UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington
D. C. 20549
 
 FORM
10-Q
 
 QUARTERLY
REPORT UNDER SECTION 13 or 15 (d)
 OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the
quarterly period ended May 31, 2008
 Commission
file number 000-23561
 
 MEXORO
MINERALS LTD.
 (Exact name of small
business issuer as specified in its charter)
 
 Colorado
              0-23561
              84-1431797(State
      or other jurisdiction of incorporation)
              (Commission
      File Number)
              (IRS
      Employer Identification Number)C.
      General Retana
                #706
      Col. San Felipe
                Chihuahua,
      Chih. Mexico
              31203(Address
      of principal executive offices)
              (Zip
      Code)
 
 Registrant’s
telephone number, including area code: (800) 661-7830
  Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the 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 þ        No
o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
 Large
      accelerated filer o
              
              Accelerated
                filer o
              
              Non-accelerated
      filer o
              
              Smaller
      reporting company þ
  Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange
Act).       Yes o         No
þ
  
 State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 26,911,388 at July 4, 2008.
 
 Transitional
Small Business Disclosure Format (Check one):
 Yes __
NoX
 
 
  -  -
  ITEM
1. FINANCIAL STATEMENTS
 
 
  
 
 
 
 
 
 
 
 
 MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 (Unaudited)
 (Expressed
in U.S. Dollars)
 
 MAY
31, 2008
 
  
  MEXORO MINERALS
LTD.
 (An
Exploration Stage Company)
 Consolidated
Balance Sheets
 (Unaudited)
(Expressed in U.S. Dollars)
 
 May
      31,
              
              
              February
      29,2008
              
              
              2008(Unaudited)
              
              
              (Audited)AssetsCurrentCash
      and cash equivalents
              
              $
              4,467
              
              
              $
              12,947Accounts
      receivable
              
              
              361,487
              
              
              
              278,847Prepaid
      expenses
              
              
              81,088
              
              
              
              104,936447,042
              
              
              
              396,730Equipment
      (note 4)
              
              
              453,033
              
              
              
              460,941Total
      assets
              
              $
              900,075
              
              
              $
              857,671LiabilitiesCurrentAccounts
      payable and accrued liabilities
              
              $
              1,341,493
              
              
              $
              655,677Current
      portion of loans payable (note 8)
              
              
              54,049
              
              
              
              71,256Promissory
      notes (note 6)
              
              
              1,593,611
              
              
              
              1,480,702Convertible
      debentures (note 7)
              
              
              500,000
              
              
              
              -3,489,153
              
              
              
              2,207,635Loans
      payable (note 8)
              
              
              20,050
              
              
              
              27,481Total
      liabilities
              
              
              3,509,203
              
              
              
              2,235,116Stockholders’
      equity (deficiency)Capital
      stockPreferred
      stockAuthorized:
      20,000,000 shares without par value (note 9)Issued:
      nilCommon
      stockAuthorized:
      200,000,000 shares without par valueIssued:
      26,781,502 (2008 – 25,380,502) (note 10)
              
              
              23,844,154
              
              
              
              22,978,654Additional
      paid-in capital
              
              
              11,730,197
              
              
              
              11,155,687Stock
      subscriptions
              
              
              9,885
              
              
              
              330,000Accumulated
      deficit from prior operations
              
              
              (2,003,427
              )
              
              
              (2,003,427
              )Accumulated
      deficit during the exploration stage
              
              
              (36,149,539
              )
              
              
              (33,828,011
              )Accumulated
      other comprehensive income (loss)
              
              
              (40,398
              )
              
              
              (10,348
              )Total
      stockholders’ equity (deficiency)
              
              
              (2,609,128
              )
              
              
              (1,377,445
              )Total
      liabilities and stockholders’ equity (deficiency)
              
              $
              900,075
              
              
              $
              857,671
 
 Going
concern (note 3)
 Commitments
(notes 5, 12 and 14)
 Subsequent
events (note 15)
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Consolidated
Statements of Operations and Deficit
 (Unaudited)
(Expressed in U.S. Dollars)
 
 Period
      fromInception
      ofExplorationThree
      Months Ended
              
              (March
      1, 2004)May
      31,
              
              May
      31,
              
              To
      May 31, 20082008
              
              2007ExpensesGeneral
      and administrative
              $
              426,410
              $
              935,264
              $
              4,762,105Stock-based
      compensation (note 11)
              
              188,510
              
              937,708
              
              5,909,306Mineral
      exploration
              
              1,292,823
              
              668,276
              
              5,063,001Impairment
      of mineral property costs
              
              -
              
              -
              
              16,145,422Operating
      loss
              
              (1,907,743)
              
              (2,541,248)
              
              (31,879,834)Other
      income (expenses)Foreign
      exchange
              
              18,802
              
              -
              
              20,159Interest
      expense
              
              (430,001)
              
              (6,358)
              
              (4,427,722)Interest
      income
              
              -
              
              -Loss
      on sale of assets
              
              (2,586)
              
              -
              
              (2,586)Gain
      on settlement of debt
              
              -
              
              -
              
              140,444Net
      loss
              
              (2,321,528)
              
              (2,547,606)
              
              (36,149,539)Accumulated
      deficit, beginning
              
              (33,828,011)
              
              (25,731,407)
              
              -Accumulated
      deficit, ending
              $
              (36,149,539)
              $
              (28,279,013)
              $
              (36,149,539)Other
      comprehensive incomeForeign
      exchange gain (loss) on translation
              
              (30,050)
              
              15,927
              
              (40,398)Total
      comprehensive loss
              $
              (2,351,578)
              $
              (2,531,679)
              $
              (36,189,937)Total loss per share –basic and diluted
              $
              (0.09)
              $
              (0.12)
              
              -Weighted
      average number of shares ofcommon stock –basic and
      diluted
              
              25,859,187
              
              21,171,156
              
              -
 
 
 
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Consolidated
Statements of Cash Flow
 (Unaudited)
(Expressed in U.S. Dollars)
 
 Period
      fromThree
      Months Ended
              
              
              Inception
      ofMay
      31,
              
              
              May
      31,
              
              
              Exploration2008
              
              
              2007
              
              
              to
      May 31, 2008Cash
      flows from operating activitiesNet
      loss
              
              $
              (2,321,528
              )
              
              $
              (2,547,606
              )
              
              $
              (36,149,539
              )Write
      off of note receivable
              
              
              -
              
              
              
              -
              
              
              
              57,500Acquisition
      of resource properties costs for stock
              
              
              -
              
              
              
              -
              
              
              
              13,645,000Issuance
      of shares for consulting services
              
              
              -
              
              
              
              -
              
              
              
              90,000Amortization
              
              
              22,099
              
              
              
              14,708
              
              
              
              126,338Discount
      on convertible debentures
              
              
              158,000
              
              
              
              -
              
              
              
              333,000Non-cash
      component of gain on settlement of debt
              
              
              -
              
              
              
              -
              
              
              
              (182,259
              )Stock-based
      compensation
              
              
              188,510
              
              
              
              937,708
              
              
              
              7,432,306Beneficial
      conversion feature
              
              
              228,000
              
              
              
              -
              
              
              
              3,945,500Prepaid
      expense
              
              
              25,082
              
              
              
              (30,778
              )
              
              
              (70,153
              )Accounts
      receivable
              
              
              (70,674
              )
              
              
              (69,786
              )
              
              
              (332,019
              )Customer
      deposits
              
              
              -
              
              
              
              -
              
              
              
              (44,809
              )Notes
      payable
              
              
              -
              
              
              
              -
              
              
              
              109,337Accounts
      payable and accrued liabilities
              
              
              767,638
              
              
              
              755,327
              
              
              
              2,193,994Cash
      used in operating activities
              
              
              (1,002,873
              )
              
              
              (940,427
              )
              
              
              (8,845,804
              )Investing
      activityPurchase
      of property and equipment
              
              
              2,013
              
              
              
              (25,152
              )
              
              
              (546,287
              )Cash
      used in investing activity
              
              
              2,013
              
              
              
              (25,152
              )
              
              
              (546,287
              )Financing
      activitiesProceeds
      from loans payable
              
              
              -
              
              
              
              45,915
              
              
              
              182,454Proceeds
      from notes payable
              
              
              541,895
              
              
              
              537,989
              
              
              
              2,185,897Proceeds
      from convertible debentures
              
              
              500,000
              
              
              
              -
              
              
              
              4,192,500Proceeds
      from exercise of options
              
              
              -
              
              
              
              -
              
              
              
              78,000Proceeds
      from exercise of warrants
              
              
              -
              
              
              
              400,000
              
              
              
              3,144,377Repayment
      of loans payable
              
              
              (26,819
              )
              
              
              (9,224
              )
              
              
              (113,278
              )Repayment
      of notes payable
              
              
              (33,076
              )
              
              
              -
              
              
              
              (393,076
              )Repayment
      of convertible debentures
              
              
              -
              
              
              
              -
              
              
              
              (530,000
              )Stock
      subscriptions
              
              
              9,885
              
              
              
              -
              
              
              
              179,885Issuance
      of common stock
              
              
              -
              
              
              
              -
              
              
              
              477,109Cash
      provided by financing activities
              
              
              991,885
              
              
              
              974,680
              
              
              
              9,403,868Outflow
      of cash and cash equivalents
              
              
              (8,975
              )
              
              
              9,101
              
              
              
              11,777Effect
      of foreign currency translation on cash
              
              
              495
              
              
              
              15,928
              
              
              
              (29,387
              )Cash
      and cash equivalents, beginning
              
              
              12,947
              
              
              
              13,148
              
              
              
              22,077Cash
      and cash equivalents, ending
              
              $
              4,467
              
              
              $
              38,177
              
              
              $
              4,467Supplemental
      cash flow informationInterest
      paid
              
              $
              13,053
              
              
              $
              -
              
              
              $
              208,340Common
      stock issued on conversion of debt
              
              
              103,000
              
              
              
              -
              
              
              
              3,320,500Common
      stock issued on settlement of notes payable
              
              
              492,500
              
              
              
              -
              
              
              
              905,300Common
      stock issued for mineral property costs
              
              
              -
              
              
              
              -
              
              
              
              500,000Shares
      issued for services
              
              
              -
              
              
              
              -
              
              
              
              90,000
 The
accompanying notes are an integral part of these consolidated financial
statements.
  
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in 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 was engaged in two business acquisitions and one business
opportunity, none of which generated a significant profit or created 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 operations to mineral
exploration. Accordingly, as of March 1, 2004 the Company is considered to be an
exploration stage company.
   On May
25, 2004, the Company completed a “Share Exchange Agreement” 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 a joint
venture agreement with Minera Rio Tinto, S.A. de C.V. (“MRT”), a company duly
incorporated pursuant to the laws of Mexico, which is controlled by an officer
of the Company. In August 2005, the Company cancelled the joint venture
agreement in order to directly pursue the mineral exploration opportunities
through a wholly-owned Mexican subsidiary, Sunburst Mining 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 5). On January 20, 2006, Sierra Minerals was dissolved.
   On May 5,
2008, the Company signed a letter of intent (‘LOI’) to enter into a strategic
alliance with Paramount Gold and Silver Corp. (‘Paramount’). The agreement calls
for Paramount to invest a minimum of $4 million and maximum of $6 million into
the Company, fixed at a price of $0.50 per unit by June 23, 2008. This has
subsequently been extended until July 21, 2008 (see note 15). Each unit will
consist of one common share of Mexoro and one half warrant to purchase
additional common shares at a price of $0.75 per share exercisable immediately
for a period of four years from closing. Should Paramount subscribe for the
maximum, it would receive 12 million shares and six million warrants in the
offering. The closing price of Mexoro shares quoted on the Over the Counter
Bulletin Board (“OTCBB”) on May 2, 2008 was $0.59 per share. The LOI
contemplates that Paramount will provide an immediate cash infusion into Mexoro
in the amount of $500,000 in the form of a secured convertible debenture bearing
interest at a rate of 8% per annum for a term of one year. Paramount will have
the option to convert the debt into units as part of the overall financing.
Paramount will retain the first right of refusal on all future financings of
Mexoro for a period of four years. On May 12, 2008, the Company received the
first investment of $500,000 from Paramount.
   The
accompanying unaudited consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles (“US
GAAP”) for interim financial information and with the instructions to Form
10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three ended May 31, 2008 are not necessarily indicative of the results that may
be expected for the year ending February 28, 2009. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company’s annual report on Form 10-KSB for the year ended February 29,
2008.
   
