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EX-31.1 - CERTIFICATION - Sonora Resources Corp.exhibit31-1.htm
EX-32.2 - CERTIFICATION - Sonora Resources Corp.exhibit32-2.htm
EX-31.2 - CERTIFICATION - Sonora Resources Corp.exhibit31-2.htm
EX-32.1 - CERTIFICATION - Sonora Resources Corp.exhibit32-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 29, 2012

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from _____________ to ______________

Commission File Number: 000-54268

SONORA RESOURCES CORP.
(Exact Name of Registrant as Specified in its Charter)

Nevada 27-1269503
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
   
Cerro del Padre #11, Rinconada de los Pirules, Guadalupe,  
Zacatecas Mexico 98691
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number including area code: 1-877-513-7873

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.
Yes [X]     No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [   ] Accelerated filer [   ]
Non-accelerated filer [   ] Smaller reporting company [X]

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:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class Outstanding as of April 16, 2012
Common Stock, $.001 par value 96,697,837


SONORA RESOURCES CORP.

TABLE OF CONTENTS

   
  PART I - FINANCIAL INFORMATION
   
Item 1. Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
   
  PART II - OTHER INFORMATION
   
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosure
Item 5. Other Information
Item 6. Exhibits
   
Signature Page
Certifications
  Exhibit 31.1
  Exhibit 31.2
  Exhibit 32


FORWARD-LOOKING STATEMENTS

This Report on Form 10-Q contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms, variations of such terms or the negative of such terms. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such statements address future events and conditions concerning, among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs, and the risk factors set forth under the heading “Risk Factors” herein and in our Annual report on Form 10-K for the fiscal year ended November 30, 2011, filed on January 27, 2012.

As used in this Form 10-Q, “we,” “us,” and “our” refer to Sonora Resources Corp. and its wholly-owned subsidiary, Finder Plata S.A. de C.V., a company organized under the laws of Mexico, which are also sometimes collectively referred to as the “Company” or “Sonora Resources” unless otherwise noted.

YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS

The forward-looking statements made in this report on Form 10-Q relate only to events or information as of the date on which the statements are made in this report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents that we reference in this report, including documents referenced by incorporation, completely and with the understanding that our actual future results may be materially different from what we expect or hope.


PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SONORA RESOURCES CORP AND SUBSIDIARY (Formerly NATURE’S CALL BRANDS INC.)
A DEVELOPMENT STAGE COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012
(Unaudited)

Financial Statements-
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income/Loss
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements


SONORA RESOURCES CORP. AND SUBSIDIARY (Formerly NATURE'S CALL BRANDS INC.)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEETS

    February 29, 2012     November 30, 2011  
ASSETS            
             
CURRENT ASSETS:            
       Cash and cash equivalents $  44,950   $  62,095  
       Consumption and deferred tax receivable   52,383     30,276  
       Prepaid expense   13,662     17,247  
               Total current assets   110,995     109,618  
             
OTHER ASSETS            
       Mining interest- Los Amoles   282,000     282,000  
       Mining interest- Jalisco (First Majestic Silver Corp.)   3,400,000     3,400,000  
       Mining interest- Ayones   287,111     174,131  
             
       TOTAL ASSETS $  4,080,106   $  3,965,749  
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
CURRENT LIABILITIES:            
       Accounts payable and accrued liabilities $  68,118   $  45,156  
       Convertible demand promissory note   605,000     400,000  
               Total current liabilities   673,118     445,156  
             
COMMITMENTS AND CONTINGENCIES   -     -  
             
STOCKHOLDERS' EQUITY            
             
        Common stock - $0.001 par value, 500,000,000 shares authorized, 96,697,837
            and 96,664,600 shares issued and outstanding at 2/29/12 and 11/30/11, respectively
 
51,148
   
51,115
 
       Additional paid in capital   4,914,394     4,765,321  
       (Deficit) accumulated during the exploration stage   (1,560,442 )   (1,262,226 )
       Unrealized gain (loss)   1,888     (33,617 )
               Total stockholders' equity   3,406,988     3,520,593  
             
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $  4,080,106   $  3,965,749  

The accompanying notes are an integral part of these financial statements.


SONORA RESOURCES CORPORATION AND SUBSIDIARY (formerly NATURE'S CALL BRANDS INC.)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/LOSS

                December 3, 2007  
    Three Months Ended,     (Inception) to  
    February 29, 2012     February 28, 2011     February 29, 2012  
                   
REVENUE $  -   $  -   $  11,254  
COST OF SALES   -     -     8,186  
GROSS PROFIT   -     -     3,068  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   159,205     105,878     827,320  
EXPLORATION EXPENSE   17,173     9,155     201,800  
(LOSS) BEFORE OTHER EXPENSE   (176,378 )   (115,033 )   (1,026,052 )
                   
OTHER INCOME (EXPENSE):                  
         Interest expense   (121,838 )   -     (535,659 )
         Foreign exchange gain   -     5     1,269  
         Total other expense   (121,838 )   5     (534,390 )
                   
NET LOSS BEFORE INCOME TAX   (298,216 )   (115,028 )   (1,560,442 )
                   
INCOME TAX   -     -     -  
                   
NET LOSS $  (298,216 ) $  (115,028 ) $  (1,560,442 )
                   
                   
Basic and diluted loss per common share attributable to Sonora Resources Corp. common shareholders-
         Basic and diluted loss per share $  (0.00 ) $  (0.00 )      
                   
         Weighted average shares of common stock outstanding- basic and diluted   96,697,837     85,250,000        

The accompanying notes are an integral part of these financial statements.


SONORA RESOURCES CORP. AND SUBSIDIARY (Formerly NATURE'S CALL BRANDS INC.)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS

                December 3, 2007  
    Three Months Ended,     (Inception) to  
    February 29, 2012     February 28, 2011     February 29, 2012  
                   
CASH FLOWS FROM OPERATING ACTIVITIES:                  
       Net (loss) $  (298,216 ) $  (115,028 ) $  (1,560,442 )
       Adjustments to reconcile net loss to net cash (used in) operating activities            
                             Stock based compensation expense   29,173     17,615     196,619  
                             Accrued interest on convertible note   119,900     -     534,146  
                             Consulting and management fees forgiven   -     -     4,500  
       Changes in operating assets and liabilities:                  
               Accounts receivable   -     -     1,510  
               Consumption and deferred tax receivable   (22,107 )   -     (55,685 )
               Prepaid expenses   3,585     2,681     (10,838 )
               Accounts payable - trade and accrued expenses   22,962     35,807     31,649  
CASH (USED IN) OPERATING ACTIVITIES   (144,703 )   (58,925 )   (858,541 )
                   
CASH FLOWS FROM INVESTING ACTIVITIES:                  
       Mineral interest   (112,980 )   -     (328,938 )
NET CASH (USED IN) INVESTING ACTIVITIES:   (112,980 )   -     (328,938 )
                   
CASH FLOWS FROM FINANCING ACTIVITIES:                  
       Issuance of common stock   -     -     286,500  
       Convertible demand promissory note   205,000     -     605,000  
       Loan payable   -     -     300,000  
       Loan from shareholders   -     -     9,800  
NET CASH PROVIDED BY FINANCING ACTIVITIES   205,000     -     1,201,300  
                   
EFFECT OF FOREIGN CHANGE RATE ON CASH   35,538     -     31,129  
                   
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (17,145 )   (58,925 )   44,950  
                   
CASH AND CASH EQUIVALENTS, beginning of period   62,095     202,069     -  
                   
CASH AND CASH EQUIVALENTS, end of period $  44,950   $  143,144   $  44,950  
    -              
Supplemental disclosures of cash flow information:                  
       Interest paid $  -   $  -   $  1,665  

The accompanying notes are an integral part of these financial statements.


SONORA RESOURCES CORP. AND SUBSIDIARY (Formerly NATURE'S CALL BRANDS INC.)
A DEVELOPMENT STAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2012

1.    Nature of Operations and Going Concern

Sonora Resources Corp. (formerly Nature’s Call Brands, Inc.) (the “Company” or “Sonora Resources”) was incorporated under the laws of the State of Nevada on December 3, 2007 with a business plan to sell and distribute water treatment systems for residential and commercial use. In September of 2010, the business of the Company was changed to the acquisition, exploration and development of mineral resources, with emphasis on gold and silver. Efforts in the area of water treatment were then abandoned.

