**UNITED
          STATES**
 **SECURITIES
          AND EXCHANGE COMMISSION**
 **Washington,
          D.C. 20549**
 
 **Form
          10**-**QSB/A**
 
 
 X
          QUARTERLY
          REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
          1934
 **For
          the
          quarter ended May 31, 2006**
 
 _
          TRANSITION REPORT
          UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
          the transition
          period from ____ to _____
 
 
 **MEXORO
          MINERALS LTD.**
 **(Formerly
          Sunburst Acquisitions IV, Inc.**
 (Name
          of small
          business in its charter)


Colorado
                0-23561
                84-1431797(State
                    or
                    other jurisdiction of incorporation)
                (Commission
                    File Number)
                (IRS
                    Employer
                    Identification
                    Number)


609
                    Granville
                    Street, Suite 880
                  Vancouver,
                    BC
                V7Y
                    1G5(Address
                    of principal executive offices)
                (Zip
                    Code)


Registrant’s
          telephone number, including area code: (800) 661-7830
 
 Check
          whether the
          issuer (1) filed all reports required to be filed by Section 13 or 15(d)
          of the
          Securities Exchange Act during the past 12 months (or for such shorter
          period
          that the registrant was required to file such reports), and (2) has been
          subject
          to such filing requirements for the past 90 days. Yes X No
          ____


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


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





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





Applicable
        only to
        corporate issuers:


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





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




*-1-*





**EXPLANATORY
          NOTE**
 
 We
          are filing this Form 10-QSB/A for the period ended May 31, 2006, to reflect
          changes in our management’s discussion and analysis.
 
 Any
          items included
          in the original report on Form 10-QSB for the period ended May 31, 2006,
          that
          are not included herein, are not amended and remain in effect as of the
          date of
          the original filing thereof. Additionally, this Form 10-QSB/A does not
          purport
          to provide a general update or discussion of any other developments subsequent
          to the original filing.
 
 The
          filing of this
          Form 10-QSB/A shall not be deemed to be an admission that the original
          filing,
          when made, included any untrue statement of material fact or omitted to
          state a
          material fact necessary to make a statement contained therein not
          misleading.


**MEXORO
          MINERALS LTD.**
 **(Formerly
          Sunburst Acquisition IV, Inc.)**
 **(An
          Exploration Stage Company)**
 
 **Consolidated
          Financial Statements**
 **May
          31,
          2006**
 **(Unaudited)
          (U.S. Dollars)**








**INDEX**
                **Page****Consolidated
                  Financial Statements**Consolidated
                  Balance Sheets
                3Consolidated
                  Statements of Operations and Accumulated
                  Deficit
                4Consolidated
                  Statements of Cash Flows
                5Notes
                  to Consolidated Financial Statements
                6
                    -
                    19


*-2-*


**MEXORO
              MINERALS LTD.**
 **(Formerly
              Sunburst Acquisitions IV, Inc.)**
 **(An
              Exploration Stage Company)**
 **Consolidated
              Balance Sheets**
 **(U.S.
            Dollars)                                         Restated
            - Note 2**


**May
                      31,**
                  **2006**
                **(Unaudited)**
              **February
                      28,****2006****(Audited)****Assets****Current**Cash
                  and cash
                  equivalents
              
              
              $
              2,074,857
              
              
              $
              479,530Accounts
                  receivable
              
              
              
              62,726
              
              
              
              10,069Prepaid
                  expenses
              
              
              
              10,000
              
              
              
              48,2692,147,583
              
              
              
              537,868**Equipment
                  (note 4)**
              
              
              
              2,725
              
              
              
              880**Total
                  Assets**
              
              
              $
              2,150,308
              
              
              $
              538,748**Liabilities****Current**Accounts
                  payable and accrued liabilities
              
              
              $
              86,777
              
              
              $
              79,124Promissory
                  notes (note 6)
              
              
              
              -
              
              
              
              412,80086,777
              
              
              
              491,924**Convertible
                  Debentures (note 7)**
              
              
              
              2,917,500
              
              
              
              652,000**Total
                  Liabilities**
              
              
              
              3,004,277
              
              
              
              1,143,924**Stockholders’
                  Deficiency****Capital
                  Stock**Preferred
                  stockAuthorized:
                  20,000,000 shares without par value (note 8)Issued:
                  nil
              
              
              
              **-**
              
              
              
              **-**Common
                  stockAuthorized:
                  200,000,000 shares without par valueIssued:
                  15,201,102 (2006 - 12,799,902) (note 9)
              
              
              
              16,361,777
              
              
              
              15,573,977Additional
                  paid-in capital
              
              
              
              6,744,346
              
              
              
              3,991,596Stock
                  subscriptions
              
              
              
              -
              
              
              
              170,000Accumulated
                  deficit from prior operations
              
              
              
              (2,003,427
              )
              
              
              (2,003,427
              )Accumulated
                  deficit during the exploration stage
              
              
              
              (21,940,299
              )
              
              
              (18,338,373
              )Other
                  comprehensive income
              
              
              
              (16,366
              )
              
              
              1,051**Total
                  Stockholders’ Deficiency**
              
              
              
              (853,969
              )
              
              
              (605,176
              )**Total
                  Liabilities and Stockholders’ Deficiency**
              
              
              $
              2,150,308
              
              
              $
              538,748





Going
          concern (note
          3)
 Commitments
          (note
          5)
 Subsequent
          events
          (note 13)
 The
          Accompanying
          Notes are an Integral Part of These Financial Statements.


*-3-*
 Table
          of Contents




**MEXORO
              MINERALS LTD.**
 **(Formerly
              Sunburst Acquisitions IV, Inc.)**
 **(An
              Exploration Stage Company)**
 **Consolidated
              Statements of Operations and Accumulated Deficit**
 **(Unaudited)
              (U.S. Dollars)**
 **Restated
            -
            Note 2**


**Three
                  Months Ended****May
                    31,****2006**
              
              
              **May
                    31,****2005**
              
              
              **Period
                            from**
                        **Inception
                          of**
                      **Exploration
                        Stage**
                    **(March
                      1, 2004)**
                  **To****May
                    31****,**2006**Expenses**General
                  and
                  administrative
              $
              570,288
              
              $
              13,052
              
              $
              1,267,035Stock-based
                  compensation
              
              487,250
              
              
              -
              
              
              1,309,455Mineral
                  exploration
              
              252,261
              
              
              -
              
              
              252,261Acquisition
                  of resource properties
              
              -
              
              
              -
              
              
              15,306,422**Operating
                  Loss**
              
              (1,309,799
              )
              
              (13,052
              )
              
              (18,135,173
              )**Other
                  Income (Expenses)**Interest
                  expense
              
              (2,305,441
              )
              
              (1,290
              )
              
              (3,951,625
              )Interest
                  income
              
              6,055
              
              
              -
              
              
              6,055Gain
                  on
                  settlement of debt (notes 6 and 7)
              
              7,259
              
              
              -
              
              
              140,444**Net
                  Loss**
              
              (3,601,926
              )
              
              (14,342
              )
              
              (21,940,299
              )**Accumulated
                  Deficit, Beginning**
              
              (18,338,373
              )
              
              (13,912,488
              )
              
              -**Accumulated
                  Deficit, Ending**
              $
              (21,940,299
              )
              $
              (13,926,830
              )
              $
              (21,940,049
              )**Other
                  Comprehensive Income**Foreign
                  exchange gain (loss) on translation
              
              (32,612
              )
              
              5,975
              
              
              (25,682
              )**Total
                  Comprehensive Loss**
              $
              (3,634,538
              )
              $
              (8,367
              )
              $
              (21,965,981
              )**Total
                  Loss Per Share** - basic and diluted
              $
              (0.25
              )
              $
              (0.01
              )**Weighted
                  Average Number of Shares of****Common
                  Stock** - basic and diluted
              
              14,159,872
              
              
              1,737,902




The
        Accompanying
        Notes are an Integral Part of These Financial Statements.




*-4-*
 Table
          of Contents


**MEXORO
              MINERALS LTD.**
 **(Formerly
              Sunburst Acquisitions IV, Inc.)**
 **(An
              Exploration Stage Company)**
 **Consolidated
              Statements of Cash Flows**
 **(Unaudited)
            (U.S.
            Dollars)                                    Restated
            - Note
            2**


**Three
                  Months Ended****May
                    31,**
                **2006**
              
              
              **May
                    31,****2005**
              
              
              **Period
                              from**
                          **Inception
                            of**
                        **Exploration
                          Stage**
                    **(March
                      1, 2004)**
                  **to
                    May
                    31,****2006****Operating
                  Activities******Net
                  loss
              $
              (3,601,926
              )
              $
              (14,342
              )
              $
              (21,940,049
              )Adjustments
                  to reconcile net lossto
                  net cash
                  flowsWrite
                  off of
                  note receivable
              
              -
              
              
              -
              
              
              57,500Acquisition
                  of resource properties for stock
              
              -
              
              
              -
              
              
              13,065,000Amortization
              
              117
              
              
              -
              
              
              117Discount
                  on
                  convertible debenture
              
              -
              
              
              -
              
              
              175,000Non-cash
                  component of gain on settelement of debt
              
              -
              
              
              (175,000
              )
              
              (175,000
              )Effect
                  of
                  foreign currency translation on cash
              
              (17,417
              )
              
              96
              
              
              (25,295
              )Stock-based
                  compensation
              
              487,250
              
              
              -
              
              
              2,922,455Beneficial
                  conversion feature
              
              2,265,500
              
              
              -
              
              
              3,717,500Prepaid
                  expense
              
              38,269
              
              
              4,492
              
              
              (3,520
              )Accounts
                  receivable
              
              (52,657
              )
              
              -
              
              
              (54,520
              )Customer
                  deposits
              
              -
              
              
              -
              
              
              (44,809
              )Accounts
                  payable and accrued liabilities
              
              7,653
              
              
              418
              
              
              64,584**Cash
                  Used in Operating Activities**
              
              (873,211
              )
              
              (10,172
              )
              
              (2,241,287
              )**Investing
                  Activity**Purchase
                  of
                  property and equipment
              
              (1,962
              )
              
              -
              
              
              (2,842
              )**Cash
                  Used in Investing Activity**
              
              (1,962
              )
              
              -
              
              
              (2,842
              )**Financing
                  Activities**Proceeds
                  from
                  notes payable
              
              -
              
              
              -
              
              
              562,800Proceeds
                  from
                  convertible debentures
              
              2,265,500
              
              
              -
              
              
              3,717,500Proceeds
                  from
                  exercise of options
              
              -
              
              
              -
              
              
              78,000Repayment
                  of
                  notes payable
              
              -
              
              
              (15,000
              )
              
              (178,500
              )Repayment
                  of
                  convertible debentures
              
              -
              
              
              -
              
              
              (530,000
              )Stock
                  subscriptions
              
              (170,000
              )
              
              -
              
              
              -Issuance
                  of
                  common stock
              
              375,000
              
              
              -
              
              
              647,109**Cash
                  Provided by (Used in) Financing****Activities**
              
              2,470,500
              
              
              (15,000
              )
              
              4,296,909**Inflow
                  of Cash and Cash Equivalents**
              
              1,595,327
              
              
              (25,172
              )
              
              2,052,780**Cash
                  and Cash Equivalents, Beginning**
              
              479,530
              
              
              35,122
              
              
              22,077**Cash
                  and Cash Equivalents, Ending**
              $
              2,074,857
              
              $
              9,950
              
              $
              2,074,857**Supplemental
                  Cash Flow Information**Interest
                  paid
              $
              39,941
              
              $
              106,684
              
              $
              146,625Common
                  stock
                  issued on conversion of debt
              $
              -
              
              $
              300,000
              
              $
              300,000Common
                  stock
                  issued on settlement of notes payable
              $
              412,800
              
              $
              -
              
              $
              412,800Shares
                  issued
                  for services
              $
              -
              
              $
              90,000
              
              $
              90,000




The
        Accompanying
        Notes are an Integral Part of These Financial Statements.




*-5-*
 Table
          of Contents
  **MEXORO
          MINERALS LTD.**
 **(Formerly
          Sunburst Acquisitions IV, Inc.)**
 **(An
          Exploration Stage Company)**
 **Notes
          to
          Consolidated Financial Statements**
 **Three
          Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)**




**1.    BASIS
            OF PRESENTATION**


Mexoro
          Minerals
          Ltd. (formerly Sunburst Acquisitions IV, Inc.) ("Mexoro" or the “Company”) was
          incorporated in the state of Colorado on August 27, 1997 and on February
          15,
          2006 its name was changed to Mexoro Minerals Ltd.  The Company was formed
          to seek out and acquire business opportunities.  Between 1997 and 2003, the
          Company engaged in two business acquisitions and one business opportunity,
          none
          of which generated a significant profit or created a sustainable business.
          All
          were sold or discontinued. Currently the main focus of the Company’s operations
          is in Mexico.
 
 The
          Company had
          previously been pursuing various business opportunities and, effective
          March 1, 2004, the Company changed its principal operations to mineral
          exploration. Accordingly, as of March 1, 2004 the Company is considered an
          exploration stage company.
 
 On
          May 25, 2004,
          the Company completed a share exchange transaction with Sierra Minerals
          and
          Mining, Inc. (“Sierra Minerals”), a Nevada corporation, which caused Sierra
          Minerals to become a wholly-owned subsidiary.  Sierra Minerals held certain
          rights to properties in Mexico that the Company now owns or has an option
          to
          acquire.  Through Sierra Minerals, the Company entered into an arm’s length
          joint venture agreement with Minera Rio Tinto, S.A. De C.V. (“MRT”), a company
          duly incorporated pursuant to the laws of the United Mexican States, which
          is
          controlled by an officer and director of the Company. In August 2005, the
          Company cancelled the joint venture agreement in order to pursue directly
          the
          mineral exploration opportunities through a wholly-owned Mexican subsidiary,
          Sunburst de Mexico, S.A. de C.V. (“Sunburst de Mexico”).  On August 25,
          2005, Sunburst de Mexico, Mexoro and MRT entered into agreements providing
          Sunburst de Mexico the right to explore and exploit certain properties
          in
          Mexico. In December 2005, the Company and Sunburst de Mexico entered into
          a new
          agreement with MRT (the “New Agreement”) (note 5). On January 20, 2006, Sierra
          Minerals was dissolved.