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  2.
              SIGNIFICANT
      ACCOUNTING POLICIES
  (a)
              Recent
      accounting pronouncements
  
 (i)
              In
      September 2006, the United States Securities and Exchange Commission
      (“SEC”) released SAB No. 108, “Considering the Effects of Prior Year
      Misstatements when Quantifying Misstatements in Current Year Financial
      Statements” (“SAB 108”). SAB 108 provides interpretive guidance on the
      SEC’s views on how the effects of the carryover or reversal of prior year
      misstatements should be considered in quantifying a current year
      misstatement. The Company adopted SAB 108 during the fourth quarter of
      2006. The adoption did not have a material impact on the Company’s
      financial position, cash flows or results of
  operations.
  (ii)
              In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      SFAS No. 157, “Fair Value Measurements” (“SFAS 157”).  SFAS 157
      provides guidance for using fair value to measure assets and
      liabilities.  It clarifies that for items that are not actively
      traded, such as certain kinds of derivatives, fair value should reflect
      the price in a transaction with a market participant, including adjustment
      for risk, not just the company’s mark-to-model value.  SFAS 157
      also requires expanded disclosure of the effect on earnings for items
      measured using unobservable data.  Fair value refers to the
      price that would be received to sell an asset or paid to transfer a
      liability in an orderly transaction between market participants in the
      market in which the reporting entity transacts. SFAS 157 is effective for
      financial statements issued for fiscal years beginning after November 15,
      2007.
  (iii)
              In
      July 2006, FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for
      Uncertainty in Income Taxes – An Interpretation of FASB Statement No.
      109.  FIN 48 clarifies the accounting for uncertainty in income
      taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement No. 109, and also 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. FIN 48 is effective for financial statements issued for fiscal
      years beginning after December 15, 2006.  The adoption of this
      standard did not have a significant impact on the Company’s consolidated
      financial statements.
  (iv)
              On
      February 15, 2007, the FASB issued SFAS Statement No. 159, “The Fair Value
      Option for Financial Assets and Financial Liabilities” (“SFAS 159”). This
      Statement permits companies and not-for-profit organizations to make a
      one-time election to carry eligible types of financial assets and
      liabilities at fair value, even if fair value measurement is not required
      under US GAAP. SFAS 159 is effective for fiscal years beginning after
      November 15, 2007. The adoption of this standard will not have an impact
      on the Company’s consolidated financial
  statements.
  (v)
              In
      December 2007, the FASB issued SFAS No. 141 (R), Business Combinations,
      and SFAS No. 160, Noncontrolling Interests in Consolidated Financial
      Statements. SFAS No. 141 (R) requires an acquirer to measure the
      identifiable assets acquired, the liabilities assumed and any
      noncontrolling interest in the acquiree at their fair values on the
      acquisition date, with goodwill being the excess value over the net
      identifiable assets acquired. SFAS No. 160 clarifies that a noncontrolling
      interest in a subsidiary should be reported as equity in the consolidated
      financial statements. The calculation of earnings per share will continue
      to be based on income amounts attributable to the parent. SFAS No. 141 (R)
      and SFAS No. 160 are effective for financial statements issued for fiscal
      years beginning after December 15, 2008. Early adoption is prohibited. We
      have not yet determined the effect on our consolidated financial
      statements, if any, upon adoption of SFAS No. 141 (R) or SFAS No.
      160.
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  2.
              SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)
  (a)
              Recent
      accounting pronouncements
(continued)
 
 (vi)
              In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements”, which improves the relevance,
      comparability, and transparency of financial information provided to
      investors by requiring all entities to report noncontrolling (minority)
      interests in subsidiaries in the same way as equity in the consolidated
      financial statements. In addition, SFAS No. 160 eliminates the diversity
      that currently exists in accounting for transactions between an entity and
      noncontrolling interests by requiring they be treated as equity
      transactions. SFAS No. 160 is effective for fiscal years beginning after
      December 15, 2008. The Company is currently evaluating the impact of SFAS
      No. 160 on its financial position and results of
    operations.
  (vii)
              In
      February 2008, the FASB issued FSP FAS No. 140-3, “Accounting for
      Transfers of Financial Assets and Repurchase Financing Transactions”,
      which provides a consistent framework for the evaluation of a transfer of
      a financial asset and subsequent repurchase agreement entered into with
      the same counterparty. FSP FAS No. 140-3 provides guidelines that must be
      met in order for an initial transfer and subsequent repurchase agreement
      to not be considered linked for evaluation. If the transactions do not
      meet the specified criteria, they are required to be accounted for as one
      transaction. This FSP will be effective March 1, 2009, and shall be
      applied prospectively to initial transfers and repurchase financings for
      which the initial transfer is executed on or after adoption. The adoption
      of FSP FAS No. 140-3 will not have an impact on our consolidated financial
      condition or results of operations.
  (viii)
              In
      March 2008, the FASB issued SFAS No. 161, “Disclosure About Derivative
      Instruments and Hedging Activities, an amendment to Financial Accounting
      Standards Board Financial Accounting Standard No. 133” (SFAS
      161).  SFAS 161 requires among other things, enhanced disclosure
      about the volume and nature of derivative and hedging activities and a
      tabular summary showing the fair value of derivative instruments included
      in the statement of financial position and statement of operations. SFAS
      161 also requires expanded disclosure of contingencies included in
      derivative instruments related to credit risk. SFAS 161 is effective for
      fiscal 2009. The adoption of SFAS 161 will not have an impact on our
      consolidated financial condition or results of
  operations.
  (ix)
              In
      May 2008, the FASB issued Statement No. 162, “The Hierarchy of Generally
      Accepted Accounting Principles”. This Statement identifies the sources for
      generally accepted accounting principles (“GAAP”) in the U.S. and lists
      the categories in descending order. An entity should follow the highest
      category of GAAP applicable for each of its accounting transactions. The
      adoption will not have a material effect on the Company’s consolidated
      financial statements.
  (x)
              In
      May 2008, the FASB issued FASB Staff Position (“FSP”) No. APB 14-1
      “Accounting for Convertible Debt Instruments That May Be Settled in Cash
      Upon Conversion (Including Partial Cash Settlements)” (previously FSP APB
      14-a), which will change the accounting treatment for convertible
      securities which the issuer may settle fully or partially in cash. Under
      the final FSP, cash settled convertible securities will be separated into
      their debt and equity components. The value assigned to the debt component
      will be the estimated fair value, as of the issuance date, of a similar
      debt instrument without the conversion feature, and the difference between
      the proceeds for the convertible debt and the amount reflected as a debt
      liability will be recorded as additional paid-in capital. As a result, the
      debt will be recorded at a discount reflecting its below market coupon
      interest rate. The debt will subsequently be accreted to its par value
      over its expected life, with the rate of interest that reflects the market
      rate at issuance being reflected on the income statement. This change in
      methodology will affect the calculations of net income and earnings per
      share for many issuers of cash settled convertible securities. The FSP is
      effective for financial statements issued for fiscal years beginning after
      December 15, 2008, and interim periods within those fiscal years. The
      Company is currently evaluating the impact of the adoption of FSP No. APB
      14-1 on the Company’s consolidated financial
  statements.
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  3.
              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 May 31, 2008, the Company had a
working capital deficiency of $3,042,111 (February 29, 2008 - $1,810,905 working
capital) and a cumulative loss during the exploration period of $36,149,539
(February 29, 2008 - $33,828,011). 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 (note 5).
In addition, the Company has conducted private placements of convertible debt
and common stock (note 9), which have generated a portion of the initial cash
requirements of its planned Mexican mining ventures (note 5).
   4.
              EQUIPMENT
  May
      31, 2008
              February
      29,2008Cost
              Accumulated
      Depreciation
              Net
      Book
              Net
      BookValue
              ValueSoftware
              $      24,225
              $          16,204
              $          8,021
              $        7,739Machinery
              349,251
              41,626
              307,625
              305,221Vehicles
              155,211
              55,019
              100,192
              109,173Computers
              33,641
              13,571
              20,070
              21,798Office
      equipment
              20,224
              3,099
              17,125
              17,010$    582,552
              $        129,519
              $      453,033
              $    460,941
  5.
              MINERAL
      PROPERTIES
   The
Company incurred exploration expenses as follows in the three months ended May
31, 2008:
  Cieneguita
      Operations
              
              
              Sahuayacan
              
              
              Guazapares
              
              
              Cieneguita
              
              
              Encino
      Gordo
              
              
              New
      Projects
              
              
              TotalDrilling
      and sampling
              
              $
              -
              
              
              $
              -
              
              
              $
              86,309
              
              
              $
              617,631
              
              
              $
              -
              
              
              $
              -
              
              
              $
              703,940Geological,
      geochemical, geophysics
              
              
              -
              
              
              
              -
              
              
              
              35,736
              
              
              
              124,553
              
              
              
              -
              
              
              
              30,652
              
              
              
              190,941Land
      use permits
              
              
              52
              
              
              
              26,850
              
              
              
              3,009
              
              
              
              115,117
              
              
              
              (2,281
              )
              
              
              -
              
              
              
              142,747Automotive
              
              
              255
              
              
              
              -
              
              
              
              2,416
              
              
              
              2,253
              
              
              
              -
              
              
              
              -
              
              
              
              4,924Travel
              
              
              682
              
              
              
              209
              
              
              
              12,928
              
              
              
              6,760
              
              
              
              209
              
              
              
              -
              
              
              
              20,788Consulting
              
              
              12,771
              
              
              
              -
              
              
              
              42,311
              
              
              
              46,060
              
              
              
              -
              
              
              
              -
              
              
              
              101,142Equipment
              
              
              111
              
              
              
              -
              
              
              
              14,673
              
              
              
              12,925
              
              
              
              -
              
              
              
              -
              
              
              
              27,709General
              
              
              8,560
              
              
              
              2,017
              
              
              
              21,473
              
              
              
              68,433
              
              
              
              149
              
              
              
              -
              
              
              
              100,632$
              22,431
              
              
              $
              29,076
              
              
              $
              218,855
              
              
              $
              993,732
              
              
              $
              (1,923
              )
              
              $
              30,652
              
              
              $
              1,292,823
  
  
 MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  5.
              MINERAL
      PROPERTIES (CONTINUED)
   The
Company incurred exploration expenses as follows in the three months ended May
31, 2007:
  Cieneguita
      Operations
              
              
              Sahuayacan
              
              
              Guazapares
              
              
              Cieneguita
              
              
              Encino
      Gordo
              
              
              TotalDrilling
      and sampling
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Geological,
      geochemical, geophysics
              
              
              -
              
              
              
              42,592
              
              
              
              4,061
              
              
              
              -
              
              
              
              2,323
              
              
              
              48,976Salaries
              
              
              24,690
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              24,690Land
      use permits
              
              
              
              
              
              
              8,789
              
              
              
              20,612
              
              
              
              346
              
              
              
              -
              
              
              
              29,747Automotive
              
              
              2,205
              
              
              
              31
              
              
              
              48
              
              
              
              -
              
              
              
              -
              
              
              
              2,284Travel
              
              
              2,539
              
              
              
              10,884
              
              
              
              7,720
              
              
              
              6,598
              
              
              
              362
              
              
              
              28,103Consulting
              
              
              57,220
              
              
              
              27,546
              
              
              
              22,190
              
              
              
              31,870
              
              
              
              -
              
              
              
              138,826Equipment
              
              
              31,923
              
              
              
              2,674
              
              
              
              1,282
              
              
              
              16
              
              
              
              8
              
              
              
              35,903General
              
              
              19,883
              
              
              
              323,032
              
              
              
              8,624
              
              
              
              7,578
              
              
              
              630
              
              
              
              359,747$
              138,460
              
              
              $
              415,548
              
              
              $
              64,537
              
              
              $
              46,408
              
              
              $
              3,323
              
              
              $
              668,276
  
   Since May
2004, the Company has held interests in gold exploration properties in
Mexico.
   In August
2005, the Company formed its wholly owned subsidiary, Sunburst de Mexico, which
allowed the Company to take title to the properties into the name of Sunburst de
Mexico. On August 25, 2005 the Company entered into property agreements with
MRT, which provided Sunburst de Mexico options to purchase the mineral
concessions of the Cieneguita and Guazapares properties and the right of refusal
on three Encino Gordo properties. The Company also entered into an exploration
and sale agreement, in October 2006, with Minera Emilio for mineral concessions
of the Sahuayacan Property.
   In August
2005 the parties also entered into an operator’s agreement, that gave MRT the
sole and exclusive right and authority to manage the Cieneguita Property, and a
share option agreement which granted MRT the exclusive option to acquire up to
100% of all outstanding shares of Sunburst de Mexico if the Company did not
comply with the terms of the property agreements. The operating agreement and
share option agreement have been cancelled.
   
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  5.
              MINERAL
      PROPERTIES (CONTINUED)
   The
material provisions of the property agreements are as follows:
  Cieneguita
   MRT
assigned to Sunburst de Mexico, with the permission of the Cieneguita owner,
Corporativo Minero, S.A. de C.V. (“Corporativo Minero”), all of MRT’s rights and
obligations acquired under a previous agreement, the Cieneguita option
agreement, including the exclusive option to acquire the Cieneguita Property for
a price of $2,000,000. As the Cieneguita Property was not in production by May
6, 2006, Sunburst de Mexico was required to pay $120,000 to Corporativo Minero
to extend the contract. Corporativo Minero agreed to reduce the obligation to
$60,000, of which $10,000 was paid in April 2006 and the balance paid on May 6,
2006. The Company made this payment to Corporativo Minero and the contract was
extended.
   The
Company has the obligation to pay a further $120,000 per year for the next 13
years and the balance of the payments in the 14th year, until the total amount
of $2,000,000 is paid. The Company renegotiated the payment due May 6, 2007, to
$60,000 payable on November 6, 2007, which was paid, and the balance of $60,000
was paid on December 20, 2007. We paid $60,000 on May 12, 2008 of the $120,000
due on May 6, 2008, and the balance was deferred to June 2008. We are not in
default on our payments.
   In the
alternative, if the Cieneguita Property is put into production, of which there
is no guarantee, the Company must pay the Cieneguita owners $20 per ounce of
gold produced, if any, from the Cieneguita Property to the total $2,000,000 due.
In the event that the price of gold is above $400 per ounce, the property
payments payable to the Cieneguita owners from production will be increased by
$0.10 for each dollar increment over $400 per ounce. The total payment of
$2,000,000 does not change with fluctuations in the price of gold. Non-payment
of any portion of the $2,000,000 total payment will constitute a default. In
such case, the Cieneguita owners will retain ownership of the concessions, but
the Company will not incur any additional default penalty. MRT retained no
interest in the Cieneguita Property.
  Guazapares
   MRT
assigned to Sunburst de Mexico, with the consent of the Guazapares Property
owner Compañía Minera, S.A. de C.V. (“Compañía Minera”), MRT’s rights and
obligations concerning the Guazapares Property, including the exclusive option,
for a term of four years, to purchase seven of the Guazapares Property
concessions upon payment of $910,000. The total payments for the Company to
acquire and retain 100% ownership of all eight concessions are as follows:
November 30, 2005 - $100,000 (this payment date was extended – see below),
October 31, 2006 - $60,000 (this payment date was extended to February 28, 2007,
then to May 31, 2007 and then to August 31, 2007- see below), August 2, 2007 -
$140,000 (see below), August 2, 2008 - $110,000 and August 2, 2009 -
$500,000.
   On
September 19, 2007, Sunburst de Mexico, Mexoro and MRT entered into an agreement
to defer any and all property payments regarding Guazapares, currently owing to
MRT and which would otherwise become due by December 31, 2007, until such time
as Sunburst de Mexico and Mexoro have sufficient funds to make the payments, in
the opinion of the disinterested directors of Mexoro.
   Mexoro
agreed to issue 250,000 shares to MRT and/or assignees, in consideration for the
deferral of any and all Guazapares property payments currently outstanding and
those arising on or before December 31, 2007
   In
return, Sunburst de Mexico granted MRT a 2.5% NSR and the right to extract from
the Guazapares concessions up to 5,000 tons per month of rock material; this
right will terminate on exercise of the option to purchase the concessions.
Otherwise, MRT retained no interest in the Guazapares Property.
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  5.
              MINERAL
      PROPERTIES (CONTINUED)
  San
Francisco (Guazapares)
   MRT
assigned to Sunburst de Mexico, for a term of 60 months, commencing from June
25, 2004 (the “Option Period”), with the consent of the San Francisco
concessions owner Minera Rachasa, S.A. de C.V. (“Minera Rachasa”), MRT’s rights
and obligations acquired under the San Francisco option agreement, including the
option to purchase the San Francisco concessions for a price of $250,000 on June
25, 2009.
   To
maintain the option, Sunburst de Mexico assumed the obligation to pay to the San
Francisco owner cumulative annual payments. The payments are: $20,000 on June
25, 2006 (paid); $30,000 on June 25, 2007 (paid); and $40,000 on June 25,
2008.
   If the
option is exercised prior to the expiration of the Option Period by payment of
the purchase price of $250,000; the obligation to pay the annual payments will
be terminated. MRT and the San Francisco owner reserved a combined 2.5% NSR. MRT
reserved no other rights on the San Francisco concessions.
  San
Antonio (Guazapares)
   MRT
assigned to Sunburst de Mexico, with the consent of the San Antonio concessions
owner (Rafael Fernando Astorga Hernández), MRT’s rights and obligations acquired
under the San Antonio option agreement, including the option to purchase the San
Antonio concessions for a price of $500,000, commencing on January 15, 2004, the
signing date of the San Antonio option agreement, and due on January 15,
2010.
   To
maintain the option, Sunburst de Mexico assumed the obligation to pay to the San
Antonio owner cumulative annual payments. The remaining payments are: $50,000 on
January 15, 2008 (this payment was deferred to January 31, 2008 and paid) and
$50,000 on January 15, 2009.
   If the
option is exercised prior to the expiration of the option period by payment of
the purchase price; the obligation to pay the annual payments will be
terminated. The San Antonio owner reserved the right to extract from the San
Antonio concessions up to 50 tonnes per day of rock material; this right will
terminate on the date of the exercise of the option. MRT and the San Antonio
owner reserved a combined 2.5% NSR to be paid to them. MRT reserved no other
rights on the San Antonio concessions.
   Encino
Gordo
   On
December 8, 2005, the Company and Sunburst de Mexico entered into a “New
Agreement” with MRT to exercise their option under the sale and purchase of
mining concessions agreement, dated August 18, 2005, 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.
   The
following are additional material terms of the New Agreement:
  (a)
              The
      share option 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. On April 6, 2006, MRT agreed to
      waive its option to purchase the shares of Sunburst de Mexico and also
      waived the Company’s obligation to transfer $1,500,000 to Sunburst de
      Mexico;
  The
property agreements were modified to change the NSR to a maximum of 2.5% for all
properties covered by the agreements. The property agreements contained NSRs
ranging from 0.5% to 7%;
   
