Pan American Goldfields 10K/A 2009 Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K /A

þ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 28, 2009

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

For the transition period from ____ to _____

Commission file number 0-23561

___________________________

MEXORO MINERALS LTD.

(Exact name of registrant as specified in its charter)


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

C. General Retana #706 Col. San Felipe Chihuahua, Chih. Mexico	31203
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 52 (614) 426 5505

Securities registered under Section 12(b) of the Act:

Title of each class

N/A

Securities registered under Section 12(g) of the Act:

Title of Each Class Name of Each Exchange on Which Registered

Common Stock, no par value OTC Bulletin Board

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yeso Noþ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yeso Noþ

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.

Yesþ Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. þ

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 filero Accelerated filero

Non-accelerated filero (Do not check if a smaller reporting company) Smaller reporting companyþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

The aggregate market value of voting Common Stock held by non-affiliates of the Registrant, based upon the average of the closing bid and asked price of Common Stock on the OTC Bulletin Board system on August 29, 2008 of $0.40 was approximately $10,936,555.

As of May 30, 2009, the Registrant had 34,845,493 shares of Common Stock issued and outstanding.

EXPLANATORY NOTE

Mexoro Minerals, Ltd. is filing this Amendment No. 1 on Form 10-K/A (this "Amendment") to its Annual Report on Form 10-K for the fiscal year ended February 28, 2009, which was filed with the Securities and Exchange Commission on June 15, 2009 (the "Original Filing"), to amend certain information primarily relating to Item 8 – Financial Statements and Supplementary Data, Item 9A(T) – Controls and Procedures, and Exhibit 31.1 - Certification.

This Amendment No. 1 on Form 10-K/A does not update other items or disclosures in the Original Filing. This Amendment No. 1 on Form 10-K/A does not reflect events occurring after the filing of the Original Filing or modify or update those disclosures, including any exhibits to the Original Filing affected by subsequent events. Information not affected by the changes described above is unchanged and reflects the disclosures made at the time of the Original Filing. Accordingly, this Amendment No. 1 on Form 10-K/A should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing, including any amendments to those filings.

PART I

ITEM 1. BUSINESS

Background

Mexoro Minerals Ltd. (formerly known as Sunburst Acquisitions IV, Inc.) (“the Company,” or “Mexoro”) was incorporated in the State of Colorado on August 27, 1997. We were formed to seek out and acquire business opportunities. Between 1997 and 2003, we engaged in two business acquisitions and one business opportunity, none of which generated a significant profit or created a sustainable business for us.

On May 3, 2004, we completed a “Share Exchange Agreement” with Sierra Minerals and Mining, Inc. (“Sierra Minerals”), a Nevada corporation, which caused Sierra Minerals to become our wholly owned subsidiary. At the time of the share exchange transaction, Sierra Minerals held, through a joint venture with Minera Rio Tinto, S.A. de C.V. (“MRT”), a company duly incorporated pursuant to the laws of the United Mexican States, mineral concessions and options to obtain certain mineral concessions on properties in Chihuahua, Mexico. Because Sierra Minerals was not a Mexican company, it was prohibited by Mexican law from owning the mineral concessions directly. The joint venture allowed Sierra Minerals to have rights to these concessions while maintaining compliance with Mexican law. MRT was controlled, and continues to be controlled, by Mario Ayub. Concurrently with the Share Exchange Agreement, Mr. Ayub became a director, and later Chief Operating Officer, of Mexoro. In August 2005, Mexoro cancelled the joint venture agreement in order to pursue the mineral exploration opportunity through a new wholly owned Mexican subsidiary. On January 20, 2006, Sierra Minerals was dissolved.

In August 2005, we created a wholly owned Mexican subsidiary corporation, Sunburst Mining de Mexico, S.A. de C.V. (“Sunburst Mining”). On August 25, 2005, Sunburst Mining, Mexoro and MRT entered into agreements in which MRT assigned to Sunburst Mining the right to explore and exploit two properties in Mexico. MRT had previously acquired property

rights from the owners, Corporativo Minero, S.A. de C.V. (“Corporativo Minero”), and Compañía Minera De Namiquipa, S. A. de C. V. (“Compañía Minera”), respectively. There is no relationship between either Corporativo Minero or Compañía Minera, their officers, directors and affiliates and Mexoro’s subsidiaries, officers, directors and affiliates. Concurrent with assigning to Sunburst Mining its rights to these two properties, MRT assigned to Sunburst Mining the option, but not the obligation, to purchase additional mineral concessions on a separate property, also located in Chihuahua, Mexico.

Through Sunburst Mining, we are engaged in the exploration of four gold and silver exploration properties, each made up of several mining concessions, located in the State of Chihuahua, Mexico. (“Mining Concessions” refers to an area of land for which the owner of the concession has the right to explore for and develop mineral deposits. The rights to and ownership of the minerals in the concessions were granted, in our case, originally by the Mexican Government to the former concession owners, and then to us from those owners. In Canada and the United States, the term is commonly referred to as “Mineral Rights” or “Mining Claims.”) These properties are generally referred to as the Cieneguita Property, the Guazapares Property, the Encino Gordo Property and the Sahuayacan Property. We will own 100% of the Cieneguita Property upon completion of a payment of $2,000,000 (of which $710,000 has been paid to date) to Corp orativo Minero and we have the option to purchase the Guazapares Property and Sahuayacan Property. In August 2005, we purchased two Encino Gordo mineral concessions for $100, and we have exercised our option to purchase three additional Encino Gordo mineral concessions from an unrelated third party, all of which now comprise the Encino Gordo Property.

In December 2005, Mexoro and Sunburst Mining entered into a new agreement with MRT (the “New Agreement”). In the New Agreement, Sunburst Mining exercised its option to purchase three additional mining concessions in the Encino Gordo region. The New Agreement required the Company to issue to MRT two million shares of Mexoro’s common stock within four months of the date of the signing of the New Agreement. These shares were issued on February 23, 2006. Under the terms of the New Agreement, MRT had the option to buy all of the outstanding shares of Sunburst Mining for $100 if the Company failed to transfer $1,500,000 to Sunburst Mining by April 30, 2006. However, in April 2006, the parties amended the New Agreement to delete both the required transfer of $1,500,000 to Sunburst Mining along with MRT’s option to purchase all of the shares of Sunburst Mining. The New Agreement also requires the Company to issue one million additional shares of common stock to MRT when, if ever, production of the Cieneguita Property reaches 85% of production capacity.

On October 24, 2006, we purchased exclusive exploration rights and an option to purchase several additional mineral concessions, collectively referred to as the Sahuayacan Property, in Chihuahua, Mexico, from Minera Emilio, S.A. de C.V., (“Minera Emilio”). There is no relationship between Minera Emilio, its officers, directors and affiliates and Mexoro‘s subsidiaries, officers, directors and affiliates. In order to maintain the right to explore the Sahuayacan Property, the Company paid $30,000 upon execution of the agreement and must pay $252,000 in monthly installments over a five year term. In order to purchase the Sahuayacan Property, Mexoro must pay $300,000 in cash or $500,000 in shares of the Company within the term of the option. The Company must also pay a royalty of 3% or 4% of “Net Revenues”. Net Revenue is calculated by subtracting smelting expenses, added value taxes and all other taxes on production sales from revenu e described in detail below.

On February 13, 2006, the shareholders of the Company approved a 1:50 reverse split of its issued and outstanding common stock with one new share issued for each 50 old shares. Prior to the reverse split, the Company had 189,994,324 shares of common stock issued and outstanding. Immediately following the reverse split, the Company had 3,799,887 shares issued and outstanding. All figures relating to shares of common stock or price of shares of common stock herein reflect the 1:50 reverse split unless otherwise indicated.

We changed our name to Mexoro Minerals Ltd. on February 15, 2006. As of the date of this report, we are considered to be an exploration stage corporation, as that term is defined in the U.S. Securities and Exchange Commission’s (“SEC”) Industry Guide 7, as we are engaged in the search for mineral deposits but not engaged in the preparation of an established commercially mineable deposit for extraction or in the exploitation of a mineral deposit.

Prior Acquisitions

In August 1999, we invested $1,000,000 in Prologic Management Systems, Inc. (“Prologic”), which was engaged in the business of providing systems integration services, networking services, software development and applications software for the commercial market. The investment in Prologic was made in anticipation of a business combination with that company. As part of that transaction, we acquired 3,459,972 shares of Prologic. However, the agreement to complete a business combination was terminated prior to its consummation and in March 2000 we charged off our investment to operations.

In January 2001, we entered into an agreement with Prologic to recover a portion of our investment. Pursuant to that agreement, on February 16, 2001, we completed the sale of 2,859,972 shares of stock in Prologic to Prologic, or its designees, for a total sales price of $400,000. Of the sale price, $325,000 was paid in cash at closing and $75,000 through Prologic’s execution of a promissory note. The promissory note bore interest at the rate of 10% per annum and required payments of $25,000 principal, plus accrued interest, on each of April 12, 2001, July 12, 2001 and October 12, 2001, none of which were ever received by us. Subsequently, Prologic declared bankruptcy and we wrote the promissory note off as uncollectible.

We retained ownership of a total of 600,000 shares of Prologic, which we subsequently sold. Such shares were “restricted securities” as defined in Rule 144 under the Securities Act of 1933. The shares were sold in accordance with the provisions of Rule 144.

On December 4, 2000, the Company completed an agreement for share exchange between itself and HollywoodBroadcasting.com, Inc. (“HBC”), a Nevada corporation. As a result of that closing, HBC became a wholly-owned subsidiary of the Company.

HBC was a development stage company formed for the purpose of developing and producing original entertainment and information programming for various media including domestic and foreign broadcast, cable and satellite television, home video, DVD sales and rentals and the Internet. The Company was not able to generate significant revenues from any of the sources it relied upon in establishing its business model.

On September 28, 2001, the Company completed the sale of its wholly-owned subsidiary HBC for $1,000 in cash.

Prior Business Activities

On February 27, 2002, we were assigned a sub-distributorship agreement pursuant to a contract between 1357784 Ontario Ltd. and Romlight International, Inc. (“Romlight International”), a company based in Toronto, Ontario, Canada. There was no affiliation between 1357784 Ontario Ltd. and Romlight International and Prologic, HBC, Sierra Minerals, Mexoro, their officers, directors or affiliates. Pursuant to the sub-distributorship agreement, we became the exclusive worldwide distributor to the hydroponics industry of digital electronic lighting ballasts. This sub-distributorship agreement was assigned to our wholly owned subsidiary, Sunburst Digital, Inc. (“Sunburst Digital”), a Canadian corporation. In January 2003, the contract between 1357784 Ontario Ltd. and Romlight International and our sub-distributorship agreement were cancelled. On April 2, 2003, Sunburst Digital signed an agreement directly with Romlight International containing terms and conditions substantially identical to the terms of the sub-distributorship agreement.

We paid Romlight International a deposit of $183,454 for the sub-distributorship. Due to quality control issues, the ballasts were never sold, and we wrote off our entire deposit and ceased to operate Sunburst Digital. Sunburst Digital was administratively dissolved on March 31, 2006. We had no operations between the cessation of these activities and the acquisition of Sierra Minerals.

Current Operations

On May 3, 2004, we entered into a Share Exchange Agreement with the shareholders of Sierra Minerals, which was incorporated in Nevada on March 19, 2004. As a result of this transaction, Sierra Minerals became our wholly owned subsidiary. Pursuant to the Share Exchange Agreement, we agreed to loan to MRT, on behalf of Sierra Minerals, $147,500 to be evidenced by an 8% promissory note signed by MRT. In addition, and as a result of the closing of this Share Exchange Agreement, we paid a finders’ fee to two corporate entities whereby we issued an aggregate of 120,000 five year options to purchase shares of our common stock, at a price of $0.50 per share, as follows: 60,000 were issued to T.R. Winston & Company, LLC and 60,000 were issued to Liberty Management, LLC. T.R. Winston & Company, LLC, Liberty Management, LLC, and their officers, directors and affiliates are not affiliates of Mexoro, Sierra Minerals, MRT or their officers, directors, and affiliates.

Sierra Minerals had no operations between its date of incorporation and April 26, 2005. Sierra Minerals was a party to a joint venture agreement dated April 26, 2004 and amended on June 1, 2004, by and between Sierra Minerals and MRT. MRT had the right to acquire certain mineral concessions, the Cieneguita Property and Guazapares Property, as explained below. Under the terms of the joint venture, MRT and Sierra Minerals planned to form a Mexican corporation, of which Sierra Minerals would own 60% and MRT would own 40%. Sierra Minerals was required to invest $1,000,000 in this corporation within 30 days of the signing of the joint venture agreement and to secure an additional $2,000,000 line of credit for the new company. In exchange, MRT would transfer its rights in the mineral concessions to the new corporation. MRT was appointed

as the operator of the Cieneguita Property. Sierra Minerals advanced $167,500 to MRT, pursuant to the joint venture agreement, to pay for costs associated with the rights. However, Sierra Minerals did not meet the deadline of investing $1,000,000 into the new corporation. MRT retained the $167,500 as liquidated damages under the joint venture agreement; Sierra Minerals was not required to pay any additional damages.

The board of directors decided that it wanted to hold these mineral concessions and options for mineral concessions directly instead of through a joint venture agreement due to its belief that holding the title directly is a stronger legal position for the Company. Consequently, the joint venture agreement was cancelled and a new subsidiary formed. Once the joint venture agreement was cancelled, Sierra Minerals no longer had any rights to the mineral concessions.

On August 25, 2005, we entered into a new arrangement with MRT. Instead of a joint venture, we formed a wholly owned subsidiary, Sunburst Mining, which was incorporated in Mexico. Because Sunburst Mining is a Mexican corporation, this restructuring allowed us to take title to the properties directly in the name of Sunburst Mining rather than holding the interests in a joint venture. We entered into agreements with MRT, which gave Sunburst Mining options to purchase the mineral concessions of the Cieneguita and Guazapares Properties and the right of first refusal on two Encino Gordo Properties. The parties also entered into an operating agreement (which has subsequently been cancelled) that gave MRT the sole and exclusive right and authority to manage the Cieneguita Property. (This right had also been granted to MRT under the joint venture agreement with Sierra Minerals.)

The material provisions of the Company’s property agreements are as follows:

(1)

MRT assigned to Sunburst Mining, with the permission of Corporativo Minero (the “Cieneguita Owner”), all of MRT’s rights and obligations acquired under a previous agreement, the “Cieneguita Option Agreement”, including the exclusive option to acquire the Cieneguita concessions for a price of $2,000,000. The Cieneguita Option Agreement states that the Company is to make yearly payments on May 6 of each year in the amount of $120,000 for the next 13 years and a final payment of the outstanding balance owed on the $2,000,000 in the 14th year to the Cieneguita Owner to keep the option in good standing. The Company renegotiated the payment due May 6, 2007, to $60,000 payable on November 6, 2007, which was paid and the balance of $60,000 was paid on December 20, 2007. Once the full $2,000,000 payment has been made, we will own the concessions. Yearly payments will need to be made from working capital. We d o not have the capital at this time to fund the ongoing payments. We will need to raise the funds through the sale of debt or equity. We do not have any sources for such capital at this time. In the alternative, if Cieneguita is put into production, of which there is no guarantee, we must pay the Cieneguita Owner $20 per ounce of gold produced, if any, from the Cieneguita concessions up to the total $2,000,000 due. In the event that the price of gold is above $400 per ounce, the property payments payable to the Cieneguita Owners from production will be increased by $0.10 for each dollar increment the spot price of gold trades over $400 per ounce. The total payment of $2,000,000 does not change with fluctuations in the price of gold. Non-payment of any portion of the $2,000,000 total payment will constitute a default. In such case, the Cieneguita Owners will retain ownership of the concessions, but we will not incur any additional default penalty. MRT retained no interest in the Cieneguita Property.

(2)

MRT assigned Sunburst Mining, with the consent of Compañía Minera (the “Guazapares Owner”) MRT’s rights and obligations concerning the Guazapares Property, including the exclusive option under the “Guazapares Option Agreement”, for a term of four years, to purchase seven of the Guazapares concessions upon payment of $910,000. In return, Sunburst Mining granted MRT a 2.5% Net Smelter Royalty (“NSR”) and the right to extract from the Guazapares concessions up to 5,000 tons per month of rock material; this right will terminate on exercise of the option to purchase the concessions. MRT retained no interest in the Guazapares Property.

(3)

Sunburst Mining purchased two of the Encino Gordo concessions from MRT for a price of 1,000 pesos (approximately US$90), and MRT assigned to Sunburst Mining a first right of refusal to acquire three additional Encino Gordo concessions. The Company has the option to acquire 100% of the additional three Encino Gordo concessions subject to a 2.5% NSR and the obligation to make the scheduled property payments totaling $500,000.

(4)

MRT assigned to Sunburst Mining, for a term of 60 months, commencing from June 25, 2004 (the “Option Period”), with the consent of Minera Rachasa, S.A. de C. V. (the “San Francisco Concessions Owner”), MRT’s rights and obligations acquired under the “San Francisco Option Agreement”, including the option to purchase the San Francisco concession for a price of $250,000 (the “Purchase Price”). MRT and the San Francisco Concessions Owner reserved a combined 2.5% NSR. MRT reserved no other rights in the San Francisco concessions. To maintain the option, Sunburst Mining assumed the obligation to pay to the San Francisco Concessions Owner cumulative annual payments totaling $90,000; if the option is exercised prior to the expiration of the Option Period by payment of the Purchase Price, the obligation to pay the annual payments will be terminated.

(5)

MRT assigned to Sunburst Mining, with the consent of the Rafael Fernando Astorga Hernández (“San Antonio Concessions Owner”), MRT’s rights and obligations acquired under the San Antonio Option Agreement, including the option to purchase the San Antonio concessions for a price of $500,000 (the “Purchase Price”) commencing from January 15, 2004, the date of signing of the “San Antonio Option Agreement” (the “Option Period”). MRT and the San Antonio Concessions Owner reserved a combined 2.5% NSR to be paid to them. MRT reserved no other rights in the San Antonio concessions. To maintain the option, Sunburst Mining assumed the obligation to pay to the San Antonio Concessions Owner cumulative annual payments totaling $150,000; if the option is exercised prior to the expiration of the Option Period by payment of the Purchase Price, the obligation to pay the annual payments will be terminated. The San Antonio Concessions Owner reserved the right to extract from the San Antonio concessions up to 50 tonnes per day of rock material; this right will terminate on the date of the exercise of the option.

Also on August 25, 2005, the parties signed an operator’s agreement (which has subsequently been cancelled, as discussed below) pursuant to which Sunburst Mining engaged MRT as the operator of the Cieneguita Property. MRT was to be paid an operator’s fee based on the functions performed and an operator’s bonus equal to 10% of the net proceeds of production if operating cash costs did not exceed $230 per ounce of gold produced from the Cieneguita Property. The operator’s fee was to be: (a) with respect to programs: (i) 2% for each individual contract which expressly includes an overhead charge by the party contracted; (ii) 5% for each individual contract which exceeds $50,000; (iii) 15% of all other costs not included; (b) with respect to construction: 2 % of all other such costs; (c) 3.5% of operating costs after the completion of construction on Cieneguita. MRT’s duties were to (a) comply with the provisions of all agreements or instruments of title under which the Cieneguita Property or assets were held; (b) pay all costs properly incurred promptly as and when due; (c) keep the Cieneguita Property and assets free of all liens and encumbrances arising out of the mining operations and, in the event of any lien being filed as aforesaid, proceed with diligence to contest or discharge the same; (d) perform such assessment work or make payments in lieu thereof and pay such rentals, taxes or other payments and do all such other things as may be necessary to maintain the Cieneguita Property in good standing, (e) maintain books of account in accordance with generally accepted accounting principles provided that the judgment of the operator, as to matters related to the accounting, shall govern if the operator’s accounting practices are in accordance with accounting principles generally accepted in the mining industry in Canada; (f) perform its duties and obligations in accordance with sound mining and engineering practices and other p ractices customary in the Canadian mining industry, and in substantial compliance with all applicable federal, state and municipal laws of Mexico; and (g) prepare and deliver reports.

The parties also signed a share option agreement pursuant to which Sunburst Mining granted to MRT the exclusive option to acquire up to 100% of all outstanding shares of Sunburst Mining if Mexoro did not (a) comply with the terms of the underlying Cieneguita Option Agreement, the San Antonio Option Agreement, the San Francisco Option Agreement and the Guazapares Option Agreement and (b) loan to Sunburst Mining the amounts of $1,000,000 by December 31, 2005 and $1,000,000 by April 30, 2006. If the option to purchase 100% of the shares of the capital of Sunburst Mining were exercised by MRT, MRT was obligated to return to the Company for cancellation all of the shares of the capital of Mexoro issued by the Company to MRT and Mario Ayub. No finder’s fees were paid in these agreements.

On December 8, 2005, Mexoro and Sunburst Mining entered into a new agreement with MRT (the “New Agreement’) to exercise their option under the August 18, 2005 “Sale and Purchase of Mining Concessions Agreement” to obtain two mining concessions in the Encino Gordo region. The New Agreement modified the Company’s property agreements, as discussed below. The following are additional material terms of the New Agreement:


(1)	The share option agreement with MRT was cancelled.


(2)	The Company granted MRT the option to buy all of the outstanding shares of Sunburst Mining for $100 if the Company failed to transfer $1,500,000 to Sunburst Mining by April 30, 2006. On April 6, 2006, MRT agreed to waive its option to purchase the shares of Sunburst Mining and also waived Mexoro’s obligation to transfer $1,500,000 to Sunburst Mining.


(3)	The property agreements were modified to change the NSR to a maximum of 2.5% for all properties covered by the Agreements. The property agreements contained NSRs ranging from 0.5% to 7%.


(4)	The Company agreed to issue 2,000,000 shares of the Company to MRT within four months of the date of the signing of the New Agreement. These shares were issued to MRT and its assignee, Etson, Inc., on February 23, 2006. This issuance fulfilled the Company’s payment obligations under the previous property agreements.


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


(6)	The New Agreement gave Sunburst Mining the option to obtain three additional concessions in the Encino Gordo region.


(7)	The operator’s agreement with MRT was cancelled.

Unless explicitly superseded or terminated by the New Agreement, as discussed above, the terms of the Company’s existing property agreements remain in effect. Under the New Agreement, MRT has assigned to Sunburst Mining rights it acquired in a contract with Corporativo Minero. MRT entered into an agreement with Corporativo Minero on January 12, 2004 by which it acquired the right to explore and exploit the Cieneguita Property and purchase it for $2,000,000. MRT paid $150,000 upon execution of the agreement and two months later paid $200,000. This agreement gave MRT the exclusive right and option, but not the obligation, to purchase, during the term of the mining concessions of the property, an undivided 100% title to the mining concessions and the exclusive right to carry out mining activities on any portion of the mining concessions. Under our agreements with MRT, MRT has assigned this agreement and all of its rights and obligations there under, to us. As of the date of this annual report, $710,000 of the $2,000,000 has been paid to Corporativo Minero by MRT ($350,000 paid) and Sunburst Mining ($360,000 paid in “no production” penalty fees). Sunburst Mining had the obligation of bringing the property to production on or prior to May 6, 2006. The Cieneguita Property was not in production as of May 6, 2006 and, therefore, Sunburst Mining had the obligation to pay $120,000 to Corporativo Minero on May 6, 2006 to extend the contract. Through discussions with Mexoro, Corporativo Minero agreed to reduce the obligation to $60,000, of which $10,000 was paid in April 2006. Sunburst Mining was then required to pay the remaining $50,000 by May 6, 2006. We made this payment to Corporativo Minero and the contract was extended. The Company renegotiated the payment due May 6, 2007, to $60,000 payable on November 6, 2007, which was paid and the balance of $60,000, which was paid on December 20, 2007. Payment of $60,000 on the $120,000 that was due to the co ncession holders was made in May 2008 with the balance of the payment due to be paid in June 2008. We have the obligation to pay a further $120,000 per year on May 6 of each year, until the total of $2,000,000 is paid. We are currently not in default on our payments.

If the property is put into production, of which there is no assurance, then the contract calls for the remaining payments to be paid from the sale of gold, up to a total of $2,000,000. The payments, if the property should go into production, would be as follows: Any remaining amount of the $2,000,000 payment would be paid out of production from the Cieneguita Property at a rate of $20 dollars per ounce of gold sold. However, in the event that the price of gold exceeds $400, then Sunburst Mining would be required to pay an additional $0.10 per each ounce for every dollar the spot price of gold trades over $400. For example, at $900 per ounce gold price, the royalty payment would be $70 per ounce of gold produced. Once $2,000,000 is paid, there is no further obligation to Corporativo Minero. Non-payment of any portion of the $2,000,000 total payment will constitute a default. In such case, Corporativo Minero would retain ownership of the concessions, but we will not incur any additional default penalty. Corporativo Minero has the obligation to pay, from the funds they receive from us, any royalties that may be outstanding on the properties from prior periods. Corporativo Minero has informed us that there were royalties of up to 7% NSR owned by various former owners of the Cieneguita Property. They have informed us that the corporations holding those royalties have been dissolved and that there is no further legal requirement to make these royalty payments. We can make no assurance that we will not ultimately be responsible to pay all or some of the 7% NSR to these former royalty holders if the property was ever put into production and Corporativo Minero did not make the payments to the royalty holders. MRT no longer has any ownership interest or payment obligations with respect to any of the Cieneguita concessions.

On May 15, 2006, Sunburst Mining entered into an exploration contract with Jose Maria Rascon Rascon and Sabino Amador Rascon Polanco and with Rene Muro Lugo (all three representatives constitute the “Concessionaires”) for the Segundo Santo Nino concession on the Sahuayacan Property. Each concession representative owns 33.3% of the total Segundo Santo Nino title. The Company must pay the Concessionaires a total of $255,000 for this concession. The total payments to acquire 100% of this concession are as follows: all payments up to November 15, 2008 totaling $85,000 have been paid, May 15, 2009 - $20,000 ($3,333 paid, balance to be paid in June 2009), November 15, 2009 - $30,000 and May 15, 2010 - $120,000.

On June 21, 2006, Sunburst Mining entered into an Exploration and Sale Option Agreement of Mining Concessions (the “Exploration Agreement”) with Minera Emilio for mineral concessions in Chihuahua, Mexico on the Sahuayacan Property. Minera Emilio owns 100% of the Sahuayacan Property. There is no affiliation between Minera Emilio and the Company or its officers, directors or affiliates.

Under the Exploration Agreement, Minera Emilio granted the Company the exclusive right to conduct exploration on the Sahuayacan Property. The Company must pay Minera Emilio $282,000 in the following manner: (i) $30,000 payable at the execution of the Agreement (paid); (ii) $2,500 per month as of August 21, 2006, and so on for each month elapsed for twelve months, on the 21st day of each month (these amounts have been paid); (iii) $3,500 per month as of the beginning of the second yearly term, that is, as of August 21, 2007, and every month, on the 21st day of each month, for the whole second yearly term (these amounts have been paid); and (iv) $5,000 monthly, during the third, fourth, and fifth yearly term, on the 21st. day of each month (we have yet to pay the March, April and May 2009 payments, which we are negotiating for extension). The term of the Exploration Agreement is five years from the date of execution by Minera Emilio, which is June 22, 2011. While Minera Emilio signed the agreement on June 22, 2006, further negotiations occurred and the Company signed the agreement on October 24, 2006. Non-payment of any of the payments owed would constitute a default under the Exploration Agreement. As of the date of this annual report, we have not been given notice of any default. In the event we were given notice and default was not cured in a timely manner, the Company would lose the right to explore on the Sahuayacan Property and would lose the option to purchase the mineral concessions.

Minera Emilio also granted the Company the option to purchase the mineral claim. The option shall expire on June 22, 2011. The Company must provide Minera Emilio with 30 days written notice before exercising the option. The purchase price of the mineral claim is $300,000 or the equivalent of $500,000 in restricted shares of common stock of Mexoro based upon the market value of such shares during the 30 days preceding notice of the intent to exercise the option. The Company must complete a feasibility survey within three years from the date the option is exercised.

After exercising the option, the Company must pay Minera Emilio royalties on any mineral ore that is sold from the mineral claim. The rate of the royalties due varies based on the price of gold on the London Metal Exchange (the “Price”). If the Price is less than or equal to $600 per ounce, the royalty due is 3% of Net Revenue. If the Price is higher than $600 per ounce, the royalty due is 4% of the Net Revenue. Net Revenue is calculated by subtracting smelting expenses, added value taxes, and all other taxes on production sales from revenue.

On January 25 2008, Sunburst Mining entered into an exploration and option agreement with Maria Luisa Wong Madrigal for mineral concessions under the “La Maravilla” project on the Sahuayacan Property. The Company must pay Maria Luisa Wong Madrigal $600,000 in the following manner: (i) $33,000 – January 25, 2008 (paid); (ii) $33,000 – July 25, 2008 (paid); (iii) $34,000 – January 25, 2009 (outstanding, negotiating for extension); (iv) $500,000 – at the option to purchase the concession or in 36 months – January 25, 2010.

The La Maravilla project concessions are subject to royalties of 2.0% over net liquidations, which may be acquired by Sunburst Mining for $400,000 before commercial production is initiated. This exploration and option agreement has yet to be filed before the Mining Public Records Office as of the date of this report.

In addition, we intend to identify and obtain options on additional gold and silver properties within the Chihuahua region, if possible. We will utilize our management’s contacts in the Mexican mining community in order to find potential properties that may be available. There can be no assurance that we will be able to obtain any additional property on acceptable terms or at all.

On September 19, 2007, Sunburst Mining, MRT and Mexoro entered into an agreement to defer Guazapares Property payments. This agreement modifies the agreement entered into by MRT and Sunburst Mining on August 18, 2005 in regard to the Guazapares concessions in Mexico. Under the original agreement entered into by the parties on August 18, 2005, Sunburst Mining was obligated to pay MRT US$60,000 on August 2, 2006 as part of the payments required for the purchase of eight mineral concessions in the Guazapares area of Mexico. On July 18, 2006 the parties agreed to extend the due date

for ninety days until October 31, 2006. MRT agreed to re-extend the due date for such payment by 120 days until February 28, 2007 and then again to May 31, 2007. An oral agreement extended the due date to August 31, 2007. Pursuant to the same agreement entered into by the parties on August 18, 2005, Sunburst Mining was obligated to pay MRT a further amount of US$140,000 on August 2, 2007 to purchase the Guazapares concessions.

Under the September 17, 2007 agreement, Sunburst Mining, MRT and Mexoro agree that:


●	Any and all property payments regarding Guazapares, then owing to MRT or which would otherwise become due by December 31, 2007, will be deferred until such time as Sunburst Mining and Mexoro have sufficient funds to make the payments, in the opinion of the disinterested directors of Mexoro and,


●	Mexoro issued 250,000 shares to MRT and/or assignees, in consideration for the deferral of any and all Guazapares property payments then outstanding or those arising on or before December 31, 2007.

On May 5, 2008, we signed a letter of intent (Paramount “LOI”) to enter into a strategic alliance with Paramount Gold and Silver Corp. (“Paramount”) to combine mining and exploration expertise, along with efficient use of personnel, drill rigs and current mining concessions to improve efficiencies and potentially reduce costs for both companies. We believed that the alignment of interest between the two companies created synergy, especially as the two companies’ Guazapares projects are contiguous and create a large land position located in the state of Chihuahua, Mexico.

The Paramount LOI called for Paramount to invest a minimum of $4 million and maximum of $6 million into the Company, at a fixed price of $0.50 per unit by June 23, 2008. This date was extended until July 21, 2008 and then to August 5, 2008. Paramount was unable to complete the minimum investment on August 5, 2008 and as such the strategic alliance with Paramount was terminated on August 6, 2008. Prior to the termination, we issued three debentures to Paramount.

On May 9, 2008, we issued a secured convertible debenture (the “Debenture”) with a one-year term in the amount of $500,000. In connection with the issuance of the Debenture, we entered into a “Security Agreement” with Paramount that secures our assets until there has been full compliance with the terms of the Debenture. Paramount may convert all or a portion of the principal amount of the Debenture into units consisting of one share of our common stock and half a warrant to purchase one share of our common stock. Subject to certain adjustments upon the occurrence of various capital reorganizations and other events, the units are convertible at $0.50 per unit for a total of up to 1,000,000 shares of common stock and up to 500,000 warrants at $0.75 to purchase shares of common stock (the “Warrants”). The Warrants have a term of four years from the date that Paramount converts the Debenture or the portion of the Debenture cover ing those warrants. A holder of the Warrants may exercise those Warrants at $0.75 (subject to adjustments upon the occurrence of certain events like stock splits).

On June 23, 2008, we signed an addendum to the strategic alliance granting Paramount an extension for the closing of the transaction until July 21, 2008. As such, Paramount invested an additional $70,000 on June 10, 2008 and $300,000 on June 23, 2008 into the Company under the same terms as the original secured convertible debenture. This debenture is convertible into 740,000 shares of our common stock and up to 370,000 warrants, which are exercisable into shares of our common stock at $0.75 per share.

On July 16, 2008, we received an additional payment from Paramount in the amount of $500,000 pursuant to the strategic alliance. This additional advance allowed Mexoro to continue its ongoing drill program on both the Cieneguita and Guazapares projects. The funds are advanced by way of a secured convertible debenture which bears interest at a rate of 8% per annum for a term of one year. Paramount had the option to convert the debt into units. Along with this additional advance, Mexoro agreed to extend the closing deadline of the strategic alliance transaction until August 5, 2008 with Paramount's continued commitment to fund Mexoro's operating expenses.