**2.    RESTATEMENTS**


(a)    Management
              has determined that, in the year ending February 28, 2005, previous
              management
              used a nominal value to record the issuance of 860,000 shares of common
              stock
              (43,000,000 pre−split) pursuant to a share exchange agreement, and 120,000
              options (6,000,000 pre−split) issued as finders fees with respect to the share
              exchange agreement. Current management believes that a fair value should
              have
              been used and has restated each of these amounts. Management has also
              determined
              that in the year ending February 28, 2005, the Company should have
              recorded a
              beneficial conversion feature on convertible debentures that included
              conversion
              to common shares, warrants and additional investment rights. Management
              has also
              reclassified stock−based compensation expense from general and administrative to
              stock−based compensation.
  In
            the year ending February 28, 2006, management has corrected a calculation
            error
            in the recording of a beneficial conversion feature on warrants issued
            with the
            convertible debentures. Management has also reclassified accrued interest
            from
            promissory notes to accounts payable and accrued interest.
 
 Management
            has
            accordingly restated the Company’s financial statements as at February 28, 2006
            and 2005 and for the years ended February 28, 2006 and 2005.


*-6-*
 Table
          of Contents
  **MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 **Three
            Months Ended May 31, 2006**
 (Unaudited)


**RESTATEMENTS
          (continued)**
 
 The
          effect of these
          adjustments on the Company’s consolidated financial condition is as
          follows:


28-Feb-06Restated
              
              Originally
                ReportedAccounts
                  payable andaccrued
                  liabilities
              
              79,124
              
              71,865Promissory
                  notes
              
              412,800
              
              420,059Common
                  stock
              
              15,583,977
              
              5,048,977Additional
                  paid-in capital
              
              16,082,346
              
              13,990,646Accumulated
                  deficit
              
              (30,439,123
              )
              (17,812,423
              )





The
          effect of these
          adjustments on the Company’s consolidated results of operations is as
          follows:


Period
                  ended
              28-Feb-06Restated
              
              Originally
                ReportedInterest
                  expense
              
              1,053,561
              
              721,561Net
                  loss for
                  the period
              
              16,526,635
              
              16,194,635Loss
                  per
                  share
              
              (7.56
              )
              (7.41
              )




(b) 
After
            further review, management has determined that, in the year ending February
            28,
            2006, compensation expense recorded in the amount of $8,680,000 relating
            to the
            issuance of 7 million common shares was incorrect. Accordingly, these
            shares
            were issued as consideration for receiving cash proceeds of
            $70,000.


The
          effect of these
          adjustments on the Company’s consolidated financial condition is as
          follows:


31-May-06
              28-Feb-06Restated
              
              Originally
                Reported
              
              
              Restated
              
              
              Restated
                in
                    2(a)Additional
                  paid-in capital
              
              9,667,846
              
              18,347,846
              
              
              7,402,346
              
              
              16,082,346Accumulated
                  deficit
              
              (24,873,799
              )
              (33,553,799
              )
              
              (21,759,123
              )
              
              (30,439,123
              )




*-7-*
 Table
          of Contents
  **MEXORO
              MINERALS LTD.**
 **(Formerly
              Sunburst Acquisitions IV, Inc.)**
 **(An
              Exploration Stage Company)**
 **Notes
              to
              Consolidated Financial Statements**
 **Three
              Months Ended May 31, 2006**
 (Unaudited)


The
          effect of these
          adjustments on the Company’s consolidated results of operations is as
          follows:


Period
                  ended
              
              28-Feb-06Restated
              
              
              Restated
                in
                    2(a)General
                  and
                  administrative
              
              
              469,337
              
              
              9,149,337Net
                  loss for
                  the period
              
              
              7,846,635
              
              
              16,526,635Loss
                  per
                  share
              
              
              (3.59
              )
              
              (7.56
              )







(c) 
After
            further review, management has determined that, in the year ending February
            28,
            2006, shares issued for services and recorded as compensation expense
            was
            overstated by $10,000. Accordingly, this amount originally recorded as
            a
            compensation expense totalling $100,000 has been corrected and is now
            recorded
            as $90,000.




The
          effect of this
          adjustment on the Company’s consolidated financial condition is as
          follows:


31-May-06
              28-Feb-06Restated
              
              
              Restated
                  in
                  2(b)
              
              
              Restated
              
              
              Restated
                  in
                  2(b)Common
                  stock
              $
              16,361,777
              
              $
              16,371,777
              
              $
              15,573,977
              
              $
              15,583,977Accumulated
                  deficit
              
              (24,863,799
              )
              
              (24,873,799
              )
              
              (21,749,123
              )
              
              (21,759,123
              )








The
        effect of this
        adjustment on the Company’s consolidated results of operations is as
        follows:








Period
                  ended
              
              28-Feb-06Restated
              
              
              Restated
                  in
                  2(b)General
                  and
                  administrative
              
              
              459,337
              
              
              469,337Net
                  loss for
                  the period
              
              
              (7,836,635
              )
              
              (7,846,635
              )Loss
                  per
                  share
              
              $
              (3.59
              )
              $
              (3.59
              )








In
        addition, in the
        year ending February 28, 2006, management revised the disclosure in the
        consolidated statement of cash flows respecting the non-cash component of
        the
        gain on settlement of debt.




*-8-*
 Table
          of Contents
  **MEXORO
                MINERALS LTD.**
 **(Formerly
                Sunburst Acquisitions IV, Inc.)**
 **(An
                Exploration Stage Company)**
 **Notes
                to
                Consolidated Financial Statements**
 **Three
                Months Ended May 31, 2006**
 (Unaudited)


The
        effect of this
        adjustment on the Company’s consolidated statement of cash flows is as
        follows:





Period
                  ended
              
              28-Feb-06Restated
              
              
              Originally
                  Reported**Operating
                  activities**Non-cash
                  component of gain on settlement of debt
              
              $
              (175,000
              )
              
              -**Financing
                  activities**Repayment
                  of
                  convertible debenture
              
              $
              530,000
              
              $
              705,000







(d) 
After
          further review, management has determined that, in the year ended February
          28,
          2006, shares issued for services and recorded as compensation expense was
          overstated by $3,410,750. A compensation expense totalling $3,898,000 should
          be
          amortized over the term of the contract. Accordingly, this amount has been
          corrected and is now recorded as $487,250 per
          quarter.


The
        effect of this
        adjustment on the Company’s consolidated financial condition is as
        follows:





31-May-06
              28-Feb-06Restated
              
              
              Restated
                  in
                  2(c)
              
              
              Restated
              
              
              Restated
                  in
                  2(c)Additional
                  paid-in capital
              $
              6,744,346
              
              $
              9,667,846
              
              $
              3,991,596
              
              $
              7,402,346Accumulated
                  deficit
              
              (21,940,299
              )
              
              (24,863,799
              )
              
              (18,338,373
              )
              
              (21,749,123
              )





The
        effect of this
        adjustment on the Company’s consolidated results of operations is as
        follows:





Period
                  ended
              31-May-06
              28-Feb-06Restated
              
              
              Restated
                  in
                  2(c)
              
              
              Restated
              
              
              Restated
                  in
                  2(c)Stock-based
                  compensation
              $
              487,250
              
              
              -
              
              $
              735,250
              
              $
              4,146,000Net
                  loss for
                  the period
              $
              3,601,926
              
              $
              3,114,676
              
              
              (4,425,885
              )
              
              (7,836,635
              )Loss
                  per
                  share
              
              (0.25
              )
              
              (0.22
              )
              
              (2.03
              )
              
              (3.59
              )





**3.**
              **SIGNIFICANT
                  ACCOUNTING POLICIES** 
 
 (a)
              Principles
                  of
                  consolidation 
 The
          accompanying
          financial statements include the accounts and activities of Mexoro Minerals
          Ltd.
          and its wholly-owned subsidiary, Sunburst de Mexico. All intercompany
          transactions have been eliminated in consolidation.
 
 (b)
              Financial
                  instruments


*-9-*
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**MEXORO
              MINERALS LTD.**
 **(Formerly
              Sunburst Acquisitions IV, Inc.)**
 **(An
              Exploration Stage Company)**
 **Notes
              to
              Consolidated Financial Statements**
 **Three
              Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)** (i)
                      Fair
                          value 
 The
                  carrying values
                  of cash and cash equivalents, accounts receivable, and accounts
                  payable and
                  accrued liabilities approximate their fair values because of the
                  short-term
                  maturity of these financial instruments. The carrying value of
                  convertible
                  debentures approximates their fair value because these instruments
                  earn interest
                  at the market rate.
 
 (ii)
                      Interest
                          rate
                          risk 
 The
                  Company is not
                  exposed to significant interest rate risk due to the short-term
                  maturity of its
                  monetary current assets and current liabilities. The convertible
                  debentures are
                  not exposed to interest cash-flow risk because the interest rate
                  is fixed to
                  maturity.


(iii)
                  Credit
                      risk
 
 The
            Company's
            financial assets that are exposed to credit risk consist primarily of
            cash that
            is placed with major financial institutions.
 
 (iv)
                  Translation
                      risk
 
 The
            Company
            translates the results of non-US operations into US currency using rates
            approximating the average exchange rate for the year. The exchange rate
            may vary
            from time to time. This risk is considered nominal, as the Company does
            not
            incur any significant transactions in-non-US currency.
 
 (c)
                  Equipment
 
 Equipment
            is
            recorded at cost. Depreciation is provided on a declining-balance basis
            at 30%
            on computer equipment and 20% on office furniture.
 
 (d)
                  Cash
                      and cash
                      equivalents
 
 The
            Company
            considers all highly liquid debt instruments purchased with an original
            maturity
            of three months or less to be cash equivalents.
 
 (e)
                  Basic
                      and
                      diluted income (loss) per share
 
 The
            Company
            computes income (loss) per share in accordance with SFAS No. 128, "*Earnings
            per Share*", which requires presentation of both basic and diluted earnings
            per share (EPS) on the face of the statement of operations and deficit.
            Basic
            EPS is computed by dividing income (loss) available to common shareholders
            (numerator) by the weighted average number of shares outstanding (denominator)
            during the period. Diluted EPS gives effect to all dilutive potential
            common
            shares outstanding during the period using the treasury stock method
            and
            convertible preferred stock using the if-converted method. In computing
            diluted
            EPS, the average stock price for the period is used in determining the
            number of
            shares assumed to be purchased from the exercise of stock options or
            warrants.
            Diluted EPS excludes all dilutive potential shares if their effect is
            anti-dilutive. All previously stated share


*-10-*
 Table
          of Contents


**MEXORO
              MINERALS LTD.**
 **(Formerly
              Sunburst Acquisitions IV, Inc.)**
 **(An
              Exploration Stage Company)**
 **Notes
              to
              Consolidated Financial Statements**
 **Three
              Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)** 
 **3****.** **SIGNIFICANT
                    ACCOUNTING POLICIES (Continued)**
 
 and
                per share
                balances have been restated to give retroactive effect to the 1:50
                share
                consolidation that occurred on February 15,
                2006.
 (f)
                  Impairment
                      or
                      disposal of long-lived assets  In
              August 2001, the
              FASB issued Statement No. 144, *“Accounting for the Impairment or Disposal of
              Long-Lived Assets”* (“FAS 144”). FAS 144 clarifies the accounting for the
              impairment of long-lived assets and for long-lived assets to be disposed
              of,
              including the disposal of business segments and major lines of business.
              The
              Company has implemented FAS 144. Long-lived assets are reviewed when
              facts and
              circumstances indicate that the carrying value of the asset may not
              be
              recoverable. When necessary, impaired assets are written down to estimate
              fair
              value based on the best information available. Estimated fair value
              is generally
              based on either appraised value or measured by discounting estimated
              future cash
              flows. Considerable management judgment is necessary to estimate discounted
              future cash flows. Accordingly, actual results could vary significantly
              from
              such estimates.
 (g)
                  Use
                      of
                      estimates
 
 The
            preparation of
            financial statements in conformity with US generally accepted accounting
            principles requires management to make estimates and assumptions that
            affect the
            reported amounts of assets and liabilities and disclosures of contingent
            assets
            and liabilities at the date of the financial statements and the reported
            amounts
            of revenues and expenses during the reporting period. Actual results
            could
            differ from those estimates and would impact future results of operations
            and
            cash flows.
 
 (h)
                  Consideration
                      of other comprehensive income items
 
 SFAS
            No. 130 -
*“Reporting Comprehensive Income”*, requires companies to present
            comprehensive income (consisting primarily of net loss plus other direct
            equity
            changes and credits) and its components as part of the basic financial
            statements.
 
 (i)
                  Stock-based
                      compensation
 
 SFAS
            No. 123(R) -
            "*Accounting for Stock Based Compensation*", requires companies to
            estimate the fair value of share based payment awards on the date of
            grant using
            an option-pricing model. The value of the portion of the award that is
            ultimately expected to vest is recognized as expense over the requisite
            service
            period in the Company's financial statements. Stock based compensation
            expense
            recognized during the period is based on the value of the portion of
            the share
            based payment awards that is ultimately expected to vest during the period.
            The
            Company estimates the fair value of stock options using the Black Scholes
            valuation model, consistent with the provisions of SFAS No. 123(R). The
            Black
            Scholes valuation model requires the input of highly subjective assumptions,
            including the options expected life and the price volatility of the underlying
            stock.


*-11-*
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          of Contents


**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 **Three
            Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)** 
 **3.** **SIGNIFICANT
                ACCOUNTING POLICIES (Continued)**
   (j)
                    Income
                        taxes
 
 The
              Company
              accounts for income taxes in accordance with SFAS No. 109 - *“Accounting for
              Income Taxes”*. Deferred tax assets and liabilities are recognized with
              respect to the tax consequences attributable to differences between
              the
              financial statement carrying values and tax basis of existing assets
              and
              liabilities. Deferred tax assets and liabilities are measured using
              enacted tax
              rates expected to apply to taxable income in the years in which these
              temporary
              differences are expected to be recovered or settled. Further, the effect
              on
              deferred tax assets and liabilities of changes in tax rates is recognized
              in
              income in the period that includes the enactment.
 