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  5.
              MINERAL
      PROPERTIES (CONTINUED)
  (c)
              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 and $2,100,000 was charged to
      operations for the year ended February 28, 2006. This issuance fulfilled
      the Company’s payment obligations under the previous property
      agreements;
 
 (d)
              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; and,
 
 (e)
              The
      operator’s agreement with MRT was
cancelled.
  Sunburst
de Mexico purchased two of the Encino Gordo concessions from MRT for a price of
1,000 pesos (approximately US$100), and MRT assigned to Sunburst de Mexico a
first right of refusal to acquire three additional Encino Gordo concessions. The
total payments to acquire 100% of these three additional concessions are as
follows: $10,000 on June 30, 2006 (paid); $25,000 on December 31, 2006 (paid),
$50,000 on December 31, 2007 ($20,000 of this payment was made on January 3,
2008 and the balance was paid on February 29, 2008), $75,000 on December 31,
2008, $125,000 on December 31, 2009 and $200,000 on December 31,
2010.
  Sahuayacan
   On June
21, 2006, Sunburst de Mexico entered into an exploration and sale option
agreement of mining concessions with Minera Emilio, S.A. de C.V. (“Minera
Emilio”) for mineral concessions of the Sahuayacan Property. Minera Emilio
granted the Company the exclusive right to conduct exploration on the Sahuayacan
Property and the Company must pay $282,000 in the following manner: $20,000 on
date of signing agreement (paid); $10,000 due December 1, 2006 (paid); $2,500
per month effective from August 21, 2006 to July 21, 2007, for a total of
$30,000 (paid); $3,500 per month effective from August 21, 2007 to July 21, 2008
for a total of $42,000 (the monthly payments have all been paid up to date); and
$5,000 per month effective August 21, 2008 to July 21, 2011, for a total of
$180,000, until the balance of the total $282,000 is paid (36
months).
  Segundo
Santo Nino (Sahuayacan)
   On May
15, 2006, Sunburst de Mexico entered into an exploration contract with Jose
Maria Rascon and Sabino Amador Rascon Polanco and on November 20, 2007 entered
into an exploration contract with Rene Muro Lugo (all three representatives
constitute the “Concessionaires”) for the Segundo Santo Nino concession on the
Sahuayacan Property. Each concession representative owns 33.3% of the total
Segundo Santo Nino title. The Company must pay the Concessionaires a total of
$255,000 for this concession. The payments to acquire 100% of this concession
are as follows: all payments up to February 13, 2008 totalling $65,000 have been
paid, July 13, 2008 - $20,000, February 13, 2009 - $20,000, July 13, 2009 -
$30,000 and February 13, 2010 - $120,000.
  La
Maravilla (Sahuayacan)
   On
January 25, 2008, Sunburst de Mexico entered into an exploration and option
agreement with Maria Luisa Wong Madrigal for mineral concessions under the “La
Maravilla” project on the Sahuayacan Property. The Company must pay Maria Luisa
Wong Madrigal $600,000, to acquire 100% of this concession, as follows: $33,000
– January 25, 2008 (paid); $33,000 – July 25, 2008; $34,000 – January 25, 2009;
$500,000 – at the option to purchase the concession or 36 months – January 25,
2010.
   
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  6.
              PROMISSORY
      NOTES
   As at May
31, 2008, the Company had $1,593,611 (February 29, 2008 - $1,480,702) of
promissory notes outstanding, comprising the following:
  (a)
              $484,714
      (CHF 565,000) of promissory notes accruing interest rate of 7.5% p.a.
      payable semi-annually. The principal and interest on the notes was due and
      payable on April 30, 2008. The Company did not make the payment by April
      30, 2008 and is in default. Interest rate payable during the default
      period is 12%.
 
 (b)
              $1,108,897
      of promissory notes are due to related parties and close associates that
      bear no interest and have no terms of repayment (see note
    13).
  During
the quarter ended May 31, 2008, the Company converted promissory notes of
$492,500 into $1.00 units. The units consist of two common shares and one
warrant exercisable at $0.75 each (note 10).
   7.
              convertible
      debentures
   On May 5,
2008, the Company signed a LOI to enter into a strategic alliance with
Paramount. The agreement calls for Paramount to invest a minimum of $4 million
and maximum of $6 million into the Company, fixed at a price of $0.50 per unit
by June 23, 2008. This has subsequently been extended until July 21, 2008 (see
note 15).  The LOI contemplates that Paramount will provide an
immediate cash infusion into Mexoro in the amount of $500,000 in the form of a
secured convertible debenture bearing interest at a rate of 8% per annum for a
term of one year.
   On May 9,
2008, the Company issued $500,000 in convertible debentures to Paramount, with a
maturity date of one year, accruing interest at 8% per year payable in arrears
and convertible at the option of the holder. As of May 31, 2008, a beneficial
conversion feature of $228,000 was recorded in interest expense as to the
anticipated conversion of these debentures. Also included in interest expense is
$158,000 representing the relative fair value of the warrants (immediately
exercisable) in relation to the convertible debt. As at May 31, 2008, there were
$500,000 convertible debentures outstanding.
   Paramount
may convert all or a portion of the principal amount of the Debenture into units
consisting of one share of our common stock and half a warrant to purchase one
share of our common stock. Subject to certain adjustments upon the occurrence of
various capital reorganizations and other events, the units are convertible at
$0.50 per unit for a total of up to 1,000,000 shares of common stock and up to
500,000 warrants at $0.75 to purchase shares of common stock (the “Warrants”).
The Warrants have a term of four years from the date that Paramount converts the
Debenture or the portion of the Debenture covering those warrants. A holder of
the Warrants may exercise those Warrants at $0.75 (subject to adjustments upon
the occurrence of certain events like stock splits).
   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:
  2008Expected
      volatility
              
              71.48%Weighted-average
      volatility
              
              71.48%Expected
      dividend rate
              
              -Expected
      life of warrants in years
              
              5Risk-free
      rate
              
              3.41%
  8.
              LOANS
      PAYABLE
   As at May
31, 2008 there were loans payable in the amount of $74,099, of which $54,049 is
current and $20,050 is long-term. The loans are repayable in monthly
installments of $9,146 including interest ranging from 9.89% to 15.6% per annum
and are partially secured by specified automotive equipment.
  
 MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in 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
   In May
2008, the Company converted $535,500 of debt into subscription proceeds and
issued 1,071,000 common shares. The subscribers to the subscription proceeds
have agreed to purchase one unit for each $1.00 of debt. Each unit consists of
two shares of Company’s common stock and one warrant each exercisable at $0.75,
which expire in four years.
   On April
25, 2008, stock  subscriptions of $330,000 were converted into 330,000
shares of common stock.
   In fiscal
2008, the Company issued 1,174,000 shares of common stock on the exercise of
1,174,400 warrants where each warrant was exercisable into shares of common
stock at the price of $1.00 per share. The warrants were to expire on April 30,
2008.
   In the
second and third quarter of fiscal 2008, the Company issued 1,000,000 shares of
common stock on the exercise of 1,000,000 warrants where each warrant was
exercisable into shares of common stock at the price of $0.75 per share. The
warrants were to expire on December 31, 2007.
   In the
first two quarters of fiscal 2008, the Company issued 1,000,000 shares of common
stock on the exercise of 1,000,000 warrants where each warrant was exercisable
into shares of common stock at the price of $0.50 per share. The warrants were
to expire on June 30, 2007.
   On
November 7, 2007, the Company issued 670,000 shares of common stock on the
exercise of 670,000 warrants where each warrant was exercisable into shares of
common stock at the price of $1.00 per share. The warrants were to expire on
December 31, 2007.
   On
September 20, 2007, the Company issued 250,000 shares of common stock pursuant
to an agreement in consideration of deferral of any and all Guazapares property
payments currently outstanding and those arising on or before December 31, 2007.
The shares were valued at $1.16 per share, based on the closing quoted market
price on September 18, 2007.
   On
September 20, 2007, the Company issued 250,000 shares of common stock pursuant
to Encino Gordo contract. The shares were valued at $1.16 per share, based on
the closing quoted market price on September 18, 2007.
   On August
15, 2006, the Company returned to treasury 50,000 shares of common stock that
were issued but not delivered pending payment with respect to the convertible
debt converted into shares of common stock on July 5, 2006.
   On August
10, 2006, the Company issued 50,000 shares of common stock on the exercise of
50,000 warrants where each warrant was exercisable into shares of common stock
at a price of $1.00 per share.
   On July
5, 2006, the Company issued 5,835,000 shares of common stock on the exercise of
$2,917,500 of convertible debt at a price of $0.50 per share.
   On April
3, 2006 and May 31, 2006 the Company issued 550,000 and 200,000 shares of common
stock, 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.
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  10.
              COMMON
      STOCK (CONTINUED)
   On March
4, 2006, the Company agreed to issue 1,651,200 shares of common stock at a price
of $0.25 per share to settle $412,800 in promissory notes payable. On April 6,
2006, these shares were issued.
   11.
              STOCK
      COMPENSATION PROGRAM
   On April
29, 2008, the board of directors approved the granted of stock option according
to the 2008 Nonqualified Stock Option Plan (“2008 Option Plan”) whereby the
board is authorized to grant to employees and other related persons stock
options to purchase an aggregate of up to 6,000,000 shares of the Company's
common stock. Subject to the adoption of the 2008 Option Plan, all of the
options were granted and vest, pursuant to the terms of the 2008 Option Plan in
six equal installments, with the first installment vesting at the date of grant,
the second installment vesting October 29, 2008, the third installment vesting
April 29, 2009, the fourth installment vesting October 29, 2009, the fifth
installment vesting April 29, 2010 and the last installment vesting October 29,
2010.
   On April
29, 2008, the Company granted 400,000 stock options to employees at a price of
$0.52 per share and 850,000 stock options to management at a price of $0.52 per
share.
   In the
quarter ended May 31, 2008, the Company has agreed to grant share stock awards
to officers and directors for each newly discovered reserves of 1,000,000 oz AU
(or Au-Ag equivalent) to a maximum of 400,000 shares.
   In the
three months ended May 31, 2008, the Company awarded 1,250,000 options to
purchase common shares (2007 – $nil) and recorded stock-based compensation
expense of $176,510 (2007 - $937,708). The weighted average fair value of each
option granted for the three months ended May 31, 2008 was $0.30. The following
weighted average assumptions were used for the Black-Scholes option-pricing
model used to value stock options granted in 2008:
  2008Expected
      volatility
              
              72.15%Weighted-average
      volatility
              
              72.15%Expected
      dividend rate
              
              -Expected
      life of options in years
              
              10Risk-free
      rate
              
              3.86%
  
   There
were no capitalized stock-based compensation costs at May 31, 2008 or May 31,
2007.
   