On August 6, 2008, the strategic alliance between Mexoro and Paramount was terminated, including Paramount’s right of first refusal on financings. As a result of Paramount holding convertible debentures in the amount of $1,370,000 resulting from advances made to Mexoro Minerals to fund exploration, they agreed to defer interest payments on the advances until September 10, 2008. The September 10, 2008 interest payment date was subsequently extended again to November 10, 2008. All interest payments were brought up to date by December 30, 2008 and we are now current with all of our interest payments to Paramount Gold and Silver Corp.

the first debenture issued May 9, 2008 for $500,000 and the third debenture issued to them July 11, 2009 for $500,000. We also amended the second debenture that we issued to them in June 18, 2009 in the face amount of $370,000. The amount of that debenture was increased to $521,047.37 which, among other things, includes interest accrued to March 31, 2009. We are obligated to make a payment on March 31, 2009 on this debenture in the amount of $393,547.37 (of which $300,000 was paid on March 31, 2009) and the balance of $127,500 is to be re-paid on April 30, 2009. This remaining amount of $127,500 is interest free as long as the debenture remains in good standing. As part of a restructuring fee, we issued to Paramount 150,000 shares of our common stock. As we were granted an extension for the balance of the March 31, 2009 payment, we have issued an additional 100,000 shares to Paramount as an extension fee. As part of the agreemen t, Paramount has released its security interest on our Cieneguita properties. The other security as described in the original security agreement issued with the original debentures remains in place until the amended debenture has been repaid in full.

Subsequent to the year ended February 28, 2009, in May , 2009 we entered into a letter of agreement to sell our Guazapares project located in southwestern Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount Gold and Silver Corp. (“Paramount”) for a total consideration of up to $5.3 million USD. The sale is subject to the signing of a definitive agreement by June 2, 2009 and to the satisfaction of various conditions precedent prior to closing. Closing is scheduled prior to the end of June 2009 and a 5.7% commission is payable on the closing of the sale.

Mexoro’s Guazapares project comprises 12 claims close to Paramount’s San Miguel discovery. The purchase price is to be paid in two stages. The first payment of $3.7 million will be deposited into escrow at closing, and will be released from escrow to Mexoro when the transfer of the 12 claims to Paramount is finalized. An additional payment of $1.6 million is due to Mexoro if, within 36 months following execution of the letter of agreement, either (i) Paramount Gold de Mexico SA de C.V. is sold by Paramount, either through a stock sale or a sale of substantially all of its assets, or (ii) Paramount’s San Miguel project is put into commercial production. As such, the final repayment of the outstanding loan with Paramount has been deferred until the closing of the sale of the Guazapares properties. Interest will accrue on the outstanding amount at 8% per annum and the final payment will be deducted from the first $3.7 million purchase price payable to us.

On February 12, 2009 we entered into a definitive agreement for development of Cieneguita project with Minera Rio Tinto, a private Mexican corporation whose president was a former president of our Company. The definitive agreement covers project financing of up to USD $9,000,000. The major points of the agreement are as follows:

Minera Rio Tinto (“MRT”) and/or its investors will subscribe for up to USD$1 million of a secured convertible debenture at 8% interest (payable in stock or cash). The debenture is convertible into units at $0.60 per unit. Each unit comprises 2 common shares and 1 warrant. Each warrant is exercisable at $0.50 per share for a period of 3 years. The placement will be used for continued exploration of our properties and general working capital. As of May 15, 2009 MRT had contributed the $1 million.

MRT is to provide the necessary working capital to begin and maintain mining operations estimated to be $3,000,000 used for the purpose of putting the Cieneguita property into production. MRT will spend 100% of the money to earn 75% of the net cash flow from production. The agreement will limit the mining to the mineralized material that is available from surface to a depth of 15 meters or approximately 10% of the mineralized material found to date. It is anticipated that production at the rate of 750 tonnes per day will commence by July 2009.

MRT will spend up to USD $5 million to take the Cieneguita property through the feasibility stage. In doing so, MRT will earn a 60% interest in Mexoro’s rights to the property. After the expenditure of the $5 million all costs will be shared on a ratio of 60% to MRT and 40% to Mexoro Minerals. If we elect not to pay our portion of costs after the $5 million has been spent, our position shall revert to a 25% carried interest on the property.

Portions of the joint venture agreement require we obtain consent from Paramount Gold and Silver Corporation, our secured convertible debenture holder or we repay the debenture held by Paramount Gold and Silver Corporation. Those portions of the agreement that need consent will not be undertaken until such consent is obtained or extinguished by repayment. Subsequently, we repaid approximately $1,300,000 of the debenture owed to Paramount Gold and Silver Corp and in doing so, Paramount agreed to release the Cieneguita property as part of its security under the debenture. Therefore, we no longer need the consent of Paramount to begin extraction of mineralized material at Cieneguita.

The Spanish version of this agreement is the governing agreement in case of dispute between the English version and the Spanish versions.

Principal Products

Our principal product is the exploration for, and, if warranted, the mining and sale of precious minerals. Because our properties are in the exploration stage, there is no guarantee that any ore body will be found.

Francisco Quiroz, the Company’s President and chief operating officer, has been able to discuss and obtain information on additional potential mining properties. A potential mining property is identified first by a visit to the property by a geologist. If the property has potential, based upon the geologist’s findings, another visit is made to gather more information by taking surface samples and mapping the property. Also, geophysical work (in this case mineral exploration techniques using electromagnetic instruments to measure the conductivity of the rocks underground) may be performed before entering into the negotiation process for a particular property. To date we have not entered into any agreements to acquire additional potential mining properties and no assurance may be given that such agreements will ever be entered into.

Glossary of Certain Mining Terms

ASSAY -- A chemical test performed on a sample of ores or minerals to determine the amount of valuable metals contained.

AURIFEROUS ZONE -- An area of gold bearing rock.

BRECCIA -- A rock in which angular fragments are surrounded by a mass of fine-grained minerals.

BROWNFILEDS EXPLORATION -- While loosely defined, the general meaning of brownfields exploration is that which is conducted within geological terranes within close proximity to known ore deposits.

COLUMN TEST -- The process of putting sample ore in a PVC pipe 500 centimeters in diameter and 2-3 meters high and applying lime and a cyanide solution. The purpose of a column leach test is to collect kinetic information on the ore being evaluated so that scale-up equations can be validated which will allow the projection of the commercial heap leach operation's performance under different operating scenarios.

DEVELOPMENT DRILLING -- Drilling to establish accurate estimates of mineral reserves.

DILUTION (mining) -- Rock that is, by necessity, removed along with the mineralized ore in the mining process, subsequently lowering the grade of the ore.

EPITHERMAL DEPOSIT -- A mineral deposit consisting of veins and replacement bodies, usually in volcanic or sedimentary rocks, containing precious metals, or, more rarely, base metals.

EXPLORATION -- Work involved in searching for ore, usually by sampling rocks, drilling or driving a drift.

HEAP LEACHING -- A process involving the percolation of a cyanide solution through crushed ore heaped on an impervious pad or base to dissolve minerals or metals out of the ore.

HIGH GRADE -- Rich ore. As a verb, it refers to selective mining of the best ore in a deposit.

HYDROTHERMAL -- An adjective applied to heated or hot magmatic emanations rich in water, to the processes in which they are concerned, and to the rocks, ore deposits, alteration products and springs produced by them.

INDICATED MINERAL RESOURCE -- An ‘Indicated Mineral Resource’ is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. Under SEC standards this term is not a recognized term in Industry Guide 7.

INFERRED MINERAL RESOURCE -- An ‘Inferred Mineral Resource’ is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed,

but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Under SEC standards this term is not a recognized term in Industry Guide 7.

LEACHABILITY -- The ability for cyanide solution in a heap leach operation to leach the desirable minerals from the host rock and allow for recovery at an economic level.

MINERAL -- A naturally occurring homogeneous substance having definite physical properties and chemical composition and, if formed under favorable conditions, a definite crystal form.

MINERAL RESERVE -- A mineral reserve is the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined.

MINERAL RESOURCE -- A mineral resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.

MINERALIZATION -- The act or process of mineralizing.

MINERALIZED MATERIAL OR DEPOSIT -- A mineralized body which has been delineated by appropriate drilling and/or underground sampling to support a sufficient tonnage and average grade of metal(s). Under SEC standards, such a deposit does not qualify as a reserve until a comprehensive evaluation, based upon unit cost, grade, recoveries, and other factors, concludes economic feasibility.

MINING CONCESSION -- A term used to describe an area of land for which the owner of the concession has the right to explore for and develop mineral deposits. The rights to and ownership of the minerals in the concession are granted, in our case, by the Mexican Government to the former owners who then either transferred or optioned them to us. In Canada and the United States, the term is commonly referred to as a Mineral Right or Mining Claim.

NET SMELTER RETURN (“NSR”) -- A share of the net revenues generated from the sale of metal produced by a mine.

ORE -- Mineralized material that can be mined and processed at a positive cash flow.

OREBODY -- A natural concentration of valuable material that can be extracted and sold at a profit.

PRELIMINARY FEASIBILITY STUDY -- A preliminary feasibility study is a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established and an effective method of mineral processing has been determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, economic, social, and environmental factors and the evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve.

QUALIFIED PERSON -- An individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these; has experience relevant to the subject matter of the mineral project and the technical report; and is a member or licensee in good standing of a professional association. Under SEC standards this term is not a recognized term in Industry Guide 7 but is more commonly used in Canadian National Instrument 43-101.

RECLAMATION -- The restoration of a site after mining or exploration activity is completed.

ROYALTY -- An amount of money paid at regular intervals by the lessee or operator of an exploration or mining property to the owner of the ground. The royalty, generally, is based on a certain amount per ton or a percentage of the total production or profits. Also, the fee paid for the right to use a patented process.

SILVER PAN AMALGAMATION MILL -- The raw ore is wet crushed with stamps, the crushed ore is separated from the slurry in a settling tank and then the crushed ore is charged with mercury (approximately 10% of the weight of the ore) in the amalgamation pan. The amalgam is separated from the slurry and the silver and gold is separated from the amalgam with a retort.

STRIKE LENGTH -- The actual or estimated length, generally measured in meters, of a mineralized structure.

VEIN -- A mineralized zone having a more or less regular development in length, width and depth, which clearly separates it from neighboring rock.

ITEM 2. PROPERTIES

All of the properties discussed below are located in the State of Chihuahua, Mexico. The following map illustrates the locations of Chihuahua and of the properties:

Location of Cieneguita, Encino Gordo and Guazapares Properties in Chihuahua, Mexico

Cieneguita Property

Property Location

The Cieneguita Property is located in the Baja Tarahumara in Cieneguita Lluvia De Oro, an area of canyons in the Municipality of Urique, in southwest Chihuahua, Mexico. The property is located within one half mile of the small village of Cieneguita Lluvia de Oro. Access to the property is by an all weather dirt road. There is available electrical power for the property generated by diesel generators at Cieneguita Lluvia de Oro.

Claim Status and Licensing

The Cieneguita Property is currently owned by Corporativo Minero. Sunburst Mining has the option of purchasing the concessions under the payment plan discussed below. The concessions of this project cover a total area of 822 hectares (approximately 2,031 acres). The following table is a summary of the concessions on the Cieneguita Property:


Lot Name	Title Number	Area (Ha)	Term of Validity(2)	Royalties and Payments

Aurifero	196356	492.00	7/16/1993 to 7/15/2043	(1)

Aurifero Norte	196153	60.00	7/16/1993 to 7/15/2043	(1)

Aquilon Uno	208339	222.1077	9/23/1998 to 9/22/2048	(1)

La Maravilla	190479	48.00	4/29/1991 to 4/24/2041	(1)

(1) The Cieneguita concessions are all under an option to purchase for $2,000,000 of which $710,000 has been paid. MRT paid $150,000 upon execution of the agreement with Corporativo Minero and two months later paid $200,000. Because the Cieneguita property was not in production by May 6, 2006, Sunburst Mining was required to pay $120,000 to Corporativo Minero to extend the contract. Through discussions with Mexoro, Corporativo Minero agreed to reduce the obligation to $60,000, of which $10,000 was paid in April 2006. Sunburst Mining was then required to pay the remaining $50,000 by May 6, 2006. We made this payment to Corporativo Minero so the contract has been extended. The Company renegotiated the payment due May 6, 2007, to $60,000 payable on November 6, 2007, which was paid and the balance of $60,000 was paid on December 20, 2007. We paid $60,000 on May 12, 2008 of the $120,000 due on May 6, 2008, and the balance was paid in June 2008. We paid $30,000 on May 22, 2009 of the $120,000 payment due on May 6, 2009. We’ve verbally negotiated to pay the balance of $90,000 in three equal monthly payments from June 2009 to August, 2009. We are not in default on our payments. We have the obligation to pay a further $120,000 per year for the next 13 years and the balance of payments in the 14th year, until the total of $2,000,000 is paid. If the property is put into production, of which there is no assurance, then the contract calls for the remaining payments to be paid from the sale of gold, to avoid termination of the agreement.

The payments, if the property should go into production, would be as follows: The remainder of the $2,000,000 payment will be paid out of production from the Cieneguita Property at a rate of $20 dollars per ounce of gold sold. However, in the event that the price of gold is in excess of $400, then Sunburst Mining is required to accelerate payments by an additional $0.10 per each ounce for every dollar of gold priced over $400. The total payment we are liable for is $2,000,000. Once that amount is paid, we have no further obligation to Corporativo Minero. Corporativo Minero has the obligation to pay, from the funds they receive from us, any royalties that may be outstanding on the properties from prior periods. Corporativo Minero has informed us that there were royalties up to 7% NSR owned by various former owners of the property. They have informed us that the corporations holding those royalties have been dissolved and t hat there is no further legal requirement to make these royalty payments. We can make no assurances that we will not ultimately be responsible to pay all or some of the 7% NSR to these former royalty holders if the property were ever put into production and Corporativo Minero did not make the payments to the royalty holders. However, we do not see this potential for additional royalty payments as a material risk to us.

(2) Amendments to the Mexican mining laws took effect with the publication on December 21, 2005, including certain amendments to the Ley Federal de Derechos, the act that sets forth the mining taxes' rates. Effective January 1, 2006, this legislation has converted all of the former exploration and exploitive concessions in Mexico, which carried maximum lives of six years, and 25 years, respectively, into general concessions with a 50 year life from their date of registration with the Mining Registry. The concessions are automatically registered as soon as the concession mining rights are paid and no further paper work is required. Our claims are currently in good standing and held by Sunburst Mining. There will be no special documents sent to us to reflect the change.

In April 2006, we applied to the Mexican government for a change of use of land permit for 30 hectares of the La Maravilla concession. La Maravilla is the concession that contains the mineralized rock that is the main interest of our exploration on the Cieneguita Property. As described in our joint venture agreement below, we are currently extracting mineralized material from La Maravilla as well as continuing our exploration program. The purpose of the change of use permit is to allow us to

extract the rock from this concession for the purposes of processing to extract the precious metals that may be contained therein. We made the application in advance of any known reserves being discovered on the Cieneguita Property. We cannot assure that we will have sufficient ore reserves, if any, to continue extraction as per our agreement with MRT. This permit required negotiations with the government and municipality concerning such things as the removal of timber, building and maintaining roads and reclamation. We paid the required amount of approximately $67,000 (726,000 Mexican pesos) in November 2006 and the government agency issued the change of use permit in January 2007. The permit is valid until December 31, 2011.

In July 2006, we submitted an environmental impact study and a risk analysis study to the Mexican government for a permit to build a heap leach mining operation on the Aurifero concession of the Cieneguita Property. The purpose of this permit is to allow us to construct an ore processing facility through heap leach mining methods. We do not have any ore reserves on the Cieneguita Property and applied for permits in advance of any conclusive results. In January 2007, the necessary permits to allow for the building and operation of a heap leach operation were granted to the Company. If we are unable to extract and process our discoveries, if any, then there is no need to continue exploration.

On February 12, 2009 we entered into a Definitive Agreement For Development Of “Cieneguita” Project with Minera Rio Tinto, a private Mexican corporation whose president was a former president of our Company. The definitive agreement covers project financing of up to USD $9,000,000. The major points of the agreement are as follows:

Portions of the joint venture agreement require we obtain consent from Paramount Gold and Silver Corporation, our secured convertible debenture holder or we repay the debenture held by Paramount Gold and Silver Corporation. Those portions of the agreement that need consent will not be undertaken until such consent is obtained or extinguished by repayment. Subsequently, we repaid approximately $1,300,000 of the debenture owed to Paramount Gold and Silver Corp and in doing so, Paramount agreed to release the Cieneguita property as part of its security under the debenture. As a result of this partial repayment we no longer need the consent of Paramount to begin extraction of mineralized material at Cieneguita.

The Spanish version of this agreement is the governing agreement in case of dispute between the English version and the Spanish versions.

History

The Cieneguita mine was in limited production in the 1990s. Over a four-year period, the Cieneguita mine was operated by Mineral Glamis La Cieneguita S. de R.L. de C.V. (“Glamis”), a subsidiary of the Canadian company Glamis Gold Ltd. (“Glamis Gold”). Glamis was recently acquired by Goldcorp Inc. According to Glamis’ records, Glamis mined and processed 198,000 tonnes of mineralized rock grading 2.2 g/t gold on the property in 1995, ceasing production shortly thereafter. At that time, Corporativo Minero, the operator of the mine for Glamis, acquired the property. MRT entered into an agreement with Corporativo Minero on January 12, 2004 pursuant to which MRT acquired all of the mineral rights from Corporativo Minero to explore and exploit the Cieneguita concessions and to purchase them for $2,000,000. Under our agreements with MRT, MRT has assigned this agreement to us. As of the date of this annual report, $710,000 of the $2,000,0 00 has been paid to Corporativo Minero. MRT paid $150,000 upon execution of this agreement and two months later paid $200,000. We are obligated to make yearly payments on these concessions to Corporativo Minero until the $2,000,000 has been paid.

Also, the agreement calls for the balance of the purchase price remaining to be paid out of production, if any, on Cieneguita at a rate of $20 per ounce of gold sold. However, in the event that the price of gold were to exceed $400, then Sunburst Mining would be required to pay an additional $0.10 per each ounce for every dollar gold trades over $400.

If Cieneguita is never put into production, we are still obligated to pay the $120,000 per year until the $2,000,000 is paid. Sunburst Mining made payments to the property owners of $10,000 in April 2006 and $50,000 in May 2006 in lieu of its obligation of bringing the property to production on or prior to May 6, 2006. Sunburst Mining has the obligation to pay $120,000 per year for the years subsequent to May 6, 2006 until the $2,000,000 is paid or the mine is put into production, if ever, in which case the remaining amount owed would be paid out of any production of the property, to avoid termination of the agreement. The Company renegotiated the payment due May 6, 2007, to $60,000 payable on November 6, 2007, which was paid, and the balance of $60,000 which was paid on December 20, 2007. The Company paid $60,000 of the $120,000 due on May 6, 2008, and the balance was paid on June 20, 2008. We paid $30,000 on May 22, 2009 of the $120,000 payment due on May 6, 2009. We’ve verbally negotiated to pay the balance of $90,000 in three equal monthly payments from June 2009 to August, 2009. We are not in default on our payments. On termination of the agreement, there would be no further obligations by Mexoro to any parties other than assuming responsibility for any reclamation work that may need to be done as a result of exploration or mining activity if any should occur.

Geology

The Cieneguita Property is located in the mid-Tertiary domain of the Sierra Madre Occidental of Chihuahua State, Mexico. This region is dominated by felsic ignimbrites and reportedly represents the largest field of felsic volcanics in the world (Jones, 2006).

Based on the work of Jones (2006), who spent approximately two weeks on the Cieneguita Property in mid-November of 2006, the Cieneguita Property appears to lie along the eastern margin of a well-defined but previously unidentified collapse caldera named the ‘Cieneguita Caldera’. The Cieneguita Caldera appears to be part of a larger caldera complex which exhibits a rough north-south trend, which may, at its southern end, include the El Sauzal project (a producing mine). As suggested by Jones (2006), this north-south trending caldera complex may have developed along a broad north-south arc related to post-Laramide collapse and extension which occurred throughout western North America. The identification of this nested caldera is considered important as the mineralization on the Cieneguita Property appears to be controlled by volcano-structural features related to the Cieneguita Caldera and the caldera complex in which it lies (Jones, 2006).

Field mapping by Jones (2006) has indicated that the Cieneguita Caldera is approximately 15 kilometers in width and possibly up to 32 kilometers in length. This mapping also identified a number of diagnostic features of calderas. These include:

Significant thicknesses of horizontally stratified tuff – interpreted as intracaldera deposits.

Morphologic/topographic break between ponded and outflow ignimbrites – interpreted as the topographic caldera wall.

Ring structure (based on satellite imagery).

Landslide deposits of caldera wallrocks that have been engulfed by intra-caldera tuffs in the form of megabreccias.

Jones (2006) has suggested that the Cieneguita deposit lies along the (eastern) topographic rim of the Cieneguita Caldera. This interpretation is based on an important litho-structural break between outward (easterly) dipping outflow tuffs and horizontally stratified intra-caldera tuffs. Furthermore, erosion appears to have reduced the rim to the level of the ring-fracture zone. This is based on a number of well-defined north-south striking faults and shears in the caldera wall (Jones, 2006).

Lithotypes

A number of lithologies have been identified on the Cieneguita Property and have been summarized by Jones (2006) below.

The extra-caldera (caldera wall) lithologies include (from oldest to youngest) a lower rhyolite tuff, an andesite vitrophyre, an upper rhyolite tuff and basaltic dykes.

Field observations indicate that the lower two units and portions of the third were deposited prior to caldera formation. Landslide blocks of andesite vitrophyre and portions of the upper rhyolite can be found engulfed by intra-caldera tuffs.

These units show relatively conformable dips in sequential beds demonstrating that they were deposited on the margins of the volcanic edifice and predate caldera formation.

Lower rhyolite tuff: The lower rhyolite unit includes at least two welded tuff sequences that are nearly indistinguishable from the upper rhyolite sequence. The rhyolites contain a low percentage but consistent amount of lithic fragments. The unit’s thickness is unknown.

Andesite vitrophyre: This unit is a basaltic to andesitic flow which is exposed for nearly two kilometers along the strike of the caldera wall. It is strongly vitric to the north, moderately vitric in the centre and largely devitrified at the project area and to the south. The unit contains an even abundance of relatively calcic plagioclase crystals while the mafic component is predominately hornblende with minor pyroxene and biotite. This unit acts as the most important marker horizon in the caldera wall with an estimated thickness of 65-80 meters.

Upper rhyolite tuff: The base of this unit is defined by locally well graded basal surge deposits that grade upwards into tuffs with a very high percentage of lithic fragments including blocks up to several metres in diameter. The unit grades upward into a high lithic load welded tuff which marks the lowest of at least three welded tuff packages. The base of this unit occurs as landslide blocks on the Cieneguita Property indicating that it at least partially predates the Cieneguita Caldera. The three overlying welded tuff packages may be correlative with the Cieneguita Caldera itself

Basalt dykes: A single 6 meter wide basaltic dyke has been mapped cutting the upper rhyolite tuff sequence. This dyke cuts the upper caldera fill facies of the upper rhyolite sequence and is therefore considered to be post-Cieneguita Caldera formation.

The intra caldera lithologies are found within the Cieneguita Caldera and include a megabreccia sequence and caldera infill sequence.

Megabreccia Sequence: This unit is characterized by large blocks of caldera wall that collapsed into the caldera during caldera collapse. At Cieneguita, a portion of the caldera wall, consisting of both the andesite vitrophyre and the basal units of the upper rhyolite sequence, slid into the caldera and were engulfed and injected by intra caldera ash flow deposits. Within one of the larger blocks contained in the megabreccia, the contact between the andesite vitrophyre unit and the upper rhyolite tuffs strikes through the center of the formally mined area of Pit 1. This contact is thought to have had an important control on the emplacement and localization of the gold mineralization.

Caldera Infill Sequence: This unit includes rocks that were formed by volcaniclastics that were vented and deposited during caldera formation. This unit can be subdivided into two groups; basal surge deposits and lithic rhyolite tuffs.


i)	Basal surge deposits exhibit dune-like forms consisting of moderately to well sorted beds of well rounded grains of siliceous volcanic rocks. They are thought to be shock deposits formed from the air blast of the initial caldera explosion.


ii)	Lithic rhyolite tuffs overlying the basal surge deposits consist of horizontally stratified pyroclastics that were deposited into the Cieneguita Caldera. The tuffs include a variable, heterogeneous lithic load of pre-existing volcanic rocks and megabreccia. The unit varies from grey (when unconsolidated) to purple-salmon colored where they are more indurated and welded.

Intrusives: The youngest rocks found at Cieneguita are the intrusives, which cut the caldera infill sequences. They occur as dykes and sills ranging in width from one to eight meters. The three types of intrusives that have been identified are felsites, composite basalt-rhyolite vent breccias, and basalts.


i)	Felsite dykes can be observed along the south ridge of Cieneguita as two dykes with an east-northeast strike dipping moderately to steeply to the northwest. They clearly crosscut the intra-caldera tuffs and are nowhere brecciated, altered or veined. They are characteristically fine grained and siliceous with sanidine and bi-pyramidal quartz phenocrysts.

ii)

The composite basalt-rhyolite vent breccias/dykes commonly contain a high percentage of lithic and pumice clasts, compositional banding and spherulites. Quartz veining, specularite and heavy hematite dustings are locally quite intense within and adjacent to these intrusions suggesting they may be mineralized. They are thought to have formed by the commingling of actively erupting basaltic and rhyolitic melt.


iii)	Basalt is present as dykes and irregular intrusions exhibiting a chocolate brown color and fine-grained homogenous texture. They show no signs of deformation or alteration and are thought to be post-mineralization.

Structure

The most important structures in a regional sense are those that controlled the development of the Cieneguita Caldera. The elongate shape of the Cieneguita Caldera suggests that it formed along a NNW-SSE trending axis of regional collapse and extension at the end of the Laramide. Extension continued during and after caldera formation as evidenced by normal faults that offset both pre-caldera and intra-caldera rocks down to the west (Jones, 2006).

The primary structural controls at the mineralized area on the Property trend WSW-ENE as indicated by extensive sheeted fractures and a few faults. The most important of these structures identified thus far is a fault which strikes through the centre of Tajo 1 resulting in the down faulting of the rhyolite/andesite contact to the north. Intense quartz veining and elevated gold values are associated with this fault indicating that it also acted as a conduit for gold-bearing fluids. Notably, this fault is paralleled by two of the felsite dykes described earlier. Jones (2006) suggests that these are deep-seated pre-caldera extensional structures which were reactivated during resurgent magmatism within a nested caldera to the west of the town of Cieneguita and subsequently exploited by the late felsite dykes.

Jones (2006) considers NNW to NNE striking high-angle faults to be important from an economic standpoint. He suggests that mineralization may be well off the main trend as a result of these structures acting as permeable pathways for migrating gold-bearing fluids.

Deposit Types

There are three main deposit types that are considered relevant to the Cieneguita Property: epithermal vein, mesothermal vein and porphyry. These are briefly discussed below.

Epithermal

High sulphidation epithermal deposits occur as veins, vuggy breccias and sulphide replacements ranging from pods to massive lenses associated with high-level hydrothermal systems marked by acid-leached, advanced argillic and siliceous alteration. Metal associations in these deposits include variable amounts of precious (Au-Ag) and base (Cu-Pb-Zn) metals and variable gangue mineralogies. Irregular deposit geometries are the result of host rock permeability and the orientation of mineralized controlling structures. Multiple, crosscutting composite veins are common.

Recent research indicates that these deposits form in subaerial volcanic complexes or composite island arc volcanoes above degassing magma chambers. The deposits commonly contain multiple stages of mineralization, presumably related to periodic tectonism associated with increased intrusive activity and magmatic hydrothermal fluid generation (Panteleyev, 1996). The age of the deposits are commonly Tertiary to Quaternary, however, some deposits have been dated in Mesozoic and Paleozoic volcanic belts. The rare preservation of older deposits reflects rapid rates of erosion before burial of subaerial volcanoes in tectonically active arcs.

Rock types associated with epithermal deposits include a subaerial andesite-dacite-rhyodacite pyroclastics & flows as well as their subvolcanic intrusive equivalents. It is also thought that permeable intervolcanic sedimentary rocks can act as sites of mineralization. The country rock surrounding epithermal veins is commonly extensively altered even though the vein walls may be sharply defined. It is also not uncommon to find large, highly coloured supergene gossans covering epithermal mineralization.

Mesothermal

Mesothermal gold vein deposits are commonly associated with crustal-scale strike slip faults and can be hosted in a wide variety of lithologies (Olsen et al., 1994). Analysis of fluid inclusions from samples of quartz veins yield average temperatures of more than 250 degrees Celsius. The veins are podiform, sheared, and concordant with the enclosing brittle to ductily deformed host rock and range in metamorphic grade from greenschist to amphibolite facies. Mesothermal gold deposits are found in proximity to major regional crustal-scale fault and fracture systems and are most often hosted in

secondary or tertiary structures related to the regional scale structures. Gold is deposited via 250-400 C hydrothermal fluids which originate deep in the earths crust. The fault and fracture zones act as permeable conduits for the fluids to migrate. Gold is carried in solution until the fluid reaches a point where there is either a chemical reaction with the country rock or changes in temperature and/or pressure causes the gold to precipitate. The gold and various associated metals precipitate out of solution together with quartz, carbonate and various other accessory minerals. Structural evidence such as shears, folds in bedding or pinches, swells, and pods in quartz veins are characteristic of ductile deformation and can be often found at many Au-bearing mesothermal quartz veins. Au is often associated with pyrite, chalcopyrite and/or arsenopyrite and can occur as either free grains, within the pyrite/arsenopyrite structure o r as electrum.

Porphyry

Porphyry deposits are typically low grade and large tonnage deposits that are both spatially and genetically to igneous intrusions (McMillan, 1991). The intrusive rocks that host these deposits are generally found to be felsic to intermediate. There are two primary processes that are responsible for porphyry-style mineralization. The first is the fracturing that results from the upwelling of magmatic derived hydrothermal fluids into the shallow crust where lower pressure conditions cause it to boil.

The build up of fluids occurs at the time the intrusion crystallizes, leaving behind an excess of fluids, some of which are derived from the intrusions contact metamorphic front. This aqueous fluid can potentially be enriched in gold, copper, or molybdenum. Further mineralization is achieved as the cooling magma chamber provides the heat engine to create hydrothermal convection cells. Metal enriched aqueous fluid circulates thought the stockwork and all fractures adding to and re-depositing these metals. Mineralization and alteration develop both in the intrusive and in the country rock. The core of the mineralizing system is dominated by a potassic alteration zone. Potassic alteration consists of potassium feldspar, biotite, and quartz. This grades out into the phyllic zone, in which the alteration is made up of quartz and muscovite (typically fine grained sericite). This grades out into the argillic zone, where the principal alteration is quartz and a variety of clay minerals. The propylitic zone rinds the argillic zone and consists of chlorite, epidote, and carbonate.

Mineralization

The gold mineralization identified to date at Cieneguita is localized exclusively within the intra-caldera rocks (megabreccias and infill tuffs). The mineralization is structurally controlled, occurring at the intersections of east-northeast structures and north-south extensional faults. Its spatial and temporal association with the felsic dykes suggests a genetic relationship between resurgent felsic magmatism (related to a younger nested caldera?) and gold mineralization.

The three main gold-related alteration assemblages that have been observed at Cieneguita include:


-	Quartz +/- biotite +/- orthoclase +/- adularia +/- calcite
-	Quartz-sericite-pyrite


-	Hematite-goethite

Quartz-biotite-orthoclase-adularia-calcite (Low Sulphidation)

This assemblage is a form of potassic alteration and is typically bordered by sericite-chlorite-epidote-alunite-clay alteration on the margins of quartz veins. With increased veining, the clay-sericite alteration merges into a more pervasive style of alteration. Associated sulphides are minimal. This variety of alteration is best observed in the andesite vitrophyre north of the project area. The quartz, along with other minerals, are present as veins and sometimes as vain selvedge alteration which in areas of intense alteration is observed as being pervasive. This alteration is not known to be associated with significant sulphide mineralization.

Quartz-sericite-pyrite (High Sulphidation)

This alteration style occurs as a pervasive overprinting within and along structural and lithological breaks. The quartz-sericite-pyrite zones are commonly bordered by clay alteration.

Hematite-goethite

This alteration style is found locally along reaction fronts, fractures, and at the leading edges of silica veins. It locally overprints the first two assemblages. It occurs as massive red to orange-brown zones that are inferred to represent the

deposition of and conversion of earlier sulphides to, hypogene iron oxides. Gold mineralization on the Cieneguita Property is most strongly associated with this alteration assemblage.

As noted by Jones (2006) the alteration and mineralization styles on the Property differ with rock type and geological setting. The two principle mineralized rock hosts are intra-caldera megabreccia and intra-caldera rhyolite tuff as discussed below:

Intra-caldera megabreccia

The megabreccia unit is the primary lithological host to mineralization at Tajo 1.

Severe fracturing, faulting and brecciation during caldera formation were enhanced by the rheological contrasts between the brittle andesite vitrophyre and upper rhyolite tuff. These structures were subsequently infilled/injected by the highly fluid tuff which formed the matrix to the megabreccia. It was these faulted and tuff-injected zones that became the preferred pathways for mineralizing fluids.

