**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 August 31, 2006**
 
 _
          TRANSITION REPORT
          UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
          the transition
          period from ____ to _____
  **MEXORO
          MINERALS LTD.**
 **(Formerly
          Sunburst Acquisitions IV, Inc.)**
 **(Name
          of
          small business in its charter)**


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


Registrant’s
          telephone number, including area code: (800) 661-7830
 
 Check
          whether the
          issuer (1) filed all reports required to be filed by Section 13 or 15(d)
          of the
          Securities Exchange Act during the past 12 months (or for such shorter
          period
          that the registrant was required to file such reports), and (2) has been
          subject
          to such filing requirements for the past 90 days. Yes X No
          ____
 
 Applicable
          only to
          issuers involved in bankruptcy proceedings during the past five
          years:
 
 Check
          whether the
          issuer has filed all documents and reports required to be filed by Section
          12,
          13 or 15(d) of the Exchange Act after the distribution of securities under
          a
          plan confirmed by a court. Yes ____ No ____
 
 Indicate
          by check
          mark whether the registrant is a shell company (as defined in Rule 12b-2
          of the
          Exchange Act). Yes ____ No X
 
 Applicable
          only to
          corporate issuers:
 State
          the number of
          shares outstanding of each of the issuer's classes of common equity, as
          of the
          latest practicable date: 21,036,102 at October 13, 2006.
 
 Transitional
          Small
          Business Disclosure Format (Check one): Yes __ No X


-1-




***EXPLANATORY
          NOTE***
 
 We
          are filing this Form 10-QSB/A for the period ended August 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 August 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 Acquisitions IV, Inc.)**
 **(An
          Exploration Stage Company)**
 
 **Consolidated
          Financial Statements**
 **August
          31,
          2006**
 **(Unaudited)
          (U.S. Dollars)**














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




-2-




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


**August
                  31,**
                **2006**
                **(Unaudited)**
              **February
                  28,**
                **2006**
                **(Audited)****Assets****Current**Cash
                  and cash
                  equivalents
              
              
              $
              1,534,113
              
              
              $
              479,530Amounts
                  receivable
              
              
              
              97,954
              
              
              
              10,069Prepaid
                  expenses
              
              
              
              -
              
              
              
              48,2691,632,067
              
              
              
              537,868**Equipment
                  (note 5)**
              
              
              
              91,188
              
              
              
              880**Total
                  assets**
              
              
              $
              1,723,255
              
              
              $
              538,748**Liabilities****Current**Accounts
                  payable and accrued liabilities
              
              
              $
              181,633
              
              
              $
              79,124Promissory
                  notes (note 7)
              
              
              
              -
              
              
              
              412,800181,633
              
              
              
              491,924**Convertible
                  debentures (note 8)**
              
              
              
              -
              
              
              
              652,000**Total
                  liabilities**
              
              
              
              181,633
              
              
              
              1,143,924**Stockholders’
                  equity (deficiency)****Capital
                  stock**Preferred
                  stockAuthorized:
                  20,000,000 shares without par value (note 9)Issued:
                  nil
              
              
              
              **-**
              
              
              
              **-**Common
                  stockAuthorized:
                  200,000,000 shares without par valueIssued:
                  21,036,102 (2006 - 12,799,902) (note 10)
              
              
              
              19,304,277
              
              
              
              15,573,977Additional
                  paid-in capital
              
              
              
              7,479,596
              
              
              
              3,991,596Stock
                  subscriptions
              
              
              
              -
              
              
              
              170,000Accumulated
                  deficit from prior operations
              
              
              
              (2,003,427
              )
              
              
              (2,003,427
              )Accumulated
                  deficit during the exploration stage
              
              
              
              (23,252,727
              )
              
              
              (18,338,373
              )Other
                  comprehensive income
              
              
              
              13,903
              
              
              
              1,051**Total
                  stockholders’ equity (deficiency)**
              
              
              
              1,541,622
              
              
              
              (605,176
              )**Total
                  liabilities and stockholders’ equity (deficiency)**
              
              
              $
              1,723,255
              
              
              $
              538,748


Going
          concern (note
          4)
 Commitments
          (note
          6)
 Contingent
          liability (note 14)
 Subsequent
          events
          (note 15)


-3-
 Table
          of Contents




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


**Three
                  Months Ended**
              **Six
                  Months Ended****August
                    31,**
                **2006**
              
              
              **August
                    31,**
                **2005**
              
              
              **August
                    31,**
                **2006**
              
              
              **August
                    31,**
                **2005**
              
              
              **Period
                          from**
                      **Inception
                        of**
                    **Exploration
                      Stage**
                  **(March
                    1, 2004)**
                **To
                  August 31,**
                **2006****Expenses**General
                  and
                  administrative
              $
              227,472
              