   
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  11.
              STOCK
      COMPENSATION PROGRAM (CONTINUED)
   The
summary of option activity under the stock option plan as of May 31, 2008, and
changes during the period then ended is presented below:
  Weighted
              
              
              Number
      of
              
              
              Weighted-
              
              
              AggregateAverage
              
              
              Shares
              
              
              Average
              
              
              IntrinsicExercise
              
              
              
              
              
              Remaining
              
              
              ValuePrice
              
              
              
              
              
              ContractualOptions
              
              
              
              
              
              
              
              TermBalance
      at March 1, 2008
              
              $
              0.87
              
              
              
              2,475,000
              
              
              
              7.93
              
              
              $
              222,500Options
      granted
              
              
              0.52
              
              
              
              1,250,000Options
      exercised
              
              
              -
              
              
              
              -Options
      cancelled/forfeited
              
              $
              -
              
              
              
              -Balance
      at May 31, 2008
              
              $
              0.75
              
              
              
              3,725,000
              
              
              
              8.43
              
              
              $
              -Exercisable
      at May 31, 2008
              
              $
              0.66
              
              
              
              2,904,167
              
              
              
              7.85
              
              
              $
              -
 
  The
weighted-average grant-date fair value of options granted during the three
months ended May 31, 2008 and May 31, 2007 was $0.30 and $nil,
respectively.
   A summary
of the status of the Company’s nonvested options as of May 31, 2008, and changes
during the quarter ended May 31, 2008, is presented below:
  Weighted-averagegrant-dateNon-vested
      options
              
              Shares
              
              
              fair
      valueNonvested
      at February 29, 2008
              
              
              1,065,000
              
              
              $
              0.76Granted
              
              
              1,250,000
              
              
              
              0.30Vested
              
              
              (452,500
              )
              
              
              0.39Nonvested
      at May 31, 2008
              
              
              1,862,500
              
              
              $
              0.49
  
   As of May
31, 2008, there was an estimated $959,248 of total unrecognized compensation
cost related to nonvested share-based compensation arrangements granted under
the 2007 and 2008 NQSO Plans. That cost is expected to be recognized over a
weighted-average period of approximately 1.97 years.
   
   
  MEXORO MINERALS
LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  12.
              WARRANTS
   As at May
31, 2007, the Company had a total of 2,648,500 (February 29, 2008 – 4,486,100)
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
2,648,500 shares of common stock in the event that these warrants are
exercised.
   During
the three months ended May 31, 2008, the Company had $nil from warrants
exercised.
   The
warrants include 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, have no redemption features, and are
settled on a physical basis. All the Warrants were fully vested upon
issuance.
   At May
31, 2008, there were 1,000,000 Series D Warrants and 1,000,000 Series E Warrants
outstanding. The Series E Warrants will become exercisable only at the time when
Series D Warrants have been fully exercised.  Unless terminated
earlier as a result of failure to vest, the Series D and Series E Warrants will
each expire on December 31, 2008.
   The
Company issued 2,917,500 warrants exercisable at $1.00 each pursuant to the
issuance of convertible debentures. These warrants expired on April 30, 2008,
were redeemable by the Company, at $0.01 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 and are settled on a physical basis.
   The
Company issued 375,000 warrants exercisable at $1.00 each pursuant to the
issuance of a private placement unit offering (note 9). These warrants expired
on April 30, 2008, were redeemable by the Company, at $0.10 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 and are settled on a physical
basis.
   The
following table summarizes the continuity of the Company’s share purchase
warrants:
  Number
      of
                Warrants
              
              
              Weighted
      average exercise priceBalance,
      February 28, 2007
              
              
              8,217,500
              
              
              $
              1.00Issued
              
              
              113,000
              
              
              
              1.00Cancelled
              
              
              -
              
              
              
              -Exercised
              
              
              (3,844,400
              )
              
              
              0.80Balance,
      February 29, 2008
              
              
              4,486,100
              
              
              $
              1.17Issued
              
              
              535,500
              
              
              
              0.75Cancelled
              
              
              (2,043,100
              )
              
              
              1.00Exercised
              
              
              (330,000
              )
              
              
              1.00May
      31, 2008
              
              
              2,648,500
              
              
              $
              1.23
 
  As at May
31, 2008, the following share purchase warrants were outstanding:
  Number
      of Warrants
              Exercise
      Price
              
              Expiry
      Date535,000
              $
      0.75
              
              April
      30, 20111,000,000
              $
      1.25
              
              December
      31, 20081,000,000
              $
      1.50
              
              December
      31, 2008113,000
              $
      1.00
              
              January
      31, 20102,648,500
  
  MEXORO
MINERALS LTD.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 Three
Months Ended May 31, 2008
 (Unaudited)
(Expressed in U.S. Dollars)
  13.
              RELATED
      PARTY TRANSACTIONS
   For the
three months ended May 31, 2008, the Company paid or accrued management fees of
$54,077 (May 31, 2007 - $60,030) to certain officers and directors and to
companies controlled by directors. The Company also paid or accrued $6,157 (May
31, 2007 - $6,861) to certain officers and directors and to companies controlled
by directors for travel, office and other related expenses.
   As at May
31, 2008, accounts payable of $66,000 (May 31, 2007 - $24,000) were owing to an
officer and director of the Company and $nil (May 31, 2007 - $58,793) was owing
to companies controlled by directors. In addition, promissory notes of $640,500
(May 31, 2007 - $350,326) were owed to companies controlled by directors (note
6).
   All
related party transactions are in the normal course of business at the exchange
amount agreed to by each party.
   14.
              COMMITMENTS
   During
the year ended February 28, 2007 the Company entered into an agreement for the
lease of new office premises for a two-year period, commencing on September 15,
2006 and ending on September 14, 2008. The Company is committed to spend
approximately $22,800 under this arrangement.
   15.
              SUBSEQUENT
      EVENTS
  a)
              Secured
      Convertible Debenture Issued
  On June
18, 2008, the Company issued a secured convertible debenture (the “Debenture”)
with a one-year term. The Debenture is in a principal amount of $370,000 and
carries a per annum interest rate of 8%.
  
 b)
              Extension
      of Term
  On June
18, 2008, the Company and Paramount agreed to extend the date from June 23, 2008
to July 21, 2008, to invest a minimum of $4 million and maximum of $6 million
into the Company.
  c)
              Consulting
      Agreement
  On June
25, 2008, the Company entered into a consulting agreement with Sam Osman to
conduct public relations for the Company. Mr. Osman was granted 200,000 options
to purchase 200,000 common shares of the Company at a price of $0.52 per share,
expiring June 30, 2010.
  d)
              Investor
      Relations Agreement
  On July
1, 2008, the Company entered into an investor relations agreement with Vastani
Company (“Vastani”), whereby Vastani will act as an investor relationship
advisor to the Company. The Company has agreed to pay a monthly retainer of
€20,000 and 1,000,000 warrants to purchase shares of the Company’s common stock.
This includes 250,000 warrants at a price of $0.65 per share vesting on signing,
250,000 warrants at an execution price of $1.30 per share vesting after 90 days,
250,000 warrants at a price of $2.00 per share vesting after 120 days and
250,000 warrants at a price of $2,75 per share vesting after 180 days. The
warrants expire on June 30, 2012.
   
  
  
  ITEM
2.
 
 MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
 
 CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
 Certain statements contained in this Form
10-Qconstitute
"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 Operations" and elsewhere in this Form
10-Q. 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 theUnited StatesSecurities 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
  Mexoro Minerals Ltd. (“Mexoro” or the
“Company”) is a start-up exploration stage company and has not yet generated or
realized any revenues from exploration projects, which commenced on May 1, 2004.
As of May 31,
2008,wehad $4,500 in our bank
account.
 
 On May 5, 2008,we signed a letter of intent (‘LOI’)
toenter into a strategic
alliance with Paramount Gold and Silver Corp. (“Paramount”) to combine mining
and exploration expertise, along with efficient use of personnel, drill rigs and
current mining concessions to improve efficiencies and potentially reduce costs
for both companies. We believe that the alignment of interest between the two
companies creates synergy, especially as the two companies’ Guazapares projects
are contiguous and create a large land position located in the state of
Chihuahua, Mexico.
 
 The LOI called for Paramount to invest a
minimum of $4 million and maximum of $6 million into the Company, at a fixed
price of $0.50 per unit byJune 23, 2008. This has subsequently been extended
until July 21, 2008. The LOI contemplates that Paramount will provide an
immediate cash infusion into the Company in the amount of $500,000 in the form
of asecured convertible
debenture that bears interest at 8% for one year with interest paid in arrears
on a monthly basis and is secured by all of the assets of our
Company. On May 9, 2008, we
issued a secured convertible debenture (the “Debenture”) with a one-year
term.
 
 In connection with the issuance of the
Debenture, we entered into a “Security Agreement” with Paramount that secures
our assets until there has been full compliance with the terms of the
Debenture.Paramount will have the option to
convert the debt into units as part of the overall financing. Paramount will
retain the first right of refusal on all future financings of Mexoro for a
period of four years.On
May 12, 2008, we received the first investment of $500,000 from
Paramount.
 
 Paramount may convert all or a portion
of the principal amount of the Debenture into units consisting of one share of
our common stock and half a warrant to purchase one share of our common stock.
Subject to certain adjustments upon the occurrence of various capital
reorganizations and other events, the units are convertible at $0.50 per unit
for a total of up to 1,000,000 shares of common stock and up to 500,000 warrants
at $0.75 to purchase shares of common stock (the “Warrants”). The Warrants have
a term of four years from the date that Paramount converts the Debenture or the
portion of the Debenture covering those warrants. A holder of the Warrants may
exercise those Warrants at $0.75 (subject to adjustments upon the occurrence of
certain events like stock splits).
 
 At the closing of the transaction, Chris
Crupi will be appointed president of the Company and Mario Ayub will remain as
chairman of the board. Paramount will have the right to appoint two members to
Mexoro’s board of directors and Mr. Ayub will have the option to be appointed to
Paramount’s board of directors.
 
 The two companies will form a joint
exploration and development management committee with the responsibility of
reviewing and planning the exploration programs of both companies. Charles Reed
and Barry Quiroz will remain Vice President of Exploration for Paramount and
Mexoro, respectively.
 
 On June 23, 2008, we signed an addendum
to the strategic alliance granting Paramount an extension for the closing of the
transaction until July 21, 2008. As such, Paramount invested an additional
$370,000 into the Company under the same terms as the original secured
convertible debenture.This
debenture is convertible into up to 740,000 shares of our common stock and up to
370,000 warrants which are exercisable into shares of our common stock at $0.75
per share.Paramount has
committed to us that they will continue to fund our operating expenses until the
closing of the transaction. No assurance, though, may be given that Paramount
will close the transaction or forward any additional funds to us.If no additional capital is raised prior
to the end of July 2008, we will most likely have to cease operations.
Furthermore, 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 have raised sufficient funds
in our recent private placement offering to allow us to continue in businessuntilJuly2008,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.
 
 
 For the 12 month period from June
2008toMay2009, wemay need to raise additional capital to
maintain operations. We will need a minimumof $550,000for taxes and property payments and an
additional $1,400,000 for general and administrative costs. This does not
include any capital to execute our exploration programs as detailed below. The
following table shows our contractual property payments that are due until April
2009:
 
 Name
              Date
              Payment
      Type
              USDSahuayacan
      Property (La Maravilla)
              July
      2008
              Property
      payment
              $33,000Guazapares
      Property1
              August
      2008
              Property
      payment
              $110,000Sahuayacan
      Property
              August
      2008 to July 2011
              Property
      payments
              $180,000Sahuayacan
      Property (La Maravilla)
              November
      2008
              Property
      payment
              $20,000Encino
      Gordo Property
              December
      2008
              Property
      payment
              $75,000San
      Antonio
              January
      2009
              Property
      payment
              $50,000
 1All Guazapares payments due
by December 31, 2007 have been deferred, until in the opinion of the directors
of Mexoro, Sunburst de Mexico and Mexorohave sufficient funds to make the
payments. This includes deferred payments of $60,000 in August 2006 and $140,000
in August 2007.
 
 Additionally, if our exploration during
that time period is successful, we may need to raise additional capital to fund
those exploration programs. At this time, we cannot assess with any accuracy our
total capital needs to fund an expanded exploration program beyond our basic
program.As part of our
agreement with Paramount we are expecting a capital infusion between $4 and $6
million prior toJuly
21, 2008.No assurance can be given, though, that
these funds will be received by us.We do not have any additional sources of
additional capital to fund our operationsbeyond July 2008if the funds from Paramount are not
received.We also believe
that we will not generate any revenues that would allow us to continue
operations. If we are unable to raise additional capital through debt or equity
beyondJuly2008, it is most likely that we would
need to cease operations and forfeit our properties as we would be unable to
make the necessary property payments.
  Plan
of Operation
  Summary
 
 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. On May 5,
2008,we entered into a strategic alliance
with Paramountto
investbetween $4 million
and $6 millionin our
company by July 21, 2008.
Paramount forwarded an initial $500,000on May 9, 2008and an additional $370,000,on June 23, 2008,in the form of secured convertible
debentures. The funds should be sufficient to
enable the Company to operate until the end of July 2008. After that time, we
will neither have sufficient funds to continue our exploration plans nor funds
for general administrative expenses if Paramount does not close on the strategic
alliance transaction. As a minimum, we will need to raise additional working
capital to maintain basic operations. We would plan to raise those funds through
the sale of equity or debt. Other than the Paramount transaction, at this time
we do not have any sources to raise additional capital for the company and no
assurance may be given that we will be able to find sources to raise additional
capital. Failure to raise any additional capital would most likely require us to
cease operations and abandon all of our exploration
properties.
 
 In the event that our exploration
program finds exploration targets that warrant additional exploration work,
including exploration by drilling, we will not have enough cash available to
fund an expanded exploration program. If we decide to expand our exploration
program, 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. The failure to raise additional capital would
severely curtail our ability to conduct any additional exploration work that
might be warranted because of the results of our current exploration
program.
 
 We are not involved in any research and
development on our exploration properties. We have no known reserves on the
Cieneguita Property. In anticipation of putting the property into production, we
purchased approximately $250,000 worth of new and used mining equipment to be
used for heap leach production. We contemplated putting the Cieneguita Propertyintoproduction during 2008 but recent
positive exploration resultsfrom our drilling programshavechanged that plan.It is managements’ plan to try and sell
the equipment that we have purchased.At this time, we have no estimates on
what the equipment will be worth in the secondary market.If we are unable to sell it, we may lose all of our capital
investment.No assurances can be given that we
willbe able to sell the equipment at a
price to recover our original investment, or at all.
 
 In the event that we did discover a
mineral deposit on one of our properties, 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. The amount of such expenditures is
indeterminable at this time as our exploration program has not advanced far
enough to provide us with results to determine this
information.
 
 Such expenditures are dependent upon the
size of themineralizedbody, the grade of themineralizedand the type of mining that is required
to extract any minerals that may be found. Regardless, we do not have enough
capital available to us to make any such expenditure that would be required to
put any mineral property into production, and we thereforewould 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 to fund such a project if one should be discovered.
 
