploration properties. Also, as we
      are
      in the exploration phase, we do not anticipate purchasing any plants or
      significant equipment other than described above for Cieneguita. In the event
      that we did discover a mineral deposit, of which there is no guarantee, we
      would
      need to expend substantial amounts of capital to put any of our properties
      into
      production, if so warranted. We do not have enough capital available to us
      to
      make such expenditures, and we therefore would have to raise the additional
      capital or, if possible, enter into a joint venture for the production phase.
      If
      we were to form a joint venture, we cannot assess what our final position in
      the
      project would be. We do not have any sources of capital available to us at
      this
      time nor do we have any joint venture partners to fund such a project if one
      should be discovered.





We
      have recently
      hired a Vice President of Exploration to conduct our exploration programs and
      three geologists, on contract, to assist him.  We also have hired an office
      administrator in our office in Chihuahua. We plan to hire one more geologist
      by
      the end of October to work on our exploration programs. Other than the one
      additional geologist on contract, we do not expect any significant change in
      additional employees over the next 12 months.  All of the exploration work
      we are conducting is contracted out to third parties except for the two
      employees we have now.  In the event that we should find a mineable
      reserve, it is management’s intention to contract the mining of any ore reserves
      out to third parties.  We do not have any known reserves at this time.




***Cieneguita
      Property***




Because
      we already
      have data from the previous exploration programs and mining records from Glamis
      Gold, our exploration program on the Cieneguita Property will focus mainly
      on
      identifying mineralized zones of economic grade to allow for the property to
      be
      put into production as an open pit heap leach mine. We expect the exploration
      cost to be approximately $200,000. Since January 2006, we have spent
      approximately $200,000, as budgeted, on the exploration of this
      project. The funds that were expended came from our general working
      capital. This exploration program included the review of available data to
      create a structural mineralization framework, detailed soil and rock sampling,
      resampling existing trenches, the extension of existing trenches, and the
      creation of new trenches.   In April 2006, we completed a sampling of the
      property that included more than 500 meters of deep trenches from which we
      took
      comprehensive channel sampling.  The trenches comprised 8 trenches
      approximately 200 meters long and 2 to 10 meters deep spaced equally along
      the
      1,000 meters strike length of the property. From the walls of these trenches,
      we
      took approximately 550 rock samples for a total weight of 20 tonnes. One half
      of
      these samples were sent to ALS Chemex’s laboratory in Chihuahua for assaying.
      The sampling protocol followed the best mining practices. The purpose of the
      sampling was to further define the ore grade and potential of the property.
       We have received the results of the sampling program and we have
      determined that it is warranted to continue exploration on the property to
      determine if it is suitable for a heap leach open pit mining operation.  We
      have not determined any known reserves on this property to date, and our program
      is still exploratory.





The
      other half of
      the 20 tonnes sample was used to complete column tests to determine the
      leachability of the precious metals from the rock.  In this test, the ore
      was placed in 3 PVC tubes, 500 cm in diameter and 3 meters high.  Different
      mixtures of a cyanide solution were dripped over the top of the columns at
      different flow rates.  The results from these tests will help us to
      determine the most effective solution to be used on the heap leach pads on
      the
      property in the event the property should ever be put into production.
 These tests have been completed. The tests were done by qualified
      geologists employed by MRT as part of our office package costs.  The tests
      were scientifically conducted and monitored for quality control and efficacy.
       These tests were done to ensure that the metallurgy of the minerals allows
      for economic recovery of the precious metals using a cyanide heap leach process.
       The results of the column test indicate that up to 98% of the gold
      contained in the ore samples we took could be recovered from the ore if the
      ore
      is leached long enough.  Under actual mining production conditions in the
      field, though, we would anticipate that the economic recovery levels of the
      ore
      would be approximately 80% to 85% recovery of gold from the ore.  The cost
      of the cyanide needed to produce the additional gold above the 85% level
      outweighs the value of the gold recovered.  We cannot guarantee that we
      would be able to achieve this level of recovery.  This is not an estimate
      of reserves on the property.




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Additional
      tests
      will be needed to determine the most effective crush size of the ore, the most
      cost effective flow rates of the cyanide and most economical leaching time
      to be
      undertaken if we should ever put the property into production.  We
      anticipate these additional tests will begin in October 2006 and the tests
      should be completed approximately 90 days thereafter.  The funds required
      for these additional tests will come from general working capital.





The
      Cieneguita
      Property is without known reserves. Our proposed programs are exploratory in
      nature.