Mineralization within the upper rhyolite tuff blocks of the megabreccia is typically accompanied by a strong quartz-sericite-pyrite alteration assemblage. It is described as having dark grey, highly siliceous, sulphide-rich, resistant bands that preserve relict bedding. Iron-oxide alteration crosscuts this alteration along fractures and is interpreted by Jones (2006) to represent a hypogene iron-oxide retrograde event. Quartz veins appear to be either paragenetically early and/or adjacent to the more intensely altered zones. Gold grades within this litho-alteration assemblage are consistently high (>>1 g/t) in these area

Mineralization within the andesite vitrophyre blocks of the megabreccia is found in faulted and tuff injected fractures. The brittle nature of the andesite resulted in extensive internal deformation in part related to devitrification. These structures were easily exploited during landslide collapse giving rise to 3D forked voids which were immediately injected with tuff and subsequently used as preferred pathways for mineralizing fluids. These pathways contain strong quartz-sericite-pyrite alteration bordered by extensive and pervasive argillic (clay) zones. In contrast to the rhyolite, the quartz-sericite-pyrite zones in the andesite show only moderate elevations in gold (0.5-0.7 g/t).

The leading edges of the stronger quartz-sericite-pyrite zones in the andesite are marked with intense iron-oxide fronts of heavy dark red to orange brown goethite-hematite. These iron-oxide fronts consistently carry higher (>2g/t) gold grades whilst adjacent quartz-sericite-pyrite zones are only weakly mineralized.

Intra-caldera rhyolite tuff

In comparison to the megabreccia unit the rhyolite tuffs are only weakly to moderately consolidated. The repercussions of this are that there is little brittle deformation such that would allow for focused fluid flow. Instead, the highly permeable tuffs exhibit broad and diffuse zones of alteration and mineralization.

Mineralization & alteration zones in the intra-caldera rhyolite tuffs are primarily controlled by east-northeast striking structures and, to a lesser degree, north-south structures. These zones are typically characterized by Iron oxide concentrations along and bordering the associated structure. Mineralization and quartz-sericite-pyrite alteration can also be found bordering felsite dykes. Trenching at Tajo 2 has suggested a gold-copper association based on the presence of chrysocolla. Distal to the quartz-sericite-pyrite zones, the rhyolite tuff takes on a chalky white appearance related to pervasive but diffuse clay alteration.

Glamis Gold performed a test pilot heap leach operation on the property in the mid 1990s. Exploration on the property is still in its early stages and significant work needs to be completed before any type of ore reserve calculations, if any, could be made. We have done some initial sampling and drilling on the La Maravilla concessions as described below.

A total of 51 diamond drill holes (6,700 meters) drilled by Cominco defined an auriferous zone approximately 1,000 meters long by 200 meters wide. Within the zone, two mineralized structures were drilled during an exploration program in 1981 and 1982. Later, two drilling programs were performed by Glamis: 135 holes were drilled during 1994 and 62 holes were drilled during 1997. Both programs confirmed the delineation of the two mineralized bodies. We have posted these reports from Cominco and Glamis on our website at www.mexoro.com. The continuing exploration conducted by the Company will focus on further delineating the oxide and mixed mineralized rock structures.

Select intersections from historic drilling at the Cieneguita Property


Hole ID	From	To	Interval (m)	Au (g/ton)	Ag (g/ton)
C-6	46	48	2	5.1	107
C-7	17.25	18.75	1.5	4.9	86.1
C-8	16	18	2	5.3	1
C-12	7.45	10.5	3.05	7.8	6.2
C-12	10.5	12	1.5	4.9	3.2
C-12	160.25	162	1.75	101	31.8
C-14	42	45	3	18	7.8
C-16	2.8	4.2	1.4	6.5	6.5
C-19	87	88.7	1.7	8.5	-
C-19	88.7	90.55	1.85	13.3	105
C-29	42	45	3	4.7	69.8
8	1	4	3	4.6	85
13	0	1	1	11	17
13	1	4	3	10.2	15
13	4	7	3	5.7	37
14	0	1	1	5.6	34
14	1	4	3	5.3	24
14	7	8.9	1.9	4.3	26
19	13	16	3	4.6	18
22	2.6	5.6	3	7.4	15
41	0	1	1	7.5	19
60	10.4	12.7	2.3	4.7	13
61	11.9	14.4	2.5	4.7	3
63	2.1	3.8	1.7	5.8	8
63	3.8	6.8	3	10.1	16
64	0	1	1	4	4
88	7	10	3	5.2	69
106	1	4	3	39	38
106	4	7	3	5.5	16
106	7	10	3	5	10
106	10	13	3	4.9	9
115	0	1	1	6.5	130
137	0	2.55	2.55	4.1	30

We used the original data from Cominco and Glamis to delineate the mineralized zone and to plan our original trenching and sampling programs. In April 2006, we completed a sampling of the property that included more than 500 meters of deep trenches from which we took comprehensive channel sampling. Each of the eight trenches was approximately 200 meters long and two to 10 meters deep spaced equally along the 1,000 meters strike length of the property. From the walls of these trenches, we took approximately 550 rock samples. One half of these samples were sent to ALS Chemex’s laboratory in Chihuahua for assaying. The sampling protocol followed the best mining practices. The purpose of the sampling was to further define the mineralized grade and potential of the property.

Our president believes that the mineralized material at Cieneguita is structurally controlled and hosted by breccias and tuffs varying from rhyolitic to dacitic in composition. The main mineralization and alteration zones have been developed in the intersection of WNW, NW and NE structures to the northwest (Pit 1 area) and to the southeast (Pit 2 area). These mineralized zones consist mainly of acid-sulphate alteration, including quartz-alunite and small and localized areas exhibiting residual or vuggy silica alteration zones and are interpreted to represent a high-sulphidation gold (±silver) system.

Phase 2 of exploration was designed to identify new veins and/or mineralized zones. The geological mapping and sampling activities carried out within phase 2 at Cieneguita has resulted in the discovery of gold zones in three different locations along Cieneguita’s mineralized body. The three new gold locations have been identified just on the outlined limit of the known mineralized body opening the potential to the southeast in the Pit 1 South area, to the north in the Central area and to the north in the Pit 2 area, respectively.

Gold mineralization in the Pit 1 South area is mainly controlled by N35°E structures exhibiting quartz-sericite-pyrite alteration and small and localized areas with high clay content, where exposures allowed continuous chip sampling along roadcuts.

The new Central and Pit 2 North areas indicate that the mineralized material is primarily controlled by E-W and N30°W structures also exhibiting quartz-sericite-pyrite where pyrite has been completely oxidized. Small and localized areas of high clay content are also common.

As we originally had planned to produce precious metals from the Cieneguita property by heap leach method of mining we took samples at the Cieneguita Property 22 tonnes of the material to complete column tests to determine the leachability of the precious metals from the rock. In this test, the mineralized rock was placed in PVC tubes and different mixtures of a cyanide solution were dripped over the top of the columns at different flow rates. The results from these tests will help us to determine the most effective solution to use on the heap leach pads on the property. The tests, conducted by qualified geologists employed by MRT, were undertaken to determine if the metallurgy of the minerals would allow for economic recovery of the precious metals using a cyanide heap leach process. The tests were scientifically conducted and monitored for quality control and efficacy. The results of the column test indicate that up to 98% of the gold contained in the mineralized rock samples we took could be recovered from the mineralized rock if the mineralized rock is leached for a sufficient period of time. Under actual mining production conditions in the field, we would anticipate economic recovery levels from the mineralized rock to be approximately 70% to 75% recovery. The cost of the cyanide needed to recover gold above the 85% level would outweigh the value of gold recovered. We cannot guarantee that we will be able to reach this level of recovery. This is not an estimate of reserves on the property. Additional tests will be needed to determine the most effective crush size for the mineralized rock, the most cost effective flow rates of the cyanide and the most economical period of time for leaching. But as our drilling and exploration program discovered additional mineralized material contained in the sulphide material located on the property we deferred our plan to implement the heap leach mining process until we could have a better understanding of the geology of the property and the best method to use to put the property into production.

During the year ended February 28, 2009, we completed a 20,215 meter drilling program, and a technical report that is compliant with Canadian National Instrument 43-101 estimating the mineralized material was produced.

The main activities in the Cieneguita project are set forth below:

100 diamond drillholes completed for a total of 20,215 meters of drilling

Broad mineralized intercepts including 111.5 meters with 1.24 g/t Au, 99.6 g/t Ag, 0.45% Pb and 0.73% Zn (C-21) and 94 meters with 1.21 g/t Au, 79.8 g/t Ag, 0.78% Pb and 1.2% Zn (CI-30)

Mineralization at Cieneguita has been traced over 900 meters along strike and still remains open to the southwest and to depth

Exploration ongoing; infill drilling program has been designed to expand the size of the mineralized material

Cieneguita is a new gold‐silver and polymetallic discovery made in 2008 by our exploration team. Our exploration work to date includes 100 diamond core drillholes totaling 20,215 meters of drilling. The drilling exploration program commenced in December 2007 with one drill rig and a second rig was added in July 2008. Due to our financial constraints, one of the drill rigs was taken away in October 2008 and drilling continued with one rig until December 19, 2008.

Mexoro has received analysis results for only 60 holes of 100 drilled to date (CI-01 to CI-54, CI 67-CI-69, CI 71, CI 74 and CI-77). A complete listing of the drill logs are published in the Form 10Q for the period ended August 31, 2008 and at our website www.mexoro.com. With the exception of the holes noted above, the assay results from holes CI-55 to CI-100 are still pending; however, most of the holes returned the same broad mineralized intercepts similar to previously announce results. No assurance may be given, though, that these new holes will have the same values as previously analyzed holes. Two different styles of mineralization have been identified: precious (gold‐silver) and base (lead‐zinc-silver) metal mineralization, with higher gold‐silver grades starting on surface and higher grade lead‐zinc-silver mineralization intercepted at depth and to the west of the Cieneguita deposit. We interpret the Cieneguita deposit as a diatreme breccia body where disseminated oxide and sulphide mineralization is mainly hosted by quartz‐sericite altered diatreme breccias and lapilli tuffs.

The mineralized body is shaped like a funnel which has been flattened laterally, measuring over 900 meters by 300 meters as defined by the drill results. Dana Durgin, an independent geological engineer has completed a cross section‐based geological model and has calculated inferred mineralized material of 15.249 million tons with 2.62 g/t Au equivalent based on assays that were composited using the sum of the dollar values for Au, Ag, Pb and Zn in each drill interval. Three-year trailing average prices used were: gold = $727.22 per ounce, silver = $13.66 per ounce, lead = $1.00 per pound, zinc = $1.36 per pound. A cutoff of $30 was applied and weighted averages calculated for each above-cutoff interval. These intervals

were projected between drill holes and between sections to produce resource blocks, which were then compiled using weighted averages to produce a total tonnage and grade with a dollar value per ton.

Mineralization intersected in CI‐34 (46 meters with 4.68 grams per ton gold, 87.67 grams per ton silver, 0.24% lead and 0.22% zinc) and CI‐29 (51 meters with 0.5 grams per ton gold, 55.03 grams per ton silver, 0.34% lead and 0.46% zinc), both collared in the western portion of Cieneguita suggests that mineralization still remains open to west, southwest and to depth in the western part of the Cieneguita deposit. No assurance may be given, though, that additional mineralized material will be found in these areas.

This figure is showing the geological units and distribution of the 100 drillholes.

Because of the favorable mapping-sampling and drilling results in Cieneguita, we initiated a brownfield exploration program aimed at locating additional mineralization within our properties. The exploration process around the main mineralization zone at Cieneguita has identified two new areas of mineralization 500 meters to south of the current known reserves. These two areas known as Piedras Blancas and Piedra Amarilla are exhibiting the same size, characteristics, and intensity of alteration-mineralization on surface as encountered at Cieneguita. No assurance, though, may be given that any positive exploration results will come from these similarities.

Detailing mapping and sampling is currently underway. Our exploration at the Piedras Blancas area has consisted of a 1:1,000 scale geologic mapping, rock chip samples and vein geochemical sampling.

A figure exhibiting main geological and mineralization features on the Piedras Blancas and Piedra Amarilla areas is shown below.

Despite these results, the Cieneguita Property has no known or estimated reserves.

To date, MRT has extracted approximately 5,000 tonnes of mineralized material and has shipped it to its mill located in Sinoloa as a commercial test pilot program. The main purpose of the test is to determine the best process for extracting the precious metals from the mineralized material. We are currently waiting to receive those results back from MRT.

Infrastructure

The town, near the former mine, has the following services: diesel generated electrical power, cellular phone service, radio communication (CB), a health center and a school. Because the property was previously in production, it has existing infrastructure that includes power, water, railroad transportation (within 20 kilometers), and a public, all weather road with access year round. The haul roads to the heap leach pads from the open pit area are in good condition and have been maintained by third parties since Glamis halted production, and the heap leach pads used in previous mining operations are still in place. It is our intention to use the existing pads and tailings site to reduce our costs to re-open the mine. Because of this existing infrastructure, we believe that the investment needed to put the mine into production would be less than the

investment that would be required for a mine that was never in production. There are no additional equipment or facilities available to us on the property. Further study is required to review the feasibility and suggested extent of our use of the existing infrastructure of the old mine.

Budget

To date, we have spent $4,246,000 (Peso 49,967,000) on the exploration of the Cieneguita Property. The proposed exploration budget for the Cieneguita project for 2009 is $1,128,047. This budget does not include any money to be spent by MRT in the event a joint venture agreement is finalized with them. See “Plan of Operations” in the “Management’s Discussion and Analysis” section for further information.

Guazapares Property

Property Location

The Guazapares Property is located in the Barranca section of Chihuahua State in Mexico. According to data published by the Government of Mexico, it is at the interphase between the two main volcanic groups that form the bulk of the Sierra Madre Occidental. The location is 220 kilometers to the southwest of Chihuahua City. An all weather dirt road traverses the property. The property is accessible year round by air, rail (within 20 kilometers) and road. The area has available diesel generated power and water.

The Guazapares Property, covering 1,980 hectares (approximately 4,893 acres), is in a mining district with a history of large ore deposits. A large ore deposit would be defined as a property capable of producing in excess of 50,000 ounces of gold equivalent per year.

Claim Status & Licensing

Sunburst Mining owns or has an option to purchase 100% of the Guazapares concessions, as indicated below. If our exploration is successful on the optioned concessions, then Sunburst Mining intends to exercise its option to acquire them. There is no penalty for not exercising our options. The concessions not owned by Sunburst Mining are owned by Compañía Minera. There is no relationship between Compañía Minera and Mexoro, its officers, directors and affiliates. The following table sets forth those concessions in the Guazapares area that Sunburst Mining owns or has the option to purchase:


GUAZAPARES CONCESSIONS OWNED BY SUNBURST MINING (Property Payments Still Due and Owing)
Name	Title Number	Area (Ha)	Term of Validity (1)		Royalties and Payments
Guazapares	209497	30.91	3/8/1999 to 2/8/2049		NSR of 2.5% (2)
Guazapares 1	212890	451.97	2/13/2001 to 1/12/2051		NSR of 2.5% (2)
Guazapares 2	226217	404.00	12/2/2005 to 12/1/2055		NSR of 2.5% (2)
Guazapares 3	211040	250.00	3/24/2000 to 3/23/2050		NSR of 2.5% (2)
Guazapares 4	223664	63.97	2/2/2005 to 1/2/2055		NSR of 2.5% (2)
Guazapares 5	213572	88.87	5/18/2001 to 5/17/2051		NSR of 2.5% (2)
El Cantilito	220788	37.04	7/10/2003 to 6/10/2053		NSR of 2.5% (2)
Vinorama	226884	474.22	3/17/2006 to 3/16/2056		NSR of 2.5% (2)

GUAZAPARES CONCESSIONS UNDER OPTION AGREEMENTS
Name	Title Number	Area (Ha)		Term of Validity (1)	Royalties and Payments
San Antonio	222869	105.11		9/14/2004 to 9/13/2054	NSR of 2.5% (3)
San Antonio	204385	14.89		2/13/1997 to 2/12/2047	NSR of 2.5% (3)
Ampliacion San Antonio	196127	20.92		9/23/1992 to 9/22/2042	NSR of 2.5% (3)
San Francisco	191486	38.16		12/19/1991 to 12/18/2041	NSR of 2.5% (4)

(1)

Amendments to the Mexican mining laws took effect with the publication on December 21, 2005, of certain amendments to the Ley Federal de Derechos, the act that sets forth the mining taxes' rates. Effective January 1, 2006, this Mexican Government legislation has converted all of the former exploration concessions in Mexico, which carried a maximum six year life, and exploitive concessions, which had a 25 year life, into general concessions with a 50 year life from the date they were registered with the Mining Registry. The concessions are automatically registered as soon as the concession

mining rights are paid and no further paper work is required. These claims are currently in good standing and held by Sunburst Mining. There will be no special documents sent to us to reflect this change.

(2)

These concessions have been transferred to the Company. However, we must continue to make payments on these concessions in order to retain ownership. The total payments for us to acquire and retain 100% ownership of all eight concessions are as follows: November 30, 2005 - $100,000 (this payment date has been extended – see below), October 31, 2006 - $60,000 (this payment date was extended to February 28, 2007 and then to May 31, 2007 and then to August 31, 2007- see below 5), August 2, 2007 - $140,000 (see below 5), August 2, 2008 - $110,000 (we did not make this payment. Under the Letter of Intent signed with Paramount for the sale of Guazapares concessions, Mexoro will negotiate deferring payment until the 37^th month from the closing date of the sale) and August 2, 2009 - $500,000. These scheduled payments must be made to keep our agreement in good standing. Failure to make the payments would cancel our agreements to acquire these concessions.

(3)

These concessions are currently under option agreements. Title to the concessions has not yet been transferred to the Company. The total payments for us to acquire 100% ownership of all three concessions are as follows: January 15, 2006 - $20,000 (paid), January 15, 2007 - $40,000 (this payment was deferred until April 15, 2007 and payment was made on March 26, 2007), January 15, 2008 - $50,000 (this payment was deferred to January 31, 2008 and was paid in April 2008), January 15, 2009 - $50,000 (we did not make this payment. Under the Letter of Intent signed with Paramount for the sale of Guazapares concessions, Mexoro will negotiate deferring payment until the 37^th month from the closing date of the sale) and January 15, 2010 - $500,000. These scheduled payments must be made to keep our option to acquire these concessions in good standing. Failure to make the payments would cancel our options to acquire these concessions.

(4)

This concession is currently under an option agreement. Title to the concession has not been transferred to the Company. The total payments for us to acquire 100% ownership of this concession are as follows: June 25, 2006 - $20,000 (paid), June 25, 2007 - $30,000 (paid), June 25, 2008 - $40,000 (paid) and June 25, 2009 - $250,000. These payments must be made to keep our option to acquire these concessions in good standing. Failure to make the payments would cancel our options to acquire these concessions.

(5)

On September 19, 2007, Sunburst Mining, Mexoro and MRT entered into an agreement to defer any and all property payments regarding Guazapares, owing to MRT which became due by December 31, 2007, until such time as Sunburst Mining and Mexoro have sufficient funds to make the payments, in the opinion of the disinterested directors of Mexoro.

History

Old mining records in the public domain indicate that mining operations commenced on this site in the 17^th century. Most of the production on this site came from high-grade vein deposits mined by crude underground methods. These records indicate that the main Guazapares breccia veins were discovered in or around 1830. The major period of production was from 1870 to 1900, when there were four silver pan amalgamation mills in operation. Although the deposits contain both gold and silver, the early mills could not recover the gold as it is very fine and occurs along cleavage planes in the pyrite. The mills at the time could only process the oxidized portions of the veins, and the unoxidized, sulfide-bearing material was usually left in the mines as pillars. The principal mine owner died in 1890, after which the mines of Guazapares slowly sank into disrepair and closed by 1900. In 1905, a U.S. company consolidated most of the properties and reopened some of the mine workings. The company ran into financial difficulties during 1907 and work halted. Ramon Valenzuela then acquired the Guazapares Property and operated a mill until 1912. Noranda Exploration, Inc. briefly optioned concessions in the area in the early 1990s. Kennecott Utah Copper Corp. optioned the core concessions in 1993-94 and drilled a few holes at one of the concessions. On Guazapares 4, and on a property adjacent to it, War Eagle Mining Company, Inc. drilled a total of 5,552 meters in 50 holes on three mineralized zones between November 1991 and August 2002.

Geology

There are two main deposit types that are considered relevant to the Guazapares Property: epithermal vein and mesothermal vein. These are briefly discussed below.

In an epithermal gold deposit, the gold is deposited within one to two kilometers of the surface and is deposited from hot fluids. The fluids of epithermal systems range between 50 and 200 degrees Celsius with moderate pressures (Panteleyev, 1991-4). These deposits are typically related to volcanism in continental arc settings. Epithermal type mineralized veins are often spatially and genetically related to porphyry systems (Panteleyev, 1991-4). Epithermal gold deposits are formed by two chemically distinct fluids. The first is low sulphidation fluid, a mixture of meteoric water and magmatic fluid that is of nearly neutral pH. Gold is carried in solution in low sulphidation waters and is deposited when the water rises to shallow low pressure levels in the crust and boils. The second fluid, high sulphidation fluid, which is almost totally derived from a magmatic source is deposited when the fluid cools or is mixed with meteoric water. Gold and other metal s can originate either from the magma or be leeched from the host rock as the fluids travel though fractures. Low sulphidation fluids typically form mineralized cavity filling quartz veins. High sulphidation fluids often form mineralization that is penetrative into the host rock often observed as disseminated texture. Low sulphidation systems are known for containing economic quantities of silver with some copper, lead, and zinc. Other minerals associated with low sulphidation systems are chalcedony, carbonate, pyrite, sphalerite, and galena. High sulphidation systems often contain economic quantities of gold and copper. Other minerals associated with high sulphidation systems are quartz, alunite, pyrite, and other copper minerals (Panteleyev, 1991-4). Geochemical exploration for these types of deposits results in different chemical anomalies depending on the type

of mineralization present. Low sulphidation deposits are higher in zinc and lead, lower in copper, and have a higher ratio of silver to gold. High sulphidation deposits are higher in arsenic and copper and have lower silver to gold ratio.

Mesothermal gold deposits can be hosted in a wide variety of lithologies. These deposit often show relationships with regional scale strike slip faults (Olsen et al., 1994). Analysis of fluid inclusions from samples of quartz veins give average temperatures of more than 250 degrees Celsius. These veins are podiform, sheared, and concordant with enclosing schists of a transitional greenschist-amphibolite grade. Gold mineralization is best associated with faults that show evidence of deformation that is transitional between ductile to brittle and associated with greenschist to amphibolite facies metamorphism (Olsen et al., 1994). Mesothermal gold deposits are found in the proximity of major regional fault and fracture systems and most often hosted in secondary or tertiary structures related to the regional scale structures. The gold is deposited from hydrothermal fluids which originated deep in the earths crust with temperatures of 250 to 400 degrees Celsi us. The fault and fracture zones act as permeable conduits for the fluids to migrate. Gold is carried in solution until the fluid reaches a point where either there is a chemical reaction with the country rock or changes in temperature and/or pressure cause the gold to precipitate. The gold and associated metals precipitates out of solution along with quartz vein material. Mesothermal type deposits can be recognized by the fact that the host rocks show the affects of the fault/fracture origins. Structural evidence such as folds in bedding or pinches, swells, and pods in quartz veins is characteristic of ductile deformation and can be often found in at mineralized mesothermal quartz veins. Mesothermal quartz carbonate veins typically include pyrite and arsenopyrite with the gold. Gold can be pure, and be found as free grains or grains intergrown with sulphide minerals. The gold can also occur within the crystal lattice of arsenopyrite or as electrum, a gold mineral containing between 20 to 80 percent silver. Mineralized mesothermal quartz carbonate veins are characterized by iron rich hydrothermal carbonate alteration assemblages, which are pervasive with respect to the host rock.

Mineralization

The style of mineralization at the Guazapares Property is characterized by gold and silver bearing veins and vein breccias occurring within and/or at the intersection of numerous north – northwest structures (San Francisco and San Antonio Fault Systems) and west – northwest structures (San Antonio and El Cantilito Fault Systems). These are multi-phase deposits which produced several generations of cross-cutting veins, veinlets, breccias and related hydrothermal alteration. Alteration ranges from peripheral propylitization to argillic alteration to strong to intense silicification, often with adularia development. This mineralization is physically expressed as quartz vein stockworks, silicified hydrothermal breccias, and vuggy, quartz-filled expansion breccias. At many such deposits, such as those nearby at Palmarejo (Gustin, 2004), there are at least two stages of gold-silver mineralization. The first is characterized by pyrite, sphalerite, gal ena and argentite in structurally controlled quartz vein breccias. There is often a later fine-grained higher-grade gold-silver, base metal-deficient phase cross-cutting the first (Durgin, 2007).

Numerous polymetallic vein showings have been the subject of much of the exploration work at the Guazapares Property.

The San Francisco Area was found to contain mineralized quartz veins, vein breccias, and quartz vein stockwork zones comprising and area of approximately 500 by 700 meters. The mineralized zone trends predominately northwest, with the highest grade mineralization occurring at intersections with the west, northwest, and northeast trending faults. The San Francisco area is characterized by stockwork type mineralization, with silicification being the major alteration.

The San Antonio Area consists of two main mineralized veins trending northwest and west-northwest. The mineralization covers an area of 500 by 300 meters and is observed as quartz veins and quartz stockworked veins. These exhibit textures of multiple phases of hydrothermal activity.

The El Cantilito Area is a mineralized zone found related to west and northeast trending structures where high concentrations of gold and silver have been found. The mineralization style is quartz veins, quartz stockwork, and silicification observed to cover a 500 by 350 meter area within the felsic volcanic rocks.

The Montana de Oro Area lies to the north of the Guazapares Property. This showing is characterized by mineralized structures trending north-northeast, where development of mineralized shoots was found to contain high gold concentrations.

Mineral Deposits

Geological mapping and sampling over an area of four square kilometers has outlined numerous mineralized areas within the project area.

According to our VP of Exploration, the Guazapares property consists of a series of sub-vertical, brecciated, quartz-rich zones that outcrop within an area of approximately four square kilometers and have a strike length of over two kilometers. The mineralized areas and identified drilling targets include four main zones: San Antonio, San Francisco, El Cantilito and Montaña de Oro. The mineralization is characterized by silver-gold low-sulphidation veins, locally overprinted by high-level high-grade gold-silver quartz veins. The mineralized areas and veins are structurally-controlled by north-northwest striking faults and west-northwest trending faults that have favored the development of high-grade mineralized shoots.

Mineralization at Guazapares is characterized by gold-silver veins and vein-breccias occurring within and/or at the intersection of numerous north-northwest structures (San Francisco and San Antonio fault systems) and west-northwest structures (San Antonio and El Cantilito fault systems).

On the basis the field evidence, all four mineralized areas have been considered to be prospective in which three of them San Francisco, San Antonio and El Cantilito have been followed up with initial geological mapping, sampling and drilling.

The San Francisco area is characterized by mineralized quartz veins, vein/breccias and quartz veins stockworked zones covering an area of approximately 500 x 700 meters. The mineralized zone trends predominantly northwest developing high-grade mineral concentration within the intersection of the west, northwest and northeast trending faults. The San Francisco area includes mainly stockwork mineralization and silicification, exhibiting small and localized areas of vuggy quartz within the volcanic rocks. Detailed rock chip sampling along these mineralized zones has returned high silver values ranging from trace to 2,160 g/t Ag, where gold values vary from 1.17 to 2.28 g/t Au.

Early mining, by previous owners, was focused mainly on the San Antonio vein domain where high-grade gold mineralization sampling has returned values of 42.6 g/t Au and 1,100 g/t Ag present in underground workings. Two main mineralized veins domain trending northwest and west-northwest have been identified within this targets area. Mineralization comprises an area of 500 x 300 meters and consists of quartz veins and quartz stockworked veins exhibiting multiple pulses of hydrothermal activity. Assay results from rock chip samples have returned gold values registering from trace to 8.76 g/t Au.

The El Cantilito area is a mineralized zone mainly along west and northeast trending structures where high concentrations of gold are common, varying from 1.86 to 8.39 g/t Au and exhibiting silver values from trace to 656 g/t Ag. El Cantilito is characterized by quartz veins, quartz stockwork mineralization and silicification developed in an area of approximately 500 x 350 meters within the hosting volcanic rocks.

The Montaña de Oro area is a newly identified target to the north of the Guazapares project. Montaña de Oro is characterized by mineralized structures trending north-northeast, where development of mineralized rock-shoots containing frequent high gold values (5.39, 7.22, 1.75, 19.7 and 2.5 g/t Au).

Most of Mexoro’s exploration efforts have been concentrated on the San Antonio and San Francisco vein domains although the vein and breccias textures, structures, alteration and metal association suggest that mineralization areas at Guazapares are of low-sulphidation style. According to our VP of Exploration, these structural and mineralized systems are open towards both the north and south. Detailed field work will continue in all identified targets in conjunction with building road access and drilling platform on selected drilling locations.

A 19 drillhole program has been completed on the Guazapares project totalling 2,670 meters. The most recent drilling results are from 16 completed holes drilled at the San Francisco Este, San Francisco Centro and El Cantilito concessions, three of the main targets identified in the project. All drill holes in the San Francisco Centro and El Cantilito concessions intersected intervals of gold and silver mineralization. The drill holes are reported both as gold and silver values, as well as gold equivalent values (Au Eq.). The formula for calculating the gold equivalent values is as follows:

For holes GU-01 to GU-03, Au Eq. was calculated using a factor = 56.32 (gold and silver prices on 20-26 October 2007). Gold equivalent is based upon metal prices of US$757 oz Au and US$13.44 oz Ag in terms of those prices 1 g/t Au = 56.32 g/t Ag ($757/$13.44)

For holes GU-04, GU-08 and GU-10 to GU-16, Au Eq. was calculated using a factor = 53.33 (gold and silver prices on 18-20 January 2008). Gold equivalent is based upon metal prices of US$800 oz Au and US$15 oz Ag in terms of those prices 1 g/t Au = 53.33 g/t Ag ($800/$15)

Formula to calculate gold equivalent – Au Eq.= Au (g/t) + (Ag (g/t)/($ozAu/$ozAg))

San Francisco Este Target

The San Francisco Este target is characterized by mineralized veins/breccias, quartz veins stockworked zones. The mineralized and altered zone on this target trends predominantly northwest. Drillholes GU-04 to GU-07 and GU-17 to GU-18 were designed to test the silver (± gold) mineralization identified on surface. GU-04 intersected 9.55 meters with 2.17 g/t Au Eq from surface down to 10 meters depth. Drillhole GU-08 encountered a mineralized interval of 5.20 meters with 1.68 g/t Au Eq. These intervals complement previous results for the surface sampling where we reported silver values from trace to 2,160 g/t Ag. Drillholes GU-05, GU-06 and GU-07 reported only gold and silver anomalies and did not intersect economic mineralization.

San Francisco Centro Target

The San Francisco Centro target is characterized by quartz veins, veins/breccias and quartz veins stockworked areas exhibiting multiple pulses of hydrothermal activity. Mineralization in San Francisco Este tends to cluster in mineralized-shoots developed primarily in the intersection of main structures. Drillholes GU-08 to GU-13 were planned to test the east-west mineralized structure identified during the mapping and sampling process in the central part of the concessions. All drillholes intersected mineralization from surface down to 100 meters depth. Drillhole GU-10 intersected 13.75 meters with 2.75 g/t AU Eq. and 22.98 meters with 2.80 g/t Au Eq. from 8.15 meters down to 85 meters depth. Drillhole GU-13 intercepted 9.0 meters with 3.63 g/t Au Eq. and 4.50 meters with 1.56 g/t Au Eq.

El Cantilito Target

El Cantilito is a mineralized zone produced mainly along northeast vein-structures where mineralization tends to cluster in mineralized-shoots and mineralized stock works developed in structural jogs and/mineralized intersection of main structures. Drillholes GU-14 to GU-16 and GU-19 were designed to test the outcropping mineralized structures. Drillholes GU-15 and GU-16 were collared in the west margin of the known limit of the mineralized structure and it appears to have opened up the exploration further west along El Cantilito structures. Drillhole GU-15 was stopped at 168 meters depth still in mineralization intersected 17.06 meters with 1.26 g/t Au Eq. including 1.30 meters with 6.10 g/t Au Eq. Drillhole GU-16 intercepted 18.92 meters with 4.33 g/t Au Eq. including 7.74 meters with 9.10 g/t Au Eq.

Drill holes GU-05 to Gu-07, and Drill Holes GU 17 – GU 19 did not intersect economical mineralization. A summary of the mineralized drill intercepts can be reviewed in the section headed Management's Discussion and Analysis of Financial Condition and Results of Operations and on our website at .

The following is a map of the drillhole locations:

In May 2008 we moved a drill rig onto the Guazapares property to commence the second round of drilling. A 6,000 meter diamond drilling program commenced in June 2008. The drill program tested alteration and mineralization targets, as well as additional areas identified during a drill campaign completed in December 2007. A total of 12 additional holes were drilled.

The three main target areas include San Antonio, San Francisco, and El Cantilito. The Drilling was to initially test alteration and mineralization centers located along these structural trends. The high priority target is where San Antonio, San Francisco, and El Cantilito mineralized structures intersect each other in the central part of the project area (drill holes GU-20, GU-22 and GU-23 are located within that target). Continuation along strike and at depth of the Antonio, San Francisco, and El Cantilito, mineralized structures are anticipated to be tested with this second stage diamond drilling program. Drilling consisted of twelve 150-200 meter drill holes, with deeper drilling reserved for areas that show the best results. The results of the remaining 9 holes are pending.

In addition, targets Montana de Oro and Blanquita, which were identified during recent detailed mapping and geochemical sampling program at 1:1,000 scale, are anticipated to be also tested during this drill program.

The Guazapares property is without known reserves. Our proposed exploration programs are exploratory in nature.