 We hired our VP of Exploration on March
1, 2007. We also hired an office administrator for our office in Chihuahua. We
hired one geologist at the end of August 2006, another geologist in January 2007
and two moregeologists in August 2007and one more in February
2008to work on our
exploration programs.One
of our geologists resigned in June 2008.We do not expect any significant change
in additional contractors to conduct exploration over the next 12 months. Other
than the VP of Exploration and our geologists, all of the employees we hire are
contracted from third parties specializing in providing employees for Mexican
companies. In using third party contractors, we minimize our exposure to Mexican
employment law, and all liabilities are undertaken by the third party
contractors providing the services. We pay a flat rate to the third parties for
their services.
 
 In the event that we should find a
mineable reserve, it is management’s intention to contract the mining and
milling of any mineralized reserves out to third parties. We do not have any
known reserves at this time.
 
 
  Exploration
Projects – Current Status
   Sahuayacan
  Mexoro has completed a diamond drilling
program of 13 holes comprising 2,027.35 meters. Nine of the 13 holes were
directed to test the Santo Niño vein, two drillholes were collared on the La
Cumbre target and two more were drilled on the south of the property to test the
Santa Teresa target. Of the 13 drillholes only three have intersected
economically attractive mineralization. The mineralized intercepts are as
follows:
 
 ·
              Drillhole SDH-01collared on the Santo Niño vein intersected 7.50 meters with 2.56
      g/t Au (from 65.00 to 72.50 meters) and 8.0 m with 2.98 g/t Au (from 96.50
      to 104.5 meters).
 
 ·
              Drillhole SDH-05collared on La Cumbre target intersected intense altered zone
      dominated by abundant limonites, exhibiting 4.5 m @ 1.77 g/t Au from 0 to
      4.5 meters in depth.
 
 ·
              Drillhole SDH-12drilled
      to test the Santa Teresa vein has intersected a high grade mineralized
      zone, from 74.50 to 82.00 for a total of 7.5 meters @ 56.01 g/t Au and
      283.22 g/t Ag.
 
 A detailed report with the most recent
drilling results has been completed. All data and field information collected is
being evaluated and a second phase exploration and drilling campaign is being
planned on selected targets. A second phase drilling program will be aimed to
define the potential volume and grade of the mineralized system at Sahuayacan,
primarily focusing on the Santa Teresa and La Cumbre targets which may represent
a mineralization system developed along a caldera margin. Additional targets
have been identified along the circular feature that seems control the
emplacement of alteration and mineralization zones on the Sahuayacan
Project.
 
  Guazapares
  A 19 drillhole program has been
completed on theGuazapares
project totalling 2,670 meters. The most recent drilling results are from16completed holes drilled attheSan Francisco Este, San Francisco Centro
and El Cantilitoconcessions, three of the
main targets identified in the project. All drill holes in the San Francisco
Centro and El Cantilitoconcessionsintersected
long intervals of gold and silver mineralization.
 
 The drilling commenced on the San
Antonio area, where three diamond holes (GU-01, GU-02, and GU-03) have been
drilled for 452.85 meters. All three holes intersected mineralization at a depth
of approximately 100 meters. Surface and underground sampling from San Antonio
indicates the mineralization extends from surface to a depth of at lease 135
meters with a width varying from 1.2 meters to 12 meters in thickness. The
mineralized structure has a strike length of 800 meters and is open to the
northwest and southeast as well as to depth.
 
 The GU-01, GU-02 and GU-03 holes have
been focused on extending zones of high-grade mineralization encountered in the
San Antonio adit where a new high grade gold zone in the underground samples
returned grades of 37 g/t gold and 1,000 g/t silver over two meters. The highest
grades occurred within vein-breccias, quartz veins and quartz stockworked veins
exhibiting multiple pulses of hydrothermal activity. Analysis of the
mineralization and alteration assemblages, structural setting and geochemistry
of the San Antonio target area indicates that the high gold values tend to
cluster in two main mineralization styles:
 
 1.
              Mineralized-shoots
      developed along the extensive San Antonio vein
  system.
 2.
              Large
      and structurally controlled breccia bodies or structural zones developed
      in the intersections of mainly NW and NE trending faults and
      structures.
 
  San
Francisco Este Target
  The San Francisco Este target is
characterized by mineralized veins/breccias, quartz veins stockworked zones. The
mineralized and altered zone on this target trends predominantly northwest.
Drillholes GU-04 to GU-07 and GU-17 to GU-18 were designed to test the silver (±
gold) mineralization identified on surface. GU-04 intersected 9.55 meters with
2.17 g/t Au Eq from surface down to 10 meters depth. Drillhole GU-08 encountered
a mineralized interval of 5.20 meters with 1.68 g/t Au Eq. These intervals
complement previous results for the surface sampling where we reported silver
values up to 2,160 g/t Ag. Drillholes GU-05, GU-06 and GU-07 reported only gold
and silver anomalies and did not intersect economic mineralization. Assay
results from GU-17 to GU-19 are still pending. Results from the mineral zone at
San Francisco Este are summarized below:
 
  
 San
Francisco Centro Target
  The San Francisco Centro target is
characterized by quartz veins, veins/breccias and quartz veins stockworked areas
exhibiting multiple pulses of hydrothermal activity. Mineralization in San
Francisco Este tends to cluster inmineralized-shoots developed primarily in the
intersection of main structures. Drillholes GU-08 to GU-13 were planned to test
the east-west mineralized structure identified during the mapping and sampling
process in the central part of the concessions. All drillholes intersected
mineralization from surface down to 100 meters depth. Drillhole GU-10
intersected 13.75 meters with 2.75 g/t AU Eq. and 22.98 meters with 2.80 g/t Au
Eq. from 8.15 meters down to 85 meters depth. Drillhole GU-13 intercepted 9.0
meters with 3.63 g/t Au Eq. and 4.50 meters with 1.56 g/t Au
Eq.
 
  El
Cantilito Target
  El Cantilito is a mineralized zone
produced mainly along northeast vein-structures where mineralization tends to
cluster inmineralized-shoots and mineralized stock works
developed in structural jogs and/mineralizedintersection of main structures.
Drillholes GU-14 to GU-16 and GU-19 were designed to test the outcropping
mineralized structures. Drillholes GU-15 and GU-16 were collared in the west
margin of the known limit of the mineralized structure and have opened up the
exploration further west along ElCantilitostructures. Drillhole GU-15 was stopped
at 168 meters depth still in mineralization intersected 17.06 meters with 1.26
g/t Au Eq. including 1.30 meters with 6.10 g/t Au Eq. Drillhole GU-16
intercepted 18.92 meters with 4.33 g/t Au Eq. including 7.74 meters with 9.10
g/t Au Eq. The assay results from GU-19 are still pending.
 Highlights of the mineralized drill
intercepts are presented below:
 
 ·
              Drillhole GU-01
      intersected 3.87 meters with 2.072 g/t Au and 22.66 g/t Ag; Including 1.00
      meters with 4.83 g/t Au
 ·
              Drillhole GU-02
      intersected 1.35 meters with 2.54 g/t
Au
 ·
              Drillhole GU-03
      intersected 1.50 meters with 3.17 g/t Au and 42.6 g/t
  Au
 ·
              Drillhole GU-04
      intersected 9.55 meters grading 2.17 g/t Au Eq; including 2.12 meters @
      4.78 g/t Au Eq.
 ·
              Drillhole
      GU-05 to GU-07 did not intersect economical
  mineralization
 ·
              Drillhole GU-08
      intersected 5.68 meters with 1.68 g/t Au
Eq.
 ·
              Drillhole GU-10
      intersected 13.75 meters with 2.75 g/t Au Eq. & 22.98 meters with 2.8o
      g/t Au Eq; including 4.60 meters at 5.75 g/t Au Eq & 2.30 meters @
      9.71 g/t Au Eq.
 ·
              Drillhole GU-11
      intersected 17.89 meters with 2.58 g/t Au Eq; including 4.91 meters with
      4.72 g/t Au Eq.
 ·
              Drillhole
      GU-12 did not intersect economical
  mineralization
 ·
              Drillhole GU-13
      intersected 9 meters with 3.63 g/t Au Eq and 4.50 meters with 1.56 g/t Au
      Eq; including 2.75 meters with 7.93 g/t Au
Eq.
 ·
              Drillhole GU-14
      intersected 19.86 meters with 1.29 g/t Au Eq; including 2.12 meters with
      2.06 g/t Au Eq and 2.89 meters with 3.44 g/t Au
  Eq.
 ·
              Drillhole GU-15
      intersected 17.06 meters with 1.26 g/t Au Eq; including 1.30 meters with
      6.10 g/t Au Eq.
 ·
              Drillhole GU-16
      intersected 18.92 meters with 4.33 g/t Au Eq; including 7.74 meters with
      9.10 g/t Au Eq.
 ·
              Drillhole
      GU-17 and GU-18 did not intersect economical
  mineralization
 ·
              Drillhole
      GU-19 did not intersect economical
  mineralization.
  -  -
  The following is a map of the drillhole
locations:
 
 
 
 In May 2008 we moved a drill rig onto
the Guazapares Property to commence the second round of drilling.A 6,000 meter diamond drilling program
commenced in June 2008. The drill program will test alteration and
mineralization targets, as well as additional areas identified during a drill
campaign completed in December 2007.
 
 
 Thethree main target areas include San
Antonio, San Francisco, and
El Cantilito. Drilling will
initially test alteration and mineralization centers located along these
structural trends. The high priority target is whereSan Antonio, San Francisco, and El
Cantilitomineralized
structures intersect each other in the central part of the project area (drill
holes GU-20, GU-22 and GU-23 are located within that target). Continuation along
strike and at depth of theAntonio, San Francisco, and El
Cantilitomineralized
structures will be tested with this second stage diamond drilling program.
Drilling will consist of 150-200 meter drill holes, with deeper drilling
reserved for areas that show the best results.
 
 In addition, targets Montana de Oro
andBlanquita,which were identified during recent
detailed mapping and geochemicalsampling program at 1:1,000
scale,will be also tested
during this drill program.
 
 To datethreeholes have been completed inthis second round of
drilling.The results of
these holes are pending.
 
  Cieneguita
  The phase I exploration program at
Cieneguita,carried out from November 2006 to
February 2007,was initially focused on a systematic
geological mapping (1:1,000) and sampling of roadcut and outcrop exposures. Thisexplorationprogram outlined the main mineralization
zone which has been traced in outcrops approximately 800 meters along strike. In
addition three new high-grade gold areas were identified beyond the known limits
of mineralization.
 
 According to our VP of Exploration, the
results from the mapping and sampling campaign provided evidence that potentialdiscoveriesof new areas with gold grades still
remains open as shown by the discovery of thePIT1 South, Central andPIT2 North areas.
 
 The results from the mapping and
sampling campaign outlined two main high-grade gold mineralization areas which
are providing additional evidence to increase the known mineralized zone of the
Cieneguita system to the NE. Analysis of the alteration, structural setting and
geochemistry of the northeast part of thePIT1 area indicates that there is
potential for a structurally controlled body to the northeast of the known PIT 1
area. Assay results have been received for samples from roadcuts and outcrop
exposures on the Cieneguita Property. The values ranged from trace to 31.6 g/t
Au taken from several two meter channel sample located 75 meters to the NE of
the known PIT 1 area. This high-grade gold sample is part of the NE PIT1 area, a
20 meters exposure averaging 5.43 g/t Au. The high-grade gold mineralization
encountered at the NE PIT 1 area is part of the same structural trend identified
in the PIT 1 area where gold values ranged from trace to 29 g/t
Au.
 
 High-grade gold mineralization was also
found at the S PIT 2 area, 100 meters to the south of the known PIT 2 area.
Sampling on the mineralized area has returned values varying from 1.18 to 3.2
g/t Au. Assay results from the mapping and sampling program are provided
below.
 
 Sample
              Au
              Ag
              Sample
              Au
              AgID
              (g/t)
              (g/t)
              ID
              (g/t)
              (g/t)26775
              4.29
              22.8
              26803
              0.911
              0.426776
              1.05
              11.5
              26814
              0.68
              15.926778
              0.89
              3.5
              26815
              4.22
              20.426779
              4.83
              94.5
              26816
              1.03
              13.626780
              1.80
              42
              26819
              2.57
              6.426781
              2.33
              49.1
              26820
              1.03
              2.726782
              3.2
              63.4
              26821
              0.92
              3.926783
              1.67
              76.6
              26822
              1.13
              3.826784
              0.58
              63.5
              26830
              0.70
              20.426785
              1.18
              8.6
              26831
              1.04
              18.626786
              0.59
              21.3
              26832
              0.75
              44.326790
              0.61
              2.5
              26833
              0.52
              1626791
              2.86
              13.5
              26834
              0.45
              11.226793
              0.73
              6.2
              26836
              1.38
              17.626796
              1.10
              341
              26837
              0.85
              10.826799
              0.71
              39.5
              26838
              31.6
              926800
              0.56
              30.3
              26839
              2.03
              4.826801
              0.57
              44.1
              26840
              7.34
              2.926802
              0.52
              13.9
 
 
 Concurrentwith the surfacemapping and samplingexploration,an initial4,000 meter diamond drilling programwas proposedto test the potential ofthethree new mineralized areas, increase
known mineralization and to characterize the gold mineralization contained
within the sulphide zone.Due to recent assay results from the
drilling at Cieneguita, the diamond drilling program initially consisting of
4,000 meters has been extended to a minimum of 10,000 meters.A total of31diamond core holes have been drilled
(CI-01 to CI-25) for7,166core meters since drilling began at
CieneguitainDecember 2007.
 
 All drill holes from this first phase
drilling program have been focused on extending zones of high-grade gold
mineralization identified by previous drilling programs (Glamis drilling
program, 1994-1996). Drill hole CI-4 and CI-11 failed to intersect any
economical mineralization.
 