Because
      management
      determined that the results of our initial test warranted further exploration,
      we expect to do some additional exploration work beginning in October 2006.
       This next phase of exploration is budgeted for an expenditure of $200,000.
       These funds will come from general working capital.  We originally
      had planned to do additional exploration with the use of ground-based geophysics
      to measure the conductivity of underground rocks.  Ground-based geophysics
      is a technique for exploring for minerals using electromagnetic impulses and
      the
      various resistances of the rocks to the conduction of the electromagnetic
      signals generated by the equipment.  The conductivity of the rocks is
      compared to known rock formations to help indicate the types of rock that may
      be
      found underground where the geophysical work is done.   However, based on
      the results we received from our first phase of exploration and a recommendation
      from our VP of Exploration, we do not believe that ground-based geophysical
      exploration will add any additional information about the structure of the
      mineralized ore body.  We will continue our exploration starting in October
      2006, and we estimate that this exploration will end in April 2007.  The
      exploration will be done through trenching and sampling from the trenches.
       The program will entail using a bulldozer to dig trenches the width of the
      bulldozer’s blade down to a depth between 5 and 10 meters deep.  Our
      on-site geologist will direct the bulldozer operator as where to dig the
      trenches.   The geologist will base his decision on where to dig on the
      results of our previous exploration work.  Once the trenches are dug, the
      geologist will lay large tarps in the bottom of the pits.  He will then
      take samples of rock from all levels of the walls of the trench and lets the
      rocks fall onto the tarp.  The rock on the tarp will then be gathered up
      and marked from which trench it came from.  The ore is pulverized and
      shipped out for assays.  The results from these assays are expected to be
      completed and mapped by May 2007 and will help us to further delineate the
      prospects of the property.





Because
      the rock is
      very fractured, we do not believe that a drill program will provide us with
      accurate enough information to make a determination of the grade of the ore
      or
      the size of the mineralized zones. We believe that our method of trenching
      and
      obtaining large quantities of rock samples for assaying will provide us with
      the
      necessary information to allow us to make a determination whether the property
      should be put into production.  We do not have any mineable ore reserves at
      this time on the Cieneguita property.  Our next phase of exploration will
      begin in early October, and we have funds on hand to complete this exploration
      program laid out by our VP Exploration.  This next phase of exploration is
      estimated to cost $200,000 for the next 6 months.  The goal of this phase
      of exploration is to delineate the mineralized ore body and map the grade of
      the
      mineralization that will allow us to formulate a plan to put the property into
      production, if warranted.  If the exploration program does not provide us
      with the results we deem necessary to continue exploration, then, on a
      recommendation from our VP Exploration and managements’ concurrence on his
      findings, we will cease exploration on the property.  If no further
      exploration is warranted, then we will discontinue any payments to the
      concession holders and allow our agreeement to lapse.  If we allow the
      agreement to lapse we will be obligated to complete some reclamation work on
      the
      property of approximately $50,000.  All of the money that we had invested
      in the exploration of the Cieneguita property would be lost.





We
      have one
      contract geologist on the Cieneguita Property working full time, and he will
      continue to do so through the next six months if the exploration results warrant
      the expenditure.  If the results do not warrant further work, we plan to
      move this geologist to one of our other properties to continue exploration
      on
      those properties.





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The
      results of this
      additional exploration commencing in October 2006 will help us determine whether
      or not to put the Cieneguita Property into production.  If, after the
      second phase of exploration is completed, our V.P. of Exploration continues
      to
      recommend the property as a viable exploration target and if we continue
      exploration, our next step over the ensuing three months would be to greater
      delineate the mineralized structure on the Cieneguita Property.  This would
      entail additional trenching and sampling of the property to determine where
      the
      suitable grades of mineable ore are located.   If further exploration is
      not warranted we will discontinue work on the property and not make any further
      concession payments thereby losing the property.   If more exploration is
      warranted, we have implemented a feasibility study and mine design for the
      Cieneguita Property.   The feasibility has been commissioned to a third
      party contractor with expertise in heap leach mining. The engineer is reviewing
      all of the data that we have accumulated, and, from this information, he is
      designing a heap leach mining operation best suited to the tonnage, grade of
      the
      ore and availability of land to build leaching pads.  We would also engage
      an independent third part consultant to review the work of the engineer to
      verify and agree with the results of the feasibility study and mine design.





The
      independent
      third party engineer would work with the contractor to agree on a final design.
      Once the two parties were in concurrence then they would present their plan
      to
      management for final approval.   Such a feasibility study will take
      approximately 60 days to complete and cost approximately $50,000.  We have
      not identified any additional sources of capital at this time. In the event
      the
      feasibility study came back without a viable plan to put the property into
      production, we would abandon any further work on these concessions and allow
      our
      agreement to purchase the concessions expire.  We would lose all of the
      money invested in the exploration of these concessions.





The
      final stage, if
      warranted, would be to put the Cieneguita Property into production. It is
      estimated that this phase would cost us approximately $2,000,000 to purchase
      all
      of the necessary capital equipment and to build the necessary pads to put the
      property into production.  We would need to raise the necessary capital
      through either debt or equity financing or find a joint venture partner. We
      do not currently have any sources of capital available to us to make such
      expenditures, and we can give no assurance that we would be able to raise such
      capital.  We also do not have a joint venture partner at this time that is
      interested in the Cieneguita Property. We can give no assurance that we would
      be
      able to find such a joint venture partner to put this property into production
      if the feasibility study warranted such a plan.