The Company is a mining exploration company focused on the acquisition and development of prospective silver opportunities in Mexico. It owns interests in the Los Amoles Property consisting of 1,630 hectares located in Sonora; the Jalisco Group of Properties, consisting of mining claims totaling 5,240 hectares located in Jalisco; and the Ayones Group of Properties consisting of numerous mining claims totaling 770 hectares in Jalisco. Sonora Resources is based in Guadalupe, Zacatecas, Mexico.

The Company is currently in the development stage as defined in ASC 915 “Accounting and Reporting for Development Stage Enterprises” and has minimal operations.

The Company has incurred a cumulative net loss since inception on December 3, 2007 to February 29, 2012 of $1,560,442 and has no source of operating revenue. While management of the Company believes that the Company will be successful in its planned operating activities under its business plan and capital formation activities, there can be no assurance that it will be successful in the mining development and exploration business or the formation of sufficient capital such that it will generate adequate revenues to earn a profit or sustain its operations.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of February 29, 2012, the Company had a working capital deficit of $562,123 (November 30, 2011 – working capital of $335,538). These and other factors raise doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

Effective October 12, 2010, the Company increased its authorized capital from 75,000,000 shares of common stock to 500,000,000 shares of common stock par value $0.001 per share. On November 8, 2010, we implemented a forward split, payable by way of the declaration of a share dividend on the issued and outstanding shares of our common stock, to be paid by the issuance of 20 additional shares for each issued and outstanding share held by stockholders of record as of November 7, 2010. Fractional shares, if any, were rounded up to the next whole number. There was no change in the par value of the Common Shares. All stock amounts have been retroactively restated to reflect the forward split.

On July 12, 2011, the Company established a 100% owned subsidiary, Finder Plata S.A. de C.V. (“Finder Plata”) for the conduct of the Company’s business in Mexico.

UNAUDITED FINANCIAL STATEMENTS

The accompanying unaudited financial statements of Sonora Resources Corp. have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The financial statements for the periods ended February 29, 2012 and February 28, 2011 are unaudited and include all adjustments necessary to a fair statement of the results of operations for the periods then ended. All such adjustments are of a normal, recurring nature. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for a full fiscal year. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2011 as filed with the Securities and Exchange Commission (the “SEC”) on January 27, 2012.


2.    Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with the accounting principles generally accepted in the United States.

Principles of Consolidation

These consolidated financial statements include our consolidated balance sheets, results of operations, changes in stockholders’ equity (deficit) and cash flows. All material intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements.

Use of Estimate

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from those estimates.

Cash and Cash Equivalents

The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents.

The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. Beginning December 31, 2010 and through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. In Mexico, the Company’s cash balances are currently fully insured by the Institute for the Protection of Bank Savings.

The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. As of February 29, 2012, the Company had no uninsured cash amounts.

Foreign Currency Translation

The Company maintains its accounting records in U.S. Dollars. The Company’s Finder Plata records are maintained in Mexican Pesos. At the transaction date, each asset, liability, revenue and expense involves foreign currencies is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities involving foreign currencies are remeasured by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations. The Company’s currency exposure is insignificant and immaterial and we do not use derivative instruments to reduce our potential exposure to foreign currency risk.

Mineral Property Rights Acquisition and Exploration and Development Expenditures

Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property, plant and equipment costs, to determine if these costs are in excess of their net recoverable amount annually or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs is based upon expected future cash flows and/or estimated salvage value in accordance with ASC 360, Accounting for Impairment or Disposal of Long-Lived Assets.


Fair Value of Financial Instruments

ASC 820 “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and amounts due to related parties. Fair values were assumed to approximate carrying value for these financial instruments, except where noted. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The Company is operating outside the United States of America and has significant exposure to foreign currency risk due to the fluctuation of currency in which the Company operates and U.S. dollars.

Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment in accordance with FASB ASC 360, Property, Plant, and Equipment. Under FASB ASC 360, these assets are tested for recoverability annually or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount, if any, when the carrying value of the asset exceeds the fair value. As at February 29, 2012, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

Asset Retirement Obligations

The Company applies ASC 410, Accounting for Asset Retirement Obligations which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. ASC 410 requires the Company to record a liability for the present value using a credit-adjusted risk free interest rate, of the estimated site restoration costs with a corresponding increase to the carrying amount of the related long-lived assets. The liability is accreted until it has been fully incurred and the asset is amortized over the life of the related assets. Adjustments are made for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made. As of February 29, 2012, the Company does not have any asset retirement obligations.

Comprehensive Loss

The Company applies ASC 220, Comprehensive Income. ASC 220 establishes standards for the reporting and display of comprehensive income or loss, requiring its components to be reported in a financial statement. For the years ended November 30, 2011 and 2010 our only component of comprehensive loss was the net loss reported in the statement of operations and other comprehensive loss.

Stock-Based Compensation

The Company adopted ASC 718, Compensation – Stock-Based Compensation, to account for its stock options and similar equity instruments issued. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. ASC 718 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid.

Loss per Common Share

Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the periods. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of February 29, 2012, there were options outstanding for the purchase of 1,400,000 common shares and 2,420,000 shares of common stock related to a convertible demand note.


promissory note and warrants for the issuance of 1,000,000 shares of common stock which could potentially dilute future earnings per share. As of February 28, 2011, there were options outstanding for the purchase of 1,400,000 common shares which could potentially dilute future earnings per share.

Income Taxes

The Company accounts for income taxes pursuant to FASB ASC 740, Income Taxes. Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.

New Accounting Pronouncements

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to the consolidated financial statements.

3.    Agreements

Mining Option Agreement – Los Amoles, Mexico Property

On October 4, 2010, the Company entered into a Letter of Intent with Yale Resources, whereby Yale Resources has agreed to grant the Company an option to acquire a 70% interest in its wholly owned Los Amoles property located in the municipality of Villa Hidalgo, Sonora State, Mexico. The Chief Executive Officer of Yale Resources, Ian Foreman, is a member of the Company’s Advisory Board.

On November 26, 2010, the Company entered into the definitive Option Agreement with Yale Resources to acquire a 70% interest in Los Amoles property. Pursuant to the Option Agreement, the Company can earn up to 70% of interest before December 31, 2013 by performing, paying or issuing the following:

(a)

making $50,000 payment to Yale Resources prior to December 1, 2013 as follows:

     
(i)

$25,000 upon the signing of the Letter of Intent dated October 4, 2010 (paid); and

(ii)

an additional $25,000 upon signing of the Option Agreement (paid)

     
(b)

incurring or funding a total of $900,000 in expenditures on the Los Amoles Property prior to December 1, 2013 as follows:

     
(i)

$200,000 on or before the first anniversary of the date of the Option Agreement ($100,000 of which are to be advanced with 6 months of the date of the Option Agreement). The Company incurred project expenses of $180,099 for the year ending November 30, 2011 and Yale Resources has accepted that an additional $30,000 will be spent by January 2012 (spent);

(ii)

an additional $300,000 on or before the secondary anniversary of the date of Option Agreement; and

(iii)

an additional $400,000 on or before the third anniversary of the date of Option Agreement;

Pursuant to the Option Agreement, Yale Resources will act as an operator and agreed to expend these funds pursuant to an agreed budget, however, if the Option Agreement is terminated by the Company prior to $100,000 of these expenditures being incurred, Yale will retain any unspent funds. Yale will charge a management fee of 15% on all expenditures which will be considered as part of the above required expenditures funding.

(c)

issuing shares of the Company to Yale totaling 1,000,000 shares prior to December 1, 2013 as follows:




  (i)

200,000 shares on signing of the Option Agreement (issued);

  (ii)

an additional 200,000 shares on or before the six month anniversary of the date of the Option Agreement (issued);

  (iii)

an additional 200,000 shares on or before the first anniversary of the date of the Option Agreement (issued);

  (iv)

an additional 200,000 shares on or before the second anniversary of the date of the Option Agreement; and

  (v)

an additional 200,000 shares on or before the third anniversary of the date Option Agreement.

Upon the fulfillment of the above noted, the Company would own an undivided 70% interest in the Los Amoles Property as tenants in common, with a 30% participating interest to be retained by Yale Resources. Also, upon the acquisition of a 70% interest in the Los Amoles Property, the Company and Yale agreed to bear the cost of further exploration and development in proportion to the respective interests in the Los Amoles Property on a joint venture basis.

The Company has commenced an underground work program and completed a NI 43-101 compliant technical report to define the potential vein structure and outcroppings and prepare for a planned drilling program later in 2012.