              
              70,812
              
              
              797,760
              
              $
              83,864
              
              $
              1,494,507Stock-based
                  compensation
              
              735,250
              
              
              -
              
              
              1,222,500
              
              
              -
              
              
              2,044,705Mineral
                  exploration
              
              352,237
              
              
              -
              
              
              604,498
              
              
              -
              
              
              604,498Acquisition
                  of resource properties
              
              -
              
              
              150,000
              
              
              -
              
              
              150,000
              
              
              15,306,422**Operating
                  loss**
              
              (1,314,959
              )
              
              (220,812
              )
              
              (2,624,758
              )
              
              (233,864
              )
              
              (19,450,132
              )**Other
                  income (expenses)**Interest
                  expense
              
              (15,532
              )
              
              (400
              )
              
              (2,320,973
              )
              
              (1,690
              )
              
              (3,967,157
              )Interest
                  income
              
              18,063
              
              
              -
              
              
              24,118
              
              
              -
              
              
              24,118Gain
                  on
                  settlement of debt (notes 7 & 8)
              
              -
              
              
              -
              
              
              7,259
              
              
              -
              
              
              140,444**Net
                  loss**
              
              (1,312,428
              )
              
              (221,212
              )
              
              (4,914,354
              )
              
              (235,554
              )
              
              (23,252,727
              )**Accumulated
                  deficit during the****exploration
                  stage, beginning (note 2)**
              
              (21,940,299
              )
              
              (13,926,830
              )
              
              (18,338,373
              )
              
              (13,912,488
              )
              
              -**Accumulated
                  deficit during the****exploration
                  stage, ending**
              $
              (23,252,727
              )
              $
              (14,148,042
              )
              
              (23,252,727
              )
              $
              (14,148,042
              )
              $
              (23,252,727
              )**Other
                  comprehensive income**Foreign
                  exchange gain (loss) on translation
              
              1,707
              
              
              (1,578
              )
              
              (30,905
              )
              
              5,133
              
              
              (23,975
              )**Total
                  comprehensive loss**
              $
              (1,310,721
              )
              $
              (222,790
              )
              $
              (4,945,259
              )
              $
              (230,421
              )
              $
              (23,276,702
              )**Total
                  loss per share**- basic and
                  diluted
              $
              (0.70
              )
              $
              (0.13
              )
              $
              (0.30
              )
              $
              (0.14
              )**Weighted
                  average number of shares of****common
                  stock**- basic and
                  diluted
              
              18,882,406
              
              
              1,743,228
              
              
              16,521,139
              
              
              1,740,566




-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


**Six
                  Months Ended****August
                    31,**
                **2006**
              
              
              **August
                    31,**
                **2005**
              
              
              ************Period
                    from************
                  **Inception
                            of**
                        **Exploration
                          Stage**
                      **(March
                        1, 2004)**
                    **To
                      August 31,**
                    **2006****Operating
                  activities**Net
                  loss
              $
              (4,914,354
              )
              $
              (235,554
              )
              $
              (23,252,727
              )Adjustments
                  to reconcile net income (loss) to net cash flowsWrite
                  off of
                  note receivable
              
              -
              
              
              -
              
              
              57,500Acquisition
                  of resource properties for stock
              
              -
              
              
              150,000
              
              
              13,065,000Amortization
              
              3,049
              
              
              -
              
              
              3,049Discount
                  on
                  convertible debenture
              
              -
              
              
              -
              
              
              175,000Non-cash
                  component of gain on settlement of debt
              
              -
              
              
              -
              
              
              (175,000
              )Effect
                  of
                  foreign currency translation on cash
              
              -
              
              
              -
              
              
              (7,878
              )Stock-based
                  compensation
              
              1,222,500
              
              
              -
              
              
              3,657,705Beneficial
                  conversion feature
              
              2,265,500
              
              
              -
              
              
              3,717,500Prepaid
                  expense
              
              48,269
              
              
              -
              
              
              6,480Amounts
                  receivable
              
              (87,884
              )
              
              (163,008
              )
              
              (89,747
              )Customer
                  deposits
              
              -
              
              
              -
              
              
              (44,809
              )Accounts
                  payable and accrued liabilities
              
              102,509
              
              
              31,255
              
              
              159,440**Cash
                  used in operating activities**
              
              (1,360,411
              )
              
              (217,307
              )
              
              (2,728,487
              )**Investing
                  activity**Purchase
                  of
                  property and equipment
              
              (90,308
              )
              
              -
              
              
              (91,188
              )**Cash
                  used in investing activity**
              
              (90,308
              )
              
              -
              
              
              (91,188
              )**Financing
                  activities**Proceeds
                  from
                  notes payable
              