***Guazapares
      Property***




Concurrently
      with
      the exploration of the Cieneguita Property, we have budgeted approximately
      $450,000 of our general working capital for exploration on our Guazapares
      Property until April 2007.  Of this amount, we have spent approximately
      $70,000 since March 2006.   These funds came from our general working
      capital. We have one full time contract geologist working on the Guazapares
      Property collecting rock samples and mapping the property.  By the end of
      September 2006, we plan to add one additional contract geologist to the property
      to continue sampling and mapping.  This first phase of the exploration
      program has the goal of determining whether subsequent exploration is warranted
      and if a drill program should be commenced.    This current work has
      included reviewing available data to create a structural mineralization
      framework. Continuation of the work, commencing in September 2006, will include
      detailed soil and rock sampling, and ground-based geophysics measurements.
      Once
      this information is obtained from the current exploration project (which is
      expected to be finished by April 2007), our VP of Exploration will review all
      of
      the data collected and make a recommendation to management. Management, at
      that
      time, will review the exploration data collected and the recommendations of
      the
      VP of Exploration and make a determination whether additional work is advisable.
      If the management determines that additional exploration is not warranted,
      then
      we will likely discontinue exploration and make no further property payments,
      dropping the concessions.




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We
      believe that
      most of the mining concessions being explored in the Guazapares area are
      epithermal silver deposits similar to the Cieneguita Property. The geology
      from
      other properties in that area will serve as a guide when exploring the
      Guazapares Property. Because we do not have the same amount of detailed
      information on Guazapares as we do on Cieneguita, the exploration program will
      cost more than the exploration program on Cieneguita.





We
      anticipate that
      the preliminary sampling and mapping will be completed and the reports back
      from
      the results of the samples by the end of October 2006. Even though we will
      be in
      our first phase of exploration, this initial information will allow us to
      determine if additional work is warranted. If additional work is not warranted,
      as determined by management, we will drop the properties and discontinue any
      further expenditures on the property. If we continue with phase 1 of the
      exploration we should have the results of exploration by April 2007. At that
      point, we will make a decision to whether to implement an initial drill program
      based on the recommendations of our head geologist working on the Guazapares
      Property. If the geologist does not recommend a drilling program, we may abandon
      the property. If we abandon the Guazapares Property, we will not have to make
      any further property payments as per our property purchase
      agreements.





If
      a drill program
      is warranted and implemented, the bulk of the remaining funds of the exploration
      program would be spent on the initial drilling targets. This initial drilling,
      assuming drill rigs are available in the area we could commence in October
      2006
      and last approximately 60 days. The results of this drill program would take
      approximately 90 days to be assayed and interpreted. Once those result are
      known, we would consult with our lead exploration geologists to determine
      whether to abandon the Guazapares Property or continue with further drilling
      exploration. If the Board of Directors decides to continue with further
      drilling, we would need to raise additional funding through the sale of debt
      or
      equity because we do not have sufficient capital to continue an exploration
      program beyond our original budget. Additional drilling would cost a significant
      amount of money, and there is no assurance that we would be able to raise such
      additional amounts of money. If we could not obtain additional financing, we
      could seek a joint venture partner if the results warranted it. We do not have
      any joint venture partners at this time and can give no assurance that we would
      be able to find one if the Guazapares Property warranted such a joint venture.
      There are no known ore reserves on the Guazapares Property.




***Encino
      Gordo Property***





We
      have also
      planned an exploration program, budgeted at approximately $200,000 from general
      working capital through April 2007, on our Encino Gordo Property. We currently
      have one contract geologist sampling and mapping this property, and we have
      expended approximately $30,000 of our budget. The Encino Gordo Property
      comprises four mining concessions that total 1,042 hectares (approximately
      2,575
      acres). We have limited information available to us about this property from
      previous exploration, and therefore we have not yet developed a concise
      exploration plan for these concessions. The previous geochemical sampling that
      was done suggests a presence of mineralized structures. These structures will
      be
      investigated by geochemical sampling to determine if further exploration is
      warranted and to help refine the best exploration plan for the concessions.
      Our
      goal is to have this further exploration completed by the end of October 2006,
      and a geological report prepared by our Vice President of Exploration on the
      Encino Gordo Property should be available 30 days thereafter. Depending on
      the
      results of the report, as determined by management, we intend to either abandon
      the Encino Gordo Property, in which case no further payments would be made
      or
      would be due under our agreements to acquire these concessions, or to make
      additional expenditures to determine potential drill targets. The amount and
      source of the capital needed for additional expenditures will be determined
      at
      that time. If a drill program is recommended, we do not have sufficient capital
      on hand to complete such a program because it would require the expenditure
      of
      significant amounts of money. We would need to raise additional capital through
      the sale of debt or equity.  We can give no assurance that we would be able
      to raise such capital, as we have not identified any source of capital for
      such
      a program at this time. If we could not raise additional funds, we would
      consider seeking a joint venture partner if the results warranted it. We do
      not
      have any joint venture partners at this time and can give no assurance that
      we
      would be able to find one if the Encino Gordo Property warranted such a joint
      venture. There are no known ore reserves on the Encino Gordo
      Property.