 Significant gold grades in the drilling
were intersected by drillholes CI-02, CI-05, CI-06 CI-08, CI-09, CI-10
andCI-21as follows:
 
 ·
              Drill
      hole CI-02
 o
              5
      meters (m) with 6.13 g/t Au from 97.50 to 102.50
  m
 ·
              Drill
      hole CI-05
 o
              4.10
      m with 2.75 g/t Au from 40.90 to 45.0
m
 o
              4.60
      m with 2.89 g/t Au from 62.90 to 67.50
m
 o
              6.00
      m with 1.16 g/t Au, 56.1 g/t Ag, 0.44% Pb and 0.76% Zn from 118 to 124
      m
 o
              4.50
      m with 0.69 g/t Au, 183.56 g/t Ag, 0.39% Pb and 1.23% Zn from 147.50 to
      152 m
 o
              6.00
      m with 0.62 g/t Au, 81.35 g/t Ag, 1.92% Pb and 3.55% Zn from 156.50 to
      162.50 m
 ·
              Drill
      hole CI-06
 o
              11.70
      m with 2.58 g/t Au from 12.3 to 24m
 ·
              Drill
      hole CI-08
 o
              From
      96.50 to 122.00 m (25.50 m) with 0.31 g/t Au, 48.49 g/t Ag, 0.82% Pb &
      1.22%Zn
 o
              From
      130.75 to 141.24 m (10.50 m) with 0.96 g/t Au, 90.34 g/t Ag, 0.52% Pb
      & 0.91 % Zn
 §
              Including:
      6 m with 1.47 g/t Au, 140.95 g/t Ag, 0.44% Pb and 0.61%
  Zn
 ·
              Drill
      hole CI-09
 o
              From
      8.40 to 12.20 m (3.80 m) with 1.39 g/t Au and 149.9 g/t
  Ag
 o
              From
      52.70 to 60.20 m (7.50 m) with 0.43 g/t Au, 105.58 g/t Ag, 0.40%Pb and
      0.64% Zn
 §
              Including:
      1.50 m with 0.54 g/t Au, 171 g/t Ag, 0.72% Pb and 1.49%
  Zn
 ·
              Drill
      hole CI-10
 o
              From
      0.0 to 6.00 m (6.0 m) with 1.19 g/t Au and 27.7 g/t
  Ag
 o
              From
      74.50 to 94.0 m (19.50 m) with 0.73 g/t Au, 57.56 g/t Ag, 0.73% Pb &
      1.03% Zn
 §
              Including:
      3 m with 0.81 g/t Au, 96.55 g/t Ag, 1.28% Pb and 2.47%
  Zn
 o
              From
      95.50 to 100.0 m (4.50 m) with 1.34 g/t Au, 140.90 g/t Ag, 0.09% Pb and
      0.13% Zn
 o
              From
      109.0 to 118.0 m (9.0 m) with 0.26 g/t Au, 277.88 g/t Ag, 0.26% Pb and
      0.42% Zn
 §
              Including:
      1.50 m with 0.28 g/t Au, 976 g/t Ag, 0.20% Pb and 0.19%
  Zn
 ·
              Drill
      hole CI-21
 o
              From
      42.5 to 116.5 m (74.00 m) with 1.72 g/t Au and 119. g/t
  Ag
 §
              Including
      10.5 m with 2.42 g/t Au and 244.36 g/t
Ag
 §
              Including
      16.5 m with 2.66 g/t Au and 135.22 g/t
Ag
 §
              Including
      12.00 m with 1.66 g/t Au and 71.69 g/t
Ag
 
 
 The
following map shows the location of the drill holes:
 
 
 
 According to our VP Exploration,
field evidence and drilling
results have confirmed that Cieneguita is a system composed by an oxide-mixedmineralizedvarying in thickness from five to 20
meters and a sulfide zone exhibiting mineralization at 250 meters depth. Gold
mineralization at Cieneguita occurs mainly as disseminated and minor proportion
structurally-controlled. Mineralization is hosted by breccias and tuffs varying
in composition from rhyolite to dacite. The main mineralized and altered zones
have been developed to the northwest (PIT-1 area) and southeast (PIT-2 area).
These mineralized zones consist mainly of acid-sulphate alteration, including
quartz-alunite assemblages exhibiting small and localized areas with residual or
vuggy silica. Cieneguita is interpreted to represent a high-sulphidation
gold-silver system.
 
 
 According to our VP Exploration,drilling results have demonstrated the
extension of the Cieneguita mineralized system at depth down at least to 250
meters where mineralization is mainly hosted by sulphides. The mineralization
zone is still open to the south and to depth. Drilling program continues and a
second stage drilling program has been proposed to define the complete
mineralization system and provide aCanadian National Instrument43-101(“NI 43-101”)resource
estimation.
 
 Ongoing core drilling of the Cieneguita
mineralization system has confirmed that mineralization occurs mainly as
disseminations hosted by dacitic tuffs and hydrothermal breccia bodies. Due to
the disseminated character of the mineralization, several follow-up holes will
be drilled to define lateral and vertical extensions of the three newly
identified mineralized areas.
 
 Drill holes CI-13, CI-14 and CI-17 were
collared beyond the known limits of the mineralization intersecting only
anomalous gold in most of the intervals. Holes CI-15 and CI-16 were collared in
the PIT 1 area to the northeast of the Cieneguita system. The drill holes were
designed to test the near-surface oxide mineralization identified at the PIT 1
area. The results show that gold mineralization is associated to an oxidation
zone exhibiting a thickness of up to approximately 25 meters. Gold
mineralization is also hosted in this area by a dacitic tuff and hydrothermal
breccia bodies.
 
 Holes CI-18 and CI-21 were collared on,
and to the south of, PIT 2 in a southeast direction. The drill holes were
designed to test anomalous and high grade gold values obtained from surface
samples taken during the mapping process carried out in 2007. The results
indicate the continuation to the southeast of both the near surface oxide
mineralization and the deeper sulfide gold-silver (+Pb-Zn) mineralization.
Follow-up drill holes will be programmed to test the extension of the
mineralized intervals to the east and at depth. Gold and silver mineralization
intersected in drill hole CI-21 may represent a new hydrothermal mineralization
center at the southwest margin of the Cieneguita system that could increase the
potential of the Cieneguita project significantly.
 
 Drill hole CI-21 identified a new gold
zone to the south of Pit 2 and expanded the deposit at depth. Highlights from
CI-21 include an intercept of 74 meters of 1.72 g/t Au and 119.77 g/t Ag; which
included 10.50 meters of 2.42 g/t Au and 244.36 g/t Ag and 16.50 meters of 2.66
g/t Au and 135.22 g/t Ag.
 
 Hole CI-21 was collared to the south of
Pit 2 in a southeast direction. This drill hole was designed to test anomalous
and high grade gold values obtained from surface samples taken during the
mapping process carried out in 2007. The results indicate an expansion of both
the near surface oxide mineralization and the deeper sulfide gold-silver
(+lead-zinc) mineralization. Gold, silver and base metals mineralization
intersected in drillhole CI-21 may represent a new hydrothermal mineralization
center at the southwest portion of the Cieneguita system that could
significantly increase the potential of the project. Assay results from CI-26 to
CI-31 are still pending from ALS Chemex.
 
 Partial results from drillhole CI-22
stopped in mineralization, including a five meter mineralized interval of 1.17
g/t Au and 157 g/t Ag (intercepted at the end of the hole). In addition, the
complete assay results from CI-21 included 111.0 meters of 1.24 g/t Au, 99,59
g/t Ag, 0.45% pb and 0.73% An, and 74 meters of 1.72g/t Au and 119.77 g/t Ag.
Hole CI-24 yielded 59,50 meters of 1.31 g/t Au and 60.38 g/t Ag. Hole CI-23 did
not encounter economic mineralization.
 
 
 A summary of the Cieneguita assay
results are described in the table below:
 
 Hole
              From
              To
              Interval
              Au
              Ag
              Pb
      (%)
              Zn
      (%)ID
              (m)
              (m)
              (m)
              (g/t)
              (g/t)CI-01
              4.60
              6.40
              1.80
              1.487.85
              16.45
              8.60
              1.0521.50
              30.00
              8.50
              1.35CI-02
              73.50
              78.00
              4.50
              1.2194.10
              102.50
              8.40
              2.83110.15
              113.00
              2.85
              2.33192.00
              195.00
              3.00
              1.60CI-03
              48.85
              74.50
              25.65
              1.40
              24.4682.00
              95.50
              13.50
              2.01
              21.34CI-05
              33.50
              52.50
              19.00
              1.7762.90
              82.50
              19.60
              1.69118.00
              125.00
              7.00
              1.16
              49.16
              0.36
              0.34147.50
              162.50
              15.00
              0.74
              106.53
              0.93
              1.79CI-06
              12.30
              24.00
              11.70
              2.58
 
 CI-07
              0.0
              11.50
              11.50
              0.7874.60
              78.50
              3.90
              0.5
              114.26
              0.15
              0.41102.50
              104.00
              1.5
              1.32111.50
              113.00
              1.50
              1.95CI-08
              3.50
              5.00
              1.50
              1.0896.50
              122.00
              25.50
              0.31
              48.49
              0.82
              1.21130.75
              141.25
              10.50
              0.96
              90.34
              0.52
              0.91166.75
              170.70
              3.95
              
              
              1.02
              1.18198.25
              201.40
              3.15
              
              
              0.09
              1.34CI-09
              8.40
              12.20
              3.80
              1.39
              149.9052.70
              60.20
              7.50
              0.44
              105.58
              0.40
              0.66102.20
              109.70
              7.50
              0.25
              39.08
              0.47
              1.31CI-10
              0.00
              6.00
              6.00
              1.19
              22.7012.50
              15.25
              3.25
              1.14
              22.1074.50
              94.00
              19.50
              0.73
              57.56
              0.73
              1.0395.50
              100.00
              4.50
              1.39
              140.90
              0.09
              0.131.09
              118.00
              9.00
              0.26
              277.88
              0.26
              0.42CI-12
              54.00
              55.50
              1.50
              1.7287.00
              88.50
              1.50
              1.07139.50
              159.00
              19.50
              0.76
 
 Hole
              From
              To
              Interval
              Au
              Ag
              Pb
      (%)
              Zn
      (%)ID
              (m)
              (m)
              (m)
              (g/t)
              (g/t)CI-13
              84.40
              92.00
              9.10
              0.45111.50
              123.25
              11.75
              0.81210.50
              213.50
              3.00
              
              
              0.50
              0.85282.50
              293.00
              10.50
              
              
              0.55
              0.94CI-14
              114.50
              117.50
              3.00
              1.53135.00
              144.00
              9.00
              0.95CI-15
              0.0
              10.50
              10.50
              2.15
              34.62CI-16
              0.0
              19.30
              19.30
              1.57
              26.50CI-18
              0.0
              14.50
              14.50
              1.10
              26.9581.50
              93.50
              12.00
              0.37
              100.64102.50
              149.00
              46.50
              0.47
              58.75165.50
              170.00
              4.50
              0.58
              37.90171.50
              186.59
              15.00
              0.44
              27.15189.50
              197.00
              7.50
              0.29
              82.12
              0.26
              0.56197.00
              207.50
              10.50
              0.53
              42.64215.00
              228.50
              13.50
              0.93
              50.47248.00
              251.00
              3.00
              0.14
              20.30
              0.38
              0.46264.50
              276.50
              12.00
              0.18
              21.01
              0.64
              1.02Including
              264.50
              269.00
              4.50
              0.21
              28.33
              1.03
              1.82CI-19
              15.50
              32.50
              15.00
              0.75
              106.14Including
              17.50
              23.50
              6.00
              1.33
              145.17CI-20
              0.0
              19.00
              19.00
              0.89Including
              11.50
              14.50
              3.00
              1.09CI-21
              42.50
              116.50
              74.00
              1.72
              119.77Including
              42.50
              53.00
              10.50
              2.42
              244.36Including
              76.00
              92.50
              16.50
              2.66
              135.22Including
              98.50
              110.50
              12.00
              1.66
              71.69CI-22
              0.0
              89.50
              89.50
              0.57
              50.98
              0.10
              0.17Including
              15.00
              30.00
              15.00
              1.03
              59.58Including
              21.00
              27.00
              6.00
              1.68
              75.07
              0.40
              0.81Including
              77.00
              89.50
              12.50
              0.84
              79.96Including
              84.50
              89.50
              5.00
              1.17
              157.03CI-24
              0.0
              59.50
              59.50
              1.31
              60.38Including
              12.50
              42.05
              29.55
              1.65
              90.90Including
              15.50
              29.00
              13.50
              1.70
              161.81Including
              47.85
              52.00
              4.15
              1.32
              38.55
              0.50
              1.25
  -  -
   Encino
Gordo
  During fiscal 2007, the
Companycarried out a
detailed and property scale mapping and sampling program outlining numerous
gold, silver and gold-copper coincident geochemical anomalies.Phase 1of the exploration program was
undertaken in an effort to define the style and characteristics of the
mineralization areas indicated by the geochemical anomalies. Within this stage
several gold and sulphide mineralization areas including pyrite and chalcopyrite
have been identified within an over 500 meters stockwork area and fault-veins
structure.
 
 All information and field evidence
gathered during the mapping and sampling process are suggesting the presence of
“porphyry” style alteration and mineralization characterized by the presence a
concentric alteration patterns (potassic alteration grading outward to
quartz-sericite and propylitic alteration), coincident Cu, Au and Mo geochemical
anomalies and a multiple-event of veining. No assurance can be given, though,
that we will find such a deposit, if at all.
 
 Stage IIof the exploration program aimed to
detail and characterize all identified alteration and mineralization areas and
define and prioritize drilling sites is underwayand is expected to be completed by
December 2008. In addition, a stream sediment sampling program is being planned
to fully evaluate all the concessions.
 
  Exploration
Projects – Potential and Next Exploration Stage
  Our exploration team will aggressively
pursue as a high priority the following:
 
 1.
              Advance
      all projects to the next exploration
stage
 2.
              Exploring
      and try to increment the known resources at the Cieneguita advanced
      project
 3.
              Design,
      implement and manage a strong new targets generation and identification of
      advanced projects program aimed to expand our
  portfolio.
 
 The following exploration program has
been planned for each of the projects:
 
  Sahuayacan
  Surface mapping and drilling results are
suggesting that the high gold values tend to cluster at certain areas along the
Santo Niño and the Santa Teresa vein structures with intervening areas of low
gold grades. A more disseminated deposit it seems to be present at the La Cumbre
area. The cluster of high gold values indicate the development ofmineralized-shoots within the extensive Sahuayacan
system as evidenced by the intercepts from the SDH-1 in the Santo Niño vein and
the SDH-12 along the Santa Teresa vein.
 