              -
              
              
              5,000
              
              
              562,800Proceeds
                  from
                  convertible debentures
              
              2,240,500
              
              
              -
              
              
              3,692,500Proceeds
                  from
                  exercise of options
              
              -
              
              
              25,000
              
              
              78,000Proceeds
                  from
                  exercise of warrants
              
              50,000
              
              
              -
              
              
              50,000Repayment
                  of
                  notes payable
              
              -
              
              
              (23,100
              )
              
              (178,500
              )Repayment
                  of
                  convertible debentures
              
              -
              
              
              -
              
              
              (530,000
              )Stock
                  subscriptions
              
              (170,000
              )
              
              255,500
              
              
              -Issuance
                  of
                  common stock
              
              375,000
              
              
              -
              
              
              647,109**Cash
                  provided by (used in) financing activities**
              
              2,495,500
              
              
              262,400
              
              
              4,321,909**Inflow
                  of cash and cash equivalents**
              
              1,044,781
              
              
              45,093
              
              
              1,502,234Effect
                  of
                  foreign currency translation on cash
              
              9,802
              
              
              3,795
              
              
              9,802**Cash
                  and cash equivalents, beginning**
              
              479,530
              
              
              35,122
              
              
              22,077**Cash
                  and cash equivalents, ending**
              $
              1,534,113
              
              $
              84,010
              
              $
              1,534,113**Supplemental
                  cash flow information**Interest
                  paid
              
              55,473
              
              $
              -
              
              $
              162,157Common
                  stock
                  issued on conversion of debt
              
              2,917,500
              
              
              -
              
              
              3,217,500Common
                  stock
                  issued on settlement of notes payable
              
              412,800
              
              
              -
              
              
              412,800Shares
                  issued
                  for services
              $
              -
              
              $
              -
              
              $
              90,000





-5-
 Table
          of Contents




**MEXORO
        MINERALS LTD.**
 **(Formerly
        Sunburst Acquisitions IV, Inc.)**
 **(An
        Exploration Stage Company)**
 **Notes
              to
              Consolidated Financial Statements**
 **(Unaudited)
          (U.S. Dollars)**
 
 **1.**
                **BASIS
                    OF PRESENTATION** 
 Mexoro
        Minerals
        Ltd. (formerly Sunburst Acquisitions IV, Inc.) ("Mexoro" or the “Company”) was
        incorporated in the state of Colorado on August 27, 1997 and on February
        15,
        2006 its name was changed to Mexoro Minerals Ltd.  The Company was formed
        to seek out and acquire business opportunities.  Between 1997 and 2003, the
        Company engaged in two business acquisitions and one business opportunity,
        none
        of which generated a significant profit or created a sustainable business.
        All
        were sold or discontinued. Currently the main focus of the Company’s operations
        is in Mexico.





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





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





**2.**
            **RESTATEMENT**


(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
                  shares of common stock, 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**
 **(Unaudited)
          (U.S. Dollars)**
  **2.** **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 shares of common stock 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:




28-Feb-06Restated
              Restated
                in
                    2(a)Additional
                  paid-in capital
              
              
              
              7,402,346
              16,082,346Accumulated
                  deficit
              
              
              
              (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**
 **(Unaudited)
          (U.S. Dollars)**
  **2.** **RESTATEMENTS
            (continued)**
 
 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-August-06
              28-Feb-06Restated
              Originally
                  reported
              Restated
              Restated
                  in
                  2(b)Common
                  stock
              $19,304,277
              $19,314,277
              $15,573,977
              $15,583,977Accumulated
                  deficit
              (25,688,977)
              (25,698,977)
              (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**
 **(Unaudited)
            (U.S. Dollars)**




2.RESTATEMENTS
          (continued)
 
 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-August-06
              28-Feb-06Restated
              Restated
                  in
                  2(c)
              Restated
              Restated
                  in
                  2(c)Additional
                  paid-in capital
              $7,479,596
              $9,915,846
              $3,991,596
              $7,402,346Accumulated
                  deficit
              (23,252,727)
              (25,688,977)
              (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-August-06
              28-Feb-06Restated
              Originally
                  reported
              Restated
              Restated
                  in
                  2(c)Stock-based
                  compensation
              $735,250
              $248,000
              $735,250
              $4,146,000Net
                  loss for
                  the period
              (1,312,428)
              (825,178)
              (4,425,885)
              (7,836,635)Loss
                  per
                  share
              (0.70)
              (0.04)
              (2.03)
              (3.59)




-9-
 Table
          of Contents
  **MEXORO
          MINERALS LTD.**
 **(Formerly
          Sunburst Acquisitions IV, Inc.)**
 **(An
          Exploration Stage Company)**
 **Notes
              to
              Consolidated Financial Statements**
 **(Unaudited)
            (U.S. Dollars)**
  **3.**
                  **SIGNIFICANT
                      ACCOUNTING POLICIES** 
 (a)
                  Principles
                      of
                      consolidation 
 The
              accompanying
              financial statements include the accounts and activities of Mexoro
              Minerals Ltd.
              and its wholly-owned subsidiary, Sunburst
              de Mexico S.A.
              de C.V (“Sunburst de Mexico”) . All intercompany
              transactions have been eliminated in consolidation.
 