Mining Option Agreement- Jalisco, Mexico Property

Effective January 27, 2011, the Company entered into a Letter of Intent with First Majestic Silver Corp. (NYSE:AG and TSX:FR). On April 15, 2011, the Company entered into a mining option agreement with First Majestic Silver Corp. (“First Majestic”) and Minera El Pilon S.A. de C.V., a subsidiary of First Majestic, whereby the Company has been granted an option (the “Option”) to acquire up to a 90% interest in certain mineral properties wholly owned by First Majestic located in the state of Jalisco, Mexico (the “Property”).

In consideration for the Option, the Company agreed to:

(a)

issue an aggregate of 10,000,000 shares of common stock with a fair market value of $0.34 per common share to First Majestic upon execution of the agreement (issued);

   
(b)

incur an aggregate of $3,000,000 over the first three years to earn a 50% interest in the Property (the “First Option”);

   
(c)

upon the exercise of the First Option, the Company will have the sole and exclusive option (the “Second Option”) to acquire an additional 20% interest in and to the Property by incurring an additional $2,000,000 no later than the fifth anniversary of the Agreement; and

   
(d)

upon the exercise of the Second Option, the Company will have the sole and exclusive option to acquire an additional 20% interest in and to the Property by completing a bankable feasibility study no later than the seventh anniversary of the Agreement.

First Majestic will retain a 10% free carried interest and a 2.375% net smelter return.

The Company agreed to file a registration statement with the Securities and Exchange Commission qualifying the shares and to maintain the registration statement effective for a period of not less than two years. If a registration statement has not been filed and declared effective within twelve months from the date of the Agreement or if the Company fails to maintain the registration statement effective for a period of two years, it has agreed to issue an additional 2,000,000 shares to First Majestic.

Juan Miguel Ríos Gutiérrez, our Chief Executive Officer, was an employee of First Majestic until January 2011.

Mining Option Agreement- Ayones, Mexico Property

On August 10, 2011, the Company entered into a Mining Option Agreement (“Grupo Agreement”) with IMMSA Grupo México. Under the terms of the Grupo Agreement, they granted us an option to acquire a 100% interest in certain mining properties representing the Ayones project located in the municipality of Etzatlan, Jalisco State, Mexico.

Under the terms of the Grupo Agreement between Sonora’s wholly owned Mexican subsidiary Finder Plata and Grupo Mexico subsidiary, Industrial Minera Mexico, S.A. de C.V. (“Grupo Mexico”), Finder Plata has the right to purchase 100% of two mining concessions on 49 hectares, the old La Mazata Mine, the data of past diamond drill programs, studies and maps as well as the assets located within the mine areas in exchange for payments over three years. The Grupo Agreement requires a Net Smelter Royalty (“NSR”) payment of 2.0% by Finder Plata with Finder Plata having a first option to purchase the NSR for $ 1 million.

Under the terms of the Grupo Agreement, Finder Plata is required to pay the following cash payments totaling $1 million to exercise the option:



(a)

A payment of US $100,000 with the execution of the Grupo Agreement (paid);

  
(b)

A payment of US $100,000 within six months of execution of the Grupo Agreement (paid);

  
(c)

A payment of US $100,000 within twelve months of execution of the Grupo Agreement;

  
(d)

A payment of US $175,000 within eighteen months of execution of the Grupo Agreement;

  
(e)

A payment of US $175,000 within twenty-four months of execution of the Grupo Agreement;

  
(f)

A payment of US $175,000 within thirty months of execution of the Grupo Agreement; and,

  
(g)

A payment of US $175,000 within thirty-six months of execution of the Grupo Agreement.

In addition, Finder Plata is required to spend a total of $1 million in exploration expenditures on the Ayones property as follows:

$200,000 within twelve months of execution of the Grupo Agreement; An additional $300,000 on or before the second anniversary of execution of the Grupo Agreement; and An additional $500,000 on or before the third anniversary of execution of the Grupo Agreement.

Closing of the transactions contemplated in the Grupo Agreement on or before the third anniversary of execution requires the parties to enter into a Definitive Agreement. The Definitive Agreement would require Finder Plata to begin commercial production thirty months after the execution of the Definitive Agreement. If commercial production is not started in the thirty month period, Finder Plata is required to pay 15% NSR over the future capacity of the mine as established in a feasibility study completed by Finder Plata.

Mining Option Agreement- Corazon, Mexico Property

On September 5, 2011, the Company entered into Mining Option Agreements (“Corazon Agreements”) with eight Mexican citizens. Under the terms of the Corazon Agreements, the Company was granted an option to acquire a 100% interest in certain mining properties of the Corazon group of claims located in the municipality of Etzatlan, Jalisco State, Mexico.

Under the terms of the agreement between Sonora's wholly owned Mexican subsidiary Finder Plata S.A. de C.V. (“Finder Plata”) and the eight Mexican Citizen owner’s (“Corazon Owner’s”), Finder Plata has the right to purchase 96.7% now and the remaining 3.3 % upon the receipt of a court order for five mining concessions on 721 hectares surrounding the old La Mazata Mine and Ayones claims and prospect recently acquired by Finder Plata in the Mexican state of Jalisco on August 10, 2011. The Company has paid $100,000 as of February 29, 2012, which is capitalized as mining interest in the Los Amoles region.

Under the terms of the option agreement, to exercise the option, the Company is required to pay several cash installments totaling $800,000 as detailed below:

(a)

A payment of $96,700 with the execution of the Corazon Agreements (paid) and an additional $ 3,300 within six months of execution of the Corazon Agreements for the remaining 3.3% (paid);

  
(b)

A payment of an additional $55,000 within twelve months of execution of the Corazon Agreements;

  
(c)

A payment of an additional $55,000 within twenty four months of execution of the Corazon Agreements;

  
(d)

A payment of an additional $55,000 within thirty six months of execution of the Corazon Agreements; and,

  
(e)

A payment of an additional $535,000 within forty two months of execution of the Corazon Agreements.

Closing of the transactions contemplated in the Corazon Agreements on or before the forty second month anniversary of execution of the Corazon Agreements requires the parties to enter into a Definitive Agreement.

The Company has concluded phase one field work and established an estimated reserve of approximately 199,000 troy ounces of silver and 1,000 troy ounces of gold. With the commitment to purchase $600,000 in fixed assets, the Company expects to realize revenues of $7.6 million at a silver price of $29.30 and a gold price of $1,606 per troy ounce.

Title to mineral properties and mining and exploration rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties when the Company acquires title to mineral properties either individually or through the acquisition of


subsidiaries, the conveyance of such titles can be time consuming and subject to the interpretation of Mexican laws. The Company cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that the Company will have valid title to its mining properties. The Company relies on title opinions by legal counsel who base such opinions on the laws of countries in which the Company operates.

4.    Convertible Demand Promissory Notes

On January 10, 2012, the Company executed and delivered to Coventry Capital LLC (“Holder”) a Convertible Demand Promissory Note (the “January Note”) in the principal amount of $125,000 in favor of Holder with simple interest of 10% per annum payable in arrears. Pursuant to the terms and conditions of the January Note, the unpaid principal of the January Note and any accrued and unpaid interest thereon (“Debt”) shall be immediately due and payable by the Company upon the earlier of (i) written demand by Holder at any time, or (ii) January 9, 2014 (the “Maturity Date”). Holder may convert the Debt, in whole but not in part, into shares of the Company’s common stock at a price of $0.25 per share as set forth in the January Note, at any time on or before the Maturity Date. The Company may repay the January Note in full at any time without penalty or premium.

On February 14, 2012, the Company executed and delivered to Coventry Capital LLC (“Holder”) a Convertible Demand Promissory Note (the “February 14 Note”) in the principal amount of $50,000 in favor of Holder with simple interest of 10% per annum payable in arrears. Pursuant to the terms and conditions of the February 14 Note, the unpaid principal of the February 14 Note and any accrued and unpaid interest thereon (“Debt”) shall be immediately due and payable by the Company upon the earlier of (i) written demand by Holder at any time, or (ii) February 13, 2014 (the “Maturity Date”). Holder may convert the Debt, in whole but not in part, into shares of the Company’s common stock at a price of $0.25 per share as set forth in the February 14 Note, at any time on or before the Maturity Date. The Company may repay the February 14 Note in full at any time without penalty or premium.

On February 27, 2012, the Company executed and delivered to Coventry Capital LLC (“Holder”) a Convertible Demand Promissory Note (the “February 27 Note”) in the principal amount of $30,000 in favor of Holder with simple interest of 10% per annum payable in arrears. Pursuant to the terms and conditions of the February 27 Note, the unpaid principal of the February 27 Note and any accrued and unpaid interest thereon (“Debt”) shall be immediately due and payable by the Company upon the earlier of (i) written demand by Holder at any time, or (ii) February 26, 2014 (the “Maturity Date”). Holder may convert the Debt, in whole but not in part, into shares of the Company’s common stock at a price of $0.25 per share as set forth in the February 27 Note, at any time on or before the Maturity Date. The Company may repay the February 27 Note in full at any time without penalty or premium.