Infrastructure

Guazapares has the infrastructure in place to support a mining operation. It has diesel generated electrical power, water, railroad transportation within 20 kilometers and an all weather road access all year round. There is trained labor for mining available in the area.

Budget

The total exploration budget for 2009 is $1,242,255. The expenditures are broken down as follows:


Geochemistry	$132,600
Geophysics	$0
Safety	$3,000
Land Costs	$0
Contractors	$995,040
Travel and Vehicles	$42,260
Field Support	$6,000
Communications	$4,200
Subtotal	$1,183,100
Contingency(5%)	$59,155
Total	$1,242,255

See “Plan of Operations” in the “Management’s Discussion and Analysis” section for further information.

Encino Gordo Property

Location

The Encino Gordo project is located in the Barranca section of Chihuahua State in Mexico, and according to data publicly published by the Mexican Government, it is at the interphase between the two main volcanic groups that form the bulk of the Sierra Madre Occidental. The Encino Gordo Property is 3.2 miles west of the Guazapares Property. The location is 220 kilometers to the southwest of Chihuahua City. The property is accessible by an all weather dirt road along the southwest side of the property.

Claim Status

Sunburst Mining owns two concessions (Title 220149 and 220148) and has the option to acquire 100% of the three other properties listed below, subject to a 2.5% NSR and making the scheduled property payments.

The concessions not owned by Sunburst Mining are owned by MRT. The following table is a summary of the concessions on the Encino Gordo property:


Lot Name	Title Number	Area (Ha)	Term of Validity (1)	Royalties and Payments

Encino Gordo	225277	450	8/12/2005 to 8/11/2055	None (2)

Encino Gordo	227125	382	5/17/2006 to 5/16/2056	None (2)

La Paloma	220148	100	6/17/2003 to 6/16/2053	NSR of 2.5% (3)

El Camuchin	220149	100	6/17/2003 to 6/16/2053	NSR of 2.5% (3)

Encino Gordo 2	225276	50	8/12/2005 to 8/11/2055	NSR of 2.5% (3)

(2)

Concessions are 100% owned by Sunburst Mining with no further payments to be made.

(3)

The total payments for us to acquire 100% of these concessions from the concession owners are as follows: June 30, 2006 - $10,000 (this amount has been paid), December 31, 2006 - $25,000 (this payment was deferred until March 31, 2007 and payment was made on March 26, 2007), December 31, 2007 - $50,000 ($20,000 of this payment was made on January 3, 2008 and balance was paid on February 29, 2008), December 31, 2008 - $75,000 (we are currently in default of this payment and we are renegotiating the payment terms), December 31, 2009 - $125,000 and December 31, 2010 - $200,000. These scheduled payments need to be made to keep our agreement in good standing. Failure to make the payments would cancel our agreements to acquire these concessions.

History

The Encino Gordo Property, covering 1,042 hectares (approximately 2,575 acres), is situated near an old mining district with a lengthy production history, according to public records. Old mining records indicate that mining operations commenced three kilometers east of this site in the 17^th century. Most of the production from those mines came from high-grade vein deposits mined by crude underground methods. To the east of Encino Gordo, the main Guazapares breccia veins were discovered in or around 1830. The major period of production was from 1870 to 1900 when there were four silver pan amalgamation mills in operation. Although those deposits contain both gold and silver, the early mills could not recover the gold as it is very fine and occurs along cleavage planes in the pyrite. The mills of the time could only process the oxidized portions of the veins, and the unoxidized, sulfide-beari ng material was usually left in the mines as pillars. The principal mine owner of the properties east of Encino Gordo died in 1890, after which the mines of Guazapares slowly sank into disrepair and closed by 1900. In 1905, a U.S. company consolidated most of the properties to the east of Encino Gordo and reopened some of the mine workings. That company ran into financial difficulties during 1907 and work halted. Ramon Valenzuela then acquired the properties to the east of Encino Gordo and operated a five stamp mill until 1912. Noranda Exploration, Inc. briefly optioned concessions in the area in the early 1990’s. Kennecott optioned the core concessions east of Encino Gordo in 1993-94 and drilled a few holes in one of the concessions to the east of Encino Gordo. The Encino Gordo property has never been in production.

Mineral Deposits

Blackstone Resources Inc. hired Reliance Geological Services of Vancouver, Canada in 1996 to evaluate the results of a geological and geochemical exploration program on the Encino Gordo Property. The subsequent work revealed results that were judged worthy of a second phase of exploration. Our surface sampling has indicated the presence of mineralized structures, including gold and silver anomalies on the property. Several gold and copper anomalous areas were also identified. The property is at the very early stages of exploration, though, and much more work is needed before any decisions can be made as to the viability of the property.

Structure Empalme

The Empalme vein outcrops northwest of the Elyca structure, inside the Encino Gordo Property and has been mapped for approximately 150 meters. Workings on the breccia-vein consist of two old shafts now filled with water. The host rocks consist of a sequence of volcaniclastic sediments overlain by tuffaceous dacites with moderate silicification and supergene argillic alteration.

Cienega Vein

Our exploration shows that the Cienega vein outcrops at one location along a stream bed within the Encino Gordo Property. It consists of brecciated quartz and contains 2% to 3% disseminated pyrite hosted by brown volcaniclastics.

Arroyo Los Laureles Vein

The vein outcrops in the southeast limit of the San Miguel claim in Arryo Los Laurels. The host rocks consist of intensely fractured volcaniclastic arenites, tuffs and dacites.

The Encino Gordo Property is without known reserves. Our proposed exploration programs are exploratory in nature.

Infrastructure

The Encino Gordo Property is accessible year round by all weather roads. There is no local electricity or water currently available. We will need to supply our own diesel generated electrical power.

Budget

The total 2009 exploration budget for Encino Gordo is $739,232. The exploration expenditures are as follows:


Geochemistry	$84,030
Geophysics	$84,000
Safety	$2,000
Land Costs	$0
Contractors	$507,100
Travel and Vehicles	$17,100
Field Support	$6,650
Communications	$3,150
Subtotal	$704,030
Contingency(5%)	$35,202
Total	$739,232

See “Plan of Operations” in the “Management‘s Discussion and Analysis” section for further information.

Sahuayacan Property

Location

The Sahuayacan Property is located near the Chihuahua-Sonora State border approximately 275 kilometers east-southeast of the city of Chihuahua and 50 kilometers south-southwest of the town of Mycoba in the state of Chihuahua, Mexico. The property is accessible by all weather dirt roads running through the center of the property.

Claim Status

The Company has recently optioned 14 mineral concessions totaling 649 hectares, which old mining records indicate cover an epithermal quartz vein system. The concessions are owned by Minera Emilio and optioned by Sunburst Mining. The following table is a summary of the concessions on the Sahuayacan Property:


Concession Name	Title #	Surface (Ha)	Term of Validity(1)	Royalties and Payments
Veronica Segunda	171083	8.0000	9/8/1982 – 8/8/2032	(2)
Esperanza Segunda	171000	4.0000	5/8/1982 – 4/8/2032	(2)
Maria Luisa	170673	9.6000	11/6/1982 – 10/6/2032	(2)
Carmela	176856	4.0000	12/17/1985 – 12/16/2035	(2)
Silvia	217673	212.7549	6/8/2002 – 5/8/2052	(2)
La Chonca	218432	228.1808	5/11/2002 – 4/11/2052	(2)
La Cumbre	216091	67.0314	9/4/2002 – 8/4/2052	(2)
La Cumbre II	220349	5.2498	7/18/2003 – 7/17/2053	(2)
La Cumbre II Fracc. A	220350	1.1925	7/18/2003 – 7/17/2053	(2)
Santo Nino 3	220150	19.9500	6/17/2003 – 6/16/2053	(2)
Fortunato 2	214274	7.1686	6/9/2001 – 5/9/2051	(2)
Segunda Santa Theresa	219233	12.0000	2/20/2003 – 2/19/2053	(2)
Santo Nino	191810	4.0000	12/9/1991 – 12/18/2041	(3)
Segundo Santo Nino	191086	65.8730	4/29/1991 – 4/28/2041	(4)
La Estrella	169365	9.0000	12/11/1981 – 11/11/2031	(5)
Sultana Menor	169362	4.0000	12/11/1981 – 11/11/2031	(5)

(1)

(2)

The Company must pay Minera Emilio a total of $282,000 for these concessions. Of this, $10,000 was paid on December 2005 and $20,000 was paid on October 25, 2006. The December 2005 payment was made as “good faith payment” as we negotiated to acquire the properties. That payment has been applied to the total purchase price. The Company must pay $2,500 per month for twelve months on the 21st day of each month beginning on August 21, 2006. The monthly payments of $2,500 have all been paid for a total $30,000. Beginning on August 21, 2007, the Company must pay $3,500 per month on the 21st of each month for twelve months. The monthly payments of $3,500 have all been paid to September 21, 2008 for a total of 12 months and $42,000. Beginning on August 21, 2008, the Company must pay $5,000 per month on the 21st of each month until the balance of $282,000 is paid (36 months). As of May 31, 2009, we are in default of the March, April and May 2009 payments. We expect to make these payments in June 2009.

(3)

This concession was originally included in the “Promise to Contract an Option Agreement” between Minera Emilio and Jose Emilio Touche Creel on December 5, 2005, whereby Sunburst Mining set forth an offer to enter into and execute an exploration and option to purchase an undivided 100% title in and to the mining concessions located in the Sahuayacan Property. This concession was not included in the Exploration and Sale Option Agreement of Mining Concession contract dated June 21, 2006. At the present time, Mexican public records show that this concession has been cancelled; however, there is an official letter issued by the Mexican Mining Director General at that time which notifies that cancellation was revoked. Minera Emilio has the option to reinstate this concession.

(4)

The Company must pay the following concession representatives a total of $255,000 for this concession: Leopoldo Rascon Lopez, Sabino Amador Rascon Polanco and Rene Muro Lugo. Each concession representative owns 33.3% of the total Segundo Santo Nino title. As of May 31, 2009, we’ve paid $85,000 of the payments required till November 2008 and $3,333 for the May 15, 2009 payment. The balance of the $20,000 payment of May 15, 2009 is overdue and we are renegotiating the payment terms), November 15, 2009 - $30,000 and May 15, 2010 - $120,000.

(5)

The Company must pay the following payments to Maria Luisa Wong Madrigal to acquire 100% ownership of these concessions: January 25, 2008 - $33,000 (paid), July 25, 2008 - $33,000 (paid), January 25, 2009 - $34,000 (this payment is outstanding and we are renegotiating the payment terms) and July 25, 2010 - $500,000. These scheduled payments must be made to keep our option to acquire these concessions in good standing. Failure to make the payments would cancel our options to acquire these concessions.

History

The main vein in the area, the Santo Nino vein was the focus of a small scale underground gold mining operation in the late 1800’s and early 1900’s, with at least three main underground mine access drifts supplying feed to a centrally located mill, which is still present. The mine was closed at the time of the Mexican revolution. The Santo Nino vein system has not been evaluated using modern techniques or explored by drilling.

Geology

Our initial exploration work on the property, as part of due diligence before acquiring the property, indicates that the geology exposed in the project area reveals a complex geologic history. We believe that the basement in the area is composed of dark gray-green massive, fractured and folded phyllitic metasedimentary and metavolcanic rocks in contact with Lower to Middle Cretaceous banded shale and fine grained arenite. Our exploration suggests that these phyllitic rocks are in contact with a Tertiary volcaniclastic sequence that occurs as intercalated fine to coarse grained tuffaceous sediments, volcanic breccias and flows which range in composition from andesite to rhyolite. Our exploration suggests that the entire sequence has been locally crosscut by at least two intrusive units of diorite to rhyolite composition possibly represent synvolcanic hypabyssal intrusions. The Tertiary volcanic sequence is the main host to the gold/silver quartz vein syst em present in the project area.

Mineral Deposit

A surface geological mapping and sampling crew evaluated the property from September 2006 through December 2006. Mapping on the property was completed at a scale of 1:5,000 with individual veins being mapped at a scale of 1:1,000. To date, a total of 300 samples have been taken from the property, including 101 rock chip and channel samples, 41 stream sediment samples and 158 soil samples. The underground workings were evaluated for safe entry and the mine has been deemed unsafe to open. A limited part of the mine was opened and bulk samples were taken. The Sahuayacan Property is without known reserves. Our proposed exploration program is exploratory in nature.

Santo Nino Vein

Our initial mapping indicates the Santo Nino vein consists of milky quartz and crackle breccia accompanied by iron oxides and veinletts of crustiform, banded and chalcedonic quartz which is suggestive of an epithermal origin. Our sampling of the

rocks shows that mineralization presently recognized within the vein consists of chalcopyrite, malachite, azurite, pyrite and abundant iron oxides with manganese oxides. The predominant alteration adjacent to the vein is moderate to strong argillic alteration with local quartz and sericite which forms a halo to the vein which is locally up to 50 meters wide. Further from the vein this moderate to strong argillic zone is transitional to a zone of weak argillic alteration accompanied by supergene oxidation, and propylitic alteration. This weak argillic alteration zone is more than 200 meters wide. Our initial exploration has shown that the vein is locally offset along at least one left lateral fault (in the Mina Cobriza area).

Our initial exploration shows that a second quartz vein parallel to and west of the Santo Nino vein has been mapped (“Santo Nino Segundo” vein). The northern termination of the Santo Nino vein appears to represent a fault offset (left lateral fault) possibly offsetting the mineralizing system 200 meters to the west. Here the wide weak argillic alteration zone (hangingwall to the vein system) is present and continues to the north-northwest for more than 500 meters to Sahuayacancito.

La Cumbre:

The La Cumbre area covers the local hill top located approximately 500 meters east of the Santo Nino vein. Cominco (now Teck Cominco Limited), drilled at least three holes in this area in the mid 1990s. Drill results have not been obtained from this work.

Our initial work in the area shows that the stratigraphy in the La Cumbre area consists of tertiary volcanics composed of porphyritic andesitic flows intercalated with fine to coarse volcaniclastic sediments overlain by rhyolite tuffs and flows. Tectonic breccias and stockwork zones are accompanied by veins and veinletts of chalcedonic quartz with iron oxides (hematite), manganese and very fine pyrite. Four brecciated structures have been identified to date in our preliminary exploration. Alteration consists of pervasive silicification with weak to moderate massive chalcedonic quartz in the matrix of the breccias, accompanied by a weak argillic alteration of the wall rock. Numerous old surface trenches are present in this area and will be the subject of future sampling and mapping.

Drilling program

Reconnaissance and detailed mapping (1:1,000) programs in the Sahuayacan project have identified four significant drilling targets: Santo Niño, La Cumbre, Cerro Cacho and Santa Teresa.

To date a total of approximately 2,000 meters have been drilled in 13 diamond drillholes. Eight holes were drilled in the Santo Niño vein-structure (SDH-1, through SDH-4 and SDH-7 through SDH-10), two diamond drillholes (SDH-5 and SDH-6) were drilled in La Cumbre mineralized area and two holes (SDH-11 and SDH-12) on the Santa Theresa vein.

SDH-1 through SDH-4 and SDH-7 through SDH-10 were collared along the Santo Niño mineralized vein. Drillhole SDH-1 intersected two zones of gold mineralization over the 165.05 meters drilled in this hole, including 7.50 meters with 2.56 g/t Au and 11.00 meters with 2.24 g/t Au including 8.00 meters with 2.98 g/t Au.


Drillhole	From (m)	To (m)	Interval (m)	Au (g/t)	Ag (g/t)
SDH-1	65.00	66.50	1.50	2.02	0.8
	66.50	68.00	1.50	8.09	2.8
	68.00	69.50	1.50	0.26	1.2
	69.50	71.00	1.50	0.233	1.3
	71.00	72.50	1.50	2.23	2.1

	96.50	98.00	1.50	6.13	49.4
	98.00	98.50	0.50	9.24	21.1
	98.50	99.50	1.00	0.529	0.7
	99.50	100.50	1.00	1.695	1.2
	100.50	101.50	1.00	1.415	9.2
	101.50	102.50	1.00	3.81	10.5
	102.50	103.50	1.00	0.038	0.09
	103.50	104.50	1.00	1.00	5.9
	104.50	105.50	1.00	0.363	7.3
	105.50	106.50	1.00	0.341	9.6
	106.50	107.50	1.00	0.111	10.5

The remaining holes did not return encouraging assay results. The results from drillholes SDH-3 and SDH-4 showed gold anomalies varying from 0.01 to 0.02 g/t. Geological and structural mapping survey along the Santo Niño vein has identified a north-east structure that is displacing the mineralized zone. Current field investigations are aimed to define in more detail the structural setting on this part of the mineralized vein-structure.

Drillholes SDH-5 and SDH-6 were collared in the La Cumbre zone. The two holes intersected mineralization from surface to 175 meters. Only the SDH-5 intersected several two meters wide intercepts with gold mineralization. Our VP Exploration believes that the gold in these zones is free gold and is contained in the fractures in the oxides. As the drilling consumes massive quantities of water, we believe the free gold has been washed away from the core. As a result, we plan to re-drill the La Cumbre zone using reverse circulation drilling to ensure all the particles are captured while drilling. No assurance, though, may be given that any gold values will be found when it is redrilled using reverse circulation drilling.

The final area tested at Sahuayacan was the Santa Theresa target, where two drillholes (SDH-11 and SDH-12) were completed. SDH-12 has intersected a mineralized zone, consisting of 7.5 meters with 56.01 g/t Au and 283.22 g/t Ag.


Hole ID	From (m)	To (m)	Interval (m)	Au (g/t)	Ag (g/t)
SDH-12	74.50	76.00	1.50	6.21	148
	76.00	77.50	1.50	0.716	8.5
	77.50	79.00	1.50	268.75	1215
	79.00	80.50	1.50	2.46	39.8
	80.50	82.00	1.50	1.93	4.8

Despite these results, the Sahuayacan Property has no known or estimated resources or reserves. A summary of the assay results of the mineralized zones intersected is provided in “Plan of Operations” in the “Management‘s Discussion and Analysis” section.

Infrastructure

The Sahuayacan Property is accessible year round by all weather roads. There is no local electricity or water currently available. We will need to supply our own diesel generated electrical power.

Budget

We spent $557,000 from January 2007 to February 2008, on an initial geochemical and geophysical exploration program on the Sahuayacan Property.

The total exploration budget for Sahuayacan for 2009 is $849,686. The breakdown of the budget is as follows:


Geochemistry	$165,000
Geophysics	$0
Safety	$2,000
Land Costs	$0
Contractors	$599,450
Travel and Vehicles	$34,725
Field Support	$3,850
Communications	$4,200
Subtotal	$809,225
Contingency(5%)	$40,461
Total	$849,686

See “Plan of Operations” in the “Management‘s Discussion and Analysis” section for further information.

Employees

The Company currently has 14 persons working for Sunburst Mining in Mexico, including three geologists, field staff and administrative personnel. All of these persons are provided to Sunburst Mining under third party contract, either directly or via a personnel service agency. Our president began work on March 1, 2007. The president’s is a full time position with a salary of $156,000 per year plus incentive stock options, stock awards, living allowance and benefits. The job entails spending time in the field directing the exploration projects on our four properties. Other than the president, all mineral exploration and operations are contracted out to third parties. In the event that our exploration projects are successful and warrant putting any of our properties into production, all such operations would be contracted out to third parties. Also, we rely on members of management to handle all matters related to business de velopment and business operations.

Office

We currently maintain an office at C. General Retana #706, Col. San Felipe, Chihuahua, Chih, Mexico, CP 31203. The lease for this office will expire on March 1, 2011, which commenced on March 1, 2009, and we pay approximately $682 per month for it.

As described above, we have interests in the Cieneguita, Guazapares, Encino Gordo and Sahuayacan properties.

ITEM 3. LEGAL PROCEEDINGS

Other than as disclosed herein, neither Mexoro nor its properties are the subject of any pending legal proceedings and no such proceeding is known to be contemplated by any governmental authority. We are not aware of any legal proceedings in which any director, officer or affiliate of Mexoro, any owner of record or beneficially of more than 5% of any class of our voting securities, or any associate of any such director, officer, affiliate or security holder of Mexoro, is a party adverse to Mexoro or any of its subsidiaries or has a material interest adverse to Mexoro or any of its subsidiaries.

In November 2007, the British Columbia Securities Commission (“BCSC”) placed a cease trade order (“CTO”) on the Company in the Province of British Columbia, Canada affecting residents of British Columbia. This CTO was rescinded on February 20, 2008 as the Company filed the required documents in British Columbia. On February 20, 2008, the BCSC issued a second CTO requiring the Company to file a technical report in British Columbia on its Mexican properties. The Company filed the required documents and in May 2008, the BCSC rescinded the cease trade order in British Columbia.

In February 2008, Mexoro obtained a temporary restraining order in a civil action against Mr. Argang Schariat. The civil action for temporary restraining order was made before the Tribunal of Vevey, Switzerland. We believe that Mr. Schariat is refusing to abide by the Swiss Court ruling and we are taking the necessary steps to enforce our rights by filing a criminal complaint against Mr. Schariat. The hearing for this criminal complaint against Mr. Schariat has not been scheduled yet.

On January 14, 2009, the Company received Notice of Acceleration of three outstanding Secured Convertible Debentures held by Paramount Gold and Silver Corp. The Notice of Acceleration relates to the Secured Convertible Debenture granted by the Company to Paramount Gold and Silver Corp. in the principal amount of $500,000 dated May 9, 2008; the Secured Convertible Debenture granted by the Company to Paramount in the principal amount of $370,000 dated June 18, 2008; and the Secured Convertible Debenture granted by the Company to Paramount in the principal amount of $500,000 dated July 11, 2008 as amended by an Acknowledgment dated September 10, 2008 (collectively the “Debentures”). The Debentures are secured by a security agreement from the Company in favour of Paramount dated May 9, 2008 as amended by an Addendum dated June 18, 2008 and a security agreement from Sunburst de Mexico, in favour of Paramount dated June 18, 2008 (collecti vely, the “Security Agreements”).

The notice of acceleration asserts that the Debentures are in default because the Company has failed to cure the defaults noted in a Notice of Default dated December 23, 2008 within the cure period set out in the Notice of Default, namely:

1. the failure to include the Conversion Shares issuable upon conversion of the Debentures, Warrant Shares issuable upon exercise of the Conversion Warrants and any other securities due to Paramount pursuant to the Debentures in a registration statement within 60 days of the issue date of each Debenture contrary to section 4.3 (h) of each of the Debentures; and

2. the failure to pay the entirety of the interest owed by you to Paramount in full on or before December 31, 2008.

The Notice of Acceleration is intended to serve as written notice to the Company that the entire unpaid principal balance of the Debentures, in the amount of $1,370,000, together with all accrued but unpaid interest thereon and all of Paramount’s

legal fees in connection with such defaults, which legal fees are currently in the amount of $ 3,000, is immediately due and payable in full.

The Company believes that it is not in default under the terms of the Debentures but on March 19, 2009, we entered into an agreement with Paramount Gold and Silver Corp. (“Paramount”) restructuring our payment terms on the three outstanding secured convertible debentures held by Paramount. Under the terms of the agreement we paid Paramount $1,000,000 to cancel two debentures held by them, the first debenture issued May 9, 2008 for $500,000 and the third debenture issued to them July 11, 2009 for $500,000. We also amended the second debenture that we issued to them in June 18, 2009 in the face amount of $370,000. The amount of that debenture was increased to $521,047.37 which, among other things, includes interest accrued to March 31, 2009. We are obligated to make a payment on March 31, 2009 on this debenture in the amount of $393,547.37 (of which $300,000 was paid on March 31, 2009) and the balance of $127,500 is to be re-paid on April 30, 200 9. This remaining amount of $127,500 is interest free as long as the debenture remains in good standing. As part of a restructuring fee, we issued to Paramount 150,000 shares of our common stock. As we were granted an extension for the balance of the March 31, 2009 payment, we have issued an additional 100,000 shares to Paramount as an extension fee. As part of the agreement, Paramount has released its security interest on our Cieneguita properties. The other security as described in the original security agreement issued with the original debentures remains in place until the amended debenture has been repaid in full. The final payment of amount owed has now been deferred until the closing of our sale of the Guazapares property to Paramount. Any remaining amounts owed to Paramount will be deducted from the purchase price payable to Mexoro.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's common stock is currently traded on the Over the Counter Bulletin Board (“OTCBB”) under the symbol “MXOM.OB”. The following table sets forth the Company's high and low closing prices for the Company's common stock as reported on the OTCBB for the periods indicated.


Fiscal Year Ending February 28, 2010	High		Low
First Quarter	$	0.40	$	0.26


Fiscal Year Ending February 28, 2009	High		Low
First Quarter	$	0.76	$	0.33
Second Quarter	$	0.60	$	0.31
Third Quarter	$	0.50	$	0.12
Fourth Quarter	$	0.20	$	0.11


Fiscal Year Ending February 29, 2008	High		Low
First Quarter	$	1.50	$	1.00
Second Quarter	$	1.50	$	0.72
Third Quarter	$	1.85	$	0.96
Fourth Quarter	$	1.08	$	0.73

The prices presented are bid prices which represent prices between broker-dealers and do not include retail mark-ups and mark-downs or any commission to the dealer. The prices may not reflect actual transactions.

As of February 28, 2009, there were approximately 243 stockholders of record of the Company's common stock.

There have been no cash dividends declared or paid on the shares of common stock, and management does not anticipate payment of dividends in the foreseeable future.

EQUITY COMPENSATION PLAN


		Weighted
	Number of	average	Number of securities
	securities to be	exercise	remaining available for
	issued upon	price of	future issuances under
	exercise of	outstanding	equity compensation
	outstanding	options,	plans (excluding
	options,	warrants and	securities reflected in
	warrants and	rights	column (a))
	rights (a)	(b)	(c)
Equity compensation plans approved by
security holders	11,937,890	$0.84	1,165,000
Equity compensation plans not approved
by security holders	-0-	$0.00	-0-

Total	11,937,890	$0.84	1,165,000

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Special Note of Caution Regarding Forward Looking Statements

Certain statements in this Form 10-K, including statements in the following discussion which are not statements of historical fact, are what are known as "forward looking statements", which are basically statements about the future. For that reason, these statements involve risk and uncertainty since no one can accurately predict the future. Words such as "plans," "intends," "will," "hopes," "seeks," "anticipates," "expects "and the like often identify such forward looking statements, but are not the only indication that a statement is a forward looking statement. Such forward looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits. Numerous factors and future events co uld cause the Company to change such plans and objectives or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits. Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10-K and in the Company's other filings with the SEC. No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.

Overview

Mexoro Minerals Ltd. (“Mexoro” or the “Company”) is a start-up exploration stage company and has not yet generated or realized any revenues from exploration projects, which commenced on May 1, 2004. On September 9, 2008, we announced that we have retained the services of Haywood Securities Inc. of Toronto, Canada to sponsor the listing of our common shares on the TSX or TSX-V exchange. As of February 28, 2009, we had $38,704 in our bank account.

On November 23, 2008, we signed a letter of intent (“LOI”) with Minera Rio Tinto, a related party as a beneficial owner of over 10% of our common stock controls MRT, to provide us with immediate funding to initiate production at our Cieneguita property, to complete a feasibility study and to continue the exploration of our properties. The LOI calls for project funding of up to USD$9,000,000 to be spent over the next twenty-four month period. The major points of the agreement are as follows:

Minera Rio Tinto (“MRT”) and/or its investors will subscribe for up to USD$1 million of a convertible debenture convertible into units at $0.60 per unit pursuant to Regulation S. Each unit consists of two common shares and one

warrant. Each warrant is exercisable at $0.50 per share for a period of four years. The placement will be used for continued exploration of our properties and general working capital. The LOI contemplates that MRT would invest an initial $250,000 immediately and then $150,000 per month for five months.

MRT and Sunburst Mining de Mexico, our wholly owned subsidiary, will form a new Mexican joint venture company (MRT 75%/Sunburst 25%) for the purpose of putting the Cieneguita property into production. The terms of the agreement call for Sunburst to contribute its existing mining and milling equipment and for MRT to provide the necessary working capital, estimated to be $3,000,000, to begin and maintain mining operations. The agreement will limit the mining of the mineralized material for the new joint venture company to material that is available from surface to a depth of 15 meters.

MRT will spend up to USD$5 million to take the Cieneguita property through the feasibility stage. In doing so, MRT will earn a 55% interest in our rights to the property. After the expenditure of the $5 million, all costs will be shared on a 55% to MRT and 45% to Mexoro Minerals. If Mexoro elects not to pay its portion of costs after the $5 million have been spent, then Mexoro’s position shall revert to a 30% carried interest on the property.

MRT will be the operator of the project with Mexoro/Sunburst providing two of five board members to the joint venture companies and committees.

As of May 15, 2009, MRT has contributed its $1 million commitment. It has also initiated steps to take the Cieneguita project to production having spent approximately $68,000 on drilling, sampling and metallurgical testing. MRT is also arranging for a three ton sample of material to be sent out to its milling facility located in Sinaloa, Mexico to determine grade recovery of the mineralized material. Certain portions of the definitive agreement, when signed, needed the approval of Paramount Gold and Silver Corp. As we repaid a significant portion of the outstand debt to Paramount, they have released the Cieneguita as security and therefore do not need there approval to complete the work as contemplated under the MRT agreement.

On July 16, 2008, we received an additional payment from Paramount in the amount of $500,000 pursuant to the strategic alliance. This additional advance allowed Mexoro to continue its ongoing drill program on both the Cieneguita and Guazapares projects. The funds are advanced by way of a secured convertible debenture which bears interest at a rate of 8% per annum for a term of one year. Paramount has the option to convert the debt into units. Along with this additional advance, Mexoro agreed to extend the closing deadline of the strategic alliance transaction until August 5, 2008 with Paramount's continued commitment to fund Mexoro's operating expenses.

On August 6, 2008, the strategic alliance between Mexoro and Paramount was terminated, including Paramount’s right of first refusal on financings. As a result of Paramount holding convertible debentures in the amount of $1,370,000 resulting from advances made to Mexoro Minerals to fund exploration, they agreed to defer interest payments on the advances until September 10, 2008. The September 10, 2008 interest payment date has subsequently been extended again to November 10, 2008. All interest payments were brought up to date by December 30, 2008 and we are now current with all of our interest payments to Paramount Gold and Silver Corp.

Subsequent to the year ended February 28, 2009, in March, 2009, we entered into an agreement with Paramount Gold and Silver Corp. (“Paramount”) restructuring our payment terms on the three outstanding secured convertible debentures held by Paramount. Under the terms of the agreement we paid Paramount $1,000,000 to cancel two debentures held by them, the first debenture issued May 9, 2008 for $500,000 and the third debenture issued to them July 11, 2009 for $500,000. We also amended the second debenture that we issued to them in June 18, 2009 in the face amount of $370,000. The amount of that debenture was increased to $521,047.37 which, among other things, includes interest accrued to March 31, 2009. We are obligated to make a payment on March 31, 2009 on this debenture in the amount of $393,547.37 (of which $300,000 was paid on March 31, 2009) and the balance of $127,500 is to be re-paid on April 30, 2009. This remaining amount of $127,500 is interest free as long as the debenture remains in good standing. As part of a restructuring fee, we issued to Paramount 150,000 shares of our common stock. As we were granted an extension for the balance of the March 31, 2009 payment, we have issued an additional 100,000 shares to Paramount as an extension fee. As part of the agreement, Paramount has released its security interest on our Cieneguita properties. The other security as described in the original security agreement issued with the original debentures remains in place until the amended debenture has been repaid in full.

Subsequent to the year ended February 28, 2009, in May 18, 2009 we entered into a letter of agreement to sell our Guazapares project located in southwestern Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount Gold and Silver Corp. (“Paramount”) for a total consideration of up to $5.3 million USD. The sale is subject to the signing of a definitive agreement by June 2, 2009 and to satisfaction of various conditions precedent prior to closing. Closing is scheduled prior to the end of June 2009 and a 5.7% commission is payable on the closing of the sale.

Those portions of the agreement that need consent will not be undertaken until such consent is obtained or extinguished by repayment. Subsequently, we repaid approximately $1,300,000 of the debenture owed to Paramount Gold and Silver Corp and in doing so, Paramount agreed to release the Cieneguita property as part of its security under the debenture. Therefore, we no longer need the consent of Paramount to begin extraction of mineralized material at Cieneguita.

The Spanish version of this agreement is the governing agreement in case of dispute between the English version and the Spanish versions.

Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity. While we believe that we have raised sufficient funds in our recent offerings to allow us to continue in business until May 30, 2009, we may not be able to continue in business beyond that date unless we obtain additional capital. We have not generated any revenues to date. We are expecting some revenues from the 5,000 tonne bulk sample that is to be processed at MRT’s facilities. The amount of revenue to be received from the test cannot be determined at this time. In fact, no assurance may be given that any revenue will be realized from the bulk sample test. Once MRT puts the Cieneguita property into production, anticipated to be in the second quarter 2009, we expect the 25% interest to generate ongoing revenue for us. The timing and amo unt of revenue, at this time, cannot be determined and no assurance may be given that any revenue will be generated from the operations at Cieneguita.