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Although
      two of our
      properties have been mined in the past, we are presently in the exploration
      stage and there is no assurance that a commercially viable mineral deposit
      exists in any of our properties. We do not have any proven or probable reserves
      on our properties. Our exploration programs on our properties have only just
      commenced. We have one geologist doing some preliminary mapping and sampling
      on
      each of the properties. We have made a business decision to place a higher
      priority on the Cieneguita exploration program to define mineralized ore.
      However, we intend to proceed with exploration on all three properties
      simultaneously. We do not anticipate buying equipment, other than transportation
      equipment, until construction of the Cieneguita mine is initiated, if ever.
      If
      our exploration programs warrant drilling programs on the properties, we
      anticipate contracting two geologists and four assistants for supervising the
      drilling work and taking splits for the drilling samples.





Once
      we receive
      results from these exploration programs, our management will assess whether
      to
      proceed to any further exploration phases. In making this determination, we
      will
      make an assessment as to whether the results are sufficiently positive to enable
      us to obtain the financing necessary to proceed. The decision will be based
      mainly on the recommendations of our Vice President of Exploration. Other
      factors that will influence the production decision will be the current price
      of
      gold bullion, availability of mining equipment and a mining feasibility
      study.





**Results
      of
      Operations**





Revenues





We
      did not earn
      revenues during the three and six months ended May 31, 2006 or 2005 because
      we
      did not have commercial production of any of our properties. We do not
      anticipate earning revenues until such time as we have entered into commercial
      production of our mineral properties, if ever. We are presently in the
      exploration stage of our business. We can provide no assurance that we will
      discover commercially exploitable levels of mineral resources on our properties
      or, if such resources are discovered, that we will enter into commercial
      production of our mineral properties. Interest income is recorded under Other
      Income in the Statement of Operations in the financial statements.





Operating
      Costs





We
      did not incur
      any operating costs during the three and six months ended 2006 and 2005 due
      to
      the fact that we did not achieve production from exploration activities during
      either year.





Expenses





Our
      expenses during
      the three and six months ended August 31, 2006 were $828,000 and $1,650,000
      respectively, compared to $221,000 and $234,000 respectively, for the three
      and
      six months ended August 31, 2005. The increase is primarily attributable to
      higher General and administrative expenses as there were no stock based
      compensation expense and developing exploration program in comparative periods
      in 2005.





The
      following table
      presents the General and administrative, stock-based compensation and mineral
      exploration expenses:





Three
                months ended August 31,
            
            Six
                months ended August 31,2006
            
            2005
            
            2006
            
            2005General
                and administrative
            $227,472
            
            $70,812
            
            $797,760
            
            $83,864Stock-based
                compensation
            $248,000
            
            -
            
            $248,000
            
            -Mineral
                Exploration
            $352,237
            
            -
            
            $604,498
            
            -Acquisition
                of resource properties
            -
            
            $150,000
            
            -
            
            $150,000




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The
      increase in
      General and administrative cash expenses relates to higher Management fees
      of
      $83,000 and $146,000 in the three and six months ended August 31, 2006
      respectively, from $12,000 and $12,000 in the three and six months ended August
      31, 2005. Finders’ fees increased to $285,000 in the six months ended August 31,
      2006 from $nil in the six months ended August 31, 2005. The increase was
      attributable to two private placements; a unit offering and convertible
      debentures. Accounting and legal fees increased to $37,000 and $78,000 in the
      three and six months ended August 31, 2006 respectively, from $28,000 and
      $36,000 in the three and six months ended August 31, 2005. The increase in
      fees
      was primarily attributable to higher auditing costs and the cost of regulatory
      filings with the SEC.





Stock-based
      compensation expenses of $248,000 in the three and six months ended August
      31,
      2006 compared to $nil in the three and six months ended August 31, 2006. The
      $248,000 relates to 25% vesting amount of the 800,000 stock options granted
      in
      February 2006 at a price of $0.50 per share. As at August 31, 2006, 50% of
      these
      stock options have vested.





Mineral
      exploration
      in the three and six months ended August 31, 2006 increased to $352,000 and
      $604,000 respectively, compared to $nil for the six months ended August 31,
      2005. The Company was not in a developing exploration program during the six
      months ended August 31, 2005. We anticipate that exploration expenditures will
      increase in fiscal 2007 as a result of exploration activities on our Mexican
      mineral properties.





Acquisition
      of
      resource properties was $nil in the six months ended August 31, 2006 compared
      to
      $150,000 for the six months ended August 31, 2005.





Loss





Our
      net loss
      increased to $825,000 and $3,940,000 for the three and six months ended August
      31, 2006 respectively, compared to $221,000 and $236,000 for the three and
      six
      months ended August 31, 2005. The higher losses are attributed to increased
      expenses as stated above and expensing of $2,266,000 relating to the beneficial
      conversion feature on $2,266,000 of convertible debentures issued between March
      and May 2006. We anticipate that we will continue to incur losses until such
      time as we can commence the development stage of our operations and achieve
      significant revenues from sales of gold recovered from our Mexican mineral
      properties. There is no assurance that we will be able to commence the
      development stage of our operations at any of our Mexican mineral properties
      or
      achieve revenues.