 (k)
                    Foreign
                        currency translation
 
 The
              Company’s
              functional and reporting currency is the United States dollar. Monetary
              assets
              and liabilities denominated in foreign currencies are translated to
              United
              States dollars in accordance with SFAS No. 52,*“Foreign Currency
              Translation”*, using the exchange rate prevailing at the balance sheet date.
              Gains and losses arising on translation or settlement of foreign currency
              denominated transactions or balances are included in the determination
              of
              income. Foreign currency transactions are primarily undertaken in Canadian
              dollars. The Company has not, to the date of these financials statements,
              entered into derivative instruments to offset the impact of foreign
              currency
              fluctuations.
 
 (l)
                    Recent
                        accounting pronouncements
 
 (i)
                    In
                        December
                        2004, FASB issued a revision of Statement No. 123(R), *“Accounting for
                        Stock-Based Compensation”*. This statement supersedes APB 25 and its
                        related implementation guidance. The revised pronouncement
                        requires that
                        all stock options and warrants be accounted for using the
                        fair value
                        method. This pronouncement does not impact the Company, as
                        the Company has
                        no employees and currently accounts for all options and warrants
                        using the
                        fair value method.
 
 (ii)
                    In
                        December
                        2004, the FASB issued SFAS Statement No. 153, “Exchanges of Non-Monetary
                        Assets.” The statement is an amendment of APB Opinion No. 29 to eliminate
                        the exception for non-monetary exchanges of similar productive
                        assets and
                        replaces it with a general exception for exchanges of non-monetary
                        assets
                        that do not have commercial substance. The Company believes
                        that the
                        adoption of this standard will have no material impact on
                        its financial
                        statements. The Company accounts for income taxes in accordance
                        with SFAS
                        No. 109 - *“Accounting for Income Taxes”*. Deferred tax assets and
                        liabilities are recognized with respect to the tax consequences
                        attributable to differences between the financial statement
                        carrying
                        values and tax basis of existing assets and liabilities.


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


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          of Contents




**MEXORO
              MINERALS LTD.**
 **(Formerly
              Sunburst Acquisitions IV, Inc.)**
 **(An
              Exploration Stage Company)**
 **Notes
              to
              Consolidated Financial Statements**
 **Three
              Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)** 
 **3****.** **SIGNIFICANT
                    ACCOUNTING POLICIES (Continued)**
 
 (iv)
                      47
                          is
                          effective no later than the end of fiscal years ending
                          after
                          December 15, 2005. This pronouncement does not impact the Company
                          for
                          the current year.
  (v)
                      In
                          May 2005,
                          FASB issued SFAS No. 154 “*Accounting Changes and Error Corrections - a
                          replacement of APB Opinion No. 20 and FASB Statement No.
                          3”*. This
                          Statement replaces APB Opinion No. 20, “*Accounting Changes”*, and
                          FASB Statement No. 3, “*Reporting Accounting Changes in Interim
                          Financial Statements”*, and changes the requirements for the
                          accounting for and reporting of a change in accounting
                          principles. This
                          statement applies to all voluntary changes in accounting
                          principles. It
                          also applies to changes required by an accounting pronouncement
                          in the
                          unusual instance that the pronouncement does not include
                          specific
                          transition provisions. When a pronouncement includes specific
                          transition
                          provisions, those provisions should be followed. This statement
                          is
                          effective for accounting changes and corrections of errors
                          made in fiscal
                          years beginning after December 15,
                          2005
 
 (vi)
                      In
                          February
                          2006, the FASB issued SFAS No. 155, “*Accounting for Certain Hybrid
                          Financial Instruments, an amendment of FASB Statements
                          No. 133 and
                          140”.* This statement permits fair value re-measurement
                          for any hybrid
                          financial instrument that contains an embedded derivative
                          that otherwise
                          would require bifurcation. It establishes a requirement
                          to evaluate
                          interests in securitized financial assets to identify interests
                          that are
                          freestanding derivatives or that are hybrid financial instruments
                          that
                          contain an embedded derivative requiring bifurcation. In
                          addition, SFAS
                          155 clarifies which interest-only strips and principal-only
                          strips are not
                          subject to the requirements of Statement 133. It also clarifies
                          that
                          concentrations of credit risk in the form of subordination
                          are not
                          embedded derivatives. SFAS 155 amends Statement 140 to
                          eliminate the
                          prohibition on a qualifying special purpose entity from
                          holding a
                          derivative financial instrument that pertains to a beneficial
                          interest
                          other than another derivative financial instrument. This
                          statement is
                          effective for all financial instruments acquired or issued
                          after the
                          beginning of an entity’s first fiscal year that begins after September 15,
                          2006. The adoption of this standard is not expected to
                          have a material
                          effect on the Company’s results of operations or financial
                          position.


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



The
          accompanying
          financial statements have been prepared on a going-concern basis. The Company
          has a history of operating losses and will need to raise additional capital
          to
          fund its planned operations. As at May 31, 2006, the Company had working
          capital
          of $2,060,806 (February 28, 2006 - $45,944) and a cumulative loss of $35,557,226
          (February 28, 2006 - $32,442,550). 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
          (notes 7 and 9), which have generated a portion of the initial cash
          requirements of its planned Mexican mining ventures (note 5).


*-13-*
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          of Contents
  **MEXORO
                MINERALS LTD.**
 **(Formerly
                Sunburst Acquisitions IV, Inc.)**
 **(An
                Exploration Stage Company)**
 **Notes
                to
                Consolidated Financial Statements**
 **Three
                Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)** 
  **5.**
                        **EQUIPMENT**


**May
                  31, 2006**
              
              **February
                  28, 2006**Cost
              
              
              Accumulated
                Depreciation
              
              
              Net
              
              
              NetOffice
                  equipment
              $
              2,842
              
              $
              (117
              )
              $
              2,725
              
              $
              880





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




On
          May 3, 2004, the
          Company entered into a share exchange agreement with the shareholders of
          Sierra
          Minerals. Pursuant to the terms of the share exchange agreement, the Company
          issued 860,000 shares of its common stock (43,000,000 pre-split) in exchange
          for
          all of the outstanding shares of Sierra Minerals. As a result, Sierra Minerals
          became a wholly-owned subsidiary of the Company.  The common stock issued
          was valued at $12.75 per share ($0.255 pre-split) or $10,965,000; which
          represents the fair value based on the date of the share exchange agreement
          (May
          3, 2004).  Finders’ fees of 120,000 options (6,000,000 pre-split) to
          purchase the same number of shares of the Company’s common stock at $0.50 per
          share (0.01 pre-split) were issued to non-related parties in connection
          with
          this share exchange. The fair value of these options issued as finders’ fees was
          $1,523,000; this amount was determined using the Black-Scholes formula
          with a
          5-year expected life, a volatility factor of 191%, a risk-free rate of
          5% and no
          assumed dividend rate. Due to the uncertainty of the future revenue to
          be
          generated from this property, the cost of the acquisition of $10,965.000,
          compensation expense of $1,523,000, and advances totalling $507,500 were
          charged
          to operations in the year ended February 28, 2005.
 
 Sierra
          Minerals was
          a party to a joint venture agreement, dated April 26, 2004 and amended
          on June
          1, 2004, by and between Sierra Minerals and MRT, a Mexican company. MRT
          had
          interests in exploration properties.
 
 On
          August 25, 2005,
          the joint venture agreement was cancelled and the Company entered into
          a new
          arrangement with MRT.  Instead of a joint venture, the Company incorporated
          a Mexican wholly-owned subsidiary, Sunburst de Mexico. This restructuring
          allowed the Company to take title to the properties directly in the name
          of
          Sunburst de Mexico.  The Company entered into agreements with MRT, which
          provided Sunburst de Mexico options on the concessions of the Cieneguita
          and
          Guazapares properties and the right of first refusal on two Encino Gordo
          properties (collectively, the “Property Agreements”). The parties also entered
          into an operating agreement, which gave MRT the sole and exclusive right
          and
          authority to manage the Cieneguita Property.
 
 On
          December 8,
          2005, the Company and Sunburst de Mexico entered into the New Agreement
          with MRT
          to exercise their option under the August 18, 2005 sale and purchase of
          mining
          concessions agreement to obtain two mining concessions in the Encino Gordo
          region.
 
 The
          New Agreement
          also provided the Company the option to obtain three additional concessions
          in
          the Encino Gordo region.  These properties are located in the state of
          Chihuahua, Mexico.
 
 The
          following are
          additional material terms of the New Agreement:
 
 (a)  The
          operator’s agreement with MRT was cancelled;
 
 (b)  The
          Company granted MRT the option to buy all of the outstanding shares of
          Sunburst
          de Mexico for $100 if the Company failed to transfer $1,500,000 to Sunburst
          de
          Mexico by April




*-14-*
 Table
          of Contents


**MEXORO
          MINERALS LTD.**
 **(Formerly
          Sunburst Acquisitions IV, Inc.)**
 **(An
          Exploration Stage Company)**
 **Notes
          to
          Consolidated Financial Statements**
 **Three
          Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)** 
 **6.** **MINERAL
            PROPERTIES (Continued)**
 
 30,
            2006. However,
            in April 2006, the parties amended the New Agreement to delete both the
            required
            transfer of $1,500,000 to Sunburst de Mexico and MRT’s option to purchase shares
            of Sunburst de Mexico;
 
 (c)
                  The
                      Property
                      Agreements were modified to change the net smelter rate to
                      a maximum of
                      2.5% for all properties covered by the agreements;
 
 (d)
                  The
                      Company
                      agreed to issue 2,000,000 shares of the Company’s common stock to MRT
                      within four months of the date of the signing of the New Agreement.
                       These shares were issued to MRT and its assignee at the market
                      value
                      of $1.05 per share on February 23, 2006. This issuance fulfilled the
                      Company’s payment obligations under the previous Property Agreements;
                      and
 
 (e)
                  The
                      Company
                      agreed to issue 1,000,000 additional shares of the Company’s common stock
                      to MRT if and when the Cieneguita Property is put into production
                      and
                      reaches 85% of production capacity over a 90-day period, as
                      defined in the
                      New Agreement.
 
 **7.**
                  **PROMISSORY
                      NOTES**
 
 As
            at May 31, 2006
            the Company had $nil (February 28, 2006 - $412,800) promissory notes
            outstanding
            and accrued interest of $nil (February 28, 2006 - $7,259) outstanding
            on the
            promissory notes.
 
 On
            March 4, 2006,
            the Company agreed to issue 1,651,200 common shares at a price of $0.25
            per
            share to settle $412,800 in promissory notes payable. As a condition,
            the
            promissory note holders would waive all accrued interest payable on the
            notes.
            On April 6, 2006, these shares were issued (note 9) and the Company recorded
            a
            $7,259 gain on settlement of debt.
 
 **8.**
                  **CONVERTIBLE
                      DEBENTURES**
 
 On
            August 25, 2004,
            the Company entered into a securities purchase agreement (the “Agreement”), with
            Bristol Investment Fund, Ltd., Alpha Capital AG and Stonestreet LP (the
            “Purchasers”). Pursuant to the Agreement, the Purchasers agreed to purchase up
            to $1,350,000 in face amount of secured convertible debentures (the
“Debentures”) from the Company.  The Debentures did not bear interest but
            were to be issued at a 26% discount to the face amount. Accordingly,
            the cash
            purchase price for the full $1,350,000 face amount of the Debentures
            was
            $1,000,000.   The Debentures were due and payable in full one year
            from the date of issuance.
 
 The
            Purchasers also
            had the right to convert the full-face amount of the Debentures to common
            stock
            of the Company at a price of $5.00 per share ($0.10 pre-split).  Under the
            Agreement, the Purchasers were also to receive warrants and additional
            investment rights to purchase shares of the Company’s common stock. The warrants
            were exercisable at a price of $6.00 per share ($0.12 pre-split) for
            a period of
            five years and additional investment rights were exercisable at a price
            of $5.00
            per share ($0.10 pre-split).
 
 The
            Purchasers
            purchased a total of $675,000 in face amount for cash proceeds of $500,000
            and
            the $175,000 discount was charged as interest over the term of the debenture;
            $87,500 in the year ending February 28, 2005 and the $87,500 in the year
            ending
            February 28, 2006. The Company paid $20,000 in legal fees and $50,000
            administration fees.
 
 A
            beneficial
            conversion feature expense of $500,000 resulting from the anticipated
            conversion
            of the debentures, and the exercise of the associated warrants and additional
            investment rights of the above debentures was recorded as interest expense
            for
            the year ending February 28, 2005.


*-15-*
 Table
          of Contents


**MEXORO
            MINERALS LTD.**
 **(Formerly
            Sunburst Acquisitions IV, Inc.)**
 **(An
            Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 **Three
            Months Ended May 31, 2006**
 **(Unaudited)(U.S. Dollars)** 
 **8. CONVERTIBLE
              DEBENTURES (Continued)**
 
 On
              August 10, 2005,
              the Company and the Purchasers agreed to retire the Debentures including
              all
              associated principal, terms, warrants and rights for the amount of
              $500,000 plus
              8% interest. On September 21, 2005, the Company repaid in full $500,000
              plus
              interest charges of $41,815 to the Purchasers. As a result of this
              payment, the
              Debentures were terminated and the associated warrants and additional
              investment
              rights were cancelled. A gain of $133,185 was recorded for settlement
              of this
              debt.
 
 Another
              convertible
              debenture in the amount of $30,000 was issued on January 15, 2004.
              The
              conversion of principal and accrued interest (8% per year) was at the
              rate of
              $1.00 ($0.02 pre-split) per share of common stock. On December 21,
              2005, the
              Company repaid the $30,000 convertible debenture plus accrued interest
              of
              $4,645.
 