For the 12-month period from May 2009 through April 2010, we need to raise additional capital to maintain operations. We will need a minimum of $2,384,000 for property payments, $127,500 to repay the convertible debenture to Paramount Gold and Silver Corp if our sale of the Guazapares properties to Paramount does not close, and an additional $840,000 for general and administrative costs. This does not include any capital needed to pay our accounts payables and to execute our exploration programs as detailed below. The following table shows our contractual property payments that are due until April 2010:


Name	Date	Payment Type	USD

Guazapares Property¹	August 2008	Property payment	$110,000

Sahuayacan Property²	March 2009 to April 2010	Property payments	$70,000

Encino Gordo Property³	December 2008 and December 2009	Property payments	$200,000

San Antonio (Guazapares)	January 2009 & January 2010	Property payments	$550,000

Sahuayacan Property ( La Estrella y la Sultana Menor )⁴	January 2009 & January 2010	Property payments	$534,000

Segundo Santo Nino (Sahuayacan)⁵	May 2009 & November 2009	Property payments	$50,000

Cieneguita Property	May 2009	Property payment	$120,000

San Francisco (Guazapares)	June 2009	Property payment	$250,000

Guazapares Property	August 2009	Property payment	$500,000

¹All Guazapares payments due by December 31, 2007 have been deferred, until in the opinion of the directors of Mexoro, Sunburst de Mexico and Mexoro have sufficient funds to make the payments. This includes deferred payments of $100,000 due in November 2005, $60,000 due in August 2006 and $140,000 due in August 2007. Mexoro has not made the payment of $110,000 that was due in August 2008 and is in default.

²All Sahuayacan payments due by February 28, 2009 have been made. The Company has not made the payments due for March 2009, April 2009 and May2009. The Company is in default and is negotiating the terms of payment with Minera Emilio, SA de CV.

³The Encino Gordo property payment of $75,000 was due in December 2008. Mexoro is in default of this payment and is renegotiating the terms of payment.

⁴The Sahuayacan property payment of $34,000 was due in January 2009. Mexoro is in default of this payment and is renegotiating the terms of payment.

⁵The Segundo Santo Nino property payment of $20,000 was due in May 2009. Mexoro paid only $3,333 of this payment and is in default . The balance of this payment is renegotiated to be paid in June 2009.

Additionally, if our exploration during that time period is successful, we may need to raise additional capital to fund those exploration programs. At this time, we cannot assess with any accuracy our total capital needs to fund an expanded exploration program beyond our basic program. We do not have any additional sources of additional capital to fund our operations beyond May 31, 2009. We also believe that, other than the initial bulk sample test done by MRT, we will not generate any revenues that would allow us to continue operations. If we are unable to raise additional capital through debt or equity beyond May 31, 2009, it is most likely that we would need to cease operations and forfeit our properties as we would be unable to make the necessary property payments.

Plan of Operation

Summary

Our business plan is to proceed with the exploration of our Mexican mineral properties to determine whether they contain commercially exploitable reserves of gold, silver or other metals. On November 23, 2008, we signed a letter of intent (“LOI”) with Minera Rio Tinto (“MRT”) to provide us with immediate funding to initiate production at our Cieneguita property, to complete a feasibility study and to continue the exploration of its properties. The LOI calls for project funding of up to USD$9,000,000 to be spent over the next twenty-four month period. To date MRT has contributed approximately $510,000 in working capital and has initiated production plans for the Cieneguita project. MRT is in the process of shipping a 3,000 tonne bulk sample to its mill in Sinaloa Mexico for processing to verify the metallurgical process need to process the mineralized material from the Cieneguita property.

On May 5, 2008, we entered into a strategic alliance with Paramount to invest between $4 million and $6 million in our company by July 21, 2008. Paramount forwarded an initial $500,000 on May 9, 2008, an additional $70,000 on June 10, 2008, $300,000 on June 23, 2008, and a final payment of $500,000 on July 16, 2008 for a total investment of $1,370,000 in the form of secured convertible debentures. The proceeds from these placements were primarily used to continue the drilling programs on our Cieneguita and Guazapares properties. As the Paramount strategic alliance was terminated, and in order to continue our exploration plans and fund general administrative expenses as a minimum, we will need to raise additional working capital to maintain basic operations. Along with the MRT joint venture, we plan to raise those funds through the sale of equity or debt. At this time, we do not have any sources to raise additional capital, and no assurance may be given t hat we will sign a definitive agreement with MRT. Additionally, we may not be able to find sources to raise additional capital. Failure to raise any additional capital would most likely require us to cease operations and abandon all of our exploration properties.

In the event that our exploration program finds exploration targets that warrant additional exploration work, including exploration by drilling, we will not have enough cash available to fund an expanded exploration program. If we decide to expand our exploration program, we would need to raise additional capital to meet these needs. We currently do not have any sources of additional capital available to us and we may not have any in the future. The failure to raise additional capital would severely curtail our ability to conduct any additional exploration work that might be warranted because of the results of our current exploration program.

We are not involved in any research and development on our exploration properties. We have no known reserves on the Cieneguita property. Our original strategy was to put the Cieneguita property into production, and as such we purchased approximately $250,000 worth of new and used mining equipment to be used for heap leach production. We contemplated putting the Cieneguita property into production during 2008 but recent positive exploration results from our drilling programs have changed that plan. The mineralized material that has been defined by the extensive drilling appears to suggest that the mineralized material is far larger than originally contemplated and of a different material that is not suitable for heap leaching. Therefore, Management wants to ensure, based on the new exploration results, that the mine design contemplated will be suitable for the expanded size of the mineralized material and the geological make up of the material.

With the joint venture with MRT, we do plan to put the Cieneguita project into production in the second quarter of 2009 but we will not be using the heap leach process as originally contemplated. We still plan to use the equipment as part of the new mining process designed in the joint venture agreement. Though the mining equipment will be contributed to the joint venture company to be used in the mining process, at the end of the joint venture the mining equipment will revert back to us. Then it is managements’ plan to try and sell the equipment that we have purchased. At this time, we have no estimates on

what the equipment will be worth in the secondary market. If we are unable to sell it, we may lose all of our capital investment. No assurances can be given that we will be able to sell the equipment at a price to recover our original investment, or at all.

In the event that we do discover a mineral deposit on one of our properties, of which there is no guarantee, we would need to expend substantial amounts of capital to put any of our properties into production, if so warranted. The amount of such expenditures is indeterminable at this time as our exploration program has not advanced far enough to provide us with results to determine this information.

Such expenditures depend upon the size of the mineralized body, the grade of the mineralized and the type of mining that is required to extract any minerals that may be found. Regardless, we do not have enough capital available to us to make any such expenditure that would be required to put any mineral property into production, and we therefore would have to raise the additional capital or, if possible, enter into a joint venture for the production phase. If we were to form a joint venture, we cannot assess what our final position in the project would be. We do not have any sources of capital available to us at this time to fund such a project if one should be discovered.

We hired Francesco Quiroz as our VP of Exploration on March 1, 2007. On November 15, 2008 we appointed Mr. Quiroz to the position of president to replace Mario Ayub, who resigned. We also hired an office administrator for our office in Chihuahua. We hired one geologist in 2006, three geologists in 2007 and another geologist in February 2008 to work on our exploration programs. One of our geologists resigned in June 2008. We do not expect any significant change in additional contractors to conduct exploration over the next 12 months. Other than the president and our geologists, all of the employees we hire are contracted from third parties specializing in providing employees for Mexican companies. In using third party contractors, we minimize our exposure to Mexican employment law, and all liabilities are undertaken by the third party contractors providing the services. We pay a flat rate to the third parties for their services.

In the event that we should find a mineable reserve, it is management’s intention to contract the mining and milling of any mineralized reserves out to third parties. We do not have any known reserves at this time.

Exploration Projects – Current Status

To date the Sierra Madre gold exploration program has been focused on advancing current exploration projects to the next exploration stage. During most of 2008, exploration activities were concentrated in four projects: Sahuayacan, Guazapares, Encino Gordo and Cieneguita. However, exploration activities during the quarter ended November 30, 2008 were focused exclusively on the Cieneguita project. The figure below shows the location of the different projects.

This figure is illustrating the location of the Mexoro’s project and the major Au-Ag deposits within the Sierra Madre Gold-Silver Belt

To date most of the data gathered during our field campaigns and drilling programs is completely compiled and is being evaluated. The next exploration stages for all four projects have been already planned.

Cieneguita

During the quarter ended November 30, 2008, Mexoro Minerals concentrated its exploration activities only in the Cieneguita project, where a drilling program has been completed, and aimed to obtain a technical report that is compliant with Canadian National Instrument 43-101 estimating the mineralized material by early 2009.

The main activities in the Cieneguita project are set forth below:

100 diamond drillholes completed for a total of 20,215 meters of drilling

Broad mineralized intercepts including 111.5 meters with 1.24 g/t Au, 99.6 g/t Ag, 0.45% Pb and 0.73% Zn (C-21) and 94 meters with 1.21 g/t Au, 79.8 g/t Ag, 0.78% Pb and 1.2% Zn (CI-30)

Mineralization at Cieneguita has been traced over 900 meters along strike and still remains open to the southwest and to depth

Exploration ongoing; infill drilling program has been designed to expand the size of the mineralized material

Cieneguita is a new gold‐silver and polymetallic discovery made in 2008 by our exploration team. The project consisting of three concessions totaling 822 hectares is located in Chihuahua State, Mexico. The area has well developed infrastructure being located 20 km to the north of Gold Corp’s El Sauzal mine. Mexoro holds a 100% interest subject to a royalty of USD$20 per ounce of gold sold from the property up to a maximum payment of USD$2 million.

We have conducted a series of exploration programs at Cieneguita since March 2007. Our exploration work to date includes 100 diamond core drillholes totaling 20,215 meters of drilling. The Drilling exploration program commenced in December 2007 with one drill rig and a second rig was added in July 2008. Due to our financial constraints, one of the drill rigs was taken away in October 2008 and drilling continued with one rig until December 19, 2008.

Mexoro has received analysis results for only 54 holes (CI-01 to CI-54). A complete listing of the drill logs are published in the Form 10Q for the period ended August 31, 2008. The assay results from holes CI-55 to CI-100 are still pending; however, most of the holes returned the same broad mineralized intercepts similar to previously announce results. No assurance may be given, though, that these new holes will have the same values as previously analyzed holes. Two different styles of mineralization have been identified: precious (gold‐silver) and base (lead‐zinc-silver) metal mineralization, with higher gold‐silver grades starting on surface and high‐grade lead‐zinc-silver mineralization interce pted at depth and to the west of the Cieneguita deposit. We interpret the Cieneguita deposit as a diatreme breccia body where disseminated oxide and sulphide mineralization is mainly hosted by quartz‐sericite altered diatreme breccias and lapilli tuffs.

The mineralized body is shaped like a funnel which has been flattened laterally, measuring over 900 meters by 300 meters as defined by the drill results. Mexoro has completed a cross section‐based geological model and has calculated inferred mineralized material of 15.249 million tons with 2.62 g/t Au equivalent based on assays that were composited using the sum of the dollar values for Au, Ag, Pb and Zn in each drill interval. Three-year trailing average prices used were: gold = $727.22 per ounce, silver = $13.66 per ounce, lead = $1.00 per pound, zinc = $1.36 per pound. A cutoff of $30 was applied and weighted averages calculated for each above-cutoff interval. These intervals were projected between drill holes and between sections to produce resource blocks, which were then compiled using weighted averages to produce a total tonnage and grade with a dollar value per ton..

This figure is showing the geological units and distribution of the 100 drillholes.

alteration-mineralization on surface as encountered at Cieneguita. No assurance, though, may be given that any positive exploration results will come from these similarities.

Detailing mapping and sampling is currently underway. Our exploration at the Piedras Blancas area has consisted of a 1:1,000 scale geologic mapping, rock chip samples and vein geochemical sampling.

A figure exhibiting main geological and mineralization features on the Piedras Blancas and Piedra Amarilla areas is shown below.

There are no known reserves on the Cieneguita property.

Guazapares

Formula to calculate gold equivalent – Au Eq.= Au (g/t) + (Ag (g/t)/($ozAu/$ozAg))

San Francisco Este Target

San Francisco Centro Target

El Cantilito Target

Drill holes GU-05 to Gu-07, and Drill Holes GU 17 – GU 19 did not intersect economical mineralization. A summary of the mineralized drill intercepts are presented below:

GU-01


Sample ID	From (m)	To (m)	Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized Intercept m @ g/t Au Eq

25149	50.23	51.73	1.50	0.762	17.1	1.065622	1.5 m @ 1.065
25152	51.73	53.23	1.50	0.119	3	0.172267
25153	53.23	54.73	1.50	0.488	11.9	0.699293
25154	54.73	56.23	1.50	1.305	15.6	1.581989	5.37 m @ 2.031
25155	56.23	57.60	1.37	0.283	27.7	0.774832
25156	57.60	58.60	1.00	4.63	24.7	5.068565
25157	58.60	60.10	1.50	0.292	7.8	0.430494
25158	60.10	61.60	1.50	0.204	7.4	0.335392
25159	61.60	63.10	1.50	1.585	8.2	1.730597	1.5 m @ 1.730

25184	91.30	92.80	1.50	0.466	3	0.519267
25185	92.80	94.40	1.60	0.603	2.8	0.652716


25186	94.40	95.33	0.93	0.292	4.5	0.371901
25187	95.33	96.83	1.50	0.787	4.3	0.863349
25188	96.83	98.33	1.50	2.76	9.5	2.928679	5.97 m @ 1.493
25189	98.33	99.80	1.47	1.095	11.2	1.293864
25191	99.80	101.30	1.50	0.615	15.3	0.886662

GU-02


Sample ID	From (m)	To (m)	Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized Intercept m @ g/t Au Eq

25285	57.80	58.30	0.50	0.228	18	0.547602
25286	58.30	58.95	0.65	0.18	43	0.943494
25287	58.95	59.75	0.80	0.503	81.2	1.944761	1.98 m @ 1.248
25288	59.75	60.28	0.53	0.273	32.9	0.857162
25289	60.28	61.05	0.77	0.278	26.2	0.743199
25291	61.05	61.61	0.56	0.191	18.7	0.523031
25292	61.61	62.82	1.21	0.198	39.5	0.899349
25293	62.82	64.32	1.50	0.336	19.3	0.678685
25294	64.32	65.82	1.50	0.254	14.4	0.509682

25335	112.75	113.55	0.80	0.101	25.3	0.550219
25336	113.55	114.85	1.30	0.111	47.6	0.95617
25337	114.85	116.10	1.25	0.486	22.1	0.878401
25338	116.10	117.45	1.35	2.54	2.7	2.58794
25339	117.45	118.75	1.30	0.879	2	0.914511
25341	118.75	120.25	1.50	0.436	3.6	0.49992	6.35 m @ 1.339
25342	120.25	121.15	0.90	1.165	4.6	1.246676
25343	121.15	122.45	1.30	0.534	51.6	1.450193

25355	135.45	136.60	1.15	1.31	12.2	1.526619	1.15 m @ 1.526

GU-03


Sample ID	From (m)	To (m)	Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized Intercept m @ g/t Au Eq
25367	0.00	1.50	1.50	3.17	42.6	3.926392	1.5 m @ 3.92

25455	103.70	105.20	1.50	0.165	50.3	1.058111	1.50 m @ 1.05


25470	119.65	121.05	1.40	0.882	18.5	1.21048	1.40 m @ 1.21

25480	132.35	133.85	1.50	0.293	46.3	1.115088	1.50 m @ 1.11

GU-04


Sample ID	From (m)	To (m)	Width (m)	True Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized intercepts True Width @ Au Eq. (g/t)
25498	0	1.5	1.5	1.0575	0.023	104	1.97
25499	1.5	2.5	1	0.705	0.029	29.9	0.59	9. 55 meters @ 2.17
25500	2.5	3.65	1.15	0.81075	0.046	128	2.44	Including:
25501	3.65	4.95	1.3	0.9165	0.156	79.1	1.64	2.78 meters @ 2.34
25502	4.95	6.45	1.5	1.0575	0.39	137	2.96	2.12 meters @ 4.78
25503	6.45	7.95	1.5	1.0575	0.093	61.3	1.24
25504	7.95	9.45	1.5	1.0575	0.049	15.9	0.35


25505	9.45	10.55	1.1	0.7755	0.056	47.2	0.94
25506	10.55	12.05	1.5	1.0575	0.148	387	7.40
25507	12.05	13.55	1.5	1.0575	0.23	103	2.16

25529	35.5	36.7	1.2	0.85	0.026	65.5	1.25	0.85 meters @ 1.25

GU-08


Sample ID	From (m)	To (m)	Width (m)	True Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized intercepts True Width @ Au Eq. (g/t)
26003	66.5	68	1.5	1.0575	0.105	52.8	1.09
26004	68	69.1	1.1	0.7755	0.087	93.6	1.84	5.78 meters @ 1.68
26005	69.1	70.2	1.1	0.7755	0.076	62.1	1.24
26006	70.2	71.7	1.5	1.0575	0.104	105	2.07
26007	71.7	73.2	1.5	1.0575	0.093	70.9	1.42
26008	73.2	74.7	1.5	1.0575	0.307	112	2.41

26042	122.25	123.75	1.5	1.0575	0.099	51	1.05	1.05 meters @ 1.05

GU-10


Sample ID	From (m)	To (m)	Width (m)	True Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized intercepts True Width @ Au Eq. (g/t)
26129	9.65	11.15	1.50	1.15	0.173	124	2.50	1.15 meters @ 2.50

26140	24.55	26.05	1.50	1.15	0.103	42.7	0.90	13.75 meters @ 2.75
26141	26.05	27.55	1.50	1.15	0.313	49.1	1.23
26142	27.55	28.90	1.35	1.03	0.049	24.7	0.51	Including:
26143	28.90	30.40	1.50	1.15	0.106	26.7	0.60	5.82 meters @ 5.46
26144	30.40	31.90	1.50	1.15	0.137	34.9	0.79
26145	31.90	33.40	1.50	1.15	0.079	35.4	0.74
26146	33.40	35.00	1.60	1.23	0.37	184	3.82
26147	35.00	36.50	1.50	1.15	0.205	311	6.04
26148	36.50	38.00	1.50	1.15	0.347	311	6.18
26149	38.00	39.50	1.50	1.15	0.223	276	5.40
26151	39.50	41.00	1.50	1.15	0.296	297	5.86
26152	41.00	42.50	1.50	1.15	0.035	49.1	0.95


Sample ID	From (m)	To (m)	Width (m)	True Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized intercepts True Width @ Au Eq. (g/t)
26161	54.50	56.00	1.50	1.15	0.125	90	1.81
26163	56.00	57.50	1.50	1.15	0.884	604	12.21	22.98 meters @ 2.80
26164	57.50	59.00	1.50	1.15	0.315	319	6.29
26165	59.00	60.50	1.50	1.15	0.206	133	2.70	Including:
26166	60.50	62.00	1.50	1.15	0.044	25.6	0.52	4.60 meters @ 5.75
26167	62.00	63.50	1.50	1.15	2.07	810	17.26	2.30 meters @ 9.71
26168	63.50	65.00	1.50	1.15	0.063	112	2.16
26169	65.00	66.50	1.50	1.15	0.04	31.7	0.63
26170	66.50	68.00	1.50	1.15	0.032	35.7	0.70
26171	68.00	69.50	1.50	1.15	0.052	45.2	0.90
26172	69.50	71.00	1.50	1.15	0.093	67.9	1.36
26173	71.00	72.50	1.50	1.15	0.025	39.7	0.77
26174	72.50	74.00	1.50	1.15	0.027	15	0.31


26176	74.00	75.50	1.50	1.15	0.079	55.3	1.11
26177	75.50	77.00	1.50	1.15	0.02	23.3	0.45
26178	77.00	78.50	1.50	1.15	0.026	55.9	1.07
26179	78.50	80.00	1.50	1.15	0.07	46.5	0.94
26180	80.00	81.50	1.50	1.15	0.101	53.9	1.11
26181	81.50	83.00	1.50	1.15	0.085	40.3	0.84
26182	83.00	84.50	1.50	1.15	0.133	145	2.85

GU-11


Sample ID	From (m)	To (m)	Width (m)	True Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized intercepts True Width @ Au Eq. (g/t)
26241	12.25	13.75	1.5	1.227	0.18	139	2.78
26242	13.75	15.25	1.5	1.227	0.152	112	2.25	17.87 meters @ 2.58
26243	15.25	16.75	1.5	1.227	0.112	89.1	1.78
26244	16.75	18.25	1.5	1.227	0.257	91.5	1.97	Including:
26245	18.25	19.75	1.5	1.227	0.158	311	5.99	4.91 meters @ 4.72
26246	19.75	21.25	1.5	1.227	0.067	211	4.02
26247	21.25	22.75	1.5	1.227	0.097	280	5.35
26248	22.75	24.25	1.5	1.227	0.034	186	3.52
26249	24.25	25.75	1.5	1.227	0.043	93	1.78
26251	25.75	27.25	1.5	1.227	0.15	109	2.19
26252	27.25	28.1	0.85	0.69	0.027	50.6	0.97
26253	28.1	29.6	1.5	1.227	0.112	98.7	1.96
26254	29.6	31.1	1.5	1.227	0.037	93	1.78
26255	31.1	32.6	1.5	1.227	0.016	61.2	1.16
26256	32.6	34.1	1.5	1.227	0.063	62.2	1.23

26267	47.6	49.1	1.5	1.227	0.039	46.2	0.90
26268	49.1	50.6	1.5	1.227	0.018	58.8	1.12	4.91 meters @ 0.93
26269	50.6	52.1	1.5	1.227	0.021	25.6	0.50
26270	52.1	53.6	1.5	1.227	0.023	62.5	1.19

GU-12


Sample ID	From (m)	To (m)	Width (m)	True Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized intercepts True Width @ Au Eq. (g/t)
26363	30.7	32.2	1.5	1.149	0.026	70.2	1.34	1.149 meters @ 1.34

26378	51.7	53.2	1.5	1.149	0.056	33.1	0.67	2.30 meters @ 0.68
26379	53.2	54.7	1.5	1.149	0.104	30.8	0.68

26389	66.7	68.2	1.5	1.149	0.618	4	0.69
26390	68.2	69.7	1.5	1.149	0.452	99	2.31	4.60 meters @ 1.20
26391	69.7	71.2	1.5	1.149	0.228	7.2	0.36
26392	71.2	72.7	1.5	1.149	0.857	31.7	1.45

26413	99.7	101.2	1.5	1.149	0.19	23.8	0.63	2.30 meters @ 0.74
26414	101.2	102.7	1.5	1.149	0.443	21.3	0.84

GU-13

Sample ID

From (m)

To (m)

Width (m)

True Width (m)

Au (g/t)

Ag (g/t)

Au Eq (g/t)

Mineralized intercepts

True Width @ Au Eq. (g/t)

26421

0.112

38.2

0.83


26422	2	4	2	1	0.237	211	4.19	9 meters @ 3.63
26423	4	6	2	1	0.065	258	4.90
26424	6	7.5	1.5	0.75	0.055	782	14.72	Including:
26426	7.5	9	1.5	0.75	0.11	53.4	1.11	2.75 meters @ 7.93
26427	9	10.5	1.5	0.75	1.18	54.7	2.20
26428	10.5	12	1.5	0.75	0.74	165	3.83
26429	12	13.5	1.5	0.75	0.151	86.5	1.77
26430	13.5	15	1.5	0.75	0.237	156	3.16
26431	15	16.5	1.5	0.75	0.116	52.2	1.09
26432	16.5	18	1.5	0.75	0.198	106	2.18

26444	33	34.5	1.5	0.75	0.125	47.9	1.02
26445	34.5	36	1.5	0.75	0.376	22	0.79	4.50 meters @ 1.56
26446	36	37.5	1.5	0.75	1.915	40.9	2.68
26447	37.5	39	1.5	0.75	0.12	121	2.39	Including:
26448	39	40.5	1.5	0.75	0.263	55.9	1.31	1.50 meters @ 2.53
26449	40.5	42	1.5	0.75	0.15	56.6	1.21

Drillhole GU-14


Sample ID	From (m)	To (m)	Width (m)	True Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized intercepts True Width @ Au Eq. (g/t)
26501	17	18.5	1.5	1.059	0.136	116	2.31
26502	18.5	20	1.5	1.059	0.091	92	1.81	19.86 meters @ 1.29
26503	20	21.5	1.5	1.059	0.107	8.9	0.27
26504	21.5	23	1.5	1.059	0.013	51.4	0.97	Including:
26505	23	24.5	1.5	1.059	0.036	48.8	0.95	2.12 meters @ 2.06
26506	24.5	26	1.5	1.059	0.031	45.3	0.88	2.89 meters @ 3.44
26507	26	27.5	1.5	1.059	0.039	10.1	0.23
26508	27.5	29	1.5	1.059	0.078	43.5	0.89
26509	29	30.5	1.5	1.059	0.051	10.4	0.24
26510	30.5	32	1.5	1.059	0.039	33.5	0.67
26511	32	33.5	1.5	1.059	0.196	89.8	1.88
26513	33.5	35	1.5	1.059	0.094	28.1	0.62
26514	35	36.5	1.5	1.059	0.095	8.6	0.25
26515	36.5	38	1.5	1.059	0.21	17.5	0.54
26516	38	39.5	1.5	1.059	0.159	35.3	0.82
26517	39.5	41	1.5	1.059	0.465	23.3	0.90
26518	41	42.5	1.5	1.059	0.193	46.3	1.06
26519	42.5	43.65	1.15	0.8119	1.475	339	7.83
26520	43.65	45.1	1.45	1.0237	0.216	65.2	1.44

26536	71.6	73.6	2	1.412	3.12	19.7	3.49	1.41 meters @ 3.49

Drillhole GU-15


Sample	From	To	Width	True	Au	Ag
ID	(m)	(m)	(m)	Width	(g/t)	(g/t)
26581	52	53	1	0.866	0.568	7
26582	53	54.9	1.9	1.6454	0.741	9.9



26938	148.3	149.8	1.5	1.299	4.86	66.4
26939	149.8	151.3	1.5	1.299	0.467	20.3
26940	151.3	152.8	1.5	1.299	0.141	2.6
26941	152.8	154.3	1.5	1.299	0.601	25.5
26942	154.3	155.8	1.5	1.299	0.582	22.1
26943	155.8	157.2	1.4	1.2124	0.891	35.4
26944	157.2	158.45	1.25	1.0825	0.368	9.7
26945	158.45	160	1.55	1.3423	0.282	10.2
26946	160	161.5	1.5	1.299	0.341	17.2
26947	161.5	163	1.5	1.299	0.693	22.7
26948	163	164.5	1.5	1.299	0.296	9.5
26949	164.5	166	1.5	1.299	0.317	17.7
26951	166	168	2	1.732	1.47	11.4

Drillhole GU-16


Sample ID	From (m)	To (m)	Width (m)	True Width (m)	Au (g/t)	Ag (g/t)	Au Eq (g/t)	Mineralized intercepts True Width @ Au Eq. (g/t)
26960	12.00	13.50	1.50	0.86	1.115	86.1	2.73
26961	13.50	15.00	1.50	0.86	0.534	84.2	2.11	18.92 meters @ 4.33
26962	15.00	16.50	1.50	0.86	0.71	76.4	2.14
26964	16.50	18.00	1.50	0.86	44.9	660	57.27	Including:
26965	18.00	19.50	1.50	0.86	1.55	113	3.67	7.74 meters @ 9.10
26966	19.50	21.00	1.50	0.86	0.428	152	3.28
26967	21.00	22.50	1.50	0.86	0.455	72.3	1.81
26968	22.50	24.00	1.50	0.86	1.33	119	3.56
26969	24.00	25.50	1.50	0.86	2.2	171	5.40
26970	25.50	27.00	1.50	0.86	0.005	12.3	0.23
26971	27.00	28.50	1.50	0.86	0.183	13.1	0.43
26972	28.50	30.00	1.50	0.86	0.243	79.8	1.74
26973	30.00	31.50	1.50	0.86	0.243	59.4	1.35
26974	31.50	33.00	1.50	0.86	0.425	59.2	1.53
26976	33.00	34.50	1.50	0.86	0.185	46.5	1.057
26977	34.50	36.00	1.50	0.86	0.247	23.9	0.69
26978	36.00	37.50	1.50	0.86	0.274	31.1	0.86
26979	37.50	39.00	1.50	0.86	0.235	34.3	0.88
26980	39.00	40.50	1.50	0.86	1.2	23.2	1.63
26981	40.50	42.00	1.50	0.86	0.56	38	1.27
26982	42.00	43.50	1.50	0.86	0.256	21.7	0.66
26983	43.50	45.00	1.50	0.86	0.348	34.8	1.00

27013	96.00	98.00	2.00	1.15	0.331	69.7	1.64	2.53 meters @ 1.49
27014	98.00	100.00	2.00	1.15	0.521	68.8	1.81

The following is a map of the drillhole locations:

There are no known reserves on the Guazapares property.

Encino Gordo

During fiscal 2007, the Company carried out a detailed and property scale mapping and sampling program outlining numerous gold, silver and gold-copper coincident geochemical anomalies. Phase 1 of the exploration program was

undertaken in an effort to define the style and characteristics of the mineralization areas indicated by the geochemical anomalies. Within this stage several gold and sulphide mineralization areas including pyrite and chalcopyrite have been identified within an over 500 meters stockwork area and fault-veins structure.

All information and field evidence gathered during the mapping and sampling process suggest the presence of “porphyry” style alteration and mineralization characterized by the presence of concentric alteration patterns (potassic alteration grading outward to quartz-sericite and propylitic alteration), coincident Cu, Au and Mo geochemical anomalies and a multiple-event of veining. No assurance can be given, though, that we will find such a deposit, if at all.

Phase II of the exploration program aimed to detail and characterize all identified alteration and mineralization areas and define and prioritize drilling sites is underway and is expected to be completed by the second quarter of 2009. In addition, a stream sediment sampling program is being undertaken to fully evaluate all the concessions.

There are no known reserves on the Encino Gordo property.

Sahuayacan

Mexoro has completed a diamond drilling program of 13 holes comprising 2,027 meters. Nine of the 13 holes were directed to test the Santo Niño vein, two drillholes were collared on the La Cumbre target and two more were drilled on the south of the property to test the Santa Teresa target. Of the 13 drillholes, only three have intersected economically attractive mineralization. The mineralized intercepts are as follows:


Drill Hole Number	Depth in Meters	Width of Intersection in Meters	Grade
Drillhole SDH-01collared on the Santo Niño vein	from 65.00 to 72.50 meters from 96.50 to 104.5 meters	7.50 meters 8.0 meters	2.56 g/t Au 2.98 g/t Au
Drillhole SDH-05collared on La Cumbre target	from 0 to 4.5 meters	4.5 meters	1.77 g/t Au
Drillhole SDH-12drilled to test the Santa Teresa vein	from 74.50 to 82.00	7.5 meters	56.01 g/t Au and 283.22 g/t Ag

A detailed report with the most recent drilling results has been completed. All data and field information collected is being evaluated and a second phase exploration and drilling campaign is being planned on selected targets. A second phase drilling program is anticipated to be aimed to define the potential volume and grade of the mineralized system at Sahuayacan, primarily focusing on the Santa Teresa and La Cumbre targets which may represent a mineralization system developed along a caldera margin. Additional targets have been identified along the circular feature that seems to control the emplacement of alteration and mineralization zones on the Sahuayacan project.

There are no known reserves on the Sahuayacan property.

Proposed 2009 Program: Exploration Projects – Potential and Next Exploration Stage

Over the next twelve month, the Company intends to explore its four projects (Cieneguita, Guazapares, Sahuayacan and Encino Gordo) to determine whether there are economically attractive concentrations of gold and gold-silver mineralization. The company does not intend to hire any additional employees or to make any purchase of equipment over the next twelve months, as it intends to rely upon current personnel for the exploration work being conducted.

Advance all projects to the next exploration stage.

Exploring and try to increment the known mineralization at the Cieneguita advanced project.

Design, implement and manage a strong new targets generation and identification of advanced projects program aimed to expand our portfolio.

The following exploration program has been planned for each of the projects:

Cieneguita

The recent exploration activities in Cieneguita have shown that additional exploration is warranted. Our President has made the following determinations to date:

Infill drilling displays continuity of mineralization and overall grades.

Mineralization extends 900 meters along strike, is up to 300 meters wide and is open to the southwest and to depth.

Figure is showing main mineralization zones on the Cieneguita project. Areas in red are exhibiting mineralization areas where grades is >1.5 g/t Au

The known mineralized material on the Cieneguita property combined with the assay results from drilling and the new areas found 500 meters away from Cieneguita are providing the possibility to increase the size of the mineralized material. Considering the latest results and findings the proposed work program for Cieneguita will include:

Completing the infill drilling program by doing an additional 10,000 meters of drilling to expand inferred resources;

Conducting metallurgical tests;

Initiating a pre-feasibility study;

Completing detailed mapping and sampling and locating drilling targets of the new areas identified within our property 500 meters away from Cieneguita; and

Commencing exploration drilling program at the Piedras Blancas project.

The proposed exploration budget for the Cieneguita project for 2009 is $1,128,047. This budget does not include any money to be spent by MRT in the event a joint venture agreement is finalized with them. The break down of the expenditures is as follows:


Geochemistry	$130,050
Geophysics	$0
Safety	$3,000
Land Costs	$0
Contractors	$894,760
Travel and Vehicles	$37,820
Field Support	$4,500
Communications	$4,200
Subtotal	$1,074,330


Contingency(5%)	$53,717
Total	$1,128,047

There are no known reserves on the Cieneguita property.

Sahuayacan

Surface mapping and drilling results are suggesting that the high gold values tend to cluster at certain areas along the Santo Niño and the Santa Teresa vein structures with intervening areas of low gold grades. A more disseminated structure seems to be present at the La Cumbre area. We believe that the cluster of high gold values indicate the development of mineralized shoots within the extensive Sahuayacan system as evidenced by the intercepts from the SDH-1 in the Santo Niño vein and the SDH-12 along the Santa Teresa vein.

We believe that all evidence suggests that the mineralization is controlled by a circular feature that may represent a caldera margin running from the Santa Teresa target up to north to the La Cumbre target. This evidence opens up the potential to further extend the mineralization found at Santa Teresa and La Cumbre targets further north.