**Liquidity
      and Capital Resources**





Since
      inception, we
      have undergone two unsuccessful business combinations, which have caused us
      to
      incur significant liabilities and have resulted in the accumulation of a
      substantial deficit during the exploration stage.  As of August 31, 2006,
      we have total assets of $1,723,000, total liabilities of $182,000, and a deficit
      of $25,699,000 accumulated during the exploration stage.





Cash
      and Working
      Capital




We
      had cash of
      $1,534,000 as of August 31, 2006, compared to cash of $2,075,000 as of May
      31,
      2006, and $84,000 as of August 31, 2005. We had working capital of $1,450,000
      as
      of August 31, 2006, compared to working capital of $2,061,000 as of May 31,
      2006, and a working capital deficiency of $658,000 as of August 31,
      2005.





Under
      our current
      business plan, we will not require additional financing this fiscal year.
      However, we will require additional financing during the current fiscal year
      if
      our planned exploration activities increase. We plan to spend approximately
      $850,000 in the next twelve months to carry out exploration and administration
      activities on our Mexican mineral properties, and in the event that our
      exploration is successful on our Cieneguita Property, we anticipate spending
      a
      further $2,000,000 on equipment and




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building
      a plant to
      put that property into production. We anticipate spending approximately $480,000
      during the next twelve months on general and administrative costs.


We
      presently do not
      have sufficient financing to enable us to complete these plans and will require
      additional financing to perform future exploration work on our Mexican mineral
      properties. Our actual expenditures on these activities will depend on the
      amount of funds we have available as a result of our financing efforts. There
      is
      no assurance that we will be able to raise the necessary financing.





Cash
      Used in
      Operating Activities





Cash
      used in
      operating activities increased to $1,360,000 for the six months ended August
      31,
      2006 respectively, compared to $217,000 for the three and six months ended
      August 31, 2005. The cash used in operating activities came primarily from
      convertible debt and equity sales of our common shares. It was primarily used
      for General and Administrative costs and for the exploration
      program.





Investing
      Activities





Cash
      used in
      investing activities increased to $90,000 for the six months ended August 31,
      2006 respectively, compared to $nil for the six months ended August 31, 2005.
      Cash used in investing activities was used to acquire vehicles, office
      equipment, and computer equipment for our office in Mexico.





Financing
      Activities





Cash
      provided by
      financing activities amounted to $2,496,000 for the six months ended August
      31,
      2006 respectively, compared to $262,000 for the six months ended August 31,
      2005, respectively. All cash provided by financing activities in the six months
      ended August 31, 2006 was provided by convertible debt, share issuances and
      the
      exercise of warrants. Cash provided by financing activities was used to fund
      our
      operating and investing activities. We anticipate continuing to rely on equity
      sales of our common stock or issuance of debt in order to continue to fund
      our
      business operations. Issuances of additional shares will result in dilution
      to
      our existing shareholders.





On
      April 3, 2006
      and May 31, 2006 the Company issued 550,000 and 200,000 common shares
      respectively pursuant to a private placement unit offering. Units consisted
      of
      one share of common stock and one-half of one warrant. Each full warrant
      entitles the investor to purchase an additional share of the Company’s common
      stock at a price of $1.00 per share and is exercisable until April 30,
      2008.





On
      March 4, 2006,
      the Company agreed to issue 1,651,200 common shares at a price of $0.25 per
      share to settle $412,800 in promissory notes payable (note 7). On April 6,
      2006,
      these shares were issued.





On
      July 5, 2006,
      the Company issued 5,835,000 common shares on the exercise of $2,917,500 of
      convertible debt at a price of $0.50 per share.





On
      August 10, 2006,
      the Company issued 50,000 common shares on the exercise of 50,000 warrants
      where
      each warrants was exercisable into common shares at a price of $1.00 per
      share.





On
      August 15, 2006,
      the Company returned to treasury 50,000 common shares due to non-payment of
      funds with respect to the convertible debt converted into common shares on
      July
      5, 2006.





The
      amount of our
      convertible debt outstanding at August 31, 2006 was $nil compared to $2,917,500
      at May 31, 2006 and $705,000 at August 31, 2005.





In
      June 2006, all
      of the holders of the $2,917,500 convertible debentures converted to common
      shares at $0.50 per share. The Company issued 5,835,000 common shares to
      debenture holders upon the conversion. We have paid to the convertible debenture
      holders a total of $59,325, which is their accumulated interest on the
      debentures.





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We
      believe that the
      cash on hand derived from the sale of securities totalling $3,292,500 will
      be
      sufficient to fund our budgeted exploration and operation costs until April
      2007.