 The
              Company issued
              $300,000 in convertible debentures in December 2005 to three lenders
              with a
              maturity date of December 8, 2006, accrued interest at 7% per year,
              and
              convertible at the option of the holder into shares of common stock
              at $0.15 per
              share. On January 6, 2006, these debentures were converted and the
              Company
              issued 2,000,000 common shares (100,000,000 pre-split). A beneficial
              conversion
              feature of $300,000 was recorded in interest expense as to the anticipated
              conversion of these debentures, with a corresponding increase in additional
              paid
              in capital.
 
 In
              January 2006,
              the Company issued convertible debentures, with principal and accrued
              interest
              at 7% per year, convertible into units at the option of the holder.
 Each
              unit consists of a warrant to purchase 25,000 common shares at $1.00
              per share
              and $25,000 of debt, which may be converted to common shares at $0.50
              per share
              and is exercisable until April 30, 2008.  As at February 28, 2006, the
              Company had issued convertible debentures in the amount of $652,000.
 
 
 A
              beneficial
              conversion feature of $489,000 was recorded in interest expense as
              to the
              anticipated conversion of these debentures. Also included in interest
              expense
              was $163,000 representing the relative fair value of the warrants (immediately
              exercisable) in relation to the convertible debt.
 
 In
              the quarter
              ended May 31, 2006, the Company issued an additional $2,265,500 of
              convertible
              debentures, with principal and accrued interest at 7% per year, convertible
              into
              units at the option of the holder. Each unit consists of a warrant to
              purchase 25,000 common shares at $1.00 per share and $25,000 of debt,
              which may
              be converted to common shares at $0.50 per share and is exercisable
              until April
              30, 2008. A beneficial conversion feature of $1,359,300 was recorded
              in interest
              expense as to the anticipated conversion of these debentures. Also
              included in
              interest expense was $906,200 representing the relative fair value
              of the
              warrants (immediately exercisable) in relation to the convertible debt.
              As at
              May 31, 2006 there were $2,917,500 convertible debentures outstanding
              (note 13).
 **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.


*-16-*
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                      of Contents
  ****************MEXORO
                      MINERALS LTD.****************
 ************(Formerly
                      Sunburst Acquisitions IV,
                      Inc.)************
 ****(An
                      Exploration Stage Company)****
 ****Notes
                      to Consolidated Financial
                      Statements****
 **Three
                    Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)**
 
 **10.**
                          **COMMON
                              STOCK**
 
 **Number**
                            **of
                              Shares**
                          **Amount**Balance,
                              February 28, 2006
                          12,799,902
                          $15,573,977Issued
                              pursuant to private placement
                          750,000
                          375,000Issued
                              pursuant to settlement of promissory notes
                          1,651,200
                          412,800Balance,
                              May
                              31, 2006
                          15,201,102
                          $16,361,777
  On
                    April 3, 2006
                    and May 31, 2006 the Company issued 550,000 and 200,000 common
                    shares
                    respectively pursuant to a private placement unit offering. Units
                    consisted of
                    one share of common stock and one-half of one warrant. Each full
                    warrant
                    entitles the investor to purchase an additional share of the
                    Company’s common
                    stock at a price of $1.00 per share and is exercisable until
                    April 30,
                    2008.
 
 On
                    March 4, 2006,
                    the Company agreed to issue 1,651,200 common shares at a price
                    of $0.25 per
                    share to settle $412,800 in promissory notes payable.(note 6),
                    and on April 6,
                    2006, these shares were issued.
  **11.**
                            **STOCK
                                COMPENSATION PROGRAM** 
 On
                        December 9,
                        2005, the Company’s board of directors approved a stock compensation program,
                        which was subsequently ratified at an extraordinary meeting
                        of shareholders held
                        on February 13, 2006. In order to maintain flexibility in
                        the award of stock
                        benefits, the program constitutes a single “omnibus” plan, but is composed of
                        three parts. The first part is the qualified incentive stock
                        option plan (the
“ISO Plan”), which provides grants of qualified incentive stock options
                        (“ISOs”).  The second part is the non-qualified stock option plan (“NQSO
                        Plan”), which provides grants of nonqualified stock options (“NQSOs”).  The
                        third part is the restricted shares plan (“Restricted Shares Plan”), which
                        provides grants of restricted shares of the Company’s common stock (“Restricted
                        Shares”). The maximum number of common shares that may be purchased
                        under the
                        plan is 6,000,000. Options granted under the plan include
                        incentive and
                        non-qualified stock options as well as actual shares of common
                        stock, with
                        vesting determined on the grant date, not to exceed 10 years,
                        and are
                        exercisable over a 10-year maximum period at a price to approximate
                        the fair
                        market value of the common stock at the date of
                        grant.
 On
                    February 27,
                    2006, the Company granted 800,000 ISOs under the ISO Plan to
                    directors, officers
                    and consultants at a price of $0.50 per common stock for a period
                    of ten years.
                    The ISOs vest in four equal instalments, at the time of the grant
                    and then every
                    six months thereafter. Compensation cost, being the fair value
                    of the options,
                    is calculated to be $982,000 of which $248,000 is expensed on
                    the date of issue
                    and as the remainder vest.
 
 The
                    fair value of
                    the 800,000 options was determined using the Black-Scholes option
                    pricing model
                    using a ten-year expected life of the option, a volatility factor
                    of 152%, a
                    risk-free rate of 5% and no assumed dividend rate.
 *-17-*
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                of Contents
  ****************MEXORO
                MINERALS LTD.****************
 ************(Formerly
                Sunburst Acquisitions IV,
                Inc.)************
 ****(An
                Exploration Stage Company)****
 ****Notes
                to Consolidated Financial Statements****
 **Three
                      Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)**
 **1****1.** **STOCK
                COMPENSATION PROGRAM (Continued)**
 
 The
                options are
                summarized as follows:
 Options
                    Weighted
                      Average
                      Exercise
                      PriceOutstanding
                        at February 28, 2005
                    168,000
                    $
                        0.94Granted
                    800,000
                    $
                        0.50Cancelled
                    (6,000)
                    $
                        1.50Exercised
                    (32,000)
                    $
                        1.34Outstanding
                        at February 28, 2006
                    930,000
                    $
                        0.54Outstanding
                        at May 31, 2006
                    930,000
                    $
                        0.54
 
 The
                following table
                summarizes options outstanding at May 31, 2006:
 Exercise
                        Price
                    
                    Number
                        of
                        Options Issued
                    Number
                        of
                        Options Exercisable
                    
                    Remaining
                        Contractual Life (Years)$0.50
                    
                    890,000
                    290,000
                    
                    9.06$1.50
                    
                    40,000
                    40,000
                    
                    3.75930,000
                    330,000
 
 The
                    Company has
                    reserved 930,000 common shares in the event that these options
                    are
                    exercised.
 
 For
                    the quarter
                    ended May 31, 2006, there were $487,250 (2005 - $nil) stock-based
                    compensation
                    expenses.
 **12.**
                        **WARRANTS**
 
 As
                  at May 31, 2006,
                  the Company had a total of 8,292,500 (February 28, 2006 - 5,652,000)
                  warrants
                  outstanding to purchase common stock. Each warrant entitles the
                  holder to
                  purchase one share of the Company’s common stock. The Company has reserved
                  8,292,500 common shares in the event that these warrants are
                  exercised.
 
 *-18-*
 Table
                of Contents
 **** **MEXORO
                  MINERALS LTD.**
 **(Formerly
                  Sunburst Acquisitions IV, Inc.)**
 **(An
                  Exploration Stage Company)**
 **Notes
                  to
                  Consolidated Financial Statements**
 **Three
                        Months Ended May 31, 2006**
 **(Unaudited)****(U.S. Dollars)**
 **12.** **WARRANTS
                  (continued)**
 
 The
                  warrants
                  include 1,000,000 Class A Warrants exercisable at $0.50 per share,
                  1,000,000
                  Class B Warrants exercisable at $0.75 per share, 1,000,000 Class
                  C Warrants
                  exercisable at $1.00 per share, 1,000,000 Class D Warrants exercisable
                  at $1.25
                  per share, and 1,000,000 Class E Warrants exercisable at $1.50
                  per share; of
                  which all are exercisable at the option of the holder. The Class
                  A Warrants were
                  fully vested upon issuance. They are exercisable at any time following
                  their
                  issuance but will expire on June 30, 2007 to the extent they are
                  not exercised.
                  The remaining classes of Warrants will each vest and become exercisable
                  only at
                  the time that the immediately preceding class has been fully exercised.
 
 Unless
                  terminated
                  earlier as a result of failure to vest, the Class B and Class C
                  Warrants will
                  each expire on December 31, 2007, and the Class D and Class E Warrants
                  will each
                  expire on December 31, 2008. Stock-based compensation of $487,250
                  was recorded
                  for these warrants at February 28, 2006 with the balance being
                  expensed over the
                  next seven quarters of equal amounts.
 .
 
 The
                  Company has
                  also issued 2,917,500 warrants exercisable at $1.00 each pursuant
                  to the
                  issuance of convertible debentures (note 7). These warrants expire
                  on April 30,
                  2008, and are redeemable by the Company, at $.01 per share, in
                  the event the
                  Company’s Common Stock closes with a bid price, on average, over $3.00
                  per share
                  for a consecutive 20 day period.
 
 The
                  Company has
                  also issued 375,000 warrants exercisable at $1.00 each pursuant
                  to a private
                  placement unit offering. Each warrant entitles the investor to
                  purchase an
                  additional share of the Company’s common stock at a price of $1.00 per share and
                  is exercisable until April 30, 2008.
  **13.**
                          **RELATED
                              PARTY TRANSACTIONS** 
 The
                      Company paid
                      management fees of $5 8,050
                      (2005 - $nil)
                      to certain officers and directors and to companies controlled
                      by directors. The
                      Company paid $18,137 (2005 - $nil) to certain officers and
                      directors and to
                      companies controlled by directors for travel, office and other
                      related expenses.
 
 As
                      at May 31, 2006,
                      accounts payable of $175 (2005 - $nil) were owing to certain
                      officers and
                      directors of the Company and $5,339 (2005 - $nil) was owing
                      to companies
                      controlled by directors.
 
 As
                      of May 31, 2006,
                      the Company had a note payable to former related entity in
                      the amount of $nil
                      (2005 - $28,500). Interest on this note was imputed at a rate
                      of 6.09% and
                      totalled $nil (2005 - $19,268) cumulatively at May 31, 2006.
 
 All
                      related party
                      transactions are in the normal course of business at the exchange
                      amount agreed
                      to by each party.
 
 **14.**
                          **CONTINGENT
                              LIABILITY** 
 Pursuant
                      to the
                      Agreement between the Company and GM Capital, the Agreement
                      contains
                      registration rights which requires the Company to use best
                      efforts to file a
                      registration statement registering the warrant shares within
                      45 days upon demand
                      of 50% of the warrant holders and thereafter to use best efforts
                      to cause such
                      registration statement to be declared effective as soon as
                      reasonably possible.
                      Otherwise, the Company is obligated to sell to GM Capital as
                      liquidated damages
                      payment comprising of 1,000 shares per day at $0.001 per share
                      until the default
                      is cured. As at May
                      31, 2006, GM
                      Capital had not demanded the Company to file a registration
                      statement. (note
                      15).
 
 **15.**
                          **SUBSEQUENT
                              EVENTS** 
 (a)
                          Convertible
                              debentures 
 Subsequent
                      to May
                      31, 2006, the Company received requests to convert $2,917,500
                      of convertible
                      debentures to the Company common shares at $0.50 per share,
                      and issued 5,835,000
                      common shares and paid accrued interest of $58,308.
 
 (b)
                          Contingent
                              liability 
 Pursuant
                      to the
                      Agreement signed between the Company and GM Capital, the Company
                      must use best
                      efforts to file a registration statement registering the warrant
                      shares within
                      45 days upon demand of 50% of the warrant holders and thereafter
                      to use best
                      efforts to cause such registration statement to be declared
                      effective as soon as
                      reasonably possible. Otherwise, the Company is obligated to
                      sell to GM Capital
                      as liquidated damages payment comprising of 1,000 shares every
                      day at $0.001 per
                      share until the default is cured. Subsequent to February 28,
                      2006, GM Capital
                      had not demanded the Company to file a registration statement
                      registering the
                      warrant shares and the Company filed a registration statement
                      on April 7, 2006,
                      and an amendment #1 on July 10, 2006. In the Company’s opinion best efforts have
                      been made to effect the registration of the warrant shares.
                      Accordingly, the
                      Company does not believe a liability exists at this time and
                      no provision has
                      been made in the financial statements in this regard.
 *-19-*
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                of Contents
 **ITEM
                    2.** **MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
                    OF
                    OPERATIONS**
 
 **CAUTIONARY
                    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**
  Certain
                    statements
                    contained in this Form 10-QSB constitute "forward-looking statements".
                    These
                    statements, identified by words such as “plan”, "anticipate", "believe",
                    "estimate", "should", "expect" and similar expressions include
                    our expectations
                    and objectives regarding our future financial position, operating
                    results and
                    business strategy. These statements reflect the current views
                    of management with
                    respect to future events and are subject to risks, uncertainties
                    and other
                    factors that may cause our actual results, performance or achievements,
                    or
                    industry results, to be materially different from those described
                    in the
                    forward-looking statements. Such risks and uncertainties include
                    those set forth
                    under this Item 2. "Management's Discussion and Analysis or Plan
                    of Operation"
                    and elsewhere in this Form 10-QSB. We do not intend to update
                    the
                    forward-looking information to reflect actual results or changes
                    in the factors
                    affecting such forward-looking information. We advise you to
                    carefully review
                    the reports and documents we file from time to time with the
                    Securities and
                    Exchange Commission (the “SEC”), particularly our annual reports on Form 10-KSB,
                    our quarterly reports on Form 10-QSB and our current reports
                    on Form
                    8-K.
 **Overview**
 We
                    are a start-up, exploration stage company and have not yet generated
                    or realized
                    any revenues from our exploration projects, which we commenced
                    in May 2004. We
                    have sufficient cash to maintain our operations until April 2007,
                    unless our
                    exploration is successful, of which there is no guarantee. If
                    our exploration is
                    successful, we will need to raise additional funds to meet our
                    needs for
                    additional exploration and/or production.
 