 All evidence is suggesting that the
mineralization is controlled by a circular feature that may represent a caldera
margin running from the Santa Teresa target up to north to the La Cumbre target.
This evidence is open up the potential to further extend the mineralization
found at Santa Teresa and La Cumbre targets further north.
 
 Next exploration stage will include
mapping and sampling along the circular feature trying to define additional
mineralization areas and drilling targets.
 
 
 The figure below shows the different
geological elements encountered in the Sahuayacan system and is also exhibiting
the relationship between the Santo Niño, La Cumbre and Santa Teresa target
areas.
 
 
 
 If management decides to continue
drilling, we will need to raise additional funding through the sale of debt or
equity because we do not have sufficient capital to continue such an exploration
program. 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.
We have not identified any additional sources of funding to implement such a
program
 
 The Company has budgeted$763,000for exploration on the
Sahuayacan Propertyin2008.
 
 The Sahuayacan Property is without known
reserves. Our proposed programs are exploratory in nature.
 
 
  
 Guazapares
  The mineralization systems encountered
in the Guazapares project are essentially of two types: a silver-dominated
system at San Francisco Este, San Francisco Centro, and El Cantilito which
exhibits localized areas of high-grade gold mineralization; whereas at San
Antonio the system is dominated by gold mineralization. Surface mapping and
drilling results are suggesting that the high-grade mineralization tends to
cluster at certain areas along the mineralized veins with intervening areas of
low-grade mineralization. The cluster of high-grade mineralization is suggesting
the development ofmineralized-shoots as evidenced by the intercepts
from drillholes GU-04 and from GU-08 to GU-16.
 
 The present drilling results are
providing the evidence to highlight the great potential of several areas in the
Guazapares project. Main potential targets are shown in the figure
below.
 
 1.
              Drilling
      results on the San Francisco Este target are opening the potential to
      explore further northwest along the same
  structure.
 2.
              Drillholes
      GU-12 and GU-13 at are suggesting the development of high-grade
      mineralized-shoots along structure’s inflections and have opened up the
      exploration potential to the west and
northwest.
 3.
              Drilling
      results at El Cantilito (GU-16) have opened up the exploration potential
      to the west of the system which is a covered terrain. Drillhole GU-15 is
      also opening potential to the west along the El Cantilito mineralized
      system and since GU-15 was stopped in mineralization at 169 meters depth
      the exploration potential is still open at
  depth.
 4.
              All
      mineralized system and targets are suggesting the potential to explore
      where all system intersects each other creating the right setting to
      develop attractive mineralization
zones.
 
 
 
 Diamond drillingatGuazapares encountered mineralization
in most of the drillholes. The highest grades occurred within vein-breccias,
quartz veins and quartz stockworked veins exhibiting multiple pulses of
hydrothermal activity.
 
 
 Analysis of the mineralization and
alteration assemblages, structural setting and geochemistry of the project area
indicates that the high gold values are spatially associated to a
rhyolite-dacite dome and tend to cluster in two main mineralization
styles:
 
 ·
              Mineralized-shoots
      developed along the extensive San Antonio vein
  system.
 ·
              Large
      and structurally controlled breccia bodies or structural zones developed
      in the intersections of mainly NW and NE trending faults and
      structures.
 
 Diagramatic x-section w-e guazapares project
 
 Themineralized-shoots still remain open in all
directions highlighting the potential for high grade gold mineralization beneath
covered areas on project area, though no assurance may be
given.
 
 Drilling continues to explore newly
identified altered and mineralized areas and extending the mineralized trends
andmineralized-shoots remaining with open potential in
Guazapares.
 
 If management decides to continue
drilling,the Company will
need to raiseadditional
funding through the sale of debt or equity because we do not have sufficient
capital to continue such an exploration program. Additional drilling would cost
a significant amount of money and there is no assurance that we would be able to
raise suchsignificantadditional amounts of
money. We have not identified any additional sources of funding to implement
such a program.
 
 The Company has budgeted$1,820,000for exploration onthe Guazapares projectin 2008.
 
 The Guazapares Property is without known
reserves. Our proposed programs are exploratory in nature.
 
  
 Cieneguita
  The recent exploration activitiesatCieneguita have providedthe Company withresultsthathighlight the potential of this
project. Mapping and sampling around Cieneguita has identified two new areas of
mineralizationthat are500 meters south of the
current known mineralized zones. These two areas are exhibiting same size,
characteristics, and intensity of alteration-mineralizationto the mineralized zone
previouslyencountered on
Cieneguita. Detailing mapping and sampling is currently
underway.
 
 Leaching tests on oxide and mixedmineralized
sampleshavereturned a recovery above 90%, whereas
the recovery in the sulphidemineralizationis showing recoveries varying from 70% to 75%witha leaching process lasting 25 to 30
days. Leaching tests,combined with the assay results from
drilling and the newmineralized,areasidentifiedare providing the possibility to
increase known zones and to make the Cieneguita deposit an attractive property
in the region. No assurance, though, may be given that we will be able to
identify an economicmineralizedbody at this property. Considering
latest results and findings the proposed work program for Cieneguita will
include:
 
 ·
              Current
      drilling program will be extended from 4,000 meters to 6,000
      meters
 ·
              Leaching
      test to the sulfide encountered at depth by current drilling
      program
 ·
              Detailed
      mapping and sampling of the two new areas identified within our property
      500 meters away from Cieneguita.
 
 If management decides to continue
drilling, we will need to raise additional funding through the sale of debt or
equity because we do not have sufficient capital to continue such an exploration
program. 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.
We have not identified any additional sources of funding to implement such a
program. If we can not obtain additional financing, we could seek a joint
venture partner if the drilling results warranted it. We do not have any joint
venture partners at this time and can give no assurance that we will be able to
find one if the Cieneguita Property warranted such a joint
venture.
 
 The Company has budgeted$2,050,000forexploration onthe Cieneguita Propertyin 2008.
 
 The Cieneguita Property is without known
reserves. Our proposed programs are exploratory in nature.
 
  
 Encino
Gordo
  We carried out a detailed and property
scale mapping and sampling program on the Encino Gordo project outlining a
porphyry-style mineralization exhibiting numerous gold, silver and gold-copper
coincident geochemical anomalies. We have identified two drilling targets in the
project area; however in order to define the system better, we have planned a
geophysical survey (IP and magnetics) to know the potential of the
near-mesothermal (porphyry-style) system present at the Encino Gordo property
before the drilling program.
 
 
 
 The above figure illustrates coincident
Cu and Au geochemical anomalies on the Encino Gordo Property which are spatially
associated to a potassic alteration core resembling the classical
geochemical-alteration signature of the porphyry systems.
 
 
 
  -  -
  Management and our VP of Exploration
will review the information provided by phase 1 of the exploration plan and
determine whether a drill program is recommended. If a drill program is
recommended, and we have received our permits that have been applied for in
advance, we do not have sufficient information at this time to estimate what the
drill program would entail. We need extensive information to determine the
number of drill holes to drill, where they would be located and to what depth
they would be drilled. This information will be provided by phase 1 of the
exploration plan.
 
 The Company has budgeted$740,000for exploration on the Encino Gordo
Propertyin 2008.
 
 The Encino Gordo Property is without
known reserves. Our proposed programs are exploratory in
nature.
 
  Target
Generation and Growth Strategy
  A fundamental component of our strategy
is to advance all of our properties to the drilling stage and implement a strong
generative and property acquisition program through a well establishedfinancial process and a proper funding
consistency.
 
 The proposed generative program will be
contemplating four main directions:
 
 1.
              A
      new targets generation program that will create a pipeline of quality
      properties providing a steady stream of new prospect and/or projects for
      the company to explore, farm-out and/or joint venture
  out.
 2.
              A
      property acquisition program aimed to identify and acquire at low cost
      (whenever possible) early- to mid-stage properties on selected locations
      along the main gold-silver belts in
Mexico.
 3.
              Focus
      on small- to medium-size gold-silver deposits (minimum deposits containing
      250,000 ounces of Au Eq.)
 4.
              The
      new targets generation and property acquisition program will be initially
      focused on the Sierra Madre belt and Central Mexico. It will be extended
      further south in Mexico and other countries if conditions and project’s
      potential warranted.
 
 The proposed exploration program is to
be undertaken by the Mexoro’s exploration team using in-house knowledge in
combination for support and guidance of high-quality consultant with expertise
in the region. The new targets generation program is aimed to feed our project
pipeline at drilling
stageand/or
neardrillingstage projects per
year.
 
 Phase I -
Target Generation
 
 Objectives
 
 ·
              Identify
      two to four target areas (approximately 20 x 30 kilometers) which have
      potential to host small- to medium-size gold and/or gold-silver
      deposits.
 ·
              Identify
      one or two specific opportunities with close to drill ready targets. For
      example, identify old workings or existing mines with good upside
      potential.
 ·
              Time
      frame: six months.
 
 Key Steps and Exploration
Tools
 
 Afterinitial evaluations ofpotentialgold and gold-silver deposits it has
become evident that the acquisition and evaluation of more detailed geological
maps and geochemistry with field follow-up is critically importantin identifyingnew areas ofminingpotential. Careful and selective use of
such data may be the most immediate and cost-effective way to focus exploration
efforts toward prospective gold-silver areas.
 
 Key steps will include mainly the
following activities, among other considerations:
 
 ·
              Acquire
      geological maps 1:250,000 and 1:50,000 (from Servicio Geologico
      Mexicano)
 ·
              Generate
      geological and mineral occurrences base
maps.
 ·
              Identify
      key host rocks.
 ·
              Complete
      structural interpretation from known geology, TM imagery, and geophysical
      data (if available).
 ·
              Integrate
      mineral occurrences, alteration, lithology and
  structures.
 ·
              Complete
      initial targeting using the above
compilation.
 ·
              Select
      and prioritize targets.
  
  
  Results
of Operations
  
 Three months ended May 31, 2008 compared
to the three months ended May 31, 2007.
 
 In this discussion ofthe Company’sresults of operations and financial
condition, amounts, other than per-share amounts, have been rounded to the
nearest thousand dollars.
 
 Revenues
 
 The Companydid not earn revenues during the
threemonthsendedMay 31, 2008 or 2007because we did not have commercial
productiononany 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.
 
 Operating
Costs
 
 We did not incur any operating costs
during thethree ended May
31, 2008 or 2007due to the
fact that we did not achieve production from exploration activities during
either year.
 
 Expenses
 
 Our expensesdecreasedto$1,908,000forthe three months ended May 31,2008compared to$2,541,000forthe three months ended May 31,2007, representing a decreaseof$633,000.The decrease is primarily attributable
to lower administrative costs and stock-based compensation to officers,
directors and consultants offset by higher mineral exploration
expenses.
 
 General and administrative cash expenses
decreased to $426,000 in the three months ended May 31,
2008 compared to $935,000 in the three months ended May 31, 2007, representing a
decrease of $509,000.This is almost entirely due to lower
investor relations expenses as the Company redirected its focus on the strategic
alliance with Paramount.
 
 Managementand consultantfees decreased to $83,000 in the three months ended May 31,
2008 from $173,000 in the three months ended May 31,
2007. The decrease was attributable to;lower expenses for an investor relations
contract that ended  in April 2008,lower management fees paid to the chief
executive officer due to his resignation in April 2008and certain management fees in Mexico
being charged to exploration expenses. The Company also spent only $61,000 in
the three months ended May 31, 2008 compared to $588,000 in the three months
ended May 31, 2007 on investor relationsactivities.
 
 Stock-based compensation expensedecreasedto $189,000 in the three months ended
May 31, 2008 from $938,000 in the three months ended May 31, 2007.The 2008 amounthad $177,000 of stock-based compensation
expense relating to options granted to officers, directors and consultants and
$nil of stock-based compensation relating to warrants.The 2007 amount relates to warrants
issued and stock options granted to management and key personnel for $487,000
and $450,000 respectively.
 
 Mineral exploration in the three months
ended May 31, 2008 increased to $1,293,000 compared to $668,000 for the three
months ended May 31, 2007as the Company continues to advance its mineral exploration program. We anticipate that exploration
expenditures will increase in fiscal 2009 as a result of exploration activities
on our Mexican mineral properties.
 
 Loss
 
 Our net loss increased to $2,322,000 for the three months ended May 31,
2008 compared to $2,541,000 for the three months ended May 31,
2007, representing adecreaseof $219,000.
 
 This change in our loss was primarily
attributable to higherinterest expense recognized in 2008
relating to beneficial conversion feature and the fair value of warrants for the
warrants issued to Paramount.
 
 The net losses in both 2008 and 2007
were comprised of items not requiring an outlay of cash. In 2008, the non-cash
component of stock-based compensationwas $189,000.In 2007, the non-cash component of
stock-based compensation was $938,000. We anticipate that we will continue to
incur a loss 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, if ever. There is no assurance that we will
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 May 31, 2008, we have total assets of $900,000, total liabilities of $3,509,000and a deficit of $36,150,000accumulated during the exploration
stage.
 
 Cash and
Working Capital
 
 We had cash and cash
equivalents of $4,500 as of
May 31, 2008, compared to
cash of $13,000 as of February 29, 2008. We had working capital deficiencyof $3,042,000as of May 31, 2008, compared to a working capital
deficiency of $1,811,000as of February 29, 2008and compared to a working capital of
$1,235,000 as of May 31, 2007.
 
 We will require additional financing
during the current fiscal year according to our planned exploration activities.We plan to spend
approximately$4,620,000
from July 2008 to December 2008 to carry out exploration and administration
activities on our Mexican mineral properties. We also anticipate spending
approximately $1,100,000 during the next 12 months on general and administrative
costs.
 
 The fundsfrom Paramountshould be sufficient to enable the
Company to operate until the end of July 2008. After that time, we will neither
have sufficient funds to continue our exploration plans nor funds for general
administrative expenses if Paramount does not close on the strategic alliance
transaction. As a minimum, we will need to raise additional working capital to
maintain basic operations. We would plan to raise those funds through the sale
of equity or debt. Other than the Paramount transaction, at this time we do not
have any sources to raise additional capital for the company and no assurance
may be given that we will be able to find sources to raise additional capital.
Failure to raise any additional capital would most likely require us to cease
operations and abandon all of our exploration properties.
 