Going
      Concern




Our
      financial
      statements have been prepared on a going concern basis, which assumes the
      realization of assets and settlement of liabilities in the normal course of
      business. Our ability to continue as a going concern is dependent upon our
      ability to generate profitable operations in the future and/ or to obtain the
      necessary financing to meet our obligations and repay our liabilities arising
      from normal business operations when they become due. The outcome of these
      matters cannot be predicted with any certainty at this time and raise
      substantial doubt that we will be able to continue as a going concern. Our
      financial statements do not include any adjustments to the amount and
      classification of assets and liabilities that may be necessary should we be
      unable to continue as a going concern.





The
      Company has a
      history of operating losses and will need to raise additional capital to fund
      its planned operations. The Company had working capital of $1,450,000 as of
      August 31, 2006, and an accumulated deficit during the exploration stage of
      $25,699,000. These conditions raise substantial doubt about the Company’s
      ability to continue as a going concern.





The
      Company intends
      to reduce its cumulative loss through the attainment of profitable operations
      from its investment in a Mexican mining venture. There is no assurance that
      these operations will be profitable. In addition, the Company has conducted
      private placements of convertible debt and common stock, which have generated
      a
      portion of the initial cash requirements of its planned Mexican mining
      ventures.





**Off-Balance
      Sheet Arrangements**




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





**ITEM
      3.** **CONTROLS AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**:





Disclosure
      controls
      and procedures are designed to ensure that information required to be disclosed
      in the reports filed or submitted under the Exchange Act is recorded, processed,
      summarized and reported, within the time period specified in the SEC's rules
      and
      forms. Disclosure controls and procedures include, without limitation, controls
      and procedures designed to ensure that information required to be disclosed
      in
      the reports filed under the Exchange Act is accumulated and communicated to
      management, including the Chief Executive Officer and Chief Financial Officer,
      as appropriate, to allow timely decisions regarding required disclosure. As
      of
      the end of the period covered by this report, we carried out an evaluation,
      under the supervision and with the participation of our management, including
      our Chief Executive Officer and Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures. Based upon
      and as of the date of that evaluation, the Chief Executive Officer and Chief
      Financial Officer concluded that our disclosure controls and procedures are
      effective in ensuring that information required to be disclosed in the reports
      submitted under the Exchange Act is recorded, processed, summarized and reported
      as and when required.





**Changes
      in
      Internal Control over Financial Reporting**:





There
      were no
      changes in our internal controls or in other factors that could affect these
      controls subsequent to the date of their evaluation, including any deficiencies
      or material weaknesses of internal controls that would require corrective
      action.





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**PART
      II -
      OTHER INFORMATION**





**ITEM
      4.**  **UNREGISTERED SALES OF EQUITY SECURITIES AND USE
      OF PROCEEDS.**





None.




**ITEM
      5.**  **EXHIBITS**





The
      following
      exhibits are filed in reference:




2.1
            Securities
                Purchase Agreement dated as of August 25, 2004 among Sunburst Acquisitions
                IV, Inc. (and identified purchasers) (incorporated by reference from
                Current Report on Form 8-K and filed with the Securities and Exchange
                Commission on August 31, 2004).




2.2
            Share
                Exchange Agreement, dated May 3, 2004, by and among Sunburst Acquisitions
                IV, Inc., a Colorado corporation, Sierra Minerals and Mining, Inc.,
                a
                Nevada corporation, and the shareholders of Sierra Minerals & Mining,
                Inc. (incorporated by reference from Current Report on Form 8-K/A
                and
                filed with the Securities and Exchange Commission on August 9,
                2004).




2.3
            Joint
                Venture
                Agreement, dated April 26, 2004 and amended on June 1, 2004, by and
                between Sierra Mining and Minerals, Inc., a Nevada corporation, and
                Minera
                Rio Tinto S.A. de C.V., a Mexican company (incorporated by reference
                from
                Current Report on Form 8-K/A and filed with the Securities and Exchange
                Commission on August 9, 2004).




2.4
            Amendment
                to
                Joint Venture Agreement dated June 1, 2004 (incorporated by reference
                from
                Current Report on Form 8-K/A and filed with the Securities and Exchange
                Commission on August 9, 2004).




3
                (i)
            Articles
                of
                Incorporation (incorporated by reference from Registration Statement
                on
                Form 10-SB/A filed with the Securities and Exchange Commission on
                December
                29, 1997).





3
                (ii)
            Bylaws
                (incorporated by reference from Registration Statement on Form 10-SB/A
                filed with the Securities and Exchange Commission on December 29,
                1997).




4.1
            Specimen
                Common Stock Certificate (incorporated by reference from Registration
                Statement on Form 10-SB/A filed with the Securities and Exchange
                Commission on December 29, 1997).




4.2
            Registration
                Agreement dated April 20, 2004, by and among Sunburst Acquisitions
                IV,
                Inc., a Colorado company, and each of the purchasers in a private
                placement of shares of Sunburst (incorporated by reference from Current
                Report on Form 8-K/A and filed with the Securities and Exchange Commission
                on August 9, 2004).