 Our
                    continued
                    existence and plans for future growth depend on our ability to
                    obtain the
                    additional capital necessary to operate either through the generation
                    of revenue
                    or the issuance of additional debt or equity. While we believe
                    that we raised
                    sufficient funds in our recent private placement offerings to
                    allow us to
                    continue in business until April 2007, we may not be able to
                    continue in
                    business beyond that date unless we obtain additional capital.
                    We have not
                    generated any revenues, and no revenues are anticipated unless
                    and until
                    mineralized material is discovered on the properties in which
                    we have an
                    interest.
 
 We
                    are not planning
                    to buy or sell any plant or significant equipment in the next
                    six months. In the
                    event that our exploration is successful on our Cieneguita Property,
                    we
                    anticipate spending approximately $1,500,000 on equipment and
                    building a plant
                    to put that property into production. The ability to buy such
                    equipment would be
                    dependent upon our cash position at that time and our ability
                    to raise
                    additional capital. Currently, though, the Cieneguita Property
                    has no known ore
                    reserves.
 **Plan
                of
                Operation**
 Our
                business plan
                is to proceed with the exploration of our Mexican mineral properties
                to
                determine whether they contain commercially exploitable reserves
                of gold, silver
                or other metals. We believe that we have sufficient funds to fund
                our current
                exploration plans and meet our monthly general and administrative
                costs until
                April 2007 without the need to raise additional funds. . After that
                time, we
                will neither have sufficient funds to continue our exploration plans
                nor funds
                for general administrative expenses. 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. 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 should find exploration targets that warrant
                additional
                exploration work, including exploration by drilling, we may 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.
 *-20-*
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                of Contents
 
 We
                    are not involved
                    in any research and development on our exploration properties.
 
 In
                  the event that
                  we did discover a mineral deposit on one of our properties (other than
                  Cieneguita), 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 we
                  do not have any exploitable ore reserves and with the current stage
                  of
                  exploration on the properties have no way to determine such expenditures.
                  Such
                  expenditures are dependent upon the size of the ore body, the grade
                  of the ore
                  and 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 expenditures that would be required to put any mineral property
                  into
                  production, and we therefore would have to raise the additional
                  capital or, if
                  possible, enter into a joint venture for the production phase.
                  If we were to
                  form a joint venture, we cannot assess what our final position
                  in the project
                  would be. We do not have any sources of capital available to us
                  at this time to
                  fund such a project if one should be discovered.
 
 We
                  plan to hire a
                  Vice President of Exploration in August 2006 to conduct our exploration
                  programs
                  and a geologist to assist him. We also have hired an office administrator
                  in our
                  office in Chihuahua. We plan to hire another geologist by the end
                  of December
                  2006. Other than the one additional geologist, we do not expect
                  any significant
                  change in additional contractors to conduct exploration over the
                  next 12 months.
                  Other than the VP of Exploration, all of the employees we hire,
                  including those
                  involved in the exploration work we are conducting, are contracted
                  from third
                  parties specializing in providing employees for Mexican companies.
                  In using such
                  a firm, we minimize our exposure to Mexican employment law. Such
                  liabilities are
                  undertaken by the third party providing the services. We pay a
                  flat rate to the
                  third party for their services.
 
 In
                  the event that
                  we should find a mineable reserve, it is management’s intention to contract the
                  mining of any ore reserves out to third parties. The milling of
                  the ore will be
                  done by hiring employees for the company and not through a third
                  party provider
                  of such services. In the event we should put the Cieneguita property
                  into
                  production in the next 12 months, we would anticipate hiring 2
                  mine managers and
                  4 additional employees to work on the milling of the ore. We do
                  not have any
                  known reserves at this time.
 ***Cieneguita
                Property***
 Because
                we already
                have data from the previous exploration programs and mining records
                from Glamis
                Gold, our exploration program, planned until the end of April 2007,
                on the
                Cieneguita Property will focus mainly on identifying mineralized
                zones of
                economic grade to allow for the property to be put into production
                as an open
                pit heap leach mine. The following steps summarize the exploration
                we have done
                to date on the Cieneguita Property, as well as our plans.
 
 1.  Phase
                1
                Exploration.
 
 Budget:   We
                expect the
                Phase 1 exploration program to cost approximately $200,000. The funds
                will come
                from our general working capital.
 
 Milestones:  The
                milestones for the phase 1 exploration program include the review
                of available
                data to create a structural mineralization framework, detailed soil
                and rock
                sampling, resampling existing trenches, the extension of existing
                trenches, and
                the creation of new trenches. We are conducting cyanide testing on
                the rock to
                determine the best method of leaching the precious metals from the
                rock. We plan
                to complete phase 1 of our exploration program by the end of December
                2006.
 
 In
                April 2006, we
                completed a sampling of the property that included more than 500
                meters of deep
                trenches from which we took comprehensive channel sampling. The trenches
                comprised 8 trenches approximately 200 meters long and 2 to 10 meters
                deep
                spaced equally along the 1,000 meters strike length of the property.
                From the
                walls of these trenches, we took approximately 550 rock samples.
                One half of
                these samples were sent to ALS Chemex’s laboratory in Chihuahua for assaying.
                The sampling protocol followed the best mining practices. The purpose
                of the
                sampling was to further define the ore grade and potential of the
                property. We
                also completed detailed soil sampling and rock sampling outside of
                the trenches.
 
 The
                    other half of
                    the sample was used to complete column tests to determine the
                    leachability of
                    the precious metals from the rock. In this test, the ore was
                    placed in PVC
                    tubes, and different mixtures of a cyanide solution were dripped
                    over the top of
                    the columns at different flow rates. The results from these tests
                    will help
                    determine the most effective solution to be used on the heap
                    leach pads on the
                    property. These tests were done by qualified geologists employed
                    by MRT as part
                    of our office package costs. The tests were
 *-21-*
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  scientifically
                conducted and monitored for quality control and efficacy. These tests
                were done
                to ensure that the metallurgy of the minerals allows for economic
                recovery of
                the precious metals using a cyanide heap leach process. The results
                of these
                tests should be available by the end of July 2006.
 
 By
            December 2006,
            we plan to complete a detailed mapping of the property using existing
            information and drill results from previous operators, as well as incorporating
            our own data. To this end, we will create a structural mineralization
            framework
            for the property. We do not have any proven reserves on this property.
 
 If,
            after receiving
            the results of the first phase of exploration and considering the
            recommendations of our VP of Exploration and senior geologist, management
            decides that further exploration is warranted, we will continue to the
            second
            phase of exploration.
 
 2.  Phase
            2
            Exploration.
 
 Budget:   We
            plan to
            commence phase 2 of our exploration program in March 2007 under the direction
            of
            our VP of Exploration. We have budgeted $200,000 for the Phase 2 Exploration;
            consisting of $50,000 for an additional trenching program, $50,000 for
            general
            administrative expenses and $100,000 for the cost of a drilling program,
            assaying and supervision included.
 
 Milestones:   The
            objectives for phase 2 of the exploration plan are to initiate a drill
            program
            and to continue the trenching program from phase 1 of exploration in
            order to
            further delineate the oxide ore mineralization to define where we plan
            to
            attempt to mine the ore. We plan to complete this second phase of exploration
            by
            the end of May 2007.
  Subject
            to the
            recommendation of our VP of Exploration, we may initiate a drill program
            consisting of 1,000 meters of reverse circulation drilling. At this time,
            there
            is a high demand for drill rigs, and we cannot predict with any accuracy
            the
            timing to start the drilling program. Once we do receive a rig, we anticipate
            the drilling program will take approximately one month, with assay results
            available one month later. The funds for this drilling program will come
            from
            general working capital on hand. We hope that the results from this drilling
            will help us to better delineate the mineralization of the oxide zone
            and
            provide an ore reserve calculation. We do not intend to implement a feasibility
            study for the property in this phase of exploration. Six of the drill
            holes will
            be drilled to a depth of 200 meters to test the sulphide potential of
            the
            mineral system. The use of these deep holes will help us determine if
            there is
            an extension to the oxide mineralization in the underlying sulphides.
            Our onsite
            geologist will determine where the holes will be drilled based on our
            earlier
            exploration and mapping of the property. We are currently negotiating
            with
            several contractors to secure the use of a drill to undertake our drill
            program.
            To date, we have not found a contractor able to supply drills to meet
            our time
            schedule. We cannot, with any certainty, predict when a drill rig may
            become
            available to us. The unavailability of such drill rigs could hamper our
            exploration plans, but management believes that we can generate sufficient
            information from the trenching program, to mine the oxide mineralization
            on the
            property. We have not determined any known reserves on this property
            to date.
 
 The
            trenching
            program will entail using a bulldozer to dig trenches. Our on-site geologist
            will direct the bulldozer operator as where to dig the trenches.
**The geologist will base his decision on where to dig on the
            results of our previous exploration work. Once the trenches are dug,
            the
            geologist will take samples of rock from all levels of the walls of the
            trench
            as if it were rock from a drill core. The rock will be gathered up and
            marked
            from which part of the trench it came from. The ore is pulverized and
            shipped
            out for assays. The results from these assays are expected to be completed
            and
            mapped by May 2007, with the goal of further delineating the prospects
            of the
            property.
 
 Even
            though the
            rock is fractured, the objective of the drill program will be to provide
            us with
            accurate information to make an ore calculation of the grade of the ore
            and the
            size of the mineralized zones.
 
 One
            of the main
            purposes of this phase of exploration is to delineate the mineralized
            ore body
            and map the grade of the mineralization that will allow us to refine
            our plan to
            put the property into production. If the exploration program does not
            provide us
            with the results we deem necessary to continue exploration, then, on
            a
            recommendation from our senior geologist or VP of Exploration and managements’
concurrence on his findings, we will cease exploration on the property
            and any
            plans to put the property into production. If no further exploration
            is
            warranted, then we will discontinue any payments to the concession holders
            and
            allow our option to lapse. We will also then try to sell the mining equipment
            we
            have recently purchased. If we allow the option to lapse, we will be
            obligated,
            by the Mexican Government, to complete some reclamation work on the property
            of
            approximately $50,000. These funds would come from the bond we have already
            paid
            to the government in the amount of $67,000. Any funds not expended on
            reclamation would be returned to us by
 *-22-*
 Table
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  the
            Government. All
            of the money that we had invested in the exploration of the Cieneguita
            Property
            would be lost.
 
 We
            have one
            geologist on the Cieneguita Property working full time, and he will continue
            to
            do so through April 2007 if the exploration results warrant the expenditure.
            If
            the results do not warrant further work, we plan to move this geologist
            to one
            of our other properties to continue exploration on those properties.
 
 3. Cieneguita
            Mine Design.
 
 Budget:   We
            budgeted
            $50,000 from general working capital to be used to create the mine design
            for
            the Cieneguita property.
 
 Milestones:   Concurrently
            with the second phase of exploration, we will implement our plan to put
            the
            Cieneguita Property into production. The mine design will help determine
            where
            and how we will mine the Cieneguita Property. We plan to put the mine
            into
            production by the end of May 2007 if we are able to find available
            funding.
 
 Coinciding
            with
            phase 2 of our exploration program, we will commission a mine design
            to
            determine how to put the Cieneguita Property into production. At this
            time, we
            do not plan to implement a feasibility study for this property but feel
            we have
            sufficient information to put the property into production. The mine
            design will
            be commissioned to a third party contractor with expertise in heap leach
            mining.
            This contractor, an engineering firm, will review all of the data that
            we have
            accumulated from Glamis Gold’s previous exploration and from the trenching and
            sampling we have completed on the property. All of this information will
            be put
            on a map laying out the structure of the mineralized zone on our property
            to
            assist in mining the ore. The key purpose of this map is to help enable
            our
            on-site geologist to monitor grade control during mining. Additionally,
            from the
            information accumulated so far on the Cieneguita Property, the mining
            engineer
            will design a heap leach mining operation best suited to the tonnage,
            grade of
            the ore and availability of land to build leaching pads.
 
 The
            mine design
            will call for the mining operation to be run by a third party contractor,
            who
            will charge the company a flat fee per tonne of rock that is moved. It
            is
            estimated by the engineer designing the mine that the cost per tonne
            of rock
            moved from the property to the mill site will be approximately $1.30
            per tonne
            of rock. This fee is only an estimate, as no contractor at this time
            has been
            engaged to mine the mineralized ore nor provided us with a firm quote
            on the
            cost of mining. The actual cost of mining the ore may be much higher,
            and no
            assurance can be given as to the actual cost at this time. The engineering
            firm
            who will design the mine has stated that one of the key objectives at
            this stage
            of the mining operation will be grade control. The proper grade of ore
            shipped
            to the milling site is imperative to ensure a profitable operation. If
            the head
            grade is too low, we will not recover enough gold from the rock to maintain
            a
            profitable operation. Conversely, a head grade of ore that is too high
            will
            shorten the life of the mine. We are estimating that the total cost of
            mining
            and milling the ore will be approximately $13 per tonne. If the price
            of gold
            fluctuates up or down, we may have to adjust our cut off grade, which
            is
            currently 1.5 grams per tonne, which will affect the over all life of
            the mine.
 
 The
            milling of the
            ore at the mine site will also be contracted out to a third party. The
            following
            is a brief description of the mining process we plan to use. First, the
            ore is
            crushed by a crusher into a smaller size. Second, the rock is deposited
            on a
            conveyor belt and moved to the agglomorator. Third, the agglomorator
            mixes the
            rock with lime, and then the rock is moved to a stacker. A stacker is
            a moveable
            conveyor belt that oscillates back and forth, distributing the rock equally
            onto
            a heap leach pad. At that point, the rock is sprinkled with a cyanide
            mixture
            for approximately 30 days. The fluid from the percolation through the
            rock is
            then pumped through carbon filters. Waste rock is dumped into a ravine,
            per our
            permits, while the carbon filters are shipped to a third party for extraction
            of
            the precious metals. The waste rock is completely free of any harmful
            chemicals
            and is restored to the original ph it had prior to mining.
 