 (b)
                  Financial
                      instruments


(i)
            Fairvalue





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





(ii)
            Interest
                rate
                risk





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





(iii)
            Credit
                risk





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





(iv)
            Translation
                risk





The
          Company
          translates the results of non-U.S. operations into U.S. currency using
          rates
          approximating the average exchange rate for the year. The exchange rate
          may vary
          from time to time. Accordingly, there is a risk, as most of the Company’s
          exploration expenditures are in non-U.S. currency.
 
 (c)
              Equipment 
 Equipment
          is
          recorded at cost. Depreciation is provided on a
          declining-balance basis at 30%
          on computer
          equipment, 25% on vehicles and 10% on office equipment.
 
 (d)
              Cash
                  and cash
                  equivalents 
 The
          Company
          considers all highly liquid debt instruments purchased with an original
          maturity
          of three months or less to be cash equivalents.
 
 (e)
              Basic
                  and
                  diluted income (loss) per share 
 The
          Company
          computes income (loss) per share in accordance with SFAS No. 128, " *Earnings
          per
          Share* ",
          which requires
          presentation of both basic and diluted earnings per share (EPS) on the
          face of
          the statement of operations and deficit. Basic EPS is


-10-
 Table
          of Contents




**MEXORO
        MINERALS LTD.**
 **(Formerly
        Sunburst Acquisitions IV, Inc.)**
 **(An
        Exploration Stage Company)**
 **Notes
                  to
                  Consolidated Financial Statements**
 **(Unaudited)
          (U.S. Dollars)**
  **3.** **SIGNIFICANT
            ACCOUNTING POLICIES (Continued)**
 
 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 shares of common stock
            outstanding during the period using the treasury stock method and convertible
            preferred stock using the if-converted method. In computing diluted EPS,
            the
            average stock price for the period is used in determining the number
            of shares
            assumed to be purchased from the exercise of stock options or warrants.
            Diluted
            EPS excludes all dilutive potential shares if their effect is anti-dilutive.
            All
            previously stated share and per share balances have been restated to
            give
            retroactive effect to the 1:50 share consolidation that occurred on
            February 15, 2006.


(f)
            Impairment
                or
                disposal of long-lived assets




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


(g)
              Use
                  of
                  estimates


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





-11-
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          of Contents




**MEXORO
        MINERALS LTD.**
 **(Formerly
        Sunburst Acquisitions IV, Inc.)**
 **(An
        Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 **(Unaudited)
          (U.S. Dollars)**
 **3.** **SIGNI** **FICANT
              ACCOUNTING POLICIES (Continued)**
 
 (h)
                  Consideration
                      of other comprehensive income items 
 SFAS
          No. 130 - *“Reporting
          Comprehensive Income”* ,
          requires
          companies to present comprehensive income (consisting primarily of net
          loss plus
          other direct equity changes and credits) and its components as part of
          the basic
          financial statements.
 
 (i)
                Stock-based
                    compensation 
 Prior
        to March 1,
        2004, the Company accounted for stock-based awards under the recognition
        and
        measurement provisions of Accounting Principles Board Opinion (“APB”) No. 25,
“Accounting for Stock Issued to Employees” using the intrinsic value method of
        accounting, under which compensation expense was only recognized if the exercise
        price of the Company’s employee stock options was less than the market price of
        the underlying common stock on the date of grant.





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





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


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





-12-
 Table
          of Contents




**MEXORO
        MINERALS LTD.**
 **(Formerly
        Sunburst Acquisitions IV, Inc.)**
 **(An
        Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 **(Unaudited)
          (U.S. Dollars)**
 **3.** **SIGNIFICANT
              ACCOUNTING POLICIES (Continued)**
 
 (k)
                  Foreign
                      currency translation 
 Mexoro
              and its
              subsidiary, Sunburst de Mexico, maintain accounting records in their
              functional
              currencies, U.S. dollars and Mexican pesos, respectively.
 
 Mexoro
              and Sunburst
              de Mexico translate foreign currency transactions into the respective
              functional
              currencies in the following manners: at the transaction date, each
              asset,
              liability, revenue and expense is translated into the functional currency
              by the
              use of the exchange rate in effect at that date; at the period end,
              foreign
              currency monetary assets and liabilities are re-evaluated into the
              functional
              currency by using the exchange rate in effect at the balance sheet
              date. The
              resulting foreign exchange gains and losses are included in
              operations.
 