10.1
            Distribution
                Agreement between EPI and Sunburst Acquisitions IV, Inc. (incorporated
                by
                reference from Form 10-KSB filed with the Securities and Exchange
                Commission on May 20, 2002).




10.2
            Distribution
                Agreement by and between Romlight International, Inc. and Sunburst
                Digital, Inc. (incorporated by reference from Form 10-KSB filed with
                the
                Securities and Exchange Commission on June 11,
                2003).




10.3
            Promissory
                Note between Sunburst Acquisitions IV, Inc. and Minera Rio Tinto
                S.A. de
                C.V. in the amount of $ 57,500 dated January 9, 2004 (incorporated
                by
                reference from Current Report on Form 8-K/A and filed with the Securities
                and Exchange Commission on August 9,
                2004).





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10.4
            Promissory
                Note between Sierra Mineral and Mining, Inc. and Minera Rio Tinto
                S.A. de
                C.V. in the amount of $ 167,500, dated May 3, 2004 (incorporated
                by
                reference from Current Report on Form 8-K/A and filed with the Securities
                and Exchange Commission on August 9,
                2004).




10.5
            Funds
                Escrow
                Agreement dated July 2005, among Sunburst Acquisitions IV, Inc.,
                Investment Fund, Ltd., Alpha Capital AG and Stonestreet LP, and Grushko
                & Mittman, P.C. (herein incorporated by reference from the Company’s
                current report on Form 8-K dated July 1, 2005 and filed with the
                Securities and Exchange Commission on August 17,
                2005).





10.6
            Repayment
                Agreement dated July 15, 2005 by and among Sunburst IV, Inc. and
                Investment Fund, Ltd., Alpha Capital AG and Stonestreet LP. (herein
                incorporated by reference from the Company’s current report on Form 8-K
                dated July 1, 2005 and filed with the Securities and Exchange Commission
                on August 17, 2005).





10.7
            Consulting
                Agreement dated July 1, 2005 between Tracy A. Moore and Sunburst
                Acquisitions IV, Inc. (herein incorporated by reference from the
                Company’s
                current report on Form 8-K dated July 1, 2005 and filed with the
                Securities and Exchange Commission on August 17,
                2005).




10.8
            SHARE
                OPTION
                AGREEMENT among Minera Rio Tinto, S.A. de C.V. a corporation duly
                incorporated and validly existing pursuant to the laws of the United
                Mexican States and having an office at Pascual Orozco No. 2117 -
                A
                Chihuahua, State of Chihuahua, Mexico 31310 and Sunburst Acquisitions
                IV,
                Inc., a corporation duly incorporated and validly existing pursuant
                to the
                laws of the State of Colorado, USA and having an office at Suite
                206, 595
                Howe St., Vancouver, B.C. Canada V6C 2T5 (herein incorporated by
                reference
                from the Company’s report on Form 8-K for report date August 22, 2005 and
                filed with the Securities and Exchange Commission on August 25,
                2005).




10.9
            AGREEMENT
                made and entered in the City of Chihuahua, State of Chihuahua as
                of the
                18th day of August, 2005 among COMPAÑÍA MINERA DE NAMIQUIPA, S. A. DE C.
                V. a company duly incorporated and validly existing pursuant to the
                laws
                of the United Mexican States, and MINERA RIO TINTO, S. A. DE C. V.
                a
                company duly incorporated and validly existing pursuant to the laws
                of the
                United Mexican States, and MARIO HUMBERTO AYUB TOUCHE having a domicile
                at
                San Antonio No. 2036 Chihuahua, Chihuahua and SUNBURST MINING DE
                MÉXICO,
                S. A. DE C. V., a company duly incorporated and validly existing
                pursuant
                to the laws of the United Mexican States (herein incorporated by
                reference
                from the Company’s report on Form 8-K for report date August 22, 2005 and
                filed with the Securities and Exchange Commission on August 25,
                2005).




10.10
            AGREEMENT
                made and entered at the City of Chihuahua, State of Chihuahua on
                this the
                18th day of August of the year 2005, among MINERA RIO TINTO, S. A.
                DE C.
                V. a company duly incorporated and validly existing pursuant to the
                laws
                of the United Mexican States, and SUNBURST MINING DE MÉXICO, S. A. DE C.
                V. a company duly incorporated and validly existing pursuant to the
                laws
                of the United Mexican States (herein incorporated by reference from
                the
                Company’s report on Form 8-K for report date August 22, 2005 and filed
                with the Securities and Exchange Commission on August 25,
                2005).




10.11
            OPERATOR’S
              AGREEMENT dated effective as of the 18th day of August, 2005, among
              Minera
              Rio Tinto, S.A. de C.V. a corporation duly incorporated and validly
              existing pursuant to the laws of the United Mexican States and having
              an
              office at Pascual




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 Table
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Orozco
                No.
                2117 - A Chihuahua, State of Chihuahua, Mexico 31310, and Sunburst
                de
                Mexico, S.A. de C.V. a corporation duly incorporated and validly
                existing
                pursuant to the laws of the United Mexican States and having an office
                at
                Suite 5, Avenida del Mar No.1022 Zona Costera, Mazatlan, State of
                Sinaloa,
                Mexico (herein incorporated by reference from the Company’s report on Form
                8-K for report date August 22, 2005 and filed with the Securities
                and
                Exchange Commission on August 25,
                2005).