 At
            this time, we do
            not know the cost associated with the process of having the precious
            metals
            extracted and minted into ore bars. If our head grade is not accurate
            or the
            heap leach process is not effective, we may not extract enough gold from
            the
            carbon filters to pay for this complete operation and we would lose money
            from
            the mining operation. If we lost money on the mining and milling operation,
            we
            may not be able to stay in business as we would expect the cash flow
            from
            operations to cover, at the minimum, the mining and milling operation.
            Furthermore, we do not have any proven reserves on our property and the
            ability
            to find enough ore could severely hinder any mining operations.
 
 We
            will engage an
            independent third part consultant to review the work of the engineering
            firm to
            verify and agree with the results of the mine design. The independent
            third
            party engineers will work with the mining
 *-23-*
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  engineering
            firm to
            agree on a final design. We estimate that the mine design will be completed
            by
            the end of December 2006 and will cost approximately $50,000. We will
            pay for
            the work from our general working capital. The milling equipment and
            cost of
            building the plant will be approximately $2,200,000. We estimate that
            we will
            need approximately $1,100,000 for working capital during the first four
            months
            of operation of the mine. There can be no assurance given that if the
            property
            is put into production that, after four months of operation, we will
            have
            recovered any precious metals from the milling process. We will need
            to continue
            to fund working capital if the precious metals are not in the ore as
            predicted.
            We will need to raise additional capital to put the property into production
            and
            to fund at least the first four months of working capital. The funds
            would be
            raised through the sale of debt or equity. We have not identified any
            additional
            sources of capital at this time. Furthermore, once we have commenced
            production,
            we can give no assurance that we will be profitable or recover any gold.
 
 ***Guazapares
            Property***
 
 1.  Phase
            1
            Exploration.
 
 Budget:   Concurrently
            with the exploration of the Cieneguita Property, we have budgeted approximately
            $450,000 of our general working capital for exploration on our Guazapares
            Property until April 2007. These funds will come from our general working
            capital.
 
 Milestones:   The
            goals of
            the first phase of exploration on the Guazapares Property are to collect
            rock
            sample and complete the mapping of the property. We anticipate that this
            phase
            will be completed by the end of January 2007. If management determines
            that the
            results warrant additional exploration, we will begin phase 2 of exploration,
            as
            described below.
 
 We
            believe that
            most of the mining concessions being explored in the Guazapares area
            are
            epithermal silver deposits similar to the Cieneguita Property. However,
            because
            we do not have the same amount of detailed information on Guazapares
            as we do on
            Cieneguita, the exploration program will cost more than the exploration
            program
            on Cieneguita.
 
 We
            have one full
            time geologist working on the Guazapares Property collecting rock samples
            and
            mapping the property. The goal for this phase is the completion of mapping
            on
            the property at a scale of 1:5,000 with individual veins being mapped
            at a scale
            of 1:1,000. Rock samples were taken from the property. The rock samples
            from
            this phase were sent to Chemex ALS in Chihuahua for chemical analysis
            and
            assaying. The sampling protocol followed the best mining practices. The
            results
            from this first phase of the exploration program have the goal of determining
            whether subsequent exploration was warranted and if a drill program should
            be
            commenced. This phase 1 of work includes reviewing available data to
            create a
            structural mineralization framework. We will map the topography and sample
            the
            entire underground workings along the main level of the San Antonio mine.
            The
            distribution of the veins, lithology and alteration will be mapped.
 
 2.  Phase
            2
            Exploration.
 
 Budget:   We
            have
            budgeted $100,000 of the total of $450,000 for Phase 2 of exploration.
            Of this,
            $50,000 is budgeted for a ground based geophysical exploration that will
            concentrate mainly on the area around the San Antonio mine and $50,000
            for
            specific sampling and trenching on the San Francisco property. These
            funds will
            come from general working capital of the company.
 
 Milestones:   The
            goals of
            phase 2 of exploration are to conduct more detailed soil and rock sampling,
            perform ground-based geophysical measurements, map the topography, and
            sample
            trenches in order to define the structural framework of the mineralized
            zone to
            facilitate a drilling program, if warranted. This phase commenced in
            February
            2007 and is expected to be completed by the end of May 2007.
 
 The
            second phase of
            the exploration program, using two geologists, will include more detailed
            soil
            and rock sampling, ground-based geophysics measurements and mapping on
            all of
            the concessions at Guazaparez. At this time, though, we do not have enough
            information to implement a drill program. One of the objectives of this
            stage of
            exploration will be to conduct a ground based geophysical exploration
            that will
            concentrate mainly on the area around the San Antonio mine. Another target
            will
            be to map the topography and sampled the surface trenches in the San
            Francisco
            area.
 
 The
            purpose of this
            phase of exploration will be to define the structural mainframe of the
            mineralized zone to facilitate the placing of drill holes. Once this
            information
            is obtained from phase two of the exploration project, our senior geologist
            and
            our new VP of Exploration will review all of the data collected and make
            a
 *-24-*
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  recommendation
            to
            management. Management, at that time, will review the exploration data
            collected
            and the recommendations and make a determination whether additional work
            is
            advisable. If the management determines that additional exploration is
            not
            warranted, then we will likely discontinue exploration and make no further
            property payments, abandoning the concessions. If we abandon the Guazapares
            Property, we will not have to make any further property payments as per
            our
            property purchase agreements. We will, however, lose all the funds we
            have
            expended on the property to date including property payments made to
            date. If
            management determines that further exploration is warranted, we will
            conduct
            phase 3 of our exploration program.
 
 3.  Phase
            3 Drill
            Program.
 
 Budget:   If
            a drill
            program is warranted and implemented, we estimate that the initial expenditure
            will be $250,000 (the balance of the $450,000 budgeted for the property).
            We
            will need to raise additional capital through the sale of equity or debt
            to fund
            a complete drilling program as only a small portion of the funds budgeted
            will
            be left in our general working capital to initiate the program.
 
 Milestones:   The
            goal of
            the third phase of exploration would be to gather information to determine
            if we
            should put the property into production.
 
 We
            do not have
            enough information at this time to determine any specifics on how the
            drilling
            phase of the exploration program would be implemented. We will be able
            to make
            this determination once we have all of the information back from the
            second
            phase of exploration. Management and the new VP of Exploration will review
            the
            information from phase 2 and decide whether or not to continue exploration.
            If
            the decision is to continue, we will begin the third phase of exploration.
            In
            this phase, if sufficient funds can be generated to pay for the drilling,
            and
            assuming drill rigs are available in the area, our plan would be to commence
            this program in June 2007, and it would last approximately 60 days. The
            results
            of this drill program would take approximately 90 days to be assayed
            and
            interpreted. Once those result are known, we would consult with our lead
            exploration geologists and our new VP of Exploration to determine whether
            to
            abandon the Guazapares Property or continue with further drilling exploration.
 
 If
            management
            decides to continue with further drilling, we would need to raise additional
            funding through the sale of debt or equity because we do not have sufficient
            capital to continue an exploration program. 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 sources
            of
            funds to implement such a program. If we could not obtain additional
            financing,
            we could seek a joint venture partner if the results warranted it. We
            do not
            have any joint venture partners at this time and can give no assurance
            that we
            would be able to find one if the Guazapares Property warranted such a
            joint
            venture.
 
 The
            Guazapares
            Property is without known reserves. Our proposed programs are exploratory
            in
            nature.
  ***Encino
            Gordo***
 
 The
            Encino Gordo
            Property comprises four mining concessions that total 1,042 hectares
            (approximately 2,575 acres). We have limited information available to
            us about
            this property from previous exploration that was done by other companies.
            The
            previous geochemical sampling that was done suggests a presence of mineralized
            structures. These structures are being investigated by geochemical sampling
            to
            determine if further exploration is warranted and to help refine the
            best
            exploration plan for the concessions.
 
 1.  Phase
            1
            Exploration.
 
 Budget:   We
            have
            planned for an exploration program, budgeted at approximately $200,000
            from
            general working capital through April 2007, on our Encino Gordo Property.
            Of
            this, $50,000 will be used for mapping and sampling, which we anticipate
            completing by February 2007. The funds will be spent as directed by our
            VP
            Exploration. The funds will come from general working capital.
 
 Milestones:   The
            goals of
            the first phase of exploration are to complete mapping of the property
            and to
            take geochemical samples from the property. We currently have one geologist
            taking geochemical sampling and mapping this property. The purpose of
            this
            initial program is to get a better understanding of the geology of the
            property.
            We expect to complete this phase of the exploration program by the end
            of
            February 2007.
 
 We
            intend to map
            the property at a scale of 1:5,000 with individual veins being mapped
            at a scale
            of 1:1,000 by the end of October 2006.
 
 We
            have conducted
            sampling on the property. A total of 43 stream sediment samples were
            collected
            from the
 *-25-*
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  various
            arroyos
            cutting the property. Samples of greater than 1 kilogram were collected
            with
            material crushed to less than 1 mm size. Samples of this rock will be
            analyzed
            by Chemex ALS for gold content plus 27 other mineral elements associated
            with
            the rock.******The sampling protocol followed the best
            mining practices. The purpose of the sampling was to further define the
            ore
            grade and potential of the property. To date, three samples returned
            anomalous
            results of gold which require follow-up to verify source areas. We would
            expect
            the balance of the samples to be returned by the end of February 2007.
 
 We
            plan to prepare
            a list of preliminary drill hole locations to accompany the SAMARNAT
            work permit
            application. We intend to file the application for the permit by the
            end of
            February 2007, with approval from SAMARNAT expected by the end of April
            2007.
            Once the work permit is approved, our goal will be to drill the targets
            as
            recommended by our VP of Exploration. We cannot predict with any accuracy
            when,
            if ever, we will commence drilling on this property and the cost of such
            drilling. We plan to apply for drill permits before determining whether
            or not a
            drill program will be commenced in order to save time in the event a
            drill
            program is recommended. Much additional exploration work must be completed
            and a
            definitive exploration plan needs to be prepared by our VP of Exploration
            before
            management can determine whether or not to continue to the next phase
            of
            exploration. The actual drill hole locations are likely to change from
            those
            submitted with the working plan permit as drill targets are reviewed.
            This
            change of targets will not affect the working permit as such a movement
            of
            locations is anticipated in the issuing of the permits.
  Our
            goal is to have
            this further exploration completed by the end of February 2007, and a
            geological
            report prepared by our senior geologist on the Encino Gordo Property
            should be
            available 60 days thereafter. Depending on the results of the report,
            as
            determined by management, we intend to either abandon the Encino Gordo
            Property,
            in which case no further payments would be made or would be due under
            our
            agreements to acquire these concessions, or to make additional expenditures
            to
            determine potential drill targets.
 
 2.  Phase
            2 Drill
            Program.
 
 Budget:   If
            management
            decides to continue exploration by initiating a drill program, a budget
            will be
            prepared at that time, and the amount and source of the capital needed
            for
            additional expenditures will be determined. If a drill program of any
            size is
            recommended, we do not have sufficient capital on hand to complete such
            a
            program because it would most likely require the expenditure of significant
            amounts of money. We would need to raise additional capital through the
            sale of
            debt or equity. We can give no assurance that we would be able to raise
            such
            capital, as we have not identified any source of capital for such a program
            at
            this time. If we could not raise additional funds, we would consider
            seeking a
            joint venture partner if the results warranted it. We do not have any
            joint
            venture partners at this time and can give no assurance that we would
            be able to
            find one if the Encino Gordo Property warranted such a joint venture.
 
 Milestones:  The
            second
            phase of exploration would be a drill program to gather more information.
            Such
            information would be used to determine if we should put the property
            into
            production. We do not know when this phase of exploration could be completed,
            as
            discussed above. We estimate that the program would take approximately
            60 days
            to complete, with results from the program being returned about 90 days
            after
            completion. These are estimates, as the number of drill targets will
            determine
            the length of the drill program. Once the results from the drill program
            are
            known, we would consult with our lead exploration geologists and our
            new VP of
            Exploration to determine whether to abandon the Encino Gordo Property
            or
            continue with further drilling exploration.
 
 Management
            and the
            VP of Exploration will review the information provided by the first phase
            of
            exploration 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 that 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 the first
            phase of
            exploration.
 
 The
            Encino Gordo
            Property is without known reserves. Our proposed programs are exploratory
            in
            nature.
 
 Although
            three of
            our properties have been mined in the past, we are presently in the exploration
            stage and there is no assurance that a commercially viable mineral deposit
            exists in any of our properties. We do not have any proven or probable
            reserves
            on our properties.
 
 We
            have made a
            business decision to place a higher priority on the Cieneguita exploration
            program to define
 *-26-*
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  mineralized
            ore.
            However, we intend to proceed with exploration on all three properties
            simultaneously. If our exploration programs warrant drilling programs
            on the
            properties, we anticipate contracting two geologists and four assistants
            for
            supervising the drilling work and taking splits for the drilling
            samples.
 
 Once
            we receive
            results from these exploration programs, our management will assess whether
            to
            proceed to any further exploration phases. In making this determination,
            we will
            make an assessment as to whether the results are sufficiently positive
            to enable
            us to obtain the financing necessary to proceed. The decision will be
            based
            mainly on the recommendations of our senior geologist and VP of Exploration.
            Other factors that will influence the production decision will be the
            current
            price of gold bullion, availability of mining equipment and a mining
            feasibility
            study.
 
 **Results
            of
            Operations**
  ***Three
            months ended May 31, 2006 compared to the three months ended May 31,
            2005.***
 
 Revenues
 
 We
            did not earn
            revenues during the three months ended May 31, 2006 or 2005 because we
            did not
            have commercial production of any of our properties. We do not anticipate
            earning revenues until such time as we have entered into commercial production
            of our mineral properties, if ever. We are presently in the exploration
            stage of
            our business. We can provide no assurance that we will discover commercially
            exploitable levels of mineral resources on our properties or, if such
            resources
            are discovered, that we will enter into commercial production of our
            mineral
            properties. Interest income is recorded under Other Income in the Statement
            of
            Operations in the financial statements.
 