 In
              preparing
              consolidated financial statements, the Company translates the assets
              and
              liabilities of its subsidiary into U.S. dollars at the exchange rate
              in effect
              at the balance sheet date. Revenue and expenses are translated into
              U.S. dollars
              at the average exchange rate for the applicable period. Any gain or
              loss from
              such translations are included in stockholders’ equity as a component of other
              comprehensive income.
 
 (l)
                  Recent
                      accounting pronouncements 
 (i)
                  In
                      December
                      2004, FASB issued a revision of Statement No. 123(R),*“Accounting
                      for Stock-Based Compensation”*.
                      This
                      statement supersedes APB 25 and its related implementation
                      guidance. The
                      revised pronouncement requires that all stock options and warrants
                      be
                      accounted for using the fair value method. This pronouncement
                      does not
                      impact the Company, as the Company has no employees and currently
                      accounts
                      for all options and warrants using the fair value
                      method. 
 (ii)
                  In
                      December
                      2004, the FASB issued SFAS Statement No. 153, “Exchanges of Non-Monetary
                      Assets.” The statement is an amendment of APB Opinion No. 29 to eliminate
                      the exception for non-monetary exchanges of similar productive
                      assets and
                      replaces it with a general exception for exchanges of non-monetary
                      assets
                      that do not have commercial substance. The Company believes
                      that the
                      adoption of this standard will have no material impact on its
                      financial
                      statements.The
                      Company
                      accounts for income taxes in accordance with SFAS No. 109 -*“Accounting
                      for Income Taxes”*.
                      Deferred
                      tax assets and liabilities are recognized with respect to the
                      tax
                      consequences attributable to differences between the financial
                      statement
                      carrying values and tax basis of existing assets and
                      liabilities


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




-13-
 Table
            of Contents


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




**3.** **SIGNIFICANT
          ACCOUNTING POLICIES (Continued)**
 
 (iv)
                In
                    May 2005,
                    FASB issued SFAS No. 154 “*Accounting
                    Changes and Error Corrections - a replacement of APB Opinion
                    No. 20 and
                    FASB Statement No. 3”*.
                    This
                    Statement replaces APB Opinion No. 20, “*Accounting
                    Changes”*,
                    and FASB
                    Statement No. 3, “*Reporting
                    Accounting Changes in Interim Financial Statements”*,
                    and changes
                    the requirements for the accounting for and reporting of a change
                    in
                    accounting principles. This statement applies to all voluntary
                    changes in
                    accounting principles. It also applies to changes required by
                    an
                    accounting pronouncement in the unusual instance that the pronouncement
                    does not include specific transition provisions. When a pronouncement
                    includes specific transition provisions, those provisions should
                    be
                    followed. This statement is effective for accounting changes
                    and
                    corrections of errors made in fiscal years beginning after December
                    15,
                    2005
 
 (v)
                In
                    February
                    2006, the FASB issued SFAS No. 155, “*Accounting
                    for Certain Hybrid Financial Instruments, an amendment of FASB
                    Statements
                    No. 133 and 140”.*This
                    statement permits fair value re-measurement for any hybrid financial
                    instrument that contains an embedded derivative that otherwise
                    would
                    require bifurcation. It establishes a requirement to evaluate
                    interests in
                    securitized financial assets to identify interests that are freestanding
                    derivatives or that are hybrid financial instruments that contain
                    an
                    embedded derivative requiring bifurcation. In addition, SFAS
                    No. 155
                    clarifies which interest-only strips and principal-only strips
                    are not
                    subject to the requirements of Statement 133. It also clarifies
                    that
                    concentrations of credit risk in the form of subordination are
                    not
                    embedded derivatives. SFAS 155 amends Statement 140 to eliminate
                    the
                    prohibition on a qualifying special purpose entity from holding
                    a
                    derivative financial instrument that pertains to a beneficial
                    interest
                    other than another derivative financial instrument. This statement
                    is
                    effective for all financial instruments acquired or issued after
                    the
                    beginning of an entity’s first fiscal year that begins after September 15,
                    2006. The adoption of this standard is not expected to have a
                    material
                    effect on the Company’s results of operations or financial
                    position.
 
 (vi)
                FIN
                    48,*“Accounting
                    for Uncertainty in Income Taxes”*(Interpretation of FASB statement 109). This Interpretation clarifies
                    the
                    accounting for uncertainty in income taxes recognized in an enterprise's
                    financial statements in accordance with FASB Statement No. 109,*“Accounting
                    for Income Taxes”*.
                    This
                    Interpretation prescribes a recognition threshold and measurement
                    attribute for the financial statement recognition and measurement
                    of a tax
                    position taken or expected to be taken in a tax return. This
                    Interpretation also provides guidance on derecognition, classification,
                    interest and penalties, accounting in interim periods, disclosure,
                    and
                    transition. The Company will adopt this interpretation effective
                    March 1,
                    2007.