In connection with the issuance of the January 10, 2012, February 14, 2012, and February 27, 2012 Notes totaling $205,000, the Company recorded a beneficial conversion feature and interest expense of $119,900 for the three months ended February 29, 2012.

5.    Capital Stock

On January 16, 2012, the Company issued 33,237 shares of restricted common stock at in accordance with the Restricted Stock Award Agreement dated June 15, 2011 at $0.361 per share for a total value of $12,000 to Mark Scott, our CFO, related to his June 15, 2011 Consulting Agreement. The shares do not have registration rights.

A summary of the warrants issued as of February 29, 2012 was as follows:

    February 29, 2012  
          Weighted  
          Average  
          Exercise  
    Shares     Price  
Outstanding at November 30, 2011   -   $ -  
Issued   1,000,000     0.350  
Outstanding at February 29, 2012   1,000,000   $ 0.350  
Exercisable at end of period   1,000,000        

A summary of the status of the warrants outstanding as of February 29, 2012 was as follows:



    February 29, 2012  
    Weighted     Weighted           Weighted  
    Average     Average           Average  
Number of   Remaining     Exercise     Shares     Exercise  
Warrants   Life     Price     Exerciseable     Price  
1,000,000   2.33   $ 0.350     1,000,000   $ 0.350  

At February 29, 2012, vested warrants of 1,000,000 had an aggregate intrinsic value of $300,000.

6.    Stock Options

On December 21, 2010, the Company adopted its 2010 Stock Option Plan pursuant to which it may grant stock options to acquire up to a total of 8,500,000 shares of its common stock. The Board of Directors currently acts as the plan administrator of this plan. On January 21, 2011, 1,400,000 options were granted pursuant to the plan with 400,000 such options granted to consultants with an exercise of $0.20 per share, vested over 2 years and mature on January 19, 2014 and 1,000,000 such options granted to the new president of the Company with an exercise price of $0.20 per share, vested over 5 years and mature on January 21, 2016. During the three months ended February 29, 2012, the Company recorded stock based compensation of $17,173 in connection with the stock options granted during the period.

A summary of the changes in stock options for the period ended February 29, 2012 is presented below:

    Options Outstanding  
          Weighted  
    Number of     Average  
    Shares     Exercise Price  
Balance, November 30, 2011   1,400,000   $  0.20  
Granted   0   $  0  
Balance, February 29, 2012   1,400,000   $  0.20  

The fair value of each option granted has been estimated as of the date of the grant using the Black-Scholes option pricing model with the following assumptions:

  February 29, 2012
Expected volatility 167.15% - 185.32%
Risk-free interest rate 1.185% - 2.05%
Expected life 3 – 5 years
Dividend yield 0.0%

A summary of weighted average fair value of stock options granted during the period ended February 29, 2012 as follows:

    Weighted     Weighted  
    Average     Average  
    Exercise     Fair  
November 30, 2011   Price     Value  
Exercise price is greater than market price at grant date: $  0.20   $  0.15  

The Company has the following options outstanding and none exercisable:

February 29, 2012   Options outstanding  
          Weighted     Weighted  
          Average     average  
Range of   Number     Remaining     exercise  
exercise prices   of shares     contractual     price  
          life        
$0.20   1,400,000     3.13 years     0.20  

As at February 29, 2012, 450,000 stock options are exercisable.


7.    Related Party Transactions

Related party transactions are discussed in other Notes.

8.    Commitments, Contingencies and Legal Proceedings

There are no pending legal proceedings against us that are expected to have a material adverse effect on our cash flows, financial condition or results of operations.

On January 21, 2011, the Company entered into a consulting agreement with Juan Miguel Ríos Gutiérrez whereby Mr. Gutiérrez was appointed Chief Executive Officer at $5,000 per month for a term of indefinite period unless terminated by either party with sixty days advance written notice to the other party.

On January 18, 2011, the Company entered into a Consulting Agreement (“Corcom Agreement”) with Corcom, Inc. (“Corcom”), pursuant to which Corcom is to provide certain administrative and related services including, but not limited to, accounting, coordination of annual audits and quarterly reviews, management and review of legal documentation and ensuring timely fulfillment of all regulatory filings. As consideration for the performance of the consulting services under the agreement, we agreed to pay Corcom the sum of US$2,000 per month for the duration of the agreement, exclusive of any applicable sales tax. The agreement is for an indefinite period unless terminated by either party with sixty days advance written notice to the other party. On July 15, 2011, the Corcom Agreement was replaced by an identical Consulting Agreement with Jamco Capital Partners Inc.

On June 15, 2011, the Company entered into a Consulting Agreement (the “Agreement”) with Mark E. Scott, whereby Mr. Scott will serve as Chief Financial Officer of the Company. Concurrently with the Company’s entrance into the Agreement, the Company entered into a Restricted Stock Award Agreement with Mr. Scott (the “RSA”). Pursuant to the Agreement and in connection with his service as Chief Financial Officer of the Company, Mr. Scott will receive: (i) US $4,000 cash per month and (ii) shares of Company common stock equaling US $3,000 per month calculated on a monthly basis, such shares to be vested and issued quarterly (the “Shares”). In accordance with the RSA, the determination of the number of Shares issuable to Mr. Scott is determined by dividing US $3,000 by the average bid and ask price of the Company’s common stock as reported by Bloomberg beginning June 15, 2011 and on the last day of each following month thereafter (each a “Determination Date”). If a Determination Date falls on a date on which the Company’s common stock is not reported by Bloomberg, the Determination Date shall be the next reportable trading day.

On September 15, 2011, the Company issued 14,600 shares of restricted common stock at $0.514 per share for a total value of $7,501 related to Mr. Scott’s June 15, 2011 Consulting Agreement. On January 16, 2012, the Company issued 33,237 shares of restricted common stock at in accordance with the Restricted Stock Award Agreement dated June 15, 2011 at $0.361 per share for a total value of $12,000 to Mark Scott, our CFO, related to his June 15, 2011 Consulting Agreement. The shares do not have registration rights.

As of February 29, 2012, the Company accrued compensation of $4,500 related to the Restricted Stock Award Agreement.

9.    Subsequent Events

The Company evaluates subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements are issued.


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements and Associated Risks.

This report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for future operations. In some cases, you can identify forward-looking statements by the use of terminology such as “may”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue” or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this report include statements about:

  • our plan of operations;

  • our future exploration programs and results;

  • our expectations regarding the impact of various accounting policies;

  • our future capital expenditures; and

  • our future investments in and acquisitions of mineral resource properties.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:

  • risks and uncertainties relating to the interpretation of sampling results, the geology, grade and continuity of mineral deposits;

  • risks and uncertainties that results of initial sampling and mapping will not be consistent with our expectations;

  • mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;

  • the potential for delays in exploration activities; risks related to the inherent uncertainty of cost estimates and the potential for unexpected costs and expenses;

  • risks related to commodity price fluctuations;

  • the uncertainty of profitability based upon our limited history;

  • risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration project;

  • risks related to environmental regulation and liability;

  • risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;

  • risks related to tax assessments;

  • political and regulatory risks associated with mining development and exploration; and

  • the risks in the section entitled “Risk Factors”.

Any of these risks could cause our Company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements contained in this quarterly report.

While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

In this report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.


Plan of Operation

Sonora Resources Corp. (formerly Nature’s Call Brands, Inc.) (the “Company” or “Sonora Resources”) was incorporated under the laws of the State of Nevada on December 3, 2007 with a business plan to sell and distribute water treatment systems for residential and commercial use. In September of 2010, the business of the Company was changed to the acquisition, exploration and development of mineral resources, with emphasis on gold and silver. Efforts in the area of water treatment were then abandoned.

The Company is a mining exploration company focused on the acquisition and development of prospective silver opportunities in Mexico. It owns interests in the Los Amoles Property consisting of 1,630 hectares located in Sonora; the Jalisco Group of Properties, consisting of mining claims totaling 5,240 hectares located in Jalisco; and the Ayones Group of Properties consisting of numerous mining claims totaling 770 hectares in Jalisco. Sonora Resources is based in Guadalupe, Zacatecas, Mexico.