 The amount of working capital could be
adversely affected further in the event claims are made against us alleging that
certain shares we previously issued pursuant to Form S-8 registration statements
constituted an illegal public offering because the company was a “shell company”
at the time and, as a result, was not eligible to use Form S-8 for registration
of shares under the Securities Act of 1933. In August and October of 2005, the
Company issued shares of common stock to an officer of the Company, as
compensation for consulting services. The two share issuances were for a
combined total of 30,000 shares and each of the share issuances was made
pursuant to a registration statement on Form S-8 under the Securities Act of
1933.  Although the Company believes these shares were properly
issued, a claim could be made that issuance of the shares constituted an illegal
public offering because the Company was a “shell company” at the time. Shell
companies  [i.e. companies which have no or nominal operations and
either (i) no or nominal assets; (ii) assetsconsisting solely of cash and cash
equivalents; or (iii) assets consisting of any amount of cash and cash
equivalents and nominal other assets] are not eligible to use Form S-8 for
registration under the Securities Act of 1933. If either of these transactions
did violate federal securities laws, subsequent purchasers of the shares may
have claims against us for damages or for rescission of their purchase
transaction and recovery of the full subscription price paid, together with
interest. As of the date of this quarterly report, no one has made or threatened
any claim against us alleging violation of the federal securities laws. In the
event such claims were successfully asserted there is no assurance that we would
have sufficient funds available to pay and it is likely that we would be
required to use funds currently designated as working capital for that purpose.
That would substantially reduce the amount of working capital available for
other purposes and, in that event, we could be forced to cease or discontinue
certain operations and to liquidate certain assets to pay our liabilities,
including, but not limited to, rescission claims.
 
 Cash Used in
Operating Activities
 
 Cash used in operating activities
increased to $1,003,000 for the three months ended May 31, 2008 compared to
$940,000 for the three months ended May 31, 2007. The cash used in operating
activities was primarily for general and administrative expenses and exploration
costs.
 
 Cash Used in
Investing Activities
 
 The Companyprovidedcash of $2,000from saleofusedequipment for thethree months ended May 31,
2008compared to cash used
of $25,000forpurchase of equipment forthethree months ended May 31,
2007.
 
 
 Financing
Activities
 
 Cash provided by financing activitiesincreasedto $992,000for the three months ended May 31,
2008compared to $975,000for thethree months ended May 31,
2007.Almost all of the cash provided by
financing activities was from issuing of warrants and notes
payables.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.
 
 In January 2006, the Company began
issuing 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 of the Company’s shares of common stock at $1.00
per share and $25,000 of debt, which may be converted to shares of common stock
at $0.50 per share andwasexercisable until April 30, 2008. As of
February 28, 2006, the Company had issued convertible debentures in the amount
of $652,000. In addition, the warrants are redeemable by the Company, at $0.01
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 and settled on a
physical basis.2,043,100
of these warrants expired on April 30, 2008.
 
 In order to get assistance with
financing activities, on January 30, 2006, the Company entered into a Consulting
Agreement with G.M. Capital Partners, Ltd., a British Virgin Islands company
(“GM Capital”). Under the agreement, GM Capital will provide the Company with a
variety of services including financial public relations, strategic planning,
acquisition consulting and assistance in securing equity or debt financing.
Specifically, GM Capital agreed to provide financial public relations counsel
services including (i) being a liaison between the Company and its stockholders;
(ii) advising the Company with respect to existing and potential market makers,
broker-dealers, underwriters and investors as well as being the liaison for the
Company with respect to communications and information (e.g., interviews, press
releases, stockholder reports, etc.) as well as planning, designing, developing,
organizing, writing and distribution such communications and information; (iii)
assisting the Company in establishing an investor relations program and advising
the Company with respect to stockholder meetings, interviews of Company officers
by the financial media, and interviews of Company officers by analysts, market
markers, broker-dealers and other members of the financial community; and (iv)
assisting in making the Company, its management, products and services, and
financial situation and prospects, known to the financial press and
publications, broker-dealers, mutual funds, institutional investors, market
makers, analysts, investment advisors and other members of the financial
community. GM Capital also agreed to provide strategic planning services, which
included (i) consulting with the Company as to, the management, marketing,
consulting, strategic planning, corporate organization and structure, financial
matters in connection with the operation of the business of the Company,
expansion of projects; (ii) reviewing and advising the Company regarding its
overall progress, needs and condition; (iii) assisting the Company in the
monitoring of services provided by the Company’s advertising firm, public
relations firm and other non-legal professionals to be employed by the Company;
and (iv) advising the Company on the continued development of an investor
relations program and the stimulation of interest in the Company by
institutional investors and other members of the financial
community.
 
 Under the terms of the agreement, the
CompanypaidGM Capital the following: (i) a monthly
fee of $10,000, (ii) 10% success fee for any financing facilitated by GM Capital
outside of the United States, and (iii) the issuance of a total of 5,000,000
warrants, each of which entitledthe holder to purchase one share of the
Company’s common stock.. The warrants are exercisable at the right of the
holder, have no redemption features, and are settled on a physical basis. 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. The Series A Warrants fully vested upon issuance. They were tobe exercisable at any time following
their issuance but were
toexpire on June 30, 2007
if not fully exercised on or before that date. The remaining series of Warrants
wouldeach vest and become exercisable only
at the time that the immediately preceding series has been fully exercised.
Therefore, the Series B Warrants will vest only upon the timely exercise of all
Series A Warrants, and the same restriction will apply to each of the succeeding
series of warrants (i.e. the Series C, D and E Warrants). Unless terminated
earlier as a result of failure to vest, the Series B and Series C Warrants
wouldeach expire on December 31, 2007 and
the Series D and Series E Warrants will each expire on December 31, 2008.
However, the Agreement also stipulates that G.M. Capital cannot exercise any
warrants if, after the exercise, G.M. Capital would own 4.99% or more of the
issued and outstanding common stock of Mexoro. G.M. Capital is an accredited
investor. These warrants were issued pursuant an exemption from registration
under Regulation S of the Securities Act of 1933, as amended. The fair value of
the 5,000,000 warrants 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 and totals $3,898,000 of
stock-based compensation expense which is amortized over the twenty four month
term of the GM Capital contract at $487,250 every quarter until November 30,
2007.
 
 On August 31, 2006, the Company entered
into an Amended Consulting Agreement with G.M. Capital. All of the terms
remained the same except for the following:
 
 1.
              G.M. Capital represented that it
      does fall within United States jurisdiction in regard to this
      contract.
 2.
              G.M. Capital is no longer required
      to provide services regarding the acquisition of a business because the
      Company does not plan to acquire a business in the near
      future.
 3.
              G.M. Capital clarified that the
      investors, market makers, and other financial industry contacts which it
      will speak to in regard to the Company are non-United States
      persons.
 4.
              The Company acquired the sole
      discretion to determine how many Warrants G.M. Capital can exercise in
      order to restrict G.M. Capital’s beneficial ownership at any one time to
      no more than 4.99% of the issued and outstanding shares of the
      Company.
 5.
              G.M. Capital will no longer be the
      liaison between the Company and its
  stockholders.
 6.
              G.M. Capital will no longer advise
      the Company about potential market makers, broker-dealers, underwriters
      and investors.
 7.
              The Warrants were revised to
      remove the liquidated damages provision related to the registration rights
      of the holders of the
Warrants.
 
 Furthermore, we had amended our
agreement with G.M. Capital to eliminate any reference whereby G.M. Capital
would assist us in identifying, evaluating, structuring, negotiating and closing
acquisitions. In the event we discovered no material ore reserves and have no
more exploration plans to continue after June 2008 we would be without the
services of G.M. Capital to assist us in reformulating the business plan of the
Company. If we should abandon our exploration strategy, current management has
sufficient expertise to reformulate the business plan and pursue other options
without the help of G.M. Capital. G.M. Capital’s main function was to identify
and introduce potential investors to us in foreign jurisdictions for raising
capital through the sale of equity or debt.
 
 In May 2008, the Company verbally
terminated the agreement with G.M. Capital for providing assistance in financing
activities.
 
 On March 4, 2006, the Company agreed to
issue 1,651,000 common shares at a price of $0.25 per share to settle $413,000
in promissory notes payable. As a condition, the promissory note holders waived
all accrued interest payable on the notes. On April 6, 2006, these shares were
issued and the Company recorded a $7,000 gain on settlement of
debt.
 
 
 On April 3, 2006 and May 31, 2006, the
Company issued 550,000 common shares and 200,000 common shares, respectively and
closed a private placement for total proceeds of $375,000. As at February 28,
2006, the Company had received $170,000 of subscriptions for this 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. The units were priced at $0.50 each.
 
 During the quarter ended May 31, 2006,
the Company issued a total of $2,265,500 convertible debentures. The convertible
debentures, with principal and accrued interest at 7% per year were convertible
into $25,000 units at the option of the holder. Each unit consisted of a warrant
to purchase 25,000 of the Company’s shares of common stock at $1.00 and $25,000
of debt, which may be converted to shares of common stock at $0.50 per share and
is exercisable until April 30, 2008. In addition, the warrants are redeemable by
the Company, at $0.01 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. Further, under the terms of the debenture, until May 2007, the Company
is prohibited from effecting or entering into an agreement to affect any
subsequent financing involving a “Variable Rate Transaction” The term Variable
Rate Transaction means a transaction in which the Company issues or sells any
debt or equity securities that are convertible into, exchangeable or exercisable
for, or include the right to receive additional shares of common stock at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares
of  common stock at any time after the initial issuance of such debt
or equity securities.
 
 The holders of the debentures converted
all of the debentures to shares of common stock at $0.50 per share in June 2006.
The Company issued 5,835,000 shares and 2,917,500 warrants to debenture holders
upon the conversion. We have paid to the convertible debenture holders a total
of $58,308, which is their accumulated interest on the debentures. During August
2006, the Company cancelled 50,000 shares of common stock with respect to the
conversion and 25,000 warrants with respect to this conversion due to
non-payment of subscription funds.
 
 During the quarter ended May 31, 2008,
the Company issued a total of $500,000 convertible debentures to Paramount. The
convertible debentures with principal and accrued interest at 8% per year are
convertible into 1,000,000 units at a price of $0.50 per unit at the discretion
of Paramount.  Each unit shall be comprised of one common share plus
one-half common share purchase warrant. One full warrant is exercisable
immediately at a price of $0.75 for four years.
 
 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.
As at May 31, 2008, the Company had working capital deficiency of$3,042,000(May 31, 2007 - $1,235,000) and an
accumulated deficit during the exploration stage of $36,150,000 (May 31, 2007 - $25,731,000). These conditions raise
substantial doubt about the Company’s ability to continue as a going
concern.
 
 There is no assurance that our
operations will be profitable. The Company has conducted private placements of
convertible debt and common stock, which have generated funds to satisfy all of
the initial cash requirements of its planned Mexican mining
ventures.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.
 
  
 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 is material to our investors.
 
 Item
3.                      Quantitative
and Qualitative Disclosure About Market Risk
 
 As we did
not have to disclose quantitative and qualitative information about our market
risk as of and for our last fiscal year, this item is not applicable to us at
this time.
 
 Item
4 and
 Item
4(T)                      Controls
and Procedures
 
 Evaluation
of Disclosure Controls and Procedures
  The term
“disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This
term refers to the controls and procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports
that it files under the Exchange Act is recorded, processed, summarized, and
reported within the required time periods.
  Our
acting principal executive officer and acting principal accounting officer
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as required by Rule 13a-15 of the
Exchange Act. Based on their evaluation of our disclosure controls and
procedures, our acting principal executive officer and acting principal
accounting officer concluded that our disclosure controls and procedures are
effective in ensuring that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms and in timely alerting the acting
principal executive officer and acting principal accounting officer to material
information required to be included in our periodic reports filed or furnished
with the SEC.
  Management’s
Report on Internal Control over Financial Reporting.
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934. Our internal control system was designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial reporting and the preparation of financial statements
for external purposes, in accordance with generally accepted accounting
principles.
  Our
management, including our president, acting principal executive officer and
acting principal accounting officer conducted an evaluation of the effectiveness
of our internal control over financial reporting using the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control — Integrated Framework. Based on its evaluation, our management
concluded that our internal control over financial reporting was effective as of
February 28, 2008.
  Changes
in Internal Control over Financial Reporting
  No change
in our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) occurred during the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
  
 PART
II - OTHER INFORMATION
 
 Other than disclosed herein, all other
sections in Part II are inapplicable to the Company.
 
 ITEM
1.                      LEGAL
PROCEEDINGS
 
 Other than
as disclosed herein, neither Mexoro nor its properties are the subject of any
pending legal proceedings and no such proceeding is known to be contemplated by
any governmental authority. We are not aware of any legal proceedings in which
any director, officer or affiliate of Mexoro, any owner of record or
beneficially of more than 5% of any class of our voting securities, or any
associate of any such director, officer, affiliate or security holder of Mexoro,
is a party adverse to Mexoro or any of its subsidiaries or has a material
interest adverse to Mexoro or any of its subsidiaries.
 
 In November 2007, the British Columbia
Securities Commission (“BCSC”) placed a cease trade order (“CTO”) on the Company
in the Province of British Columbia, Canada affecting residents of British
Columbia. This CTO was rescinded on February 20, 2008 as the Company filed the
required documents in British Columbia. On February 20, 2008, the BCSC issued a
second CTO requiring the Company to file a technical report in British Columbia
on its Mexican properties. The Company is cooperating with the BCSC to have the
CTO removed so that residents of British Columbia can trade in the shares of the
Company.
 
 In February 2007, Mexoro obtained a
temporary restraining order in a civil action against Mr. Argang Schariat. The
civil action for temporary restraining order was made before the Tribunal of
Vevey, Switzerland.  We believe that Mr. Schariat is refusing to abide
by the Swiss Court ruling and we are taking the necessary steps to enforce our
rights against Mr. Schariat.
 
 ITEM
6.                      EXHIBITS
 
 Exhibit
31.1 Certification of Acting Principal Executive Officer and Acting Principal
Financial Officer
 Exhibit
32.1 Certification of Acting Principal Executive Officer and Acting Principal
Financial Officer
  
  SIGNATURES
  In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  
 Mexoro
Mineral Ltd.
 
 /S/ Mario
Ayub
 Name:  Mario
Ayub
 Title:  Acting
Principal Executive Officer, Acting Principal Financial Officer, President and
Director
 Date:  July
21, 2008