The figure below shows the different geological elements encountered in the Sahuayacan system and also exhibits the relationship between the Santo Niño, La Cumbre and Santa Teresa target areas.

The next exploration stage will include mapping and sampling along the circular feature trying to define additional mineralization areas and drilling targets. The proposed exploration program will include:

Mapping and sampling at 1:1,000 scale along the La Cumbre-Santa Teresa trend;

Obtaining ASTER image analysis to identify additional alteration-mineralization areas along the semi-circular feature within the entire concession;

Identifying drilling targets on the La Cumbre and Santa Teresa areas; and

Commencing a 4,000 to 6,000 meters exploration drilling program aimed to define the potential of the project.

The total exploration budget for Sahuayacan for 2009 is $849,686. The breakdown of the budget is as follows:


Geochemistry	$165,000
Geophysics	$0
Safety	$2,000
Land Costs	$0
Contractors	$599,450


Travel and Vehicles	$34,725
Field Support	$3,850
Communications	$4,200
Subtotal	$809,225
Contingency(5%)	$40,461
Total	$849,686

There are no known reserves on the Sahuayacan properties.

Guazapares

The mineralization systems encountered in the Guazapares project are essentially of two types: a silver-dominated system at San Francisco Este, San Francisco Centro, and El Cantilito which exhibits localized areas of high-grade gold mineralization; whereas at San Antonio the system is dominated by gold mineralization. We believe that the surface mapping and drilling results suggest that the high-grade mineralization tends to cluster at certain areas along the mineralized veins with intervening areas of low-grade mineralization. The cluster of high-grade mineralization suggests the development of mineralized-shoots as evidenced by the intercepts from drillholes GU-04 and from GU-08 to GU-16. Diamond drilling of the Guazapares Project encountered mineralization in most of the drillholes. The highest grades occurred within vein-breccias, quartz veins and quartz stockworked veins exhibiting multiple pulses of hydrothermal activity.

Analysis of the mineralization and alteration assemblages, structural setting and geochemistry of the project area indicates that the high gold values are spatially associated to a rhyolite-dacite dome and tend to cluster in two main mineralization styles:

Mineralized-shoots developed along the extensive San Antonio vein system.

Large and structurally controlled breccia bodies or structural zones developed in the intersections of mainly NW and NE trending faults and structures.

The mineralized-shoots still remain open in all directions highlighting the potential for high grade gold mineralization beneath covered areas on project area. No assurance may be given, though, that any mineralization of any type will be found.

The next exploration stage will include completing the mapping and sampling for entire concessions forming the Guazapares group. A drilling exploration program will be run in parallel with the mapping-sampling process aimed at exploring newly identified altered and mineralized areas and extending the mineralized trends and mineralized-shoots remaining with open potential in Guazapares.

The present drilling results are providing the evidence for the potential of several areas in the Guazapares project. The proposed drilling program for the upcoming year will mainly focus on the most attractive areas as follows:

(1) Drilling results on the San Francisco Este target are opening the potential to explore further northwest along the same structure.

(2) Drillholes GU-12 and GU-13, which suggest the development of high-grade mineralized-shoots along the structures’ inflections and have opened up the exploration potential to the west and northwest.

(3) Drilling results at El Cantilito (GU-16), which have opened up the exploration potential to the west of the system which is a covered terrain. The drillhole GU-15 is also opening up potential to the west along the El Cantilito mineralized system and, since GU-15 was stopped in mineralization at 169 meters depth, the exploration potential is still open at depth.

(4) All mineralized system and targets, which suggest the potential to explore where all system intersects each other creating the right setting to develop attractive mineralization zones.

Figure showing all attractive areas identified during the last mapping-sampling and drilling program. The proposed 2009 drilling program will be focused in the areas denominated as 1, 2, 3 and 4.

The total exploration budget for 2009 is $1,242,255. The expenditures are broken down as follows:


Geochemistry	$132,600
Geophysics	$0
Safety	$3,000
Land Costs	$0
Contractors	$995,040
Travel and Vehicles	$42,260
Field Support	$6,000
Communications	$4,200
Subtotal	$1,183,100
Contingency(5%)	$59,155
Total	$1,242,255

There are no known reserves on the Guazapares properties.

Encino Gordo

The geology at Encino Gordo project area is dominated by flows and tuff of andesitic to dacitic composition intruded by small plugs of porphyritic intrusions varying in composition from diorite to quartz-diorite. Small and localized areas exhibiting dacite porphyries are also common. The volcanic sequence which may be part of the Lower Volcanic Series (LVS) of the Sierra Madre Occidental Volcanic Complex (SMOVC) host most of the mineralization in the Encino Gordo area and in the whole Moris district host to Palmarejo deposit and the Guazapares gold hydrothermal system. The alteration and mineralization at the Encino Gordo project is mainly characterized by two different styles:

La Junta area. Most of the alteration and mineralization in this area is associated with andesitic rocks intruded by composite stock (diorite and quartz-diorite) and dacite porphyries. The alteration at La Junta is characterized by propylitic alteration (chlorite-calcite-pyrite) exhibiting small and localized areas with incipient K-silicate alteration, where K-feldspar is mainly replacing groundmass in the intrusion phases.

Mineralization is occurring at La Junta in different styles, including: stockwork, fault-veins, sheeted veins, dissemination and breccias. However, main mineralization consists of an approximately 500 meter wide stockwork fault-vein zone developed in a dilatant jog “flower structure”. In this mineralized area, multiple cross-cutting vein types are present including:

Pyrite-only veins

Quartz-only veins

Quartz + pyrite veins

Quartz + chalcopyrite veins

Quartz + pyrite + chalcopyrite veins

Calcite veins

Quartz + galena veins

Chlorite + calcite veins

Figure is illustrating coincident Cu and Au geochemical anomalies in La Junta area which are spatially associated to a potassic alteration core resembling the classical geochemical-alteration signature of the porphyry systems.

Supergene alteration is represented by an argillic alteration pervasive event developed by the oxidation and alteration of the primary sulfide zone observed at La Junta area. Limonites developed within this supergene event are dominated by goethite (± hematite – jarosite).

The alteration assemblages, the style of mineralization, the content and type of sulfide mineralization suggest that La Junta area might be a mesothermal to near-mesothermal system, resembling a “porphyry-style” alteration-mineralization.

Potential exists in this area to find a porphyry-style system and a similar gold mineralization. The proposed exploration program for the upcoming year will be focused on trying to asses the potential of the identified targets, including:

The porphyry-style mineralization in La Junta area

Anomaly N and La Elyka areas

The total 2009 exploration budget for Encino Gordo is $739,232. The exploration expenditures are as follows:


Geochemistry	$84,030
Geophysics	$84,000
Safety	$2,000
Land Costs	$0


Contractors	$507,100
Travel and Vehicles	$17,100
Field Support	$6,650
Communications	$3,150
Subtotal	$704,030
Contingency(5%)	$35,202
Total	$739,232

There are no known reserves on the Encino Gordo properties.

New Properties-Target Generation and Growth Strategy

A fundamental component of our strategy is to advance all of our properties to the drilling stage and implement a strong generative and property acquisition program through a well established financial process and a proper funding consistency.

The proposed generative program contemplates four main directions:

A new targets generation program that may create a pipeline of quality properties providing a steady stream of new prospect and/or projects for the Company to explore, farm-out and/or joint venture.

A property acquisition program aimed to identify and acquire at low cost (whenever possible) early- to mid-stage properties on selected locations along the main gold-silver belts in Mexico.

A Focus on small- to medium-size gold-silver deposits (minimum deposits containing 500,000 ounces of Au Eq.)

The new targets generation and property acquisition program may be initially focused on the Sierra Madre belt and Central Mexico. It may be extended further south in Mexico and other countries if conditions and project’s potential warranted.

The proposed exploration program is to be undertaken by the Mexoro’s exploration team using in-house knowledge in combination for support and guidance of high-quality consultant with expertise in the region. The new targets generation program is aimed to feed our project pipeline two at drilling stage and/or near drilling stage projects per year.

Phase I - Target Generation

Objectives

Identify two to four target areas (approximately 20 x 30 kilometers) which have potential to host small- to medium-size gold and/or gold-silver deposits.

Identify one or two specific opportunities with close to drill ready targets. For example, identify old workings or existing mines with good upside potential.

Time frame: six months.

Key Steps and Exploration Tools

After initial evaluations of potential gold and gold-silver deposits it has become evident that the acquisition and evaluation of more detailed geological maps and geochemistry with field follow-up is critically important in identifying new areas of mining potential. Careful and selective use of such data may be the most immediate and cost-effective way to focus exploration efforts toward prospective gold-silver areas.

Key steps may include mainly the following activities, among other considerations:

Acquiring geological maps 1:250,000 and 1:50,000 (from Servicio Geologico Mexicano);

Generating geological and mineral occurrences base maps;

Identifying key host rocks;

Completing structural interpretation from known geology, TM imagery, and geophysical data (if available);

Integrating mineral occurrences, alteration, lithology and structures;

Completing initial targeting using the above compilation; and

Selecting and prioritizing targets.

The proposed new target generation budget for 2009 is $438,690. The breakdown of the budget expenditures is as follows:


Geochemistry	$24,000
Geophysics	$0
Landsat Imagery	$30,000
GIS & Database	$40,000
Safety	$1,500
Land Costs	$170,000
Contractors	$99,300
Travel & Accommodation	$24,000
Vehicles	$15,500
Field Support	$7,500
Communications	$6,000
Subtotal	$417,800
Contingency(5%)	$20,890
Total	$438,690

Results of Operations

Year ended February 28, 2009 compared to the year ended February 29, 2008.

In this discussion of Mexoro’s results of operations and financial condition, amounts, other than per-share amounts, have been rounded to the nearest thousand dollars.

Critical Accounting Estimates

The preparation of the Company’s financial statements requires management to make various judgments with respect to estimates and assumptions. On an ongoing basis, management regularly reevaluates its estimates and assumptions; however actual amounts could differ from those based on such estimates and assumptions.

The Company has made certain accounting estimates that have a material bearing on the financial statements. The most significant estimates are:

Income Tax Valuation Allowance

The Company has a potential $7,859,422 deferred income tax asset, which has been fully allowed for in the consolidated financial statements, based on the difference in timing of certain deductions for income tax and accounting purposes. The ability of the Company to ultimately derive a benefit from the deferred tax asset depends on the existence of sufficient taxable income of the appropriate character within the carry forward period available under the tax law.

Stock based compensation

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. Stock options and warrants are valued at their fair value utilizing the Black-Scholes option-pricing model.

Convertible debentures

Convertible debentures issued with attached warrants are recorded based upon the relative fair values of the debentures and the warrants. The fair value of the warrants is determined utilizing the Black-Scholes option-pricing model. The resulting debt

discount is amortized to Interest Expense over the life of the debentures. Any resulting beneficial conversion features on these debentures are amortized to the earliest conversion date

References in the discussion below to 2009 are to our current fiscal year ended February 28, 2009, while references to 2008 are to our fiscal year ended February 29, 2008.

Revenues

We did not earn revenues during 2009 or 2008 because we did not have commercial production of any of our properties. We do not anticipate earning revenues until such time as we have entered into commercial production of our mineral properties, if ever. We are presently in the development stage of our business. We can provide no assurance that we will discover commercially exploitable levels of mineral resources on our properties or, if such resources are discovered, that we will enter into commercial production of our mineral properties. Interest income is recorded under Other Income in the Statement of Operations in the financial statements.

Operating Costs

We did not incur any operating costs during the years ended 2009 and 2008 due to the fact that we did not achieve production from exploration activities during either year.

Expenses

Our operating expenses decreased to $7,049,069 for the year ended February 28, 2009 compared to $8,040,328 for the year ended February 29, 2008, representing a decrease of $991,259.

In 2009, we incurred lower general and administrative expenses and write off of property costs, offset by mineral exploration expenses, which resulted in decrease of expenses.

In the general and administrative expense category, the decrease in 2009 is attributable to $339,000 spent on investor relation activities compared with $816,000 in 2008 to raise additional funds for exploration activities and higher advertising and promotion costs of $16,000 in 2009 compared to $159,000 in 2008.

Our exploration expenses increased to $4,132,048 in 2009 compared with $2,680,680 in 2008 as a result of the increased activity of the Company as it advanced its business plan.

In 2009, we expensed $726,000 for stock-based compensation expense compared to $2,454,000 in 2008 primarily due to lower market price of the Company’s shares.

For the year ended February 28, 2009, we incurred $239,000 in mineral property costs as payments for our Mexican properties. At February 28, 2009, we tested the carrying amounts of all our Mexican properties for recoverability. Based on our tests, we concluded that the sum of undiscounted cash flows expected to result from the use and eventual disposition of all such properties was nil as the properties have no known reserves. Accordingly, a mineral property impairment loss of $239,000 has been recognized for the year ended February 28, 2009. Impairment of mineral property costs in 2009 decreased to $239,000 compared to $580,000 for 2008. If we are able to raise additional funds to continue with our business plan, we anticipate that exploration expenditures will increase in fiscal 2010 as a result of exploration activities on our Mexican mineral properties.

Our interest expense increased to $791,000 for 2009 compared to $58,000 for 2008. The higher interest expense in 2009 pertains to convertible debentures issued by the Company in May and June of 2008. The Company recorded a beneficial conversion feature of $313,000 as interest expense and $303,000 as relative fair value of the warrants in relation to the convertible debt. The Company did not incur interest expense related to convertible debt in 2008.

Net Loss

Our net loss decreased to $8,036,208 for 2009 compared to $8,096,604 for 2008, representing a decrease of $60,396. This change in our loss was primarily attributable to higher investor relations expenses and exploration expenses in 2009. The non-cash component of stock-based compensation costs was $726,000 compared to $2,454,000 for 2008.

We anticipate that we will continue to incur losses until such time that we can identify mineral deposits and achieve significant revenues from sale of gold recovered from our Mexican mineral properties, if ever. There is no assurance that we will commence the development stage of our operations at any our Mexican mineral properties or achieve revenues.

Liquidity and Capital Resources

Since inception, we have undergone two unsuccessful business combinations, which have caused us to incur significant liabilities and have resulted in the accumulation of a substantial deficit during the exploration stage. As of February 28, 2009, we had total assets of $597,000, total current liabilities of $4,979,000, and a deficit of $41,864,000 accumulated during the development stage.

Cash and Working Capital

We had cash of $38,704 as of February 28, 2009, compared to cash of $12,947 as of February 29, 2008. We had working capital deficiency of $4,657,260 as of February 28, 2009, compared to a working capital deficiency of $1,810,905 as of February 29, 2008.

During the fiscal year 2009, we continued with our exploration program and also incurred corporate administrative expenses but were unable to raise sufficient funds to pay many of our suppliers. Our accounts payable and accrued liabilities increased from $656,000 in 2008 to $$2,680,000 in 2009. Of the $2,680,000 accounts payable and accrued liabilities as of February 28, 2009, $1,714,000 related to exploration expenses.

We will require additional financing during the current fiscal year according to our planned exploration activities. We plan to spend approximately $4,398,000 from March 2009 to February 2010 to carry out exploration and administration activities on our Mexican mineral properties. We anticipate spending approximately $2,000,000 during the next 12 months on general and administrative costs. We presently do not have sufficient financing to enable us to complete these plans and will require additional financing to perform future exploration work on our Mexican mineral properties. Our actual expenditures on these activities will depend on the amount of funds we have available as a result of our financing efforts. There is no assurance that we will be able to raise the necessary financing.

The amount of working capital could be adversely affected further in the event claims are made against us alleging that certain shares we previously issued pursuant to Form S-8 registration statements constituted an illegal public offering because the company was a “shell company” at the time and, as a result, was not eligible to use Form S-8 for registration of shares under the Securities Act of 1933. In August and October of 2005, the Company issued shares of common stock to an officer of the Company, as compensation for consulting services. The two share issuances were for a combined total of 30,000 shares and each of the share issuances was made pursuant to a registration statement on Form S-8 under the Securities Act of 1933. Although the Company believes these shares were properly issued, a claim could be made that issuance of the shares constituted an illegal public offering because the Company was a “shell company” at the time . Shell companies (i.e. companies which have no or nominal operations and either (i) no or nominal assets; (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets) are not eligible to use Form S-8 for registration under the Securities Act of 1933. If either of these transactions did violate federal securities laws, subsequent purchasers of the shares may have claims against us for damages or for rescission of their purchase transaction and recovery of the full subscription price paid, together with interest. As of the date of this annual report, no one has made or threatened any claim against us alleging violation of the federal securities laws. In the event such claims were successfully asserted there is no assurance that we would have sufficient funds available to pay and it is likely that we would be required to use funds currently designated as working capital for that purpose. That would substan tially reduce the amount of working capital available for other purposes and, in that event, we could be forced to cease or discontinue certain operations and to liquidate certain assets to pay our liabilities, including, but not limited to, rescission claims.

Cash Used in Operating Activities

Cash used in operating activities decreased to $3,701,729 for the fiscal year ended February 28, 2009 compared to $3,837,069 for the fiscal year ended February 29, 2008. The cash was used for general and administrative costs and for the exploration programs on the properties.

Cash Used in Investing Activities

Cash used in investing activities decreased to $12,810 for the fiscal year ended February 28, 2009 compared to $172,036 for the fiscal year ended February 29, 2008 for the purchase of equipment.

Financing Activities

Cash provided by financing activities decreased to $3,779,808 for the fiscal year ended February 28, 2009 compared to $4,027,811 for the fiscal year ended February 29, 2008. Most of the cash provided by financing activities in 2009 was provided by issuance of convertible debentures and promissory notes. Cash provided by financing activities was used to fund our operating and investing activities.

We anticipate continuing to rely on equity sales of our common stock or issuance of debt in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders.

During the quarter ended August 31, 2008, Paramount provided Mexoro $1,370,000 in the form of secured convertible debentures bearing interest at a rate of 8% per annum for a term of one year. Paramount had the option to convert the debt into units.

Subsequent to the year ended February 28, 2009, in March, 2009, the Company entered into an agreement with Paramount restructuring its payment terms on the three outstanding secured convertible debentures held by Paramount. Under the terms of the agreement, the Company paid Paramount $1,000,000 to cancel two debentures held by them, one issued on May 9, 2008 for $500,000 and another issued on July 11, 2009 for $500,000. The Company also amended a debenture issued to them on June 18, 2009 in the face amount of $370,000. The amount of that debenture was increased to $521,047.37 which, among other things, includes interest accrued on all three debentures to March 31, 2009. The Company was obligated to make a payment on March 31, 2009 on this debenture in the amount of $393,547.37 and the balance of $127,500 was to be re-paid on April 30, 2009. This remaining amount of $127,500 is interest free as long as the debenture remains in good standing. Subsequently, Paramount has deferred the remaining payment until the closing of the sale of our Guazapares properties to Paramount. Paramount plans to deduct the amount owed from the purchase price to settle the final payment of the debenture.

On February 12, 2009, the Company entered into a definitive agreement for development of Cieneguita project with Minera Rio Tinto, a private Mexican corporation whose president was a former president of our Company. The definitive agreement covers project financing of up to USD $9,000,000 as follows:

(i)

MRT and/or its investors will subscribe for up to $1 million of secured convertible debentures.

(ii)

MRT is to provide the necessary working capital to begin and maintain mining operations estimated to be $3 million used for the purpose of putting the Cieneguita property into production.

(iii)

MRT will spend up to USD $5 million to take the Cieneguita property through the feasibility stage. In doing so, MRT will earn a 60% interest in Mexoro’s rights to the property. After the expenditure of the $5 million all costs will be shared on a ratio of 60% to MRT and 40% to Mexoro Minerals. If the Company elects not to pay its portion of costs after the $5 million has been spent, the Company’s position shall revert to a 25% carried interest on the property.

Subsequent to the year ended February 28, 2009, in March, 2009, the Company issued convertible secured debentures with a face value of $1,000,000 to four investors. The total offering for these debentures is $1,500,000. The debentures are due in 1 year and accrue interest at 15% paid quarterly in either cash or stock of the Company valued at 20% discount to the 20 day trading average on the day the payment is due. At the debenture holder’s option, the debenture may be repaid with accrued interest and a 20% warrant coverage on the value of the debenture.

Subsequent to the year ended February 28, 2009, in March, 2009, the Company entered into a securities purchase agreement with OHAG Holdings, Ltd. (“OHAG”). Pursuant to the securities purchase agreement, OHAG paid the Company $250,000 in exchange for a secured convertible debenture of $250,000 and 250,000 shares of common stock. The debenture was also secured by 2,250,000 restricted shares of the Company. The secured convertible debenture has a term of one year and bears interest at 15%. OHAG may elect to convert all or a portion of the secured convertible debenture into (i) up to 1,250,000 shares of the Company’s common stock and warrants to purchase 625,000 shares of common stock at $0.30 per share (each, a “Warrant”), (ii) if MRT invests in the Company by acquiring its property at Cieneguita and the Company make the following offer, cash for any principal and interest outstanding plus Warrants equal to 20% of the value

of the secured convertible debenture at 80% of the 20 day moving average of the Company’s common stock as quoted on the Over-the-Counter Bulletin Board and (iii) up to a 10% interest in the real property known as Cieneguita located in Chihuahua, Mexico, which the Company may acquire. The OHAG convertible debenture has been repaid from funds provided by an outside investor and the 2,250,000 shares issued as security are in the process of being returned to treasury.

Subsequent to the year ended February 28, 2009, in May, 2009, the Company entered into a letter of agreement to sell its Guazapares project located in southwestern Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount for a total consideration of up to $5.3 million USD. The sale is subject to the signing of a definitive agreement by June 2, 2009 and to the satisfaction of various conditions precedent prior to closing. Closing is scheduled prior to the end of June 2009 and a 5.7% commission is payable on the closing of the sale.

Mexoro's Guazapares project comprises 12 claims close to Paramount's San Miguel discovery. The purchase price is to be paid in two stages. The first payment of $3.7 million will be deposited into escrow at closing, and will be released from escrow to Mexoro when the transfer of the 12 claims to Paramount is finalized. An additional payment of $1.6 million is due to Mexoro if, within 36 months following execution of the letter of agreement, either (i) Paramount Gold de Mexico SA de C.V. is sold by Paramount, either through a stock sale or a sale of substantially all of its assets, or (ii) Paramount's San Miguel project is put into commercial production.

Going Concern

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

The Company has a history of operating losses and will need to raise additional capital to fund its planned operations. As at February 28, 2009, the Company had working capital deficiency of $4,657,260 (2008 - $1,810,011 working capital) and an accumulated deficit during the development stage of $41,864,000 (2008 – $33,828,000). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Off-Balance Sheet Arrangements

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLIMENTARY DATA.

MEXORO MINERALS LTD.

(A Development Stage Company)

Consolidated Financial Statements
(Expressed in U.S. Dollars)

February 28, 2009 and February 29, 2008

MEYLER & COMPANY, LLC

ONE ARIN PARK

1715 HIGHWAY 35

MIDDLETOWN, NJ 07748

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Mexoro Minerals Ltd.

We have audited the accompanying consolidated balance sheets of Mexoro Minerals Ltd. (a Development Stage Company) as of February 28, 2009 and February 29, 2008, and the related consolidated statements of stockholders’ deficiency, operations and comprehensive income (loss), and cash flows for the two year period ended February 28, 2009 and for period from March 1, 2004 (Development Stage) to February 28, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The related consolidated statements of stockholders’ deficiency, operations and comprehensive income (loss), and cash flows from April 27, 1997 (Development Stage) to February 29, 2004 and March 1, 2004 (Development Stage) to February 28, 2007 were audited by other auditors whose report dated May 31, 2007 expressed an unqualified opinion, with an explanatory paragraph dis cussing the Company’s ability to continue as a going-concern. Our opinion on the consolidated stockholders’ deficiency, consolidated statements of operations and comprehensive income (loss), and consolidated cash flows from April 27, 1997 (Development Stage) to February 29, 2004 and March 1, 2004 (Development Stage) to February 28, 2007, is based solely on the reports of other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mexoro Minerals Ltd. as of February 28, 2009 and February 29, 2008, and the results of its operations and its cash flows for the two-year period ended February 28, 2009 and the period from March 1, 2004 (Development Stage) to February 28, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has a history of operating losses, a working capital deficiency of $4,657,260 at February 28, 2009 and a cumulative loss during the development stage of $41,864,219. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Meyler & Company, LLC

June 11, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE STOCKHOLDERS OF MEXORO MINERALS LTD.

(Formerly Sunburst Acquisitions IV, Inc.)

(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheet of Mexoro Minerals Ltd. (formerly Sunburst Acquisitions IV, Inc.) (An Exploration Stage Company) as at February 28, 2007 and the related consolidated statements of stockholders’ equity (deficiency), operations and comprehensive income, and cash flows for the year ended February 28, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The related statements of stockholders’ deficiency, operations and comprehensive income, and cash flows from inception of the development stage on August 27, 1997 to February 29, 2004 were audited by other auditors whose reports dated May 24, 2004 and May 27, 2003 expressed unqualified opinions, with an explanatory paragraph discussing the Company’s ability to continue as a going-concern. Our opinion on the stockholders’ deficiency, statements o f operations and comprehensive income, and cash flows from inception of the development stage to February 29, 2004, is based solely on the reports of other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as at February 28, 2007 and the results of its operations and its cash flows for the period indicated above in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going-concern. As discussed in note 3, the Company has sustained operating losses since its inception and has deficits in working capital and equity, which raises substantial doubt about its ability to continue as a going-concern. The financial statements do not include any adjustments related to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going-concern. Management’s plans in regard to these matters, which include private placements of securities, are also described in note 3.

/s/ Pannell Kerr Forster

Chartered Accountants

(registered with the PCAOB as “Smythe Ratcliffe”)

Vancouver, Canada

May 31, 2007

MEXORO MINERALS LTD.

(A Development Stage Company)

Consolidated Balance Sheets

(Expressed in U.S. Dollars)

As at February 28 and February 29


	February 28, 2009		February 29, 2008
Assets

Current
Cash and cash equivalents	$	38,704	$	12,947
Accounts receivable		248,589		278,847
Prepaid expenses		34,048		104,936
		321,341		396,730

Equipment(note 4)		275,900		460,941

Total assets	$	597,241	$	857,671

Liabilities

Current
Accounts payable and accrued liabilities	$	2,679,512	$	655,677
Current portion of loans payable (note 8)		63,232		71,256
Promissory notes (note 6)		968,543		1,480,702
Current portion of convertible debentures (note 7)		1,267,314		-
		4,978,601		2,207,635

Loans payable (note 8)		7,608		27,481
Convertible debentures (note 7)		673,887		-

Total liabilities		5,660,096		2,235,116

Stockholders’ deficiency
Capital stock
Preferred stock
Authorized: 20,000,000 shares without par value (note 9)
Issued: nil		-		-
Common stock
Authorized: 200,000,000 shares without par value
Issued: 31,019,302 (2008 – 25,380,502) (note 10)		25,556,901		22,978,654
Additional paid-in capital		12,676,908		11,155,687
Stock subscriptions		121,258		330,000
Accumulated deficit from prior operations		(2,003,427)		(2,003,427)
Accumulated deficit during the development stage		(41,864,219)		(33,828,011)
Other comprehensive income (loss)		449,724		(10,348)
Total stockholders’ deficiency		(5,062,855)		(1,377,445)

Total liabilities and stockholders’ deficiency	$	597,241	$	857,671

Going-concern (note 3)

Commitments (notes 5 and 16)

Subsequent events (note 18)

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

MEXORO MINERALS LTD.

(A Development Stage Company)

Consolidated Statements of Stockholders’ Deficiency

(Expressed in U.S. Dollars)

Period from March 1, 2004 (Development Stage) to February 28, 2009


	Number of shares	Amount	Additional paid-in capital	Stock subscriptions	Deficit accumulated from prior operations	Deficit accumulated during the development stage	Other comprehensive income (loss)	Total stockholders deficiency


Balance from prior operations, March 1, 2004	709,168	$1,701,843	$ 194,391	$ 67,025	$ (2,003,427)	$ -	$ 8,929	$ (31,239)

Common stock issued in share exchange	860,000	10,965,000	-	-	-	-	-	10,965,000
Options issued as finders’ fees	-	-	1,523,000	-	-	-	-	1,523,000
Common stock issued for cash	113,222	269,134	-	(67,025)	-	-	-	202,109
Options exercised	50,000	35,000	-	-	-	-	-	35,000
Options issued	-	-	86,955	-	-	-	-	86,955
Warrants exercised	5,512	-	-	-	-	-	-	-
Beneficial conversion feature	-	-	500,000	-	-	-	-	500,000
Foreign exchange translation adjustment	-	-	-	-	-	-	(3,050)	(3,050)
Net loss for the year	-	-	-	-	-	(13,912,488)	-	(13,912,488)

Balance, February 28, 2005	1,737,902	$12,970,977	$2,304,346	$ -	$ (2,003,427)	$(13,912,488)	$ 5,879	$(634,713)
							X

Common stock issued for consulting services	30,000	90,000	-	-	-	-	-	90,000
Options exercised	32,000	43,000	-	-	-	-	-	43,000
Common stock issued on conversion of debenture	2,000,000	300,000	-	-	-	-	-	300,000
Common stock issued in property acquisition	2,000,000	2,100,000	-	-	-	-	-	2,100,000
Common stock issued for cash	7,000,000	70,000	-	-	-	-	-	70,000
Options issued	-	-	248,000	-	-	-	-	248,000
Warrants issued	-	-	487,250	-	-	-	-	487,250
Beneficial conversion feature	-	-	952,000	-	-	-	-	952,000
Stock subscriptions	-	-	-	170,000	-	-	-	170,000
Foreign exchange translation adjustment	-	-	-	-	-	-	(4,828)	(4,828)
Net loss for the year	-	-	-	-	-	(4,425,885)	-	(4,425,885)

Balance, February 28, 2006	12,799,902	$15,573,977	$3,991,596	$ 170,000	$(2,003,427)	$(18,338,373)	$ 1,051	$ (605,176)

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

MEXORO MINERALS LTD.

(A Development Stage Company)

Consolidated Statements of Stockholders’ Deficiency (continued)

(Expressed in U.S. Dollars)

Period from March 1, 2004 (Development Stage) to February 28, 2009


	Number of shares	Amount	Additional paid-in capital	Stock subscriptions	Deficit accumulated from prior operations	Deficit accumulated during the development stage	Other comprehensive income (loss)	Total stockholders’ deficiency


Balance, February 28, 2006	12,799,902	$15,573,977	$3,991,596	$ 170,000	$(2,003,427)	$(18,338,373)	$ 1,051	$ (605,176)

Common stock issued on conversion of debenture	5,835,000	2,917,500	-	-	-	-	-	2,917,500
Common stock issued on settlement of promissory notes	1,651,200	412,800	-	-	-	-	-	412,800
Common stock issued for cash	750,000	375,000	-	(170,000)	-	-	-	205,000
Warrants exercised	50,000	50,000	-	-	-	-	-	50,000
Shares returned to treasury	(50,000)	(25,000)	-	-	-	-	-	(25,000)
Options issued	-	-	496,000	-	-	-	-	496,000
Warrants issued	-	-	1,949,000	-	-	-	-	1,949,000
Beneficial conversion feature	-	-	2,265,500	-	-	-	-	2,265,500
Foreign exchange translation adjustment	-	-	-	-	-	-	(3,098)	(3,098)
Net loss for year	-	-	-	-	-	(7,393,034)	-	(7,393,034)

Balance, February 28, 2007	21,036,102	$19,304,277	$8,702,096	$ -	$(2,003,427)	$(25,731,407)	$ (2,047)	$ 269,492

Warrants exercised	4,344,400	3,674,377	-	-	-	-	-	3,674,377
Options issued	-	-	974,841	-	-	-	-	974,841
Fair value of warrants expensed	-	-	1,478,750	-	-	-	-	1,478,750
Stock subscriptions	-	-	-	330,000	-	-	-	330,000
Foreign exchange translation adjustment	-	-	-	-	-	-	(8,301)	(8,301)
Net loss for the year	-	-	-	-	-	(8,096,604)	-	(8,096,604)

Balance, February 29, 2008	25,380,502	$22,978,654	$11,155,687	$ 330,000	$(2,003,427)	$(33,828,011)	$ (10,348)	$(1,377,445)

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

MEXORO MINERALS LTD.

(A Development Stage Company)

Consolidated Statements of Stockholders’ Deficiency (continued)

(Expressed in U.S. Dollars)

Period from March 1, 2004 (Development Stage) to February 28, 2009


	Number of shares	Amount	Additional paid-in capital	Stock subscriptions	Deficit accumulated from prior operations	Deficit accumulated during the development stage	Other comprehensive income (loss)	Total stockholders’ deficiency
Balance, February 29, 2008	25,380,502	$22,978,654	$11,155,687	$ 330,000	$(2,003,427)	$(33,828,011)	$ (10,348)	$(1,377,445)

Notes converted into shares	2,936,028	1,470,522						1,470,522
Options issued			603,801					603,801
Warrants issued			122,260					122,260
Fair value of warrants embedded in convertible debentures			480,800					480,800
Value of beneficial conversion feature of convertible debentures			312,399					312,399
Stock subscriptions				121,258				121,258
Shares issued for subscriptions	330,000	330,000		(330,000)				-
Accounts payable settled with shares	206,000	103,000						103,000
Shares issued for services	672,000	262,090						262,090
Shares issued to management as bonuses	1,050,000	232,750						232,750
Cash received for options issued			1,961					1,961
Shares issued on private placement	444,772	179,885						179,885
Foreign exchange translation adjustment							460,072	460,072
Net loss for the year						(8,036,208)		(8,036,208)

Balance, February 28, 2009	31,019,302	$25,556,901	$12,676,908	$ 121,258	$(2,003,427)	$(41,864,219)	$449,724	$(5,062,855)

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

MEXORO MINERALS LTD.