 Operating
            Costs
 
 We
            did not incur
            any operating costs during the years ended 2006 and 2005 due to the fact
            that we
            did not achieve production from exploration activities during either
            year.
 
 Expenses
 
 Our
            expenses
            increased to $1,310,000 for the three months ended May 31, 2006 compared
            to
            $13,000 for the three months ended May 31, 2005, representing an increase
            of
            $1,297,000. The increase is primarily attributable to the costs associated
            to
            raising capital, stock-based compensation expense and developing exploration
            program which commenced in the prior fiscal quarter.
 
 General
            and
            administrative cash expenses increased to $570,000 in the three months
            ended May
            31, 2006 compared to $13,000 in the three months ended May 31, 2005,
            representing an increase of $557,000. Management fees increased to $88,000
            in
            the three months ended May 31, 2006 from $nil in the three months ended
            May 31,
            2005. The increase was attributable to a new management team appointed
            in the
            prior fiscal quarter. Finders’ fees increased to $285,000 in the three months
            ended May 31, 2006 from $nil in the three months ended May 31, 2005.
            The
            increase was attributable to two private placements; a unit offering
            and
            convertible debentures. Accounting and legal fees increased to $41,000
            in the
            three months ended May 31, 2006 from $8,000 in the three months ended
            May 31,
            2005. The increase in fees was primarily attributable to higher auditing
            costs
            and the cost of regulatory filings with the SEC.
 
 Stock-based
            compensation expenses of $487,000 in the three months ended May 31, 2006
            compared with $nil for the three months ended May 31, 2005 relate to
            8,218,000
            warrants being expensed equally over eight quarters, starting with the
            quarter
            ended February 28, 2006.
 
 Mineral
            exploration
            in the three months ended May 31, 2006 increased to $252,000 compared
            to $nil
            for the three months ended May 31, 2005. The Company was not in a developing
            exploration program during the three months ended May 31, 2005. We anticipate
            that exploration expenditures will increase in fiscal 2007 as a result
            of
            exploration activities on our Mexican mineral properties.
 
 Acquisition
            of
            resource properties was $nil for both three months ended May 31, 2006
            and
            2005.
 
 Loss
 *-27-*
 Table
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  Our
            net loss
            increased to $3,602,000 for the three months ended May 31, 2006 compared
            to
            $14,000 for the three months ended May 31, 2005, representing an increase
            of
            $3,588,000. This increase in our loss was primarily attributable to a
            beneficial
            conversion feature of $2,266,000 on convertible debentures issued in
            the three
            months ended May 31, 2006; which was recorded as interest expense. We
            anticipate
            that we will continue to incur losses until such time as we can commence
            the
            development stage of our operations and achieve significant revenues
            from sales
            of gold recovered from our Mexican mineral properties. There is no assurance
            that we will be able to commence the development stage of our operations
            at any
            of our Mexican mineral properties or achieve revenues.
 
 **Liquidity
            and Capital Resources**
 
 Since
            inception, we
            have undergone two unsuccessful business combinations, which have caused
            us to
            incur significant liabilities and have resulted in the accumulation of
            a
            substantial deficit during the exploration stage.  As of May 31, 2006, we
            have total assets of $2,150,000, total liabilities of $3,004,000, and
            a deficit
            of $21,940,000 accumulated during the exploration stage.
 
 Cash
            and Working
            Capital
 
 We
            had cash of
            $2,075,000 as of May 31, 2006, compared to cash of $480,000 as of February
            28,
            2006, and $10,000 as of May 31, 2005. We had working capital of $2,061,000
            as of
            May 31, 2006, compared to working capital of $46,000 as of February 28,
            2006,
            and a working capital deficiency of $736,000 as of May 31, 2005.
 
 Under
            our current
            business plan, we will not require additional financing this fiscal year.
            However, we will require additional financing during the current fiscal
            year if
            our planned exploration activities increase. We plan to spend approximately
            $850,000 in the next twelve months to carry out exploration and administration
            activities on our Mexican mineral properties, and in the event that our
            exploration is successful on our Cieneguita Property, we anticipate spending
            a
            further $1,500,000 on equipment and building a plant to put that property
            into
            production. We anticipate spending approximately $480,000 during the
            next twelve
            months on general and administrative costs. We presently do not have
            sufficient
            financing to enable us to complete these plans and will require additional
            financing to perform future exploration work on our Mexican mineral properties.
            Our actual expenditures on these activities will depend on the amount
            of funds
            we have available as a result of our financing efforts. There is no assurance
            that we will be able to raise the necessary financing.
 
 Cash
            Used in
            Operating Activities
 
 Cash
            used in
            operating activities increased to $873,000 for the three months ended
            May 31,
            2006 compared to $10,000 for the three months ended May 31, 2005. The
            cash used
            in operating activities came primarily from convertible debt and equity
            sales of
            our common shares. It was primarily used for General and Administrative
            costs
            and for the acquisition of resource properties.
 
 Investing
            Activities
 
 Cash
            used in
            investing activities increased to $1,962 for the three months ended May
            31, 2006
            compared to $nil for the three months ended May 31, 2005. Cash used in
            investing
            activities was used to acquire office equipment for our office in
            Mexico.
 
 Financing
            Activities
 
 Cash
            provided by
            financing activities increased to $2,471,000 for the three months ended
            May 31,
            2006 compared to cash used of $15,000 for the three months ended May
            31, 2005.
            All cash provided by financing activities was provided by convertible
            debt and
            share issuances. Cash provided by financing activities was used to fund
            our
            operating and investing activities.
 
 We
            anticipate
            continuing to rely on equity sales of our common stock or issuance of
            debt in
            order to continue to fund our business operations. Issuances of additional
            shares will result in dilution to our existing shareholders.
 
 On
            April 3, 2006
            and May 31, 2006, the Company issued 550,000 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
 *-28-*
 Table
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  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.
 
 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.
 
 During
            the quarter
            ended May 31, 2006, the Company issued a total of $2,266,000 convertible
            debentures. The convertible debentures, with principal and accrued interest
            at
            7% per year are convertible into units at the option of the holder.  Each
            unit consists of a warrant to purchase 25,000 of the Company’s common shares at
            $1.00 and $25,000 of debt, which may be converted to common shares at
            $0.50 per
            share and is exercisable until April 30, 2008.  In addition, the warrants
            are redeemable by the Company, at $.01 per share, in the event the Company’s
            Common Stock closes with a bid price, on average, over $3.00 per share
            for a
            consecutive 20-day period. There were no convertible debentures issued
            on the
            three months ended May 31, 2005.
 
 The
            amount of our
            convertible debt outstanding at May 31, 2006 was $2,918,000 compared
            to $652,000
            at February 28, 2006 and $705,000 at May 31, 2005.
 
 In
            June 2006, all
            of the holders of the $2,918,000 convertible debentures converted to
            common
            shares at $0.50 per share. The Company issued 5,835,000 common shares
            and
            2,918,000 warrants to debenture holders upon the conversion. We have
            paid to the
            convertible debenture holders a total of $59,000, which is their accumulated
            interest on the debentures.
 
 We
            believe that the
            cash on hand derived from the sale of securities totaling $3,293,000
            will be
            sufficient to fund our budgeted exploration and operation costs until
            April
            2007.
 
 Going
            Concern
 Our
            financial
            statements have been prepared on a going concern basis, which assumes
            the
            realization of assets and settlement of liabilities in the normal course
            of
            business. Our ability to continue as a going concern is dependent upon
            our
            ability to generate profitable operations in the future and/ or to obtain
            the
            necessary financing to meet our obligations and repay our liabilities
            arising
            from normal business operations when they become due. The outcome of
            these
            matters cannot be predicted with any certainty at this time and raise
            substantial doubt that we will be able to continue as a going concern.
            Our
            financial statements do not include any adjustments to the amount and
            classification of assets and liabilities that may be necessary should
            we be
            unable to continue as a going concern.
 
 The
            Company has a
            history of operating losses and will need to raise additional capital
            to fund
            its planned operations. The Company had working capital of $2,061,000
            as of May
            31, 2006, and an accumulated deficit of $35,557,000. These conditions
            raise
            substantial doubt about the Company’s ability to continue as a going
            concern.
 
 The
            Company intends
            to reduce its cumulative loss through the attainment of profitable operations
            from its investment in a Mexican mining venture. There is no assurance
            that
            these operations will be profitable. In addition, the Company has conducted
            private placements of convertible debt and common stock, which have generated
            a
            portion of the initial cash requirements of its planned Mexican mining
            ventures.
 
 **Off-Balance
            Sheet Arrangements**
  We
            currently do not
            have any off-balance sheet arrangements which have or are reasonably
            likely to
            have a current or future effect on our financial condition, changes in
            financial
            condition, revenues or expenses, results of operations, liquidity, capital
            expenditures or capital resources that are material to our investors.
 
 **ITEM
            3.** **CONTROLS AND PROCEDURES**
 
 The
            Securities and
            Exchange Commission defines the term “disclosure controls and procedures” to
            mean a company's controls and other procedures of an issuer that are
            designed to
            ensure that information required to be disclosed in the reports that
            it files or
            submits under the Securities Exchange Act of 1934 is recorded,
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            of Contents
  processed,
            summarized and reported, within the time periods specified in the Securities
            and
            Exchange Commission’s rules and forms. Disclosure controls and procedures
            include, without limitation, controls and procedures designed to ensure
            that
            information required to be disclosed by an issuer in the reports that
            it files
            or submits under the Securities Exchange Act of 1934 is accumulated and
            communicated to the issuer’s management, including its principal executive and
            principal financial officers, or persons performing similar functions,
            as
            appropriate to allow timely decisions regarding required disclosure.
            The Company
            maintains such a system of controls and procedures in an effort to ensure
            that
            all information which it is required to disclose in the reports it files
            under
            the Securities Exchange Act of 1934 is recorded, processed, summarized
            and
            reported within the time periods specified under the SEC's rules and
            forms and
            that information required to be disclosed is accumulated and communicated
            to
            principal executive and principal financial officers to allow timely
            decisions
            regarding disclosure.
 
 As
            of the end of
            the period covered by this report, we carried out an evaluation, under
            the
            supervision and with the participation of our chief executive officer
            and
            principal accounting officer, of the effectiveness of the design and
            operation
            of our disclosure controls and procedures. Based on this evaluation,
            our chief
            executive officer and principal accounting officer concluded that our
            disclosure
            controls and procedures are designed to provide reasonable assurance
            of
            achieving the objectives of timely alerting them to material information
            required to be included in our periodic SEC reports and of ensuring that
            such
            information is recorded, processed, summarized and reported with the
            time
            periods specified. Our chief executive office and principal accounting
            officer
            also concluded that our disclosure controls and procedures were effective
            as of
            May 31, 2006 to provide reasonable assurance of the achievement of these
            objectives.
 
 ***Changes
            in Internal Control over Financial Reporting***: There were no
            changes in our internal controls or in other factors that could affect
            these
            controls subsequent to the date of their evaluation, including any deficiencies
            or material weaknesses of internal controls that would require corrective
            action.
 
 
 **PART
            II -
            OTHER INFORMATION**
 
 **ITEM
            2.** **UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
            PROCEEDS.**
 
 In
            the quarter
            ended May 31, 2006, the Company issued $2,266,000 of convertible debentures,
            with principal and accrued interest at 7% per year, convertible into
            units at
            the option of the holder. Each unit consists of a warrant to purchase
            25,000 common shares at $1.00 per share and $25,000 of debt, which may
            be
            converted to common shares at $0.50 per share and is exercisable until
            April 30,
            2008. These 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.
 
 The
            units were
            offered and sold to the Purchasers in a private placement transaction
            made in
            reliance upon exemptions from registration pursuant to Regulation S for
            offerings outside of the United States.  The units were not offered or sold
            to United States citizens, and no directed selling efforts were made
            within the
            United States.
 
 During
            the quarter
            ended May 31, 2006, the Company issued 750,000 common shares 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.
 
 These
            units were
            only offered to individuals or entities who qualified as accredited investors
            under the Securities Act of 1933.  The units were offered under an
            exemption from registration found in Rule 506 of Regulation D.
 
 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 and on April 6,
            2006, these
            shares were issued.
 