10.12
            ASSIGNMENT
                OF
                CONTRACT AGREEMENT made and entered in the City of Chihuahua, State
                of
                Chihuahua as of this the 18th day of August, 2005 among MINERA RIO
                TINTO,
                S. A. DE C. V. a company duly incorporated and validly existing pursuant
                to the laws of the United Mexican States, and CORPORATIVO MINERO,
                S.A. DE
                C.V. a company duly incorporated and validly existing pursuant to
                the laws
                of the United Mexican States, and SUNBURST MINING DE MÉXICO, S. A. DE C.
                V. a company duly incorporated and validly existing pursuant to the
                laws
                of the United Mexican States (herein incorporated by reference from
                the
                Company’s report on Form 8-K for report date August 22, 2005 and filed
                with the Securities and Exchange Commission on August 25,
                2005).




10.13
            ASSIGNMENT
                OF
                CONTRACT AGREEMENT made and entered in the City of Chihuahua, State
                of
                Chihuahua as of this the 18th day of August, 2005, among MINERA RIO
                TINTO,
                S. A. DE C. V. a company duly incorporated and validly existing pursuant
                to the laws of the United Mexican States, and RAFAEL FERNANDO ASTORGA
                HERNÁNDEZ, having a domicile at Calle República de Uruguay No. 706 of the
                City of Chihuahua, Chih, and SUNBURST MINING DE MÉXICO, S. A. DE C. V. a
                company duly incorporated and validly existing pursuant to the laws
                of the
                United Mexican States (herein incorporated by reference from the
                Company’s
                report on Form 8-K for report date August 22, 2005 and filed with
                the
                Securities and Exchange Commission on August 25,
                2005).




10.14
            ASSIGNMENT
                OF
                CONTRACT AGREEMENT made and entered in the City of Chihuahua, State
                of
                Chihuahua as of this the 18th day of August, 2005 among MINERA RIO
                TINTO,
                S. A. DE C. V. a company duly incorporated and validly existing pursuant
                to the laws of the United Mexican States, having an office at Av.
                Pascual
                Orozco Number 2117- Altos, La Cima, C. P. 31310, Chihuahua, Chihuahua,
                and
                MINERA RACHASA, S.A. DE C.V., a company duly incorporated and validly
                existing pursuant to the laws of the United Mexican States, and having
                an
                office atNiños Héroes No. 410 Colonia Centro, Chihuahua, Chihuahua (RFC
                BMM-900120-8B6), and SUNBURST MINING DE MÉXICO, S. A. DE C. V. a company
                duly incorporated and validly existing pursuant to the laws of the
                United
                Mexican States (herein incorporated by reference from the Company’s report
                on Form 8-K for report date August 22, 2005 and filed with the Securities
                and Exchange Commission on August 25,
                2005).




10.15
            THE
                NEW
                AGREEMENT entered into on December 8, 2005 among the Company, Sunburst
                Mexico, and MRT (herein incorporated by reference from the Company’s
                report on Form 8-K for report date December 8, 2005 and filed with
                the
                Securities and Exchange Commission on December 14,
                2005).





10.16
            CREATION
                OF A
                DIRECT FINANCIAL OBLIGATION AND UNREGISTERED SALES OF SECURITIES
                ON MARCH
                31, 2006 (herein incorporated by reference from the Company’s report on
                Form 8-K for report date March 31, 2006 and filed with the Securities
                and
                Exchange Commission on April 7,
                2006).





10.17
            AMENDMENT
                TO
                AGREEMENT ENTERED INTO ON DECEMBER 8, 2005, entered into on April
                6, 2006
                among Company, Sunburst Mexico, and MRT (herein incorporated by reference
                from the Company’s report on Form 8-K for report date April 6, 2006 and





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filed
              with
              the Securities and Exchange Commission on April 7, 2006).31.1
            Certification
                of Chief Executive Officer of Mexoro
                Minerals Ltd. pursuant to Rule 13a-14(a)/15d-14(a).
                *




31.2
            Certification
                of Chief Financial Officer of Mexoro
                Minerals Ltd. pursuant to Rule 13a-14(a)/15d-14(a).*




32.1
            Certification
                of Chief Executive Officer of Mexoro
                Minerals Ltd.. pursuant to 18 U.S.C. Section 1350.
                *




32.2
            Certification
                of Chief Financial Officer of Mexoro
                Minerals Ltd. pursuant to 18 U.S.C. Section 1350.*




*filed
      herewith








**SIGNATURE**





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.








**MEXORO
      MINERALS LTD.**











By:
      /S/ Robert
      Knight


Robert
      Knight,
      President and Director




Date:
      October 16,
      2006




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