-14-
 Table
          of Contents




**MEXORO
        MINERALS LTD.**
 **(Formerly
        Sunburst Acquisitions IV, Inc.)**
 **(An
        Exploration Stage Company)**
 **Notes
            to
            Consolidated Financial Statements**
 **(Unaudited)
          (U.S. Dollars)**
 **4.**
                    **GOING-CONCERN**
 
 The
            accompanying
            financial statements have been prepared on a going-concern basis. The
            Company
            has a history of operating losses and will need to raise additional capital
            to
            fund its planned operations. As at August 31, 2006, the Company had working
            capital of $1,450,434 (February 28, 2006 - $45,944) and a cumulative
            loss during
            the exploration stage of $2 3,252,727
            (February
            28, 2006 - $18,338,373). These conditions raise substantial doubt about
            the
            Company’s ability to continue as a going-concern.
 
 **5.**
                  **EQUIPMENT**


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





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





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





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




-15-
 Table
          of Contents





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


**6.** **MINERAL
        PROPERTIES (Continued)**





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





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





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





The
      following are
      additional material terms of the New Agreement:





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





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





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





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





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




-16-
 Table
            of Contents




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




**7.**
            **PROMISSORY
                NOTES**





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





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





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





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





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





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





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





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





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




-17-
 Table
          of Contents




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


**8.** **CONVERTIBLE
      DEBENTURES (Continued)**





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





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





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





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





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





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





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






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




**9.**
            **PREFERRED
                STOCK**





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


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


**Number**
                **of
                  Shares**
              **Amount**Balance,
                  February 28, 2006
              12,799,902
              $15,573,977Issued
                  pursuant to private placement
              550,000
              275,000Issued
                  pursuant to settlement of promissory notes
              1,651,200
              412,800Issued
                  pursuant to private placement
              200,000
              100,000Issued
                  pursuant to exercise of convertible debt
              5,835,000
              2,917,500Issued
                  pursuant to exercise of warrants
              50,000
              50,000Shares
                  returned to treasury
              (50,000)
              (25,000)Balance,
                  August 31, 2006
              21,036,102
              $19,304,277





On
          April 3, 2006
          and May 31, 2006 the Company issued 550,000 and 200,000 shares
          of common
          stock respectively pursuant to a private placement unit offering. Units
          consisted of one share of common stock and one-half of one warrant. Each
          full
          warrant entitles the investor to purchase an additional share of the Company’s
          common stock at a price of $1.00 per share and is exercisable until April
          30,
          2008.
 
 On
          March 4, 2006,
          the Company agreed to issue 1,651,200 shares of common stock at a price
          of $0.25
          per share to settle $412,800 in promissory notes payable (note 7). On April
          6,
          2006, these shares were issued.
 
 On
          July 5, 2006,
          the Company issued 5,835,000 shares of common stock on the exercise of
          $2,917,500 of convertible debt at a price of $0.50 per share.
 
 On
          August 10, 2006,
          the Company issued 50,000 shares of common stock on the exercise of 50,000
          warrants where each warrants was exercisable into shares of common stock
          at a
          price of $1.00 per share.
 
 On
          August 15, 2006,
          the Company returned to treasury 50,000 shares of common stock that were
          issued
          but not delivered pending payment with respect to the convertible debt
          converted
          into shares of common stock on July 5, 2006.


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


**11.**
            **STOCK
                COMPENSATION PROGRAM**





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





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





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





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





The
      options are
      summarized as follows:





Options
              Weighted
                    Average
                  Exercise
                PriceOutstanding
                  at February 28, 2006
              930,000
              $
                  0.54Granted
              150,000
              1.04Outstanding
                  at August 31, 2006
              1,080,000
              $0.59




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


**1** **1.** **STOCK
        COMPENSATION PROGRAM (Continued)**





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





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





The
          Company has
          reserved 1,080,000 shares of common stock in the event that these options
          are
          exercised.
 
 For
          the quarter
          ended August 31, 2006, stock-based compensation expenses totalled $248,000
          (2005
          - $nil), with an offsetting amount to additional paid in
          capital.