We have commenced an underground work program at the Los Amoles property and completed a NI 43-101 compliant technical report to define the potential vein structure and outcroppings and prepare for a planned drilling program later in 2012.

We have concluded phase one field work at the Corazon property and established an estimated reserve of approximately 199,000 troy ounces of silver and 1,000 troy ounces of gold. With the commitment to purchase $600,000 in fixed assets, the Company expects to realize revenues of $7.6 million at a silver price of $29.30 and a gold price of $1,606 per troy ounce.

The Company is currently in the development stage as defined in ASC 915 “Accounting and Reporting for Development Stage Enterprises” and has minimal operations.

The Company has incurred a cumulative net loss since inception on December 3, 2007 to February 29, 2012 of $1,560,442 and has no source of operating revenue. While management of the Company believes that the Company will be successful in its planned operating activities under its business plan and capital formation activities, there can be no assurance that it will be successful in the mining development and exploration business or the formation of sufficient capital such that it will generate adequate revenues to earn a profit or sustain its operations.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of February 29, 2012, the Company had a working capital deficit of $562,123 (November 30, 2011 – working capital of $335,538). These and other factors raise doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

Effective October 12, 2010, the Company increased its authorized capital from 75,000,000 shares of common stock to 500,000,000 shares of common stock par value $0.001 per share. On November 8, 2010, we implemented a forward split, payable by way of the declaration of a share dividend on the issued and outstanding shares of our common stock, to be paid by the issuance of 20 additional shares for each issued and outstanding share held by stockholders of record as of November 7, 2010. Fractional shares, if any, were rounded up to the next whole number. There was no change in the par value of the Common Shares. All stock amounts have been retroactively restated to reflect the forward split.

On July 12, 2011, the Company established a 100% owned subsidiary, Finder Plata S.A. de C.V. (“Finder Plata”) for the conduct of the Company’s business in Mexico.

Key Market Priorities

Our primary key market priority will be to develop our Los Amoles, Jalisco, Ayones and Corazon, Mexico properties in order to determine whether they possess commercially exploitable quantities of gold, silver, and other metals. We cannot guarantee that the Los Amoles, Jalisco, Ayones and Corizon, Mexico properties will be successful or that any project that we embark upon will be successful. Our goal is to build our Company into a successful mineral exploration and development Company.

Another key market priority is to consider a listing on the TSXV Exchange in Canada.

Primary Market Risks

We are exposed to various risks related to the volatility of the price of silver, our reserve estimates, operating as a going concern, unique difficulties and uncertainties in mining exploration ventures, our need for additional financing, and a volatile market price for our common stock. These risks and uncertainties are discussed in more detail below in this item.


Results of Operations

The following table presents certain consolidated statement of operations information and presentation of that data as a percentage of change from period-to-period.

(dollars in thousands)

    Three Months Ended,  
    February 29,     February 28,              
    2012     2011   $ Variance     % Variance  
                         
Revenue $  -   $  -   $  -        
Cost of sales   -     -     -        
Gross profit   -     -     -        
General and administrative expenses   159     106     53     -50.0%  
Exploration expenses   17     9     8     -100.0%  
Operating loss   (176 )   (115 )   (61 )   -53.0%  
Other income (expense):                        
                         
                       Interest expense   (122 )   -     (122 )   -100.0%  
                       Foreign exchange gain   -     -     -     -  
Total other expense   (122 )   -     (122 )   -100.0%  
Net loss   (298 )   (115 )   (183 )   -159.1%  

For the three months ended February 29, 2012 compared to the three months ended February 28, 2011

We have not generated any revenues during the three month periods ended February 29, 2012 and February 28, 2011.

We acquired the Los Amoles, Jalisco, Ayones and Corazon, Mexico properties in order to determine whether they possess commercially exploitable quantities of gold, silver, and other metals.

General and administrative expenses for the three month period ended February 29, 2012 increased $53,327 to $159,205 as compared to $105,878 for the three month period ended February 28, 2011. The increase in our general and administrative expenses was primarily attributable to expansion of business activities and consisted of increases in consulting fees expense of $20,000, insurance costs of $11,000, and costs related to public company expenses such as investor relations and filing fees of $16,000.

Exploration expenses for the three month period ended February 29, 2012 increased $8,018 to $17,173 as compared to $9,155 for the three month period ended February 28, 2011.

Net loss for the three months ended February 29, 2012 was $298,216 as compared to a net loss of $115,028 for the three months ended February 28, 2011 for the reasons discussed above.

Liquidity and Capital Resources

As of February 29, 2012, we had cash of $44,950 and a working capital deficit of $562,123 as compared to cash of $62,095 and a working capital deficit of $335,538 as of November 30, 2011. This increase in our working capital deficit is primarily due to the issuance of convertible debentures for exploration expenses related to Los Amoles and Corazon properties and a payment related to the Ayones mining option agreement. We have incurred operating losses since inception, and this is likely to continue until we mine the Corazon property.

We require funds to enable us to address our minimum current and ongoing expenses. Presently, we do not generate any revenue and expect to incur significant operating and capital expenses. Management projects that we may require an additional approximately $1,833,300 to fund our operating expenditures for the next twelve month period for the Los Amoles, Jalisco, Ayones and Corizon, Mexico properties. Details are as follows:



Expenditures   Amount  
Mining exploration expenses $  1,433,300  
Future property acquisitions   -  
General and administration expenses   400,000  
   Total $  1,833,300  

Operating Activities

Net cash used in operating activities for the three month period ended February 29, 2012 was $144,703, compared with net cash used of $58,925 for the three month period ended February 28, 2011. This amount was primarily related to a net loss of $298,216, offset by depreciation and amortization and other non-cash expenses of $149,073.

Investing Activities

Net cash used in investing activities for the three month period ended February 29, 2012 was $112,980. This related to an option payment for the Ayones properties.

Financing Activities

Net cash provided by financing activities for the three month period ended February 29, 2012 was $205,000. This is primarily due to the issuance of a convertible demand promissory note for $205,000.

We must raise additional funds or achieve profitable operations in order to continue as a going concern. We may not be successful in our efforts to raise additional funds. Even if we are able to raise additional funds through the sale of our securities or through the issuance of debt securities, or loans from our director or financial institutions, our cash needs could be greater than anticipated in which case we could be forced to raise additional capital. At the present time, we have no commitments for any additional financing, and there can be no assurance that, if needed, additional capital will be available to us on commercially acceptable terms or at all.

These conditions raise substantial doubt as to our ability to continue as a going concern, which may make it more difficult for us to raise additional capital when needed. If we cannot get the needed capital, we may have to curtail or cease our operations.

The Company’s unaudited contractual cash obligations as of February 29, 2012 are summarized in the table below:

          Less Than                 Greater Than  
Contractual Cash Obligations   Total     1 Year     1-3 Years     3-5 Years     5 Years  
Operating leases $ 0   $ 0   $ 0   $ 0   $ 0  
Capital lease obligations   0     0     0     0     0  
Note payable   605,000     605,000     0     0     0  
Mining expenditures   8,803,300     1,433,300     4,835,000     2,535,000     0  
Acquisitions   0     0     0     0     0  
  $ 9,408,300   $ 2,038,300   $ 4,835,000   $ 2,535,000   $ 0  

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies

The application of GAAP involves the exercise of varying degrees of judgment. On an ongoing basis, we evaluate our estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies (see summary of significant accounting policies more fully described in Note 2 to the financial statements set forth in this report), the following policies involve a higher degree of judgment and/or complexity:


Foreign Currency Translation

The Company maintains its accounting records in U.S. Dollars. Our Finder Plata records are maintained in Mexican Pesos. At the transaction date, each asset, liability, revenue and expense involving foreign currencies is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities involving foreign currencies are re-measured by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations. The Company’s currency exposure is insignificant and immaterial and we do not use derivative instruments to reduce our potential exposure to foreign currency risk.

Mineral Property Rights Acquisition and Exploration and Development Expenditures

Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property, plant and equipment costs, to determine if these costs are in excess of their net recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs is based upon expected future cash flows and/or estimated salvage value in accordance with ASC 360, Accounting for Impairment or Disposal of Long-Lived Assets.

Stock-Based Compensation

The Company adopted ASC 718, Compensation – Stock-Based Compensation, to account for its stock options and similar equity instruments issued. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. ASC 718 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid.

Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment in accordance with FASB ASC 360, Property, Plant, and Equipment. Under FASB ASC 360, these assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount, if any, when the carrying value of the asset exceeds the fair value. As of February 29, 2012, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

Going Concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual financial statements for the year ended November 30, 2011, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further financing. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations or for our entry into the mining exploration and development industry. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Foreign Currency Risk

We are exposed to foreign currency risks. We do not trade in hedging instruments or “other than trading” instruments.