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  **ITEM
            6. EXHIBITS.**
 
 The
            following
            exhibits are filed in reference:
 Exhibit
                  Number
                Description3.1
                Articles
                    of
                    Incorporation, as amended on December 10, 2001 and February 13,
                    2006
                    (Herein incorporated by reference from the Registration Statement
                    on Form
                    SB-2 filed with the Securities and Exchange Commission on April
                    7,
                    2006).3.2
                Bylaws
                    of the
                    Corporation (Herein incorporated by reference from the Registration
                    Statement on Form SB-2/A filed with the Securities and Exchange
                    Commission
                    on September 25, 2006.)4.1
                Registration
                    Agreement dated April 20, 2004, by and among Sunburst Acquisitions
                    IV,
                    Inc., a Colorado company, and each of the purchasers in a private
                    placement of shares of Sunburst (Herein incorporated by reference
                    from the
                    Registration Statement on Form SB-2/A filed with the Securities
                    and
                    Exchange Commission on September 25, 2006.)4.2
                Promissory
                    Note between Sunburst Acquisitions IV, Inc. and Minera Rio Tinto
                    S.A. de
                    C.V. in the amount of $ 57,500 dated January 9, 2004 (incorporated
                    by
                    reference from Current Report on Form 8-K filed with the Securities
                    and
                    Exchange Commission on June 3, 2004).4.3
                Promissory
                    Note between Sierra Mineral and Mining, Inc. and Minera Rio Tinto
                    S.A. de
                    C.V. in the amount of $ 167,500, dated May 3, 2004 (incorporated
                    by
                    reference from Current Report on Form 8-K filed with the Securities
                    and
                    Exchange Commission on June 3, 2004).4.4
                Securities
                    Purchase Agreement with exhibits entered in connection with the
                    $1,350,000
                    original issued discount secured convertible debenture financing
                    dated
                    August 25, 2004 (Herein incorporated by reference from the Registration
                    Statement on Form SB-2/A filed with the Securities and Exchange
                    Commission
                    on September 25, 2006.)4.5
                Secured
                    Convertible Debenture by and between Bristol Capital, LLC and
                    Sunburst
                    Acquisitions IV, Inc. dated January 15, 2004 (Herein incorporated
                    by
                    reference from the Registration Statement on Form SB-2/A filed
                    with the
                    Securities and Exchange Commission on July 10, 2006).4.6
                Transaction
                    Fee Agreement dated April 22, 2004 between Sunburst Acquisitions
                    IV Inc.
                    and T.R. Winston & Company LLC ( Herein incorporated by reference from
                    the Registration Statement on Form SB-2 filed with the Securities
                    and
                    Exchange Commission on April 7, 2006).4.7
                Finder’s
                    Fee
                    Agreement dated 2004 between Sunburst Acquisitions IV, Inc. and
                    Liberty
                    Management, LLC (Herein incorporated by reference from the Registration
                    Statement on Form SB-2/A filed with the Securities and Exchange
                    Commission
                    on September 25, 2006.)4.8
                Convertible
                    Debenture template used to sell debentures and units of Mexoro
                    Minerals
                    Ltd. for the offering that occurred in January through May of
                    2006 (Herein
                    incorporated by reference from the Registration Statement on
                    Form SB-2
                    filed with the Securities and Exchange Commission on April 7,
                    2006).4.9
                Stock
                    option
                    plan approved by the shareholders of Mexoro Minerals, Ltd. on
                    February 13,
                    2006. (Herein incorporated by reference from the Registration
                    Statement on
                    Form SB-2 filed with the Securities and Exchange Commission on
                    April 7,
                    2006).4.10
                Subscription
                    Agreement template used to sell units of Mexoro Minerals Ltd.
                    for the
                    offering that occurred in February and March of 2006 and was
                    offered to
                    accredited investors under Regulation D (Herein incorporated
                    by reference
                    from the Registration Statement on Form SB-2/A filed with the
                    Securities
                    and Exchange Commission on September 25,
                    2006.)
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  4.11
                  Convertible
                      Debentures issued December 8, 2005 to Daimler Capital, James
                      Longshore,
                      and Spectrum International in the amount of $300,000 (Herein
                      incorporated
                      by reference from the Registration Statement on Form SB-2/A
                      filed with the
                      Securities and Exchange Commission on September 25,
                      2006.)10.1
                  Share
                      Exchange Agreement, dated May 3, 2004, by and among Sunburst
                      Acquisitions
                      IV, Inc., a Colorado corporation, Sierra Minerals and Mining,
                      Inc., a
                      Nevada corporation, and the shareholders of Sierra Minerals
& Mining,
                      Inc. (Herein incorporated by reference from the Registration
                      Statement on
                      Form SB-2/A filed with the Securities and Exchange Commission
                      on September
                      25, 2006.)10.2
                  Joint
                      Venture
                      Agreement, dated April 26, 2004 and amended on June 1, 2004,
                      by and
                      between Sierra Mining and Minerals, Inc., a Nevada corporation,
                      and Minera
                      Rio Tinto S.A. de C.V., a Mexican company (Herein incorporated
                      by
                      reference from the Registration Statement on Form SB-2/A filed
                      with the
                      Securities and Exchange Commission on September 25,
                      2006.)10.3
                  Amendment
                      to
                      Joint Venture Agreement dated June 1, 2004. (Herein incorporated
                      by
                      reference from the Registration Statement on Form SB-2/A filed
                      with the
                      Securities and Exchange Commission on September 25,
                      2006.)10.4
                  SHARE
                      OPTION
                      AGREEMENT among Minera Rio Tinto, S.A. de C.V. a corporation
                      duly
                      incorporated and validly existing pursuant to the laws of the
                      United
                      Mexican States and having an office at Pascual Orozco No. 2117
                      - A
                      Chihuahua, State of Chihuahua, Mexico 31310 and Sunburst Acquisitions
                      IV,
                      Inc., a corporation duly incorporated and validly existing
                      pursuant to the
                      laws of the State of Colorado, USA and having an office at
                      Suite 206, 595
                      Howe St., Vancouver, B.C. Canada V6C 2T5 (Herein incorporated
                      by reference
                      from the Registration Statement on Form SB-2/A filed with the
                      Securities
                      and Exchange Commission on September 25, 2006.)10.5
                  AGREEMENT
                      made and entered in the City of Chihuahua, State of Chihuahua
                      as of the
                      18th day of August, 2005 among COMPAÑÍA MINERA DE NAMIQUIPA, S. A. DE C.
                      V. a company duly incorporated and validly existing pursuant
                      to the laws
                      of the United Mexican States, and MINERA RIO TINTO, S. A. DE
                      C. V. a
                      company duly incorporated and validly existing pursuant to
                      the laws of the
                      United Mexican States, and MARIO HUMBERTO AYUB TOUCHE having
                      a domicile at
                      San Antonio No. 2036 Chihuahua, Chihuahua and SUNBURST MINING
                      DE MÉXICO,
                      S. A. DE C. V., a company duly incorporated and validly existing
                      pursuant
                      to the laws of the United Mexican States (herein incorporated
                      by reference
                      from the Company’s report on Form 8-K for report date August 22, 2005 and
                      filed with the Securities and Exchange Commission on August
                      25,
                      2005).10.6
                  AGREEMENT
                      made and entered at the City of Chihuahua, State of Chihuahua
                      on this the
                      18th day of August of the year 2005, among MINERA RIO TINTO,
                      S. A. DE C.
                      V. a company duly incorporated and validly existing pursuant
                      to the laws
                      of the United Mexican States, and SUNBURST MINING DE MÉXICO, S. A. DE C.
                      V. a company duly incorporated and validly existing pursuant
                      to the laws
                      of the United Mexican States (Encino Gordo) (Herein incorporated
                      by
                      reference from the Registration Statement on Form SB-2/A filed
                      with the
                      Securities and Exchange Commission on September 25,
                      2006.)10.7
                  OPERATOR’S
                      AGREEMENT dated effective as of the 18th day of August, 2005,
                      among Minera
                      Rio Tinto, S.A. de C.V. a corporation duly incorporated and
                      validly
                      existing pursuant to the laws of the United Mexican States
                      and having an
                      office at Pascual Orozco No. 2117 - A Chihuahua, State of Chihuahua,
                      Mexico 31310, and Sunburst de Mexico, S.A. de C.V. a corporation
                      duly
                      incorporated and validly existing pursuant to the laws of the
                      United
                      Mexican States and having an office at Suite 5, Avenida del
                      Mar No.1022
                      Zona Costera, Mazatlan, State of Sinaloa, Mexico (Herein incorporated
                      by
                      reference from the Registration Statement on Form SB-2/A filed
                      with the
                      Securities and Exchange Commission on September 25,
                      2006.)
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  10.8
                  ASSIGNMENT
                      OF
                      CONTRACT AGREEMENT made and entered in the City of Chihuahua,
                      State of
                      Chihuahua as of this the 18th day of August, 2005 among MINERA
                      RIO TINTO,
                      S. A. DE C. V. a company duly incorporated and validly existing
                      pursuant
                      to the laws of the United Mexican States, and CORPORATIVO MINERO,
                      S.A. DE
                      C.V. a company duly incorporated and validly existing pursuant
                      to the laws
                      of the United Mexican States, and SUNBURST MINING DE MÉXICO, S. A. DE C.
                      V. a company duly incorporated and validly existing pursuant
                      to the laws
                      of the United Mexican States (herein incorporated by reference
                      from the
                      Company’s report on Form 8-K for report date August 22, 2005 and filed
                      with the Securities and Exchange Commission on August 25,
                      2005).10.9
                  ASSIGNMENT
                      OF
                      CONTRACT AGREEMENT made and entered in the City of Chihuahua,
                      State of
                      Chihuahua as of this the 18th day of August, 2005, among MINERA
                      RIO TINTO,
                      S. A. DE C. V. a company duly incorporated and validly existing
                      pursuant
                      to the laws of the United Mexican States, and RAFAEL FERNANDO
                      ASTORGA
                      HERNÁNDEZ, having a domicile at Calle República de Uruguay No. 706 of the
                      City of Chihuahua, Chih, and SUNBURST MINING DE MÉXICO, S. A. DE C. V. a
                      company duly incorporated and validly existing pursuant to
                      the laws of the
                      United Mexican States (San Antonio) (herein incorporated by
                      reference from
                      the Company’s report on Form 8-K for report date August 22, 2005 and filed
                      with the Securities and Exchange Commission on August 25,
                      2005).10.10
                  ASSIGNMENT
                      OF
                      CONTRACT AGREEMENT made and entered in the City of Chihuahua,
                      State of
                      Chihuahua as of this the 18th day of August, 2005 among MINERA
                      RIO TINTO,
                      S. A. DE C. V. a company duly incorporated and validly existing
                      pursuant
                      to the laws of the United Mexican States, having an office
                      at Av. Pascual
                      Orozco Number 2117- Altos, La Cima, C. P. 31310, Chihuahua,
                      Chihuahua, and
                      MINERA RACHASA, S.A. DE C.V., a company duly incorporated and
                      validly
                      existing pursuant to the laws of the United Mexican States,
                      and having an
                      office at Niños Héroes No. 410 Colonia Centro, Chihuahua, Chihuahua (RFC
                      BMM-900120-8B6), and SUNBURST MINING DE MÉXICO, S. A. DE C. V. a company
                      duly incorporated and validly existing pursuant to the laws
                      of the United
                      Mexican States (San Francisco) (herein incorporated by reference
                      from the
                      Company’s report on Form 8-K for report date August 22, 2005 and filed
                      with the Securities and Exchange Commission on August 25,
                      2005).10.11
                  THE
                      NEW
                      AGREEMENT entered into on December 8, 2005 among the Company,
                      Sunburst de
                      Mexico, and MRT (herein incorporated by reference from the
                      Company’s
                      current report on Form 8-K for report date December 8, 2005
                      and filed with
                      the Securities and Exchange Commission on December 14,
                      2005).10.12
                  Funds
                      Escrow
                      Agreement dated July 2005, among Sunburst Acquisitions IV,
                      Inc.,
                      Investment Fund, Ltd., Alpha Capital AG and Stonestreet LP,
                      and Grushko
                      & Mittman, P.C. (herein incorporated by reference from the Company’s
                      current report on Form 8-K dated July 1, 2005 and filed with
                      the
                      Securities and Exchange Commission on August 17, 2005).10.13
                  Repayment
                      Agreement dated July 15, 2005 by and among Sunburst IV, Inc.
                      and
                      Investment Fund, Ltd., Alpha Capital AG and Stonestreet LP.
                      (herein
                      incorporated by reference from the Company’s current report on Form 8-K
                      dated July 1, 2005 and filed with the Securities and Exchange
                      Commission
                      on August 17, 2005).10.14
                  Consulting
                      Agreement dated July 1, 2005 between Tracy A. Moore and Sunburst
                      Acquisitions IV, Inc. (herein incorporated by reference from
                      the Company’s
                      current report on Form 8-K dated July 1, 2005 and filed with
                      the
                      Securities and Exchange Commission on August 17, 2005).10.15
                  Consulting
                      Agreement with G.M. Capital Partners, Ltd. dated January 30,
                      2006
                      (incorporated by reference from Current Report on Form 8-K
                      filed with the
                      Securities and Exchange Commission on February 7,
                      2006).10.17
                  Amendment
                      to
                      the New Agreement, dated April 6, 2006 by and among Mexoro
                      Minerals, Ltd.,
                      Sunburst Mining de Mexico S.A. de C.V., and Minera Rio Tinto,
                      S.A. de C.V.
                      (Herein incorporated by reference from the Registration Statement
                      on Form
                      SB-2/A filed with the Securities and Exchange Commission on
                      September 25,
                      2006.)
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  10.18
                  Addendum
                      To
                      Purchase Contract Of Mining Rights To Lump Sum Entered Into
                      On May 6, 2004
                      by Corporativo Minero, S.A. De C.V. And Sunburst Mining De
                      Mexico, S.A. De
                      C.V., dated March 24, 2006 (Herein incorporated by reference
                      from the
                      Registration Statement on Form SB-2/A filed with the Securities
                      and
                      Exchange Commission on September 25, 2006.)10.22
                  Original
                      Agreement between MRT and Corportivo Minero dated 2004 concerning
                      the
                      Cieneguita property (herein incorporated by reference from
                      the
                      Registration Statement on Form SB-2/A filed with the Securities
                      and
                      Exchange Commission on December 18, 2006.)10.23
                  Agreement
                      between MRT and La Empresa Denominada Minera Rachasa dated
                      2004 concerning
                      the San Francisco concessions (Herein incorporated by reference
                      from the
                      Registration Statement on Form SB-2/A filed with the Securities
                      and
                      Exchange Commission on September 25, 2006.)31.1
                  Certification
                      of Chief Executive Officer of Mexoro
                      Minerals Ltd. pursuant to Rule 13a-14(a)/15d-14(a).
                      *31.2
                  Certification
                      of Chief Financial Officer of Mexoro
                      Minerals Ltd. pursuant to Rule 13a-14(a)/15d-14(a).
                      *32.1
                  Certification
                      of Chief Executive Officer of Mexoro
                      Minerals Ltd. pursuant to 18 U.S.C. Section 1350. *32.2
                  Certification
                      of Chief Financial Officer of Mexoro
                      Minerals Ltd. pursuant to 18 U.S.C. Section 1350.
                      *
 
 *filed
            herewith
 
 **SIGNATURE**
 
 In
            accordance with
            the requirements of the Exchange Act, the registrant caused this report
            to be
            signed on its behalf by the undersigned, thereunto duly authorized.
 
 **MEXORO
            MINERALS LTD.**
 
 
 
 
 By:
            /S/ Robert
            Knight
 Robert
            Knight,
            President and Director
 Date: March
            16, 2007
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