**12.**
            **WARRANTS**





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





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





Unless
        terminated
        earlier as a result of failure to vest, the Series B and Series C Warrants
        will
        each expire on December 31, 2007, and the Series D and Series E Warrants
        will
        each expire on December 31, 2008. Stock-based compensation of $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 8). These warrants expire on April
        30,
        2008, and are redeemable by the Company, at $.01 per share, in the event
        the
        Company’s Common Stock closes with a bid price, on average, over $3.00 per share
        for a consecutive 20 day period. On August 10, 2006, 50,000 warrants were
        exercised into 50,000 shares of common stock at a price of $1.00 per share.
        On
        August 15, 2006, 25,000 warrants were cancelled due to non-payment of funds
        with
        respect to a convertible debt subscription in the amount of $25,000 (note
        10).





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


**1** **2.** **WARRANTS
        (Continued)**





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





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





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





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





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





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





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





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




-22-
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**MEXORO
      MINERALS LTD.**


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


**(An
      Exploration Stage Company)**


**Notes
          to
          Consolidated Financial Statements**
 **(Unaudited)
        (U.S. Dollars)**


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





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





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


**15.**
                **SUBSEQUENT
                    EVENT**
  Promissory
            Notes




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




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**ITEM
          2.** **MANAGEMENT'S
          DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS**
 
 **CAUTIONARY
          STATEMENT REGARDING FORWARD-LOOKING
          STATEMENTS**


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





**Overview**




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





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





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





**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.





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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.
  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 other 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
          hired 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
          expected the
          Phase 1 exploration program to cost approximately $200,000. >From January
          2006 through August 2006, we spent approximately $200,000 on the phase
          1
          exploration of this project. We expect to spend an additional $200,000
          on the
          property by the end of December 2006. Of this, $300,000 will be spent on
          the
          trenching, sampling and assaying on the property. We plan to spend approximately
          $50,000 on column testing to determine the leachability of the ore. The
          balance
          of the funds will be spent in wages, camp costs and general administrative
          costs. The funds will come from our


-25-
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general
          working
          capital. We plan to do some additional column testing to determine the
          leachablity of the ore. The estimated cost for these additional tests will
          be
          approximately $50,000. The funds required for these additional tests will
          come
          from 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 have conducted 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.
 
 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.
 
 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 scientifically conducted and
          monitored for quality control and efficacy. These tests were done to ensure
          that
          the metallurgy of the minerals allows for economic recovery of the precious
          metals using a cyanide heap leach process. The results of the column test
          indicate that up to 98% of the gold contained in the ore samples we took
          could
          be recovered from the ore if the ore is leached for a long enough period.
          Under
          actual mining production conditions in the field, though, we would anticipate
          that the economic recovery levels of the ore would be approximately 70%
          to 75%
          recovery of gold from the ore. The cost of the cyanide needed to produce
          the
          additional gold above the 85% level outweighs the value of the gold recovered.
          We cannot guarantee that we would be able to achieve this level of recovery.
          This is not an estimate of reserves on the property. Additional tests will
          be
          needed to determine the most effective crush size of the ore, the most
          cost
          effective flow rates of the cyanide and most economical leaching time to
          be
          undertaken if we should ever put the property into production. We anticipate
          these additional tests will begin in March 2007 and the tests should be
          completed approximately 90 days thereafter. We hope that these tests will
          help
          us optimize the potential for extracting precious metals from the ore for
          the
          mining operation.
 
 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.


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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. ** T he
          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 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.


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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 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


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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. Of this amount, we have spent approxi mately
          $70,000 from
          March 2006 through the end of August 2006 in our first phase of exploration.
          These funds came 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.


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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
          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.


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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. We have spent $30,000 through the end of August 2006. The balance
          of 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 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.


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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 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**
 
 Revenues
 
 We
        did not earn
        revenues during the three and six months ended May 31, 2006 or 2005 because
        we
        did not have commercial production of any of our properties. We do not
        anticipate earning revenues until such time as we have entered into commercial
        production of our mineral properties, if ever. We are presently in the
        exploration stage of our business. We can provide no assurance that we will
        discover commercially exploitable levels of mineral resources on our properties
        or, if such resources are discovered, that we will enter into commercial
        production of our mineral properties. Interest income is recorded under Other
        Income in the Statement of Operations in the financial statements.
 
 Operating
        Costs
 
 We
        did not incur
        any operating costs during the three and six months ended 2006 and 2005 due
        to
        the fact that we did not achieve production from exploration activities during
        either year.
 
 Expenses
 
 Our
          expenses during
          the three and six months ended August 31, 2006 were $ 1,315,000
          and
          $2,625,000 respectively, compared to $221,000 and $234,000 respectively,
          for the
          three and six months ended


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August
        31, 2005.
        The increase is primarily attributable to higher General and administrative
        expenses as there were no stock based compensation expense and developing
        exploration program in comparative periods in 2005.