(A Development Stage Company)

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Expressed in U.S. Dollars)


						Period from
						Inception of
						Development
						Stage
		Year Ended				(March 1, 2004)
		February 28,		February 29,		to February 28,
		2009		2008		2009

Expenses
General and administrative	$	2,677,728	$	4,779,648	$	12,734,219
Mineral exploration		4,132,048		2,680,680		7,902,226
Impairment of mineral property costs		239,293		580,000		16,384,715

Operating loss		(7,049,069)		(8,040,328)		(37,021,160)
Other income (expenses)
Foreign exchange gain (loss)		(194,107)		1,357		(192,750)
Interest		(791,452)		(57,633)		(4,789,173)
Loss on sale of assets		(1,580)		-		(1,580)
Gain on settlement of debt (note 6)		-		-		140,444

Net loss	$	(8,036,208)	$	(8,096,604)		(41,864,219)

Other comprehensive income (loss)
Foreign exchange translation adjustment		460,072		(8,301)		449,724

Total comprehensive loss	$	(7,576,136)	$	(8,104,905)	$	(41,414,495)

Total loss per share – basic and diluted	$	(0.29)	$	(0.35)	$	-

Weighted average number of shares of
common stock – basic and diluted		28,164,972		23,204,827		-

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

MEXORO MINERALS LTD.

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Expressed in U.S. Dollars)


						Period From
						Inception of
						Development Stage
		Year Ended				(March 1, 2004)
		February 28,		February 29,		to February 28,
		2009		2008		2009
Operating activities
Net loss	$	(8,036,208)	$	(8,096,604)	$	(41,864,219)
Adjustments to reconcile net (loss) to net cash flows
Write-off of note receivable		-		-		57,500
Impairment of mineral property costs		-		580,000		13,645,000
Shares issued for consulting services		262,090		-		352,090
Amortization		78,685		79,310		182,924
Discount on convertible debenture		308,358		-		483,358
Non-cash component of gain on settlement of debt		-		-		(182,259)
Stock-based compensation		726,061		2,453,591		7,969,857
Beneficial conversion feature		312,399		-		4,029,899
Prepaid expense		58,789		72,143		(36,446)
Accounts receivable		(64,602)		(103,654)		(325,947)
Customer deposits		-		-		(44,809)
Notes payable		-		-		109,337
Accounts payable and accrued liabilities		2,652,699		1,178,145		4,079,055
Cash used in operating activities		(3,701,729)		(3,837,069)		(11,544,660)
Investing activity
Sale of equipment		3,879		-		3,879
Purchase of property and equipment		(16,689)		(172,036)		(564,989)
Cash used in investing activity		(12,810)		(172,036)		(561,110)
Financing activities
Proceeds from loans payable		43,363		107,106		225,817
Proceeds from notes payable		1,419,663		1,081,202		3,063,665
Proceeds from convertible debentures		2,096,490		-		5,788,990
Proceeds from exercise of options		-		-		78,000
Proceeds from exercise of warrants		-		3,094,377		3,144,377
Repayment of loans payable		(57,581)		(73,374)		(144,040)
Repayment of notes payable		(23,270)		(181,500)		(383,270)
Repayment of convertible debentures		-		-		(530,000)
Stock subscriptions		121,258		-		291,258
Issuance of common stock		179,885		-		656,994
Cash provided by financing activities		3,779,808		4,027,811		12,191,791
Outflow of cash and cash equivalents		65,269		18,706		86,021
Effect of foreign currency translation on cash		(39,512)		(18,907)		(69,394)
Cash and cash equivalents, beginning		12,947		13,148		22,077
Cash and cash equivalents, ending	$	38,704	$	12,947	$	38,704

Supplemental cash flow information – note 15

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

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

BASIS OF PRESENTATION

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

The Company had previously been pursuing various business opportunities and, effective March 1, 2004, the Company changed its operations to mineral exploration. Accordingly, as of February 12, 2009 the Company is considered to be a Development stage company.

On May 25, 2004, the Company completed a “Share Exchange Agreement” with Sierra Minerals and Mining, Inc. (“Sierra Minerals”), a Nevada corporation, which caused Sierra Minerals to become a wholly-owned subsidiary. Sierra Minerals held certain rights to properties in Mexico that the Company now owns or has an option to acquire. Through Sierra Minerals, the Company entered into a joint venture agreement with Minera Rio Tinto, S.A. de C.V. (“MRT”), a company duly incorporated pursuant to the laws of Mexico, which is controlled by an officer of the Company. In August 2005, the Company cancelled the joint venture agreement in order to directly pursue the mineral exploration opportunities through a wholly-owned Mexican subsidiary, Sunburst Mining de Mexico S.A. de C.V. (“Sunburst de Mexico”). On August 25, 2005, Sunburst de Mexico, Mexoro and MRT entered into agreements prov iding Sunburst de Mexico the right to explore and exploit certain properties in Mexico. In December 2005, the Company and Sunburst de Mexico entered into a new agreement with MRT (the “New Agreement”) (note 5). On January 20, 2006, Sierra Minerals was dissolved.

On May 5, 2008, the Company signed a letter of intent (‘LOI’) to enter into a strategic alliance with Paramount Gold and Silver Corp. (‘Paramount’). The agreement called for Paramount to invest a minimum of $4 million and a maximum of $6 million into the Company, at a fixed price of $0.50 per unit by June 23, 2008. On June 18, 2008, the Company and Paramount agreed to extend the date from June 23, 2008 to July 21, 2008. The Company and Paramount then agreed to extend the date to August 5, 2008. On August 6, 2008 Mexoro terminated the LOI with Paramount as Paramount did not meet the terms of the agreement.

During the year ended February 28, 2009, Paramount provided Mexoro $1,370,000 in the form of secured convertible debentures bearing interest at a rate of 8% per annum for a term of one year. Paramount has the option to convert the debt into units (note 7).

On February 12, 2009, the Company entered into a definitive agreement for development of the Cieneguita project with Minera Rio Tinto, a private Mexican corporation whose president was a former president of our Company. The definitive agreement covers project financing of up to USD $9,000,000 (note 5).

SIGNIFICANT ACCOUNTING POLICIES

(a)

Principles of consolidation

The accompanying financial statements include the accounts and activities of Mexoro and its wholly-owned subsidiary, Sunburst de Mexico. All inter company balances and transactions have been eliminated in consolidation.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

SIGNIFICANT ACCOUNTING POLICIES (continued)

(b)

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas of estimate include the impairment of assets and rates for amortization, accrued liabilities, future income tax balances and the inputs used in calculating stock-based compensation. Actual results could differ from those estimates and would impact future results of operations and cash flows.

(c)

Financial instruments

(i)

Fair value

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

(ii)

Interest rate risk

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

(iii)

Credit risk

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

(iv)

Translation risk

The Company translates the results of non-U.S. operations into U.S. currency using rates approximating the average exchange rate for the year. The exchange rate may vary from time to time. This risk is considered moderate, as the Company’s mining project expenses are recorded in Mexican pesos and converted to U.S. currency for reporting purposes.

(d)

Equipment

Equipment is recorded at cost less accumulated amortization. Amortizationis provided on the following basis:


Software		2 years straight-line
Machinery		10% declining-balance
Vehicles		25% declining-balance
Computer equipment		30% declining-balance
Office equipment		30% declining-balance

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

SIGNIFICANT ACCOUNTING POLICIES (continued)

(e)

Cash and cash equivalents

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

(f)

Mineral property costs

The Company has been in the exploration stage since March 1, 2004, and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred using the guidance in EITF 04-02, “Whether Mineral Rights Are Tangible or Intangible Assets”. The Company assesses the carrying costs for impairment under SFAS No. 144, “Accounting for Impairment or Disposal of Long Lived Assets” at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve . If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

(g)

Basic and diluted income (loss) per share

The Company computes income (loss) per share in accordance with SFAS No. 128, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. All previously stated share and per share balances have been restated to give retroactive effect to the 1:50 reverse stock split that occurred on February 15, 2006. Dilutive loss per share has not been presented because the effects of all common share equivalents were anti-dilutive.

(h)

Impairment or disposal of long-lived assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimate fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

SIGNIFICANT ACCOUNTING POLICIES (continued)

(i)

Consideration of other comprehensive income items

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

(j)

Stock-based compensation

Effective March 1, 2004, the Company adopted the fair value based method of accounting for stock-based employee compensation in accordance with the provisions of SFAS No. 123 “Accounting for Stock-Based Compensation”, using the prospective transition method. Accordingly the Company recognized the fair value of stock-based employee compensation for all awards made after March 1, 2004. The Company is in accordance with Emerging Issues Task Force No. 96-18 "Accounting for Equity Instruments That are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services" ("EITF 96-18"), with respect to options and warrants issued to non-employees.

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

(k)

Income taxes

The Company accounts for income taxes in accordance with SFAS No. 109 –“Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized with respect to the tax consequences attributable to differences between the financial statement carrying values and tax basis of existing assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. Further, the effect on deferred tax assets and liabilities of changes in tax rates is recognized in income in the period that includes the enactment. A valuation allowance against deferred tax assets is recorded. If based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

SIGNIFICANT ACCOUNTING POLICIES (continued)

(l)

Foreign currency translation

Mexoro and its subsidiary Sunburst de Mexico maintain accounting records in their functional currencies, U.S. dollars and Mexican pesos, respectively. Mexoro and Sunburst de Mexico translate foreign currency transactions into the respective functional currencies in the following manners: at the transaction date, each asset, liability, revenue and expense is translated into the functional currency by the use of the exchange rate in effect at that date; at the period end, foreign currency monetary assets and liabilities are re-evaluated into the functional currency by using the exchange rate in effect at the balance sheet date. The resulting foreign exchange gains and losses are included in operations. In preparing consolidated financial statements, the Company translates the assets and liabilities of its subsidiary into U.S. dollars at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated into U.S. dollars at the average exchange rate for the applicable period. Any gain or loss from such translations is included in stockholders’ equity as a component of other comprehensive income.

(m)

Asset retirement obligations

The company accounts for asset retirement obligations (ARO) in accordance with Financial Accounting Standards Board (FASB) Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143). This accounting standard applies to the fair value of a liability for an ARO that is recorded when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. Obligations associated with the retirement of these assets require recognition in certain circumstances: (1) the present value of a liability and offsetting asset for an ARO, (2) the subsequent accretion of that liability and depreciation of the asset, and (3) the periodic review of the ARO liability estimates and discount rates. In 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations — An Interpretation of FASB Statement No. 1 43 (FIN 47), which was effective for the company on December 31, 2005. FIN 47 clarifies that the phrase "conditional asset retirement obligation," as used in FAS 143, refers to a legal obligation to perform asset retirement activity for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the company. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional ARO should be factored into the measurement of the liability when sufficient information exists. FAS 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an ARO. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an ARO.

The Company is in an early stage of mineral exploration and has no known reserves as of February 28, 2009. Accordingly, the Company cannot reasonably estimate the fair value of those obligations because of their indeterminate settlement dates.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

SIGNIFICANT ACCOUNTING POLICIES (continued)

(n)

Recent accounting pronouncements

(i)

In September 2006, FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. It clarifies that for items that are not actively traded, such as certain kinds of derivatives, fair value should reflect the price in a transaction with a market participant, including adjustment for risk, not just the company’s mark-to-model value. SFAS No. 157 also requires expanded disclosure of the effect on earnings for items measured using unobservable data. Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. On February 12, 2008, the FASB issued FSP FAS 157-2, "Effectiv e Date of FASB Statement No. 157," which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The adoption of this standard for all financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurring basis did not have a significant impact on the Company’s consolidated financial statements. The Company does not anticipate that the adoption of SFAS No. 157 for nonfinancial assets and liabilities measured at fair value on a non-recurring basis will have a significant impact on its financial position and results of operations.

(ii)

On February 15, 2007, the FASB issued SFAS Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits companies and not-for-profit organizations to make a one-time election to carry eligible types of financial assets and liabilities at fair value, even if fair value measurement is not required under U.S.GAAP. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a significant impact on the Company’s consolidated financial statements.

(iii)

In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations. SFAS No. 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 141 (R) is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company has not yet determined the effect on our consolidated financial statements, if any, upon adoption of SFAS No. 141 (R).

(iv)

In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements” — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Among other requirements, this statement requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS No. 160 is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2008. The adoption of SFAS No. 160 is not expected to have an effect on our reported financial position or earnings.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

SIGNIFICANT ACCOUNTING POLICIES (continued)

(m)

Recent accounting pronouncements (continued)

(v)

In May 2008, the FASB issued Statement No. 162 — “The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. SFAS No. 162 will be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We are currently assessing the effect, if any, the adoption of SFAS No. 162 will have on our financial statements and related disclosures.

(vi)

SFAS No. 165, "Subsequent Events" ("SFAS 165"), establishes general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. SFAS 165 establishes (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. The Company is currently assessing the potential effect that the adoption of SFAS 165 will have on its consolidated financial statements.

(vii)

On June 15, 2008, the FASB ratified Emerging Issues Task Force Issue No. 08-4 (“EITF 08-4”). EITF 08-4 addressed conforming changes made to EITF Issue 98-5 which resulted from the implantation of EITF Issue 00-27 and SFAS No. 150. EITF Issued 98-5 addresses the accounting for beneficial conversion features. Previously, beneficial conversion features were amortized to the securities earliest conversion date. Under EITF 08-4, beneficial conversion features are amortized to the stated redemption date, if one exists, rather than the earliest termination date. For beneficial conversion features without a stated redemption date, the beneficial conversion features continue to be amortized to the earliest conversion date. EITF 08-4 is effective for fiscal years ending after December 15, 2008 with early application permitted. The effects of implementing EITF 08-4 are to be presented retrospec tively with the cumulative-effect of the change being reported in retained earnings at the beginning of the first year presented. The Company adopted EITF 08-4 during the year ended February 28, 2009. As a result of adoption of EITF 08-4, the Company is amortizing its beneficial conversion features of $416,200 to the earliest termination dates of the debentures. As a result, $312,399 of the beneficial conversion features have been recognized as Interest Expense in the consolidated statement of operations and the remaining $103,801 is being deferred and amortized. Prior to adoption of EITF 08-04, the entire $416,200 beneficial conversion feature would have been recognized in the year ended February 28, 2009.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

GOING CONCERN

The accompanying financial statements have been prepared on a going-concern basis. The Company has a history of operating losses and will need to raise additional capital to fund its planned operations. At February 28, 2009, the Company had a working capital deficiency of $4,657,260 (February 29, 2008 - $1,810,905 working capital deficiency) and a cumulative loss during the exploration period of $41,864,219 (2008 - $33,828,011). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company intends to reduce its cumulative loss through the attainment of profitable operations, from its investment in a Mexican mining venture (note 5). In addition, the Company has conducted private placements of convertible debt (note 7) and common stock (note 10), which have generated a portion of the initial cash requirements of its planned Mexican mining ventures (note 5).

In November 2008, the Company signed a letter of intent with Minera Rio Tinto (“MRT”) to provide funding of up to $9,000,000 to the Company to initiate production at its Cieneguita property, complete a feasibility study and to continue the exploration of its properties (note 5).

EQUIPMENT


	February 28, 2009			February 29,
	February 28, 2009			2008
	Cost	Accumulated Depreciation	Net Book	Net Book
	Cost	Accumulated Depreciation	Value	Value

Software	$ 22,640	$ 16,910	$ 5,730	$ 7,739
Machinery	239,630	46,533	193,097	305,221
Vehicles	114,513	58,057	56,456	109,173
Computers	23,846	14,095	9,751	21,798
Office equipment	14,043	3,177	10,866	17,010
	$ 414,672	$ 138,772	$ 275,900	$ 460,941

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

MINERAL PROPERTIES

The Company incurred exploration expenses as follows in the year ended February 28, 2009:


	Cieneguita Operations	Sahuayacan	Guazapares	Cieneguita	Encino Gordo	New Projects	Total

Drilling and sampling	$ -	$ -	$ 347,438	$ 2,351,518	$ -	$ -	$ 2,698,956
Geological, geochemical, geophysics	-	-	135,994	403,573	-	43,793	583,360
Land use permits	47	23,070	11,746	14,053	-	-	48,916
Automotive	231	-	3,044	7,633	-	-	10,908
Travel	616	285	31,696	40,972	-	-	73,569
Consulting	11,542	-	140,107	189,456	-	-	341,105
Equipment	98	-	21,009	23,702	-	-	44,809
General	7,788	7,307	81,747	233,529	54	-	330,425
	$ 20,322	$30,662	$ 772,781	$ 3,264,436	$ 54	$ 43,793	$ 4,132,048

The Company incurred exploration expenses as follows in the year ended February 29, 2008:


	Cieneguita Operations	Sahuayacan	Guazapares	Cieneguita	Encino Gordo	New Projects	Total

Drilling and sampling	$ -	$ 360,575	$ 377,571	$ 255,218	$ -	$ -	$ 993,364
Geological, geochemical, geophysics	27,679	59,122	100,318	36,799	95,306	776	320,000
Land use permits	-	112,267	114,356	143,503	52,677	-	422,803
Automotive	19,691	65	1,155	1,469	-	-	22,380
Travel	11,110	16,240	34,878	19,859	7,214	-	89,301
Consulting	143,835	38,371	137,016	79,653	20,748	-	419,623
Equipment	97,306	-	22,620	10,039	2,603	-	132,568
General	102,238	3,054	109,715	59,149	6,485	-	280,641
	$ 401,859	$ 589,694	$ 897,629	$ 605,689	$185,033	$ 776	$ 2,680,680

Since May 2004, the Company has held interests in gold exploration properties in Mexico.

In August 2005, the Company formed its wholly owned subsidiary, Sunburst de Mexico, which allowed the Company to take title to the properties into the name of Sunburst de Mexico. On August 25, 2005 the Company entered into property agreements with MRT, which provided Sunburst de Mexico options to purchase the mineral concessions of the Cieneguita and Guazapares properties and the right of refusal on three Encino Gordo properties. The Company also entered into an exploration and sale agreement, in October 2006, with Minera Emilio for mineral concessions of the Sahauyacan Property.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

MINERAL PROPERTIES (Continued)

In August 2005 the parties also entered into an operator’s agreement, that gave MRT the sole and exclusive right and authority to manage the Cieneguita property, and a share option agreement which granted MRT the exclusive option to acquire up to 100% of all outstanding shares of Sunburst de Mexico if the Company did not comply with the terms of the property agreements. The operating agreement and share option agreement have subsequently been cancelled.

The material provisions of the Company’s property agreements are as follows:

Cieneguita

MRT assigned to Sunburst de Mexico, with the permission of the Cieneguita owner, Corporativo Minero, S.A. de C.V. (“Corporativo Minero”), all of MRT’s rights and obligations acquired under a previous agreement, the Cieneguita option agreement, including the exclusive option to acquire the Cieneguita property for a price of $2,000,000. As the Cieneguita property was not in production by May 6, 2006, Sunburst de Mexico was required to pay $120,000 to Corporativo Minero to extend the contract. Corporativo Minero agreed to reduce the obligation to $60,000, of which $10,000 was paid in April 2006 and the balance paid on May 6, 2006. The Company made this payment to Corporativo Minero and the contract was extended.

The Company has the obligation to pay a further $120,000 per year for the next 13 years and the balance of the payments in the 14^th year, until the total amount of $2,000,000 is paid. The Company renegotiated the payment due May 6, 2007, to $60,000 payable on November 6, 2007, which was paid, and the balance of $60,000 was paid on December 20, 2007.

In the alternative, if the Cieneguita property is put into production, of which there is no guarantee, the Company must pay the Cieneguita owners $20 per ounce of gold produced, if any, from the Cieneguita property to the total $2,000,000 due. In the event that the price of gold is above $400 per ounce, the property payments payable to the Cieneguita owners from production will be increased by $0.10 for each dollar increment over $400 per ounce. The total payment of $2,000,000 does not change with fluctuations in the price of gold. Non-payment of any portion of the $2,000,000 total payment will constitute a default. In such case, the Cieneguita owners will retain ownership of the concessions, but the Company will not incur any additional default penalty. MRT retained no interest in the Cieneguita property.

On February 12, 2009 the Company entered into a definitive agreement for development of Cieneguita project with Minera Rio Tinto (“MRT”), a private Mexican corporation whose president was a former president of our Company. The definitive agreement covers project financing of up to USD $9,000,000. The major points of the agreement are as follows:

(i)

MRT and/or its investors will subscribe for up to USD$1 million of a secured convertible debenture at 8% interest (payable in stock or cash). The debenture is convertible into units at $0.60 per unit. Each unit comprises 2 common shares and 1 warrant. Each warrant is exercisable at $0.50 per share for a period of 3 years. The placement will be used for continued exploration of our properties and general working capital.

(ii)

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

MINERAL PROPERTIES (Continued)

(iii)

MRT will spend up to USD $5 million to take the Cieneguita property through the feasibility stage. In doing so, MRT will earn a 60% interest in Mexoro’s rights to the property. After the expenditure of the $5 million all costs will be shared on a ratio of 60% to MRT and 40% to Mexoro Minerals. If the Company elects not to pay its portion of costs after the $5 million has been spent, the Company’s position shall revert to a 25% carried interest on the property.

(iv)

Portions of the joint venture agreement require we obtain consent from Paramount Gold and Silver Corporation, our secured convertible debenture holder or the Company repay the debenture held by Paramount Gold and Silver Corporation. Those portions of the agreement that need consent will not be undertaken until such consent is obtained or extinguished by repayment.

(v)

The Spanish version of this agreement is the governing agreement in case of dispute between the English version and the Spanish versions.

Guazapares

MRT assigned to Sunburst de Mexico, with the consent of the Guazapares Property owner Compañía Minera, S.A. de C.V. (“Compañía Minera”), MRT’s rights and obligations concerning the Guazapares Property, including the exclusive option, for a term of four years, to purchase seven of the Guazapares Property concessions upon payment of $910,000. The total payments for the Company to acquire and retain 100% ownership of all eight concessions are as follows: November 30, 2005 - $100,000 (this payment date was extended – see below), October 31, 2006 - $60,000 (this payment date was extended to February 28, 2007, then to May 31, 2007 and then to August 31, 2007- see below), August 2, 2007 - $140,000 (see below), August 2, 2008 - $110,000 and August 2, 2009 - $500,000.

On September 19, 2007, Sunburst de Mexico, Mexoro and MRT entered into an agreement to defer any and all property payments regarding Guazapares, currently owing to MRT and which would otherwise become due by December 31, 2007, until such time as Sunburst de Mexico and Mexoro have sufficient funds to make the payments, in the opinion of the disinterested directors of Mexoro.

Mexoro agreed to issue 250,000 shares to MRT and/or assignees, in consideration for the deferral of any and all Guazapares property payments currently outstanding and those arising on or before December 31, 2007.

In return, Sunburst de Mexico granted MRT a 2.5% NSR and the right to extract from the Guazapares concessions up to 5,000 tons per month of rock material; this right will terminate on exercise of the option to purchase the concessions. Otherwise, MRT retained no interest in the Guazapares Property.

San Francisco (Guazapares)

MRT assigned to Sunburst de Mexico, for a term of 60 months, commencing from June 25, 2004 (the “Option Period”), with the consent of the San Francisco concessions owner Minera Rachasa, S.A. de C.V. (“Minera Rachasa”), MRT’s rights and obligations acquired under the San Francisco option agreement, including the option to purchase the San Francisco concessions for a price of $250,000 on June 25, 2009.

To maintain the option, Sunburst de Mexico assumed the obligation to pay to the San Francisco owner cumulative annual payments. The payments are: $20,000 on June 25, 2006 (paid); $30,000 on June 25, 2007 (paid); and $40,000 on June 25, 2008.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

MINERAL PROPERTIES (Continued)

If the option is exercised prior to the expiration of the Option Period by payment of the purchase price of $250,000; the obligation to pay the annual payments will be terminated. MRT and the San Francisco owner reserved a combined 2.5% NSR. MRT reserved no other rights on the San Francisco concessions.

San Antonio (Guazapares)

MRT assigned to Sunburst de Mexico, with the consent of the San Antonio concessions owner (Rafael Fernando Astorga Hernández), MRT’s rights and obligations acquired under the San Antonio option agreement, including the option to purchase the San Antonio concessions for a price of $500,000, commencing on January 15, 2004, the signing date of the San Antonio option agreement, and due on January 15, 2010.

To maintain the option, Sunburst de Mexico assumed the obligation to pay to the San Antonio owner cumulative annual payments. The remaining payments are: $50,000 on January 15, 2008 (this payment was deferred to January 31, 2008 and paid) and $50,000 on January 15, 2009.

If the option is exercised prior to the expiration of the option period by payment of the purchase price; the obligation to pay the annual payments will be terminated. The San Antonio owner reserved the right to extract from the San Antonio concessions up to 50 tonnes per day of rock material; this right will terminate on the date of the exercise of the option. MRT and the San Antonio owner reserved a combined 2.5% NSR to be paid to them. MRT reserved no other rights on the San Antonio concessions.

Encino Gordo

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

The following are additional material terms of the New Agreement:

(a)

The share option agreement with MRT was cancelled;

(b)

The Company granted MRT the option to buy all of the outstanding shares of Sunburst de Mexico for $100 if the Company failed to transfer $1,500,000 to Sunburst de Mexico by April 30, 2006. On April 6, 2006, MRT agreed to waive its option to purchase the shares of Sunburst de Mexico and also waived the Company’s obligation to transfer $1,500,000 to Sunburst de Mexico;

(c)

The property agreements were modified to change the net smelter rate to a maximum of 2.5% for all properties covered by the agreements. The property agreements contained net smelter rates ranging from 0.5% to 7%;

(d)

The Company agreed to issue 2,000,000 shares of the Company’s common stock to MRT within four months of the date of the signing of the New Agreement. These shares were issued to MRT and its assignee at the market value of $1.05 per share on February 23, 2006 and $2,100,000 was charged to operations for the year ended February 28, 2006. This issuance fulfilled the Company’s payment obligations under the previous property agreements;

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

MINERAL PROPERTIES (Continued)

(e)

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

(f)

The operator’s agreement with MRT was cancelled.

Sunburst de Mexico purchased two of the Encino Gordo concessions from MRT for a price of 1,000 pesos (approximately US$100), and MRT assigned to Sunburst de Mexico a first right of refusal to acquire three additional Encino Gordo concessions. The total payments to acquire 100% of these three additional concessions are as follows: $10,000 on June 30, 2006 (paid); $25,000 on December 31, 2006 (paid), $50,000 on December 31, 2007 ($20,000 of this payment was made on January 3, 2008 and the balance was paid on February 29, 2008), $75,000 on December 31, 2008, $125,000 on December 31, 2009 and $200,000 on December 31, 2010.

Sahauyacan

On June 21, 2006, Sunburst de Mexico entered into an exploration and sale option agreement of mining concessions with Minera Emilio, SA de CV for mineral concessions of the Sahauyacan Property. Minera Emilio granted the Company the exclusive right to conduct exploration on the Sahauyacan Property and the Company must pay $282,000 in the following manner: $20,000 on date of signing agreement (paid); $10,000 due December 1, 2006 (paid); $2,500 per month effective from August 21, 2006 to July 21, 2007, for a total of $30,000 (paid); $3,500 per month effective from August 21, 2007 to July 21, 2008 for a total of $42,000 (the monthly payments have all been paid up to date); $5,000 per month effective August 21, 2008 to July 21, 2011, for a total of $180,000, when the balance of the total $282,000 is paid (36 months).

On May 15, 2006, Sunburst de Mexico entered into an exploration contract with Jose Maria Rascon and Sabino Amador Rascon Polanco and on November 20, 2007 entered into an exploration contract with Rene Muro Lugo (all three representatives constitute the “Concessionaires”) for the Segundo Santo Nino concession on the Sahauyacan Property. Each concession representative owns 33.3% of the total Segundo Santo Nino title. The Company must pay the Concessionaires a total of $255,000 for this concession. The total payments to acquire 100% of this concession are as follows: all payments up to November 15, 2007 totaling $50,000 have been paid, May 15, 2008 - $15,000, November 15, 2008 - $20,000, May 15, 2009 - $20,000, November 15, 2009 - $30,000 and May 15, 2010 - $120,000.

On January 25, 2008, Sunburst de Mexico entered into an exploration and option agreement with Maria Luisa Wong Madrigal for mineral concessions under the “La Maravilla” project on the Sahauyacan Property. The Company must pay Maria Luisa Wong Madrigal $600,000 in the following manner: (i) $33,000 – January 25, 2008 (paid); (ii) $33,000 – July 25, 2008; (iii) $34,000 – January 25, 2009; (iv) $500,000 – at the option to purchase the concession or 36 months – January 25, 2010.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

PROMISSORY NOTES

At February 28, 2009, the Company had $968,543 (February 29, 2008 - $1,480,702) of promissory notes outstanding, consisting of the following:

During the twelve months ended February 28, 2009, the Company converted accounts payable of $465,994 (Swiss Franc (“CHF”) 565,000) into promissory notes. The notes consist of one warrant for each CHF 5.00 of notes issued, exercisable at $1.00 each (note 11). The interest rate on the notes is 7.5% p.a. payable semi-annually. The principal and interest on the notes became due and payable on April 30, 2008. The principal and interest due as of February 28, 2009 amounts to $506,505. The Company has not repaid the promissory notes as of February 28, 2009 and is in default.

As at February 28, 2009, $462,038 of promissory notes are due to related parties and close associates that bear no interest and have no terms of repayment (see note 13).

CONVERTIBLE DEBENTURES

On May 5, 2008, the Company signed a LOI to enter into a strategic alliance with Paramount. The agreement called for Paramount to invest a minimum of $4 million and maximum of $6 million into the Company, fixed at a price of $0.50 per unit by June 23, 2008. The investment timeline was extended until July 21, 2008, and then to August 5, 2008. On August 6, 2008 Mexoro terminated the LOI with Paramount as Paramount did not meet the terms of the agreement.

The Company issued secured convertible debentures to Paramount as follows:

On May 9, 2008, the Company issued $500,000 in convertible debentures to Paramount, with a maturity date of one year, accruing interest at 8% per year payable in arrears and convertible at the option of the holder.

On June 10, 2008, the Company issued $70,000 in convertible debentures to Paramount, with a maturity date of one year, accruing interest at 8% per year payable in arrears and convertible at the option of the holder.

On June 25, 2008, the Company issued $300,000 in convertible debentures to Paramount, with a maturity date of one year, accruing interest at 8% per year payable in arrears and convertible at the option of the holder.

On July 11, 2008, the Company issued $500,000 in convertible debentures to Paramount, with a maturity date of one year, accruing interest at 8% per year payable in arrears and convertible at the option of the holder.

As at February 28, 2009, there were $1,370,000 convertible debentures outstanding towards Paramount.

Paramount may convert all or a portion of the principal amount of the debenture into units consisting of one share of our common stock and half a warrant to purchase one share of our common stock. Subject to certain adjustments upon the occurrence of various capital reorganizations and other events, the units are convertible at $0.50 per unit for a total of up to 2,740,000 shares of common stock and up to 1,370,000 warrants at $0.75 to purchase shares of common stock (the “Warrants”). The Warrants have a term of four years from the date that Paramount converts the debenture or the portion of the debenture covering those warrants. A holder of the Warrants may exercise those Warrants at $0.75 (subject to adjustments upon the occurrence of certain events like stock splits).

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

CONVERTIBLE DEBENTURES (Continued)

The value assigned to the beneficial conversion feature of the convertible debentures issued to Paramount was $416,200. The fair value of the Warrants attached to the convertible debentures as discussed above was estimated to be $423,000. The fair value was estimated at the date of the grants using the Black-Scholes option pricing model with the following weighted average assumptions:


		2008
Expected volatility		71.48-110.72%
Weighted-average volatility		71.48-110.72%
Expected dividend rate		-
Expected life of warrants in years		4
Risk-free rate		2.30-3.41%

The weighted average fair value of the warrants was $0.30 per warrant, while the weighted average stock price on the dates granted was $0.50. Stock-based compensation for these warrants of $423,000 is being amortized over the one year term of the convertible debentures starting on May 9, 2008.

On January 14, 2009 the Company received notice of acceleration of three outstanding secured convertible debentures held by Paramount Gold and Silver Corp. The notice of acceleration relates to the secured convertible debenture granted by the Company to Paramount in the principal amount of $500,000 dated May 9, 2008; the secured convertible debenture granted by the Company to Paramount in the principal amount of $370,000 dated June 18, 2008; and the secured convertible debenture granted by the Company to Paramount in the principal amount of $500,000 dated July 11, 2008 as amended by an acknowledgment dated September 10, 2008 (collectively the “Debentures”). The Debentures are secured by a security agreement from the Company in favor of Paramount dated May 9, 2008 as amended by an addendum dated June 18, 2008 and a security agreement from Sunburst de Mexico, in favor of Paramount dated Ju ne 18, 2008 (collectively, the “Security Agreements”).

The notice of acceleration asserts that the Debentures are in default because the Company has failed to cure the defaults noted in a notice of default dated December 23, 2008 within the cure period set out in the notice of default, namely:

1. The failure to include the conversion shares issuable upon conversion of the Debentures, Warrant shares issuable upon exercise of the conversion warrants and any other securities due to Paramount pursuant to the Debentures in a registration statement within 60 days of the issue date of each Debenture contrary to section 4.3 (h) of each of the Debentures; and

2. The failure to pay the entirety of the interest owed by the Company to Paramount in full on or before December 31, 2008.