Interest Rate Risk

We are not exposed to interest rate risks. We do not trade in hedging instruments or “other than trading” instruments and is not exposed to interest rate risks. We believe that the impact of a 10% increase or decline in interest rates would not be material to our financial condition and results of operations.

ITEM 4. CONTROLS AND PROCEDURES.

a) Evaluation of Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management to allow for timely decisions regarding required disclosure.

As required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, our management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as February 29, 2012. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and our management necessarily was required to apply its judgment in evaluating and implementing our disclosure controls and procedures. Based upon the evaluation described above, our management concluded that they believe that our disclosure controls and procedures were not effective, as of February 29, 2012, in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Management identified the weaknesses discussed below.

Identified Material Weakness

A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. Management identified material weaknesses during its assessment of internal controls over financial reporting as of February 29, 2012 as follows:

We have a board which consists of the Chief Executive Officer and we do not have an audit committee. An audit committee would improve oversight in the establishment and monitoring of required internal controls and procedures. We expect to expand the board and establish an audit committee during 2012.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the framework in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our principal executive officer and principal financial officer concluded that our internal control over financial reporting were not effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with United States generally accepted accounting principles.

The effectiveness of our internal control over financial reporting as of February 29, 2012 has not been audited by PMB Helin Donovan, LLP, an independent registered public accounting firm.

CHANGES IN INTERNAL CONTROL

There has been no change in our internal control over financial reporting during the quarter ended February 29, 2012 that has materially affected or is likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.


ITEM 1A. RISK FACTORS.

In addition to other information in this report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.

RISK FACTORS

You should carefully consider the risks described below together with all of the other information included in our public filings before making an investment decision with regard to our securities. The statements contained in or incorporated into this document that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following events described in these risk factors actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Company

We have a limited operating history on which to base an evaluation of our business and prospects.

We have been in the business of exploring mineral resource properties since November 2010. As a result, we have never had any revenues from our mining operations. In addition, our operating history has been restricted to the acquisition and exploration of our mineral properties, and this does not provide a meaningful basis for an evaluation of our prospects if we ever determine that we have a mineral reserve and commence the construction and operation of a mine. We have no way to evaluate the likelihood of whether our mineral properties contain any mineral reserves or, if they do, that we will be able to build or operate a mine successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during the period when we are exploring our properties. We therefore expect to continue to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from mining operations and any dispositions of our properties, we will not be able to earn profits or continue operations. At this early stage of our operation, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties, and our failure to do so could have a materially adverse effect on our financial condition. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.

The fact that we have not earned any operating revenues since our incorporation raises substantial doubt about our ability to continue to explore our mineral properties as a going concern.

We have not generated any revenue from operations since our incorporation, and we anticipate that we will continue to incur operating expenses without revenues unless and until we are able to identify a mineral resource in a commercially exploitable quantity on one or more of our mineral properties and we build and operate a mine. At February 29, 2012, we had a working capital deficit of $562,123. We incurred a net loss of $1,153,748 for the fiscal year ended November 30, 2011 and a net loss of $1,560,442 since inception. We will require additional financing to sustain our business operations if we are not successful in earning revenues once exploration is complete. If our exploration programs are successful in discovering reserves of commercial tonnage and grade, we will require significant additional funds in order to place our properties into commercial production. Should the results of our planned exploration require us to increase our current operating budget, we may have to raise additional funds to meet our currently budgeted operating requirements for the next 12 months. As we cannot assure a lender that we will be able to successfully explore and develop our mineral properties, we will probably find it difficult to raise debt financing from traditional lending sources. We have traditionally raised our operating capital from sales of equity and debt securities, but there can be no assurance that we will continue to be able to do so. If we cannot raise the money that we need to continue exploration of our mineral properties, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these were to occur, there is a substantial risk that our business would fail. These circumstances led our independent registered public accounting firm, in their report dated January 27, 2012 relative to our audited financial statements for the year ended November 30, 2011, to comment about our Company’s ability to continue as a going concern. When an auditor issues a going concern opinion, the auditor has substantial doubt that the Company will continue to operate indefinitely and not go out of business and liquidate its assets. These conditions raise substantial doubt about our Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event our Company cannot continue in existence. We continue to experience net operating losses.


Economic and political developments in Mexico may adversely affect our business.

All of our operations and assets are located in Mexico. As a result, our financial condition, results of operations and business may be affected by and are subject to the general condition of the Mexican economy, the devaluation of the Mexican peso as compared to the U.S. Dollar, Mexican inflation, interest rates, regulation, taxation, social instability and other political, social and economic developments in or affecting Mexico, including changes in the laws and policies that govern foreign investment, as well as changes in United States laws and regulations relating to foreign trade and investment, over which we have no control. There can be no assurance as to the future effect of any such changes on our results of operations, financial condition, or cash flows.

Fluctuations in foreign currency rates, in particular the Mexican peso, may materially affect our results of operations.

The Company carries on its primary business activity outside of the United States. Accordingly, it is subject to the risks associated with fluctuation of the rate of exchange of other foreign currencies, in particular the Mexican peso, the currency in which much of the Company’s costs are paid, and the United States dollar, the currency for calculating the Company’s sales of gold and silver based on the world’s commodity markets. Such currency fluctuations may materially affect the Company’s financial position and results of operations.

All of our assets, our sole director and most of our officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or our directors and officers.

All of our assets are located outside the United States. In addition, our sole director and Chief Executive Officer is a national and resident of a country other than the United States, and all or a substantial portion of his assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our director and officers, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under United States federal and state securities laws against us or our directors and officers.

Our future is dependent upon our ability to obtain financing. If we do not obtain such financing, we may have to cease our exploration activities and investors could lose their entire investment.

There is no assurance that we will operate profitably or generate positive cash flow in the future. We will require additional financing in order to proceed beyond the first few months of our exploration program. We will also require additional financing for the fees we must pay to maintain our status in relation to the rights to our properties and to pay the fees and expenses necessary to become and operate as a public company. We will also need more funds if the costs of the exploration of our existing projects are greater than we have anticipated. We will also require additional financing to sustain our business operations if we are not successful in earning revenues. We may not be able to obtain financing on commercially reasonable terms or terms that are acceptable to us when it is required. Our future is dependent upon our ability to obtain financing. If we do not obtain such financing, our business could fail and investors could lose their entire investment.

We are subject to new corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business.

We may face new corporate governance requirements under the Sarbanes-Oxley Act of 2002, as well as new rules and regulations subsequently adopted by the SEC and the Public Company Accounting Oversight Board. These laws, rules, and regulations continue to evolve and may become increasingly stringent in the future. In particular, under rules proposed by the SEC on August 6, 2006, we are required to include management’s report on internal controls as part of our annual report pursuant to Section 404 of the Sarbanes-Oxley Act. We strive to continuously evaluate and improve our control structure to help ensure that we comply with Section 404 of the Sarbanes-Oxley Act. The financial cost of compliance with these laws, rules, and regulations is expected to remain substantial.

As disclosed in our Quarterly Report on Form 10-Q for the period ended February 29, 2012, our management concluded that our disclosure controls and procedures were not effective due to the presence of the following material weaknesses in internal control over financial reporting:

We do not have an audit committee. An audit committee would improve oversight in the establishment and monitoring of required internal controls and procedures.

Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. We cannot assure you that we will be able to fully comply with these laws, rules, and regulations that address corporate governance, internal control reporting, and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition, and the value of our securities.


Our business is dependent on key executives and the loss of any of our key executives could adversely affect our business, future operations and financial condition.

We are dependent on the services of key executives, including our officers, Mark Scott and Juan Miguel Ríos Gutiérrez, and our sole director Juan Miguel Ríos Gutiérrez. Mr. Gutierrez has many years of experience and an extensive background in the mining industry in general. We may not be able to replace that experience and knowledge with other individuals. We do not have “Key-Man” life insurance policies on our key executives. The loss of our key executives or our inability to attract and retain additional highly skilled employees may adversely affect our business, future operations, and financial condition.

We have limited insurance.

We have limited director and officer insurance and commercial insurance policies. Any significant insurance claims would have a material adverse effect on our business, financial condition and results of operations.