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





Three
                  months
                  ended August 31,
              
              Six
                  months
                  ended August 31,2006
              
              2005
              
              2006
              
              2005General
                  and
                  administrative
              $227,472
              
              $70,812
              
              $797,760
              
              $83,864Stock-based
                  compensation
              $735,250
              
              -
              
              $1,222,500
              
              -Mineral
                  Exploration
              $352,237
              
              -
              
              $604,498
              
              -Acquisition
                  of resource properties
              -
              
              $150,000
              
              -
              
              $150,000





The
          increase in
          General and administrative cash expenses relates to higher Management fees
          of
          $83,000 and $146,000 in the three and six months ended August 31, 2006
          respectively, from $12,000 and $12,000 in the three and six months ended
          August
          31, 2005. Finders’ fees increased to $285,000 in the six months ended August 31,
          2006 from $nil in the six months ended August 31, 2005. The increase was
          attributable to two private placements; a unit offering and convertible
          debentures. Accounting and legal fees increased to $37,000 and $78,000
          in the
          three and six months ended August 31, 2006 respectively, from $28,000 and
          $36,000 in the three and six months ended August 31, 2005. The increase
          in fees
          was primarily attributable to higher auditing costs and the cost of regulatory
          filings with the SEC.
 
 Stock-based
          compensation expenses of $735,000 and $1,223,000 in the three and six months
          ended August 31, 2006 compared to $nil in the three and six months ended
          August
          31, 2006. The $248,000 relates to 12.5% vesting amount of the 800,000 stock
          options granted in February 2006 at a price of $0.50 per share. As at August
          31,
          2006, 25% of these stock options have vested. The balance of $487,000 pertains
          to 8,218,000 warrants being expensed equally over eight quarters, starting
          with
          the quarter ended February 28, 2006.


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





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





Loss
 
 Our
          net loss
          increased to $1,312,000 and $4,914,000 for the three and six months ended
          August
          31, 2006 respectively, compared to $221,000 and $236,000 for the three
          and six
          months ended August 31, 2005. The higher losses are attributed to increased
          expenses as stated above and expensing of $496,000 relating to the beneficial
          conversion feature on $2,266,000 of convertible debentures issued between
          March
          and August 2006. We anticipate that we will continue to incur losses until
          such
          time as we can commence the development stage of our operations and achieve
          significant revenues from sales of gold recovered from our Mexican mineral
          properties. There is no assurance that we will be able to commence the
          development stage of our operations at any of our Mexican mineral properties
          or
          achieve revenues.


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**Liquidity
        and Capital Resources**





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





Cash
        and Working
        Capital




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





Under
      our current
      business plan, we will not require additional financing this fiscal year.
      However, we will require additional financing during the current fiscal year
      if
      our planned exploration activities increase. We plan to spend approximately
      $850,000 in the next twelve months to carry out exploration and administration
      activities on our Mexican mineral properties, and in the event that our
      exploration is successful on our Cieneguita Property, we anticipate spending
      a
      further $2,000,000 on equipment and building a plant to put that property into
      production. We anticipate spending approximately $480,000 during the next twelve
      months on general and administrative costs.


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





Cash
        Used in
        Operating Activities





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





Investing
        Activities





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





Financing
        Activities





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





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





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





On
          July 5, 2006,
          the Company issued 5,835,000 shares of common stock on the exercise of
          $2,917,500 of convertible debt at a price of $0.50 per share.
 
 On
          August 10, 2006,
          the Company issued 50,000 shares of common stock on the exercise of 50,000
          warrants where each warrants was exercisable into shares of common stock
          at a
          price of $1.00 per share.
 
 On
          August 15, 2006,
          the Company returned to treasury 50,000 shares of common stock due to
          non-payment of funds with respect to the convertible debt converted into
          shares
          of common stock on July 5, 2006.


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





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





We
          believe that the
          cash on hand derived from the sale of securities totalling $3,693,000 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 $1,450,000 as
        of
        August 31, 2006, and an accumulated deficit during the exploration stage
        of
        $23,253,000. 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**





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Evaluation
          of
          Disclosure 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, 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
          August 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
      4.** **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**





None.








**ITEM
      5.** **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.)




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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.)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.)




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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).




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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.)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.)10.19
              Agreement
                  to
                  Extend August Payment Due Date, entered into on July 18, 2006 by
                  Minera
                  Rio Tinto and Sunburst de 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.)10.20
              Amended
                  Agreement with G.M. Capital Partners, Ltd. dated August 31, 2006
                  (herein
                  incorporated by reference to the Current Report on Form 8-K dated
                  August
                  31, 2006 and filed on September 21, 2006).10.21
              Letter
                  Employment Agreement with Mathew Wunder, dated August 15, 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.)







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.**


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By:
          /S/ Robert
          Knight
 Robert
          Knight,
          President and Director
  Date:
          March 16,
          2007


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