Risks Associated with Mining

Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure

Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications, and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, environmental permitting difficulties and delays, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the mineral claim may not result in the discovery of mineable mineral deposits. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralization, we may decide to abandon our claims. If this happens, our business will likely fail. All of our mineral properties to which we have rights are in the development and exploration stage. There is no assurance that we can establish the existence of any mineral resource on any of these properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business could fail.

Because of the speculative nature of exploration of mineral properties, we may never discover a commercially exploitable quantity of minerals, our business may fail and investors may lose their entire investment.

We plan to conduct mineral exploration on certain mineral properties. The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that additional exploration on these properties will establish that commercially exploitable reserves of minerals exist on these properties. Additional potential problems that may prevent us from discovering any reserves of minerals on these properties include, but are not limited to, unanticipated problems relating to exploration, environmental permitting difficulties and delays, and additional costs and expenses that may exceed current estimates. If we are unable to establish the presence of commercially exploitable reserves of minerals on these properties, our ability to fund future exploration activities will be impeded, we will not be able to operate profitably, and investors may lose all of their investment in our Company.

The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses that could materially and adversely affect our operations.

Exploration for minerals is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result in the discovery of mineralization and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Few properties that are explored are ultimately advanced to the stage of producing mines. Our current exploration efforts are, and any future development or mining operations we may elect to conduct will be, subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties, such as, but not limited to:

  • economically insufficient mineralized material;
  • fluctuations in production costs that may make mining uneconomical;
  • labor disputes;
  • unanticipated variations in grade and other geologic problems;
  • environmental hazards;
  • water conditions;
  • difficult surface or underground conditions;
  • industrial accidents;

  • metallurgical and other processing problems;
  • mechanical and equipment performance problems;
  • failure of pit walls or dams;
  • unusual or unexpected rock formations;
  • personal injury, fire, flooding, cave-ins, and landslides; and
  • decrease in revenues due to lower mineral prices.

Any of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures, and production commencement dates. We currently have no insurance to guard against any of these risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write-down of our investment in these interests. All of these factors may result in losses in relation to amounts spent which are not recoverable.

The potential profitability of mineral ventures depends in part upon factors beyond the control of our Company, and even if we discover and exploit mineral deposits, we may never become commercially viable and we may be forced to cease operations.

The commercial feasibility of mineral properties is dependent upon many factors beyond our control, including the existence and size of mineral deposits in the properties we explore, the proximity and capacity of processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production, and environmental regulation. These factors cannot be accurately predicted and any one or a combination of these factors may result in our Company not receiving an adequate return on invested capital. These factors may have material and negative effects on our financial performance and our ability to continue operations.

Mineralized material is based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.

Unless otherwise indicated, mineralized material presented in our filings with securities regulatory authorities, including the SEC, press releases, and other public statements that may be made from time to time are based upon estimates made by our consultants. When making determinations about whether to advance any of our projects to development, we must rely upon such estimated calculations as to the mineralized material on our properties. Until mineralized material is actually mined and processed, it must be considered an estimate only. These estimates are imprecise and depend on geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. We cannot assure you that these mineralized material estimates will be accurate or that this mineralized material can be mined or processed profitably. Any material changes in estimates of mineralized material will affect the economic viability of placing a property into production and such property’s return on capital. There can be no assurance that minerals recovered in small scale tests will be recovered at production scale. The mineralized material estimates have been determined and valued based on assumed future prices, cut-off grades, and operating costs that may prove inaccurate. Extended declines in market prices for gold and silver may render portions of our mineralized material uneconomic and adversely affect the commercial viability of one or more of our properties and could have a material adverse effect on our results of operations or financial condition.

The construction of mines is subject to all of the risks inherent in construction.

These risks include potential delays, cost overruns, shortages of material or labor, construction defects, and injuries to persons and property. While we anticipate taking all measures which we deem reasonable and prudent in connection with the construction, there is no assurance that the risks described above will not cause delays or cost overruns in connection with such construction. Any delay would postpone our anticipated receipt of revenue and adversely affect our operations. Cost overruns would likely require that we obtain additional capital in order to commence production. Any of these occurrences may adversely affect our ability to generate revenues and the price of our stock.

An adequate supply of water may not be available to undertake mining and production at our properties.

The amount of water that we are entitled to use from wells must be determined by the appropriate regulatory authorities. A determination of these rights is dependent in part on our ability to demonstrate a beneficial use for the amount of water that we intend to use. Unless we are successful in developing a property to a point where it can commence commercial production of silver, gold or other precious metals, we may not be able to demonstrate such beneficial use. Accordingly, there is no assurance that we will have access to the amount of water needed to operate a mine at our properties.

Exploration and exploitation activities are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our Company.

Exploration and exploitation activities are subject to federal, state, and local, and in some cases, foreign laws, regulations, and policies, including laws regulating the removal of natural resources from the ground and the discharge of materials into the


environment. Exploration and exploitation activities are also subject to federal, state, and local, and in some cases, foreign laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment.

Various permits from government bodies are required for drilling operations to be conducted, and no assurance can be given that such permits will be received. Environmental and other legal standards imposed by federal, state, or local authorities may be changed and any such changes may prevent us from conducting planned activities or increase our costs of doing so, which would have material adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Any laws, regulations, or policies of any government body or regulatory agency may be changed, applied, or interpreted in a manner which will alter and negatively affect our ability to carry on our business.

As we face intense competition in the mineral exploration industry, we will have to compete with our competitors for financing and for qualified managerial and technical employees.

Our mineral properties are in Mexico and our competition there includes large, established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may have to compete for financing and we may be unable to acquire financing on terms we consider acceptable. We may also have to compete with the other mining companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or qualified employees, our exploration programs may be slowed down or suspended, which may cause us to cease operations as a Company.

Government regulation may adversely affect our business and planned operations.

Mineral exploration and development activities are subject to various Mexican laws governing prospecting, development, taxes, labor standards and occupational health, mine safety, toxic substances, land use, water use, land claims of local people, and other matters. We cannot assure you that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail our exploration or development of our properties.

The Company’s mining, exploration and development projects could be adversely affected by amendments to such laws and regulations, by future laws and regulations, by more stringent enforcement of current laws and regulations, by changes in policies of México and the United States affecting foreign trade, investment, mining and repatriation of financial assets, by shifts in political attitudes in México and by exchange controls and currency fluctuations. The effect, if any, of these factors cannot be accurately predicted. Further, there can be no assurance that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects.

Our operating costs could be adversely affected by inflationary pressures especially to labor, equipment, and fuel costs.

The global economy is currently experiencing a period of high commodity prices and as a result, the mining industry is attempting to increase production at new and existing projects, while also seeking to discover, explore and develop new projects. This has caused significant upward price pressures in the costs of mineral exploration companies, especially in the areas of skilled labor and drilling equipment, both of which are in tight supply and whose costs are increasing. Continued upward price pressures in our exploration costs may have an adverse impact to our business.

We may not have sufficient funding for exploration which may impair our profitability and growth.

The capital required for exploration of mineral properties is substantial. From time to time, we will need to raise additional cash, or enter into joint venture arrangements, in order to fund the exploration activities required to determine whether mineral deposits on our projects are commercially viable. New financing or acceptable joint venture partners may or may not be available on a basis that is acceptable to us. Inability to obtain new financing or joint venture partners on acceptable terms may prohibit us from continued exploration of such mineral properties. Without successful sale or future development of our mineral properties through joint venture, we will not be able to realize any profit from our interests in such properties, which could have a material adverse effect on our financial position and results of operations.

We have no reported mineral reserves and if we are unsuccessful in identifying mineral reserves in the future, we may not be able to realize any profit from our property interests.

We are a development stage company and have no reported mineral reserves. Any mineral reserves will only come from extensive additional exploration, engineering, and evaluation of existing or future mineral properties. The lack of reserves on our mineral properties could prohibit us from sale or joint venture of our mineral properties. If we are unable to sell or joint venture for development our mineral properties, we will not be able to realize any profit from our interests in such mineral properties, which could


materially adversely affect our financial position or results of operations. Additionally, if we or partners to whom we may joint venture our mineral properties are unable to develop reserves on our mineral properties, we may be unable to realize any profit from our interests in such properties, which could have a material adverse effect on our financial position or results of operations.

Severe weather or violent storms could materially affect our operations due to damage or delays caused by such weather.

Our exploration activities are subject to normal seasonal weather conditions that often hamper and may temporarily prevent exploration activities. There is a risk that unexpectedly harsh weather or violent storms could affect areas where we conduct exploration activities. Delays or damage caused by severe weather could materially affect our operations or our financial position.

Our business is extremely dependent on gold, silver, commodity prices, and currency exchange rates over which we have no control.

Our operations will be significantly affected by changes in the market price of gold, silver and other commodities since the evaluation of whether a mineral deposit is commercially viable is heavily dependent upon the market price of gold, silver and other commodities. The price of commodities also affects the value of exploration projects we own or may wish to acquire. These prices of commodities fluctuate on a daily basis and are affected by numerous factors beyond our control. The supply and demand for gold, silver and other commodities, the level of interest rates, the rate of inflation, investment decisions by large holders of these commodities, including governmental reserves, and stability of exchange rates can all cause significant fluctuations in prices. Such external economic factors are in turn influenced by changes in international investment patterns and monetary systems and political developments. The prices of commodities have fluctuated widely and future serious price declines could have a material adverse effect on our financial position or results of operations.

Estimates of mineralized materials are subject to geologic uncertainty and inherent sample variability.

Although the estimated resources at our existing properties will be delineated with appropriately spaced drilling, there is inherent variability between duplicate samples taken adjacent to each other and between sampling points that cannot be reasonably eliminated. There also may be unknown geologic details that have not been identified or correctly appreciated at the proposed level of delineation. This results in uncertainties that cannot be reasonably eliminated from the estimation process. Some of the resulting variances can have a positive effect and others can have a negative effect on mining and processing operations. Acceptance of these uncertainties is part of any mining operation.

We engage in our operations through a venture that we do not control. We may not be able to materially affect the cost or success of that venture.

Pursuant to our option agreement with Yale Resources, the exploration and development work on our Los Amoles Property is expected to be performed by Minera Alta Vista S.A. de C.V., the Mexican subsidiary of the optionor, Yale Resources. As the operator, Yale Resources makes most of the decisions about the exploration and development of this project. We cannot assure you that Yale Resources or its subsidiaries, affiliates, agents or management will make decisions concerning this project that are reasonable, profitable or in our best interest.

If we establish the existence of a mineral resource on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could fail.

If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.

Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our Company.

Mineral exploration, development and production involve many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages


and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our Company.

If our costs of exploration are greater than anticipated, then we may not be able to complete the exploration program for our properties without additional financing, of which there is no assurance that we would be able to obtain.

We are proceeding with the initial stages of exploration on our Los Amoles Property and properties in Jalisco, Mexico. Our exploration program outlines a budget for completion of the program. However, there is no assurance that our actual costs will not exceed the budgeted costs. Factors that could cause actual costs to exceed budgeted costs include increased prices due to competition for personnel and supplies during the exploration season, unanticipated problems in completing the exploration program and delays experienced in completing the exploration program. Increases in exploration costs could result in our not being able to carry out our exploration program without additional financing. There is no assurance that we would be able to obtain additional financing in this event.

Because of the speculative nature of exploration of mining properties, there is substantial risk that no commercially exploitable minerals will be found and our business will fail.

We have not commenced the initial stage of exploration of our mineral property, and thus have no way to evaluate the likelihood that we will be successful in establishing commercially exploitable reserves of gold, silver or other valuable minerals on our Los Amoles Property or properties in Jalisco, Mexico. The search for valuable minerals as a business is extremely risky. We may not find commercially exploitable reserves of gold, silver or other valuable minerals in our mineral property. Exploration for minerals is a speculative venture necessarily involving substantial risk. The expenditures to be made by us on our exploration program may not result in the discovery of commercial quantities of ore. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan.

As we undertake exploration of our mineral property, we will be subject to compliance with government regulation that may increase the anticipated time and cost of our exploration program, which could increase our expenses.

We will be subject to the mining laws and regulations in Mexico as we carry out our exploration program. We will be required to pay mining taxes to the Mexican government. We will be required to prove our compliance with relevant Mexican environmental and workplace safety laws, regulations and standards by submitting receipts showing the purchase of equipment used for workplace safety or the prevention of pollution or the undertaking of environmental remediation projects before we are able to obtain drilling permits. If our exploration activities lead us to make a decision to go into mining production, before we initiate a major drilling program, we will have to obtain an environmental impact statement authorization. This could potentially take more than 10 months to obtain and could potentially be refused. New regulations, if any, could increase our time and costs of doing business and prevent us from carrying out our exploration program. These factors could prevent us from becoming profitable.

Because our executive officers and directors have other business interests, they may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail.

Juan Miguel Ríos Gutiérrez, our Chief Executive Officer and sole director of our Company, and Mark Scott, our Chief Financial Officer, devote approximately 40% of their working time on providing management services to us. If the demands on our executive officers and sole director from their other obligations increase, they may no longer be able to devote sufficient time to the management of our business. This could negatively impact our business development.

Risks Related to Our Common Stock

Shares of our common stock that have not been registered under the Securities Act of 1933, as amended, regardless of whether such shares are restricted or unrestricted, are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(i) which apply to a “shell company.” In addition, any shares of our common stock that are held by affiliates, including any received in a registered offering, will be subject to the resale restrictions of Rule 144(i).

Pursuant to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is defined as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other assets. As such, we were a “shell company” pursuant to Rule 144 prior to the filing of our Current Report on Form 8-K on November 29, 2010 (which report included “Form 10 Information” under Item 1.01 of that report), and as such, sales of our securities pursuant to Rule 144 were not able to be made until a period of at least twelve months had elapsed from November 29, 2010, the date on which the Company’s Current Report on Form 8-K containing Form 10


information was filed with the Commission reflecting the Company’s status as a non-“shell company.” Now that this one year period has elapsed, it is possible that shareholders holding common stock that is eligible for sale under Rule 144 may seek to sell such stock. Any significant sales of such stock will likely have a negative effect on the price of the Company’s common stock given the currently limited market for the shares. Also, as restricted securities we sell in the future or issue to consultants or employees, in consideration for services rendered or for any other purpose become eligible for sale under Rule 144, any attempted sale of such shares may have a negative effect of the price of the Company’s common stock. Given this risk, it may be harder for us to fund our operations and pay our consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funds through the sale of debt or equity securities unless we agree to register such securities with the Commission, which could cause us to expend additional resources in the future. Although we believe that more than one year has passed since the Company ceased to be a shell company and Form 10 information was filed with the SEC, because Rule 144 is vague and there is limited precedent for the application of Rule 144 to former “shell companies”, our previous status as a “shell company” could prevent us from raising additional funds, engaging consultants, and using our securities to pay for any acquisitions (although none are currently planned), which could cause the value of our securities, if any, to decline in value or become worthless. Lastly, any shares held by affiliates, including shares received in any registered offering, will be subject to the resale restrictions of Rule 144 (i).

If we issue additional shares in the future, it will result in the dilution of our existing shareholders.

Our articles of incorporation authorize the issuance of up to 500,000,000 shares of common stock with a par value of $0.001 per share. Our Board of Directors may choose to issue some or all of such shares to acquire one or more companies or properties and to fund our overhead and general operating requirements. The issuance of any such shares may reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.

Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.

Although our common stock is currently quoted on the OTC Bulletin Board, relatively few of our shares have been purchased or sold on that market. Even when a more active market is established, trading through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

We do not intend to pay cash dividends on any investment in the shares of stock of our Company.

We have never paid any cash dividends and currently do not intend to pay any cash dividends for the foreseeable future. Because we do not intend to declare cash dividends, any gain on an investment in our Company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our Company.

Our stock is categorized as a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations which may limit a shareholder’s ability to buy and sell our stock.

Our stock is categorized as a penny stock. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than US$ 5.00 per share or an exercise price of less than US$ 5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.


FINRA sales practice requirements may also limit a shareholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 16, 2012, we issued 33,237 shares of restricted common stock at in accordance with the Restricted Stock Award Agreement dated June 15, 2011 at $0.361 per share for a total value of $12,000 to Mark Scott, our CFO, related to his June 15, 2011 Consulting Agreement. The shares do not have registration rights.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

No. Description
31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. (1)

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. (1)

32.1

Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

32.2 Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)
101

Interactive data files pursuant to Rule 405 of Regulation S-T.*

(1) Filed herewith.

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Sonora Resources Corp. (the "Registrant") has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

    SONORA RESOURCES CORP.
    (Registrant)
     
     
Date: April 16, 2012    
  By: /s/ Juan Miguel Ríos Gutiérrez
    Juan Miguel Ríos Gutiérrez
    Chief Executive Officer, President, Director and
    Secretary
    (Principal Executive Officer)
     
     
     
Date: April 16, 2012 By: /s/ Mark Scott
    Mark Scott
    Chief Financial Officer
    ( Principal Financial and Accounting Officer)