The notice of acceleration is intended to serve as written notice to the Company that the entire unpaid principal balance of the Debentures, in the amount of $1,370,000, together with all accrued but unpaid interest thereon and all of Paramount’s legal fees in connection with such defaults, is immediately due and payable in full.

The Company believes that it is not in default under the terms of the Debentures, and as such, intends to vigorously defend against any legal action initiated against it by Paramount.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

CONVERTIBLE DEBENTURES (Continued)

During the year ended February 28, 2009, the Company issued 726,490 warrants to MRT under a convertible debenture agreement, where one warrant is issued for each $0.60 of convertible debentures issued (note 5). The warrants can be exercised at any time at a price of $0.50 for 3 years.

The value assigned to the beneficial conversion feature of the convertible debentures issued to MRT was $nil. The fair value of the Warrants attached to the convertible debentures as discussed above was estimated to be $57,800. The fair value was estimated at the date of the grants using the Black-Scholes option pricing model with the following weighted average assumptions:


		2008
Expected volatility		103.21-104.22%
Weighted-average volatility		103.21-104.22%
Expected dividend rate		-
Weighted-average expected life of warrants in years		3
Risk-free rate		1.01-1.44%

The weighted average fair value of the warrants was $0.08 per warrant, while the weighted average stock price on the dates granted was $0.18. Stock-based compensation for these warrants of $57,800 is being amortized till December 31, 2010.

LOANS PAYABLE

As at February 28, 2009 there were loans payable in the amount of $70,840, of which $63,232 is current and $7,608 is long-term. The loans are repayable in monthly installments of $3,045 including interest ranging from 9.89% to 15.6% per annum and are partially secured by specified automotive equipment.

PREFERRED STOCK

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

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

10.

COMMON STOCK

In November 2008, the Company issued 50,000 shares of common stock to an officer of the Company as bonus for the 500,000 ounce gold discovery.

In November 2008, the Company issued 500,000 shares of common stock to the president of the Company as a signing bonus.

In October, 2008, the Company converted subscription proceeds of $4,943 into 9,886 shares of common stock. The subscribers to the subscription proceeds have agreed to purchase one unit for each $1.00 of subscription proceeds. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.75, which expire in four years.

In October 2008, the Company issued 100,000 shares of common stock to an officer of the Company as bonus for the 500,000 ounce gold discovery.

In October 2008, the Company converted $151,866 of debt into 415,000 shares of common stock.

In September 2008, the Company converted $835,514 of debt into subscription proceeds and issued 1,671,028 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $1.00 of debt. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.75, which expire in four years.

In September, 2008, the Company received subscription proceeds of $170,000 and issued 425,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $1.00 of subscription proceeds. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.75, which expire in four years.

In September 2008, the Company converted $42,800 of debt into 107,000 shares of common.

In August 2008, the Company converted $142,508 (MXN 1,449,989) (note 6) of promissory notes into subscription proceeds and issued 280,000 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $1.00 of debt. Each unit consists of two shares of the Company’s common stock and one warrant each exercisable at $0.75, which expire in four years.

In July 2008, the Company converted $67,424 of debt into 150,000 shares of common.

In June 2008, the Company converted $60,000 of debt into subscription proceeds and issued 120,000 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $1.00 of debt. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.75, which expire in four years.

In June, 2008, the Company issued 9,885 shares of common stock in a private placement.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

10.

COMMON STOCK (Continued)

In May 2008, the Company converted $535,500 of debt into subscription proceeds and issued 1,071,000 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $1.00 of debt. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.75, which expire in four years.

On April 25, 2008, stock subscriptions of $330,000 were converted into 330,000 shares of common stock.

In the year ended February 29, 2008, the Company issued 1,174,000 shares of common stock on the exercise of 1,174,400 warrants where each warrant was exercisable into shares of common stock at the price of $1.00 per share. The warrants were to expire on April 30, 2008.

In the second and third quarters of the year ended February 29, 2008, the Company issued 1,000,000 shares of common stock on the exercise of 1,000,000 warrants where each warrant was exercisable into shares of common stock at the price of $0.75 per share. The warrants were to expire on December 31, 2007.

In the first two quarters of the year ended February 29, 2008, the Company issued 1,000,000 shares of common stock on the exercise of 1,000,000 warrants where each warrant was exercisable into shares of common stock at the price of $0.50 per share. The warrants were to expire on June 30, 2007.

On November 7, 2007, the Company issued 670,000 shares of common stock on the exercise of 670,000 warrants where each warrant was exercisable into shares of common stock at the price of $1.00 per share. The warrants were to expire on December 31, 2007.

On September 20, 2007, the Company issued 250,000 shares of common stock pursuant to an agreement in consideration of deferral of any and all Guazapares Property payments currently outstanding and those arising on or before December 31, 2007. The shares were valued at $1.16 per share, based on the closing quoted market price on September 18, 2007.

On September 20, 2007, the Company issued 250,000 shares of common stock pursuant to the Encino Gordo contract. The shares were valued at $1.16 each, based on the closing quoted market price on September 18, 2007.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

11.

STOCK COMPENSATION PROGRAM

On February 10, 2009 the board of directors approved the granting of stock options according to the 2009 Nonqualified Stock Option Plan (the “2009 Option Plan”). The 2009 Option Plan has the purpose (a) to ensure the retention of the services of existing executive personnel, key employees, and directors of the Company or its affiliates; (b) to attract and retain competent new executive personnel, key employees, consultants and directors; (c) to provide incentive to all such personnel, employees, consultants and directors to devote their utmost effort and skill to the advancement and betterment of the Company, by permitting them to participate in the ownership of the Company and thereby in the success and increased value of the Company; and (d) allowing vendors, service providers, consultants, business associates, strategic partners, and others, with or that the board of directors anticipates will ha ve an important business relationship with the Company or its affiliates, the opportunity to participate in the ownership of the Company and thereby to have an interest in the success and increased value of the Company.

The 2009 Option Plan constitutes a single “omnibus” plan, but is composed of two parts. The first part is the nonqualified stock option plan (“NQSO Plan”) which provides grants of nonqualified stock options (“NQSOs”). The second part is the restricted shares plan (“Restricted Shares Plan”) which provides grants of restricted shares of Company common stock (“Restricted Shares”). The maximum number of shares of common stock that may be purchased under the plan is 6,000,000.

Pursuant to a consulting agreement between the Company and GM Capital Partners Inc. (“GM Capital”), signed January 31, 2006, the Company granted 5,000,000 warrants (see note 11). The agreement provided for the provisions of financial public relations services from December 1, 2005 to November 30, 2007. The fair value of the 5,000,000 warrants totaled $3,898,000 and was determined using the Black-Scholes option pricing model using weighted averages: 2.38 year expected life of the warrants, a volatility factor of 152%, a risk-free rate of 5% and an assumed dividend rate of 0% The weighted average fair value of the warrant was $0.78 per warrant, while the weighted average stock price on the dates granted was $1.00. The fair value was amortized over the 24-month term of the contract and the Company recorded $487,250 as stock-based compensation expense and an offsetting credit to additional paid-in capit al every quarter until November 30, 2007.

In the year ended February 28, 2009, the Company awarded 2,805,000 options to purchase common shares (2008 – 1,915,000) and recorded stock-based compensation expense of $603,801 (2008 - $939,741). The weighted average fair value of each option granted for the year ended February 28, 2009 was $0.33. The following weighted average assumptions were used for the Black-Scholes option-pricing model used to value stock options granted in 2009 and 2008:


	2009	2008
Expected volatility	72.15% - 103.55%	66.82% - 73.37%
Weighted-average volatility	89.39%	71.32%
Expected dividend rate	-	-
Expected life of options in years	10 years	3 – 10 years
Risk-free rate	2.90% - 3.86%	4.04% - 4.91%

There were no capitalized stock-based compensation costs at February 28, 2009 or February 29, 2008.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

11.

STOCK COMPENSATION PROGRAM (Continued)

The summary of option activity under the stock option plan as of February 28, 2009, and changes during the period then ended is presented below:



		Weighted-	Number of	Weighted-	Aggregate
		Average	Shares	Average	Intrinsic
		Exercise		Remaining	Value
		Price		Contractual
Options				Term

Balance at February 29, 2008	$	0.87	2,375,000	7.93	$222,500
Options granted		0.33	2,805,000	9.59
Options exercised		-	-
Options cancelled/forfeited	$	0.91	(345,000)	6.90


Balance at February 28, 2009	$	0.56	4,835,000	8.48	$51,517

Exercisable at February 28, 2009	$	0.69	2,332,501	7.63

The weighted-average grant-date fair value of options granted during the twelve months ended February 28, 2009 and February 29, 2008 was $0.23 and $0.71, respectively.

A summary of the status of the Company’s nonvested options as of February 28, 2009, and changes during the twelve month period ended February 28, 2009, is presented below:


		Weighted-average
		grant-date
Non-vested options	Shares	fair value

Nonvested at February 29, 2008	1,065,000	$ 0.76
Granted	2,805,000	0.23
Vested	(1,210,001)	0.50
Cancelled/forfeited	(157,500)	0.77
Nonvested at February 28, 2009	2,502,499	$ 0.28

As of February 28, 2009, there was an estimated $667,767 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the NQSO Plan. That cost is expected to be recognized over a weighted-average period of approximately 1.83 years.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

12.

WARRANTS

As at February 28, 2009, the Company had a total of 7,102,890 (2008 – 4,486,100) warrants outstanding to purchase common stock. Each warrant entitles the holder to purchase one share of the Company’s common stock. The Company has reserved 7,102,890 shares of common stock in the event that these warrants are exercised.

During the year ended February 28, 2009, the Company engaged Vastani company for providing advisory services and agreed to issue 1,000,000 warrants, 250,000 for an execution price of $0.65 vesting on signing, 250,000 for an execution price of $1.30 vesting after 90 days, 250,000 for an execution price of $2.00 vesting after 120 days and 250,000 for an execution price of $2.75 vesting after 180 days. The warrants expire on June 30, 2012. The fair value of the 750,000 warrants of $130,000 has been amortized during the year ended February 28, 2009 and was determined using the Black-Scholes option pricing model using weighted averages: 3.5 to 4 years expected life of the warrants, a volatility factor of 103.99% to 138.78%, a risk-free rate of 2.46% to 3.33% and an assumed dividend rate of 0%. The weighted average fair value of the warrants was $0.17 per warrant, while the weighted average stock price on the dates granted was $0.32. The remaining 250,000 warrants are to be amortized in the next fiscal year.

During the twelve months ended February 28, 2009, the Company received $nil from warrants exercised.

During the year ended February 29, 2008, the Company issued 113,000 warrants under a ‘Promissory Note and Warrant Purchase Agreement’, where one warrant is issued for each CHF5.00 of promissory notes issued (note 6). The warrants can be exercised at any time beginning on April 1, 2008 and prior to January 31, 2010. The fair value of the 113,000 warrants totaled $64,000 and was determined using the Black-Scholes option pricing model using weighted averages: 1.83 years expected life of the warrants, a volatility factor of 68%, a risk-free rate of 3.66% and an assumed dividend rate of 0%. The weighted average fair value of the warrant was $0.57 per warrant, while the weighted average stock price on the date granted was $1.26. Stock-based compensation for these warrants of $64,000 was amortized over the six month term of the promissory notes starting on October 17, 2007.

The outstanding warrants include 1,000,000 Series D Warrants exercisable at $1.25 per share and 1,000,000 Series E Warrants exercisable at $1.50 per share; of which all are exercisable at the option of the holder, have no redemption features, and are settled on a physical basis. All the warrants were fully vested upon issuance. The Series E Warrants will become exercisable only when the Series D Warrants have been fully exercised. Unless terminated earlier as a result of failure to vest, the Series D and Series E Warrants will each expire on December 31, 2009.

The Company had issued 2,917,500 warrants exercisable at $1.00 each pursuant to the issuance of convertible debentures. These warrants expired on April 30, 2008.

The Company had issued 375,000 warrants exercisable at $1.00 each pursuant to the issuance of a private placement unit offering. These warrants expired on April 30, 2008.

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

12.

WARRANTS (Continued)

The following table summarizes the continuity of the Company’s share purchase warrants:


	Number of Warrants	Weighted average exercise price
Balance, February 28, 2005	-		-

Issued	5,652,000	$	1.00

Balance, February 28, 2006	5,652,000		1.00

Issued	2,640,500		1.00
Cancelled	(25,000)		1.00
Exercised	(50,000)		1.00

Balance, February 28, 2007	8,217,500	$	1.00

Issued	113,000		1.00
Cancelled	-		-
Exercised	(3,844,400)		0.80
			-
Balance, February 29, 2008	4,486,100	$	1.17

Issued	4,989,890		0.89
Cancelled/expired	(2,043,100)		1.00
Exercised	(330,000)		1.00

Balance, February 28, 2009	7,102,890	$	1.03

As at February 28, 2009, the following share purchase warrants were outstanding:


Number of Warrants	Exercise Price	Expiry Date
100,000	$ 0.43	September 8, 2010
726,490	$ 0.50	February 29, 2012
250,000	$ 0.65	June 30, 2012
3,163,400	$ 0.75	April 2012 to August, 2013
113,000	$ 1.00	January 31, 2010
1,000,000	$ 1.25	December 31, 2009
250,000	$ 1.30	June 30, 2012
1,000,000	$ 1.50	December 31, 2009
250,000	$ 2.00	June 30, 2012
250,000	$ 2.75	June 30, 2012
7,102,890

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

13.

RELATED PARTY TRANSACTIONS

During the year ended February 28, 2009, the Company paid management fees of $146,323 (2008 - $258,701) to certain officers and directors and to companies controlled by directors. The Company paid $9,233 (2008 - $90,066) to certain officers and directors and to companies controlled by directors for travel, office and other related expenses.

The Company also paid consulting fees of $nil (2008 - $55,890) to a company owned by a former officer and director.

As at February 28, 2009, accounts payable included $10,000 (2008 - $48,000) owing to an officer and director of the Company and $79,180 (2008 - $71,426) owing to a company controlled by a director. In addition, promissory notes of $462,037 (2008 - $1,014,708) were owed to directors and companies controlled by directors (note 6).

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

14.

INCOME TAXES

Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred income tax assets are as follows:


		2009		2008
Deferred income tax assets
Equipment	$	33,500	$	33,500
Net operating loss and credit carry forwards		7,825,922		4,271,900

Gross deferred tax assets		7,859,422		4,305,400
Valuation allowance		(7,859,422)		(4,305,400)
	$	-	$	-

As at February 28, 2009, the Company's net operating loss carry-forwards for income tax purposes were approximately $19,812,462 (2008 - $11,586,174). If not utilized, they will start to expire in 2017.

15.

SUPPLEMENTAL CASH FLOW INFORMATION


		Year Ended February 28, 2009		Year Ended February 29, 2008		Period From Inception of Development Stage (March 1, 2004) to February 28, 2009
Interest paid	$	84,765	$	33,131	$	280,053
Common stock issued on conversion of debt		103,000		-		3,320,500
Common stock issued on settlement of notes payable		1,470,522		-		1,883,322
Shares issued for mineral property costs		-		580,000		580,000
Shares issued as bonuses		232,750		-		232,750
Shares issued for services	$	262,090	$	-	$	352,090

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

16.

COMMITMENTS

On July 1, 2008, the Company entered into a consultancy agreement with Vastani Company (“Vastani”) for a period of 12 months, whereby Vastani will act as an advisor to the Company. The Company has agreed to pay a monthly retainer of €20,000 in restricted shares and 1,000,000 warrants to purchase shares of the Company’s common stock. The warrants include 250,000 warrants at a price of $0.65 per share vested on signing, 250,000 warrants at an execution price of $1.30 per share vesting after 90 days, 250,000 warrants at a price of $2.00 per share vesting after 120 days and 250,000 warrants at a price of $2.75 per share vesting after 180 days. The warrants expire on June 30, 2012.

On February 10, 2009, the Company entered into a consultancy agreement with Consulting for Strategic Growth 1, Ltd. for investor relation services. The Company will pay $3,000 per month in cash and $4,500 in shares of the Company’s common stock for the consultant’s services. The term of the agreement ends on August 10, 2009.

17.

CHANGE IN MANAGEMENT

On November 15, 2008, Mario Ayub resigned from his position as President and as a Director of the Company. Mr. Ayub’s resignation was not due to a disagreement with the Company.

On November 15, 2008, the Company’s Directors appointed Manuel Flores to the Board of Directors. Mr. Flores was granted a stock option of 150,000 shares at a strike price of $0.30 per share vesting over an 18 month period. Mr. Flores also receives a consulting fee of $1,000 per month from the Company. No employment or service contract is in place to cover this payment.

On November 15, 2008, the Company’s Directors appointed Barry Quiroz as President of the Company to fill the vacancy created by Mario Ayub’s resignation.

18.

SUBSEQUENT EVENTS

(a)

Consulting Agreement

On March 3, 2009, the Company entered into a Consulting Agreement (the “Agreement”) with Dusford Overseas Investments, Ltd., a British Virgin Islands company (“Dusford”). One of the Company’s non-executive directors, Steven Sanders, is a principal of Dusford. Under the Agreement, Dusford will provide the Company with a variety of services including financial public relations, strategic planning, acquisition consulting and assistance in securing equity or debt financing. The Agreement has an initial term of 12 months beginning on the effective date of March 3, 2009, but the Company has the right to terminate the Agreement early with 30 days’ notice.

Under the terms of the Agreement, the Company will pay Dusford a signing fee of 200,000 restricted shares and a monthly fee of $10,000 (payable in shares or cash), and the Company will issue Dusford a warrant which entitles Dusford to purchase one million shares of the Company’s common stock at $0.40 per share for three years. The warrant vests and becomes issuable at the close of any financings introduced by Dusford in increments of 100,000 shares for every $100,000 raised.

Under the Agreement, Dusford is also entitled to be reimbursed for out of pocket expenses and a success fee in the event it successfully assists the Company in consummating a financing or an acquisition.

100

MEXORO MINERALS LTD.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 28, 2009 and February 29, 2008

18.

SUBSEQUENT EVENTS (Continued)

(b)

New convertible debenture agreement

On March 19, 2009, the Company entered into an agreement with Paramount restructuring its payment terms on the three outstanding secured convertible debentures held by Paramount. Under the terms of the agreement, the Company paid Paramount $1,000,000 to cancel two debentures held by them, one

issued on May 9, 2008 for $500,000 and another issued on July 11, 2009 for $500,000. The Company also amended a debenture issued to them on June 18, 2009 in the face amount of $370,000. The amount of that debenture was increased to $521,047.37 which, among other things, includes interest accrued on

all three debentures to March 31, 2009. The Company is obligated to make a payment on March 31, 2009 on this debenture in the amount of $393,547.37 and the balance of $127,500 is to be re-paid on April 30,

2009. This remaining amount of $127,500 is interest free as long as the debenture remains in good standing. As part of a restructuring fee, the Company issued to Paramount 150,000 shares of common stock. As part of the agreement, Paramount has released its security interest on the Company’s Cieneguita properties. The other security as described in the original security agreement issued with the original debentures remains in place until the amended debenture has been repaid in full.

On March 19, 2009, the Company issued convertible secured debentures with a face value of $1,000,000 to four investors. The total offering for these debentures is $1,500,000. The debentures are due in 1 year and accrue interest at 15% paid quarterly in either cash or stock of the Company valued at 20% discount to the 20 day trading average on the day the payment is due. At the debenture holder’s option the debenture may be repaid with accrued interest and a 20% warrant coverage on the value of the debenture. The warrants would be exercisable for 3 years and have a strike price equal to a 20% discount to the 20 day trading average of the shares on the day of the payment. Alternatively the debenture holder can convert, at any time, their debenture into units. Each unit comprises 1 share and 1 warrant at $0.20 per unit. The warrants are exercisable at $0.30 for 3 years. The third option to the debenture holder is that they may conv ert their debenture, after one year, into a pro rata share of 10% of our Cieneguita project. The debenture holder is guaranteed a minimum 15% dividend for 3 years from mining operations on the property and is entitled to their pro rata share in net proceeds above the 15% dividend from the mining operation. As consideration for the debentures, the Company granted a security interest in our Cieneguita properties to these debenture holders.

(c)

Securities Purchase Agreement

On March 25, 2009, the Company entered into a securities purchase agreement with OHAG Holdings, Ltd. (“OHAG”). Pursuant to the securities purchase agreement, OHAG paid the Company $250,000 in exchange for a secured convertible debenture of $250,000 and 250,000 shares of common stock. The secured convertible debenture has a term of one year and bears interest at 15%. OHAG may elect to convert all or a portion of the secured convertible debenture into (i) up to 1,250,000 shares of the Company’s common stock and warrants to purchase 625,000 shares of common stock at $0.30 per share (each, a “Warrant”), (ii) if MRT invests in the Company by acquiring its property at Cieneguita and the Company make the following offer, cash for any principal and interest outstanding plus Warrants equal to 20% of the value of the secured convertible debenture at 80% of the 20 day moving average of the Company’s common st ock as quoted on the Over-the-Counter Bulletin Board and (iii) up to a 10% interest in the real property known as Cieneguita located in Chihuahua, Mexico, which the Company may acquire. MRT has agreed to purchase the secured convertible debenture from OHAG within 45 days of its issuance. The Company has agreed with OHAG that if this does not happen and OHAG does not waive such purchase, the Company will issue OHAG 2,250,000 shares of its common stock. To secure the secured convertible debenture, the Company has granted OHAG a lien on its interest in the real property known as Cieneguita located in Chihuahua, Mexico.

101

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

On December 6, 2007, Pannell Kerr Forster (registered with the PCAOB as “Smythe Ratcliffe”), 7th Floor, Marine Building, 355 Burrard Street, Vancouver, BC Canada V6C 2G8, resigned as the auditor for Mexoro.

The reports of Smythe Ratcliffe on the Company’s financial statements for the two fiscal years prior to resignation did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the Company’s two fiscal years prior to resignation and any subsequent interim period up to and including the date of Smythe Ratcliffe’s resignation, there have been no disagreements with Smythe Ratcliffe on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Smythe Ratcliffe, would have caused them to make reference thereto in their report on the financial statements for such periods.

On December 7, 2007, the board of directors of the Company appointed the firm of Meyler & Company, LLC (“Meyler & Company”), One Arin Park, 1715 Highway 35, Middletown, NJ 07748, as the independent auditor of the Company for the fiscal year ending February 29, 2008.

During the two most recent fiscal years or subsequent interim period, neither the Company, nor anyone on its behalf, consulted with Meyler & Company regarding the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, nor did the entity of Meyler & Company, provide advice to the Company, either written or oral, that was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue. Further, during the Company's two most recent fiscal years or subsequent interim period, the Company has not consulted the entity of Meyler & Company, on any matter that was the subject of a disagreement or a reportable event.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintai ns such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not designed and were not effective in providing reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported with the time periods specified because the Company did not have sufficient personnel resources with the accounting function to affect timely financial close.

102

Internal Control Over Financial Reporting

The management of the Company is responsible for the preparation of the financial statements and related financial information appearing in this Annual Report on Form 10-K. The financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America. The management of the Company is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company's internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reas onable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Management, including the chief executive officer and chief financial officer, does not expect that the Company's disclosure controls and internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

With the participation of the chief executive officer and chief financial officer, our management evaluated the effectiveness of the Company's internal control over financial reporting as of February 28, 2009 based upon the framework in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation along with the report from the Company’s independent registered public accounting firm, our management has concluded that, as of February 28, 2009, the Company had a material weakness in its internal control over financial reporting. Accordingly, our internal control over financial reporting is ineffective as of February 28, 2009. Specifically, the management determined that the Company did not have sufficient personnel resources with the accounting function to affect timely financial close.

To remediate our internal control weaknesses, management intends to implement the following measures:

The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.

The Company will hire a qualified professional for the role of chief financial officer to oversee the accounting and finance function of Mexoro.

The additional hiring is contingent upon Mexoro getting funded through equity or debt for its continued exploration activities and corporate expenses. Mexoro’s management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting that occurred during the last fiscal quarter, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

103

ITEM 9B. OTHER INFORMATION.

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The directors and executive officers currently serving the Company are as follows:


Name	Age	Tenure
Francisco Quiroz	46	President since May 17, 2008 and Director since February 2008
Manuel Flores	59	Director since November 15, 2008
Steven A. Sanders	63	Director since March 2008

The directors named above will serve until the next annual meeting of the Company’s stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders' meeting. Officers will hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated. There is no arrangement, plan or understanding between any of the directors or officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current directors to the Company's board. There are also no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or i nfluence the management of the Company's affairs. Officers are elected by the board of directors and serve until their successors are appointed by the board of directors. Biographical resumes of each officer and director are as follows:

Francisco Ramon Quiroz Luna

Mr. Quiroz has served as a director of the Company since February 20, 2008 and as President of the Company since May 2008. Prior to joining Mexoro Minerals, Mr. Quiroz worked for BHP Billiton for 17 years. In his last position with BHP he was program leader for BHP-Billiton managing all aspects of exploration business in China and prior to that he was the senior project geologist for BHP-Billiton in Australia. He has worked as an exploration geologist, project geologist, project manager and program leader on a variety of projects and mining properties in Mexico, United States, Canada, Central and South America, Australia, China, Mongolia and Kazakhstan. For over 20 years, Mr. Quiroz has overseen the design, management and execution of numerous mineral exploration programs with expertise in planning, contract negotiations, staff training, construction supervision and data interpretation.

Mr. Quiroz’s expertise includes the structuring and implementation of successful exploration strategies, project reviews, mineral acquisitions and management of local and expatriate exploration teams on a wide variety of cultures. Mr. Quiroz obtained a Masters in Science in the field of Economic Geology from the University of Arizona in Tucson, Arizona, USA and a Bachelors of Science in Geology from the Universidad Autonoma de Chihuahua in Chihuahua, Chihuahua, Mexico. Mr. Quiroz will contribute approximately 60 hours per week (approximately 100% of his time) to the business and operations of Mexoro

Steven A. Sanders

Mr. Sanders was appointed to the Company’s board of directors on April 7, 2008. Mr. Sanders has a strong back ground in securities and corporate law having practiced in these areas for over 25 years. He has served as a director and secretary of Genesis Gold Corporation since 2005. In 2007, he was appointed as a director of Helijet International Inc. and also serves as a director of Op-Tech Environmental Services, Inc., a position he has held since 1991. He is currently a partner in the law firm Sanders, Ortoli, Vaughn-Flam and Rosenstadt LLP. Prior to that he has been of counsel to the New York law firm Rubin, Bailin, Ortoli LLP. From 2001 to 2003 he was counsel to the law firm of Spitzer Feldman PC. Mr. Sanders served as a partner in the law firm of Beckman, Millman Sanders LLP from 1997 to 2000. Mr. Sanders is a director of the Roundabout Theatre (the largest not-for-profit theatre in North America), Town Hall, New York City and the New York Theat re Ballet. Mr. Sanders will contribute approximately 20 hours per week (approximately 30% of his time) to the business and operations of the Company.

Manuel Flores

104

Mr. Flores has 30 years’ experience managing and operating mines in several locations in Mexico. Currently, he is a General Manager for Minefinders’ Dolores mine, a gold-silver project near Chihuahua, Mexico. Mr. Flores obtained Masters in Science from Colorado School of Mines in Golden Colorado and Bachelors in Science from Universidad Autonoma de Chihuahua, Chihuahua, Mexico.

Audit Committee

As our company is relatively small and a developmental company, we have neither an audit committee of the Board of Directors nor an “audit committee financial expert”, as such term is defined under the Securities Exchange Act. We believe that the members of our Board of Directors are collectively capable of analyzing and evaluating our financial statements and understanding our internal controls and procedures, including those pertaining to financial reporting. In addition, we believe that retaining an independent Director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in light of our current size and financial condition.

Code of Ethics

Our Board of Directors adopted a code of business conduct and ethics policy, the “Code of Ethics”. The Code of Ethics allows us to focus our Board of Directors and each Director and officer on areas of ethical risk, provide guidance to Directors to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct and help foster a culture of honesty and accountability.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, officers (including a person performing a principal policy-making function) and persons who own more than 10% of a registered class of our equity securities to file with the Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities of ours. Directors, officers and 10% holders are required by Commission regulations to send us copies of all of the Section 16(a) reports they file. Based solely upon a review of the copies of the forms sent to us and the representations made by the reporting persons to us, we believe that during the fiscal year ended February 28, 2009, our directors, officers and 10% holders complied with the filing requirements under Section 16(a) of the Exchange Act.

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth executive compensation for fiscal years ended February, 2009, 2008 and 2007. We have not paid any salaries or bonuses to any of our officers from our inception through the date hereof. We refer to all of these officers collectively as our "named executive officers".

Summary Compensation Table


Name And Principal Position	Fiscal year Ended February	Salary ($)	Bonus ($)	Stock Awards ($)	Options Awards ($)	All Other Compensation ($)	Total ($)

Francisco Quiroz President, Director	2009 2008 2007	146,323 120,000 --	-- -- --	222,500 -- --	101,890 140,875 --	-- -- --	470,713 260,875 --

Mario Ayub Former President Former COO, Former Director	2009 2008 2007	48,000 72,000 86,850⁽¹⁾	-- -- --	-- -- --	76,102 228,530	-- -- --	124,102 300,530 86,850

Robert Knight, Former CEO, Former director	2009 2008 2007	42,000 60,000 60,000	-- -- --	-- -- --	117,110 228,530 --	-- -- --	159,110 288,530 60,000

105


(1)	Includes $32,850 paid to MRT for rent and office services. This amount is considered to be indirect compensation to Mr. Ayub because he controls MRT. We paid $950 per month for office rent and $5,000 per month for office services on a month to month basis from March to August 2006.

Grants of Plan-Based Awards


Name	Grant Date	Number of Shares of Stock or Units	Number of Securities Underlying Options	Exercise of Base Price of Option Awards	Grant Date Fair Value of Stock and Options Awards
Francisco Quiroz	04/29/2008		200,000	$0.52	$60,881
	10/27/2008	100,000
	11/25/2008	500,000
	02/10/2009		250,000	$0.18	$41,009
	02/23/2009	400,000

Robert Knight	04/29/2008		250,000	$0.52	$76,102
	02/23/2009		250,000	$0.18	$41,009

Mario Ayub	04/29/2008		250,000	$0.52	$76,102

Outstanding Equity Awards at Fiscal Year End


Name	Number of Securities Underlying Unexercised Options (#) exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date
Francisco Quiroz	100,000	50,000⁽¹⁾	Nil	1.04	4/16/2017
	66,667	133,333⁽²⁾	Nil	0.52	4/29/2018
	41667	208,333⁽³⁾	Nil	0.18	2/10/2019

Robert Knight	200,000	Nil	Nil	0.50	2/27/2016
	166,667	83,333⁽⁴⁾	Nil	1.15	4/16/2017
	83,333	166,667⁽⁵⁾	Nil	0.52	4/29/2018
	41,667	208,333⁽⁶⁾	Nil	0.18	2/10/2019

Mario Ayub	200,000	Nil	Nil	0.50	2/27/2016
	166,667	83,333⁽⁷⁾	Nil	1.15	4/16/2017
	83,333	166,667⁽⁸⁾	Nil	0.52	4/29/2018


(1)	Mr. Quiroz received 150,000 options under the 2007 Nonqualified Stock Option Plan. These options vest every six months over a two and a half year period. The remaining 50,000 options vest as: 25,000 options vest on March 16, 2009 and 25,000 options vest on September 16, 2009.


(2)	Mr. Quiroz received 250,000 options under the 2008 Nonqualified Stock Option Plan. These options vest every six months over a two and a half year period. The remaining 133,333 options vest as: 33,333 options vest on April 29, 2009, 33,333 options vest on October 29, 2009, 33,333 options vest on April 29, 2010 and 33,333 options vest on October 29, 2010.


(3)	Mr. Quiroz received 250,000 options under the 2008 Nonqualified Stock Option Plan. These options vest every six months over a two and a half year period. The remaining 208,333 options vest as: 41,667 options vest on August 10, 2009, 41,667 options vest on February 10, 2009, 41,667 options vest on August 10, 2010, 41,667 options vest on February 10, 2011 and 41,667 options vest on August 10, 2011.


(4)	Mr. Knight received 250,000 options under the 2007 Nonqualified Stock Option Plan. These options vest every six months over a two and a half year period. The remaining 83,333 options vest as: 41,667 options vest on March 16, 2009 and 41,667 options vest on September 16, 2009.

106


(5)	Mr. Knight received 250,000 options under the 2008 Nonqualified Stock Option Plan. These options vest every six months over a two and a half year period. The remaining 166,667 options vest as: 41,667 options vest on April 29, 2009, 41,667 options vest on October 29, 2009, 41,667 options vest on April 29, 2010 and 41,667 options vest on October 29, 2010.


(6)	Mr. Knight received 250,000 options under the 2008 Nonqualified Stock Option Plan. These options vest every six months over a two and a half year period. The remaining 208,333 options vest as: 41,667 options vest on August 10, 2009, 41,667 options vest on February 10, 2009, 41,667 options vest on August 10, 2010, 41,667 options vest on February 10, 2011 and 41,667 options vest on August 10, 2011.


(7)	Mr. Ayub received 250,000 options under the 2007 Nonqualified Stock Option Plan. These options vest every six months over a two and a half year period. The remaining 83,333 options vest as: 41,667 options vest on March 16, 2009 and 41,667 options vest on September 16, 2009.


(8)	Mr. Ayub received 250,000 options under the 2008 Nonqualified Stock Option Plan. These options vest every six months over a two and a half year period. The remaining 166,667 options vest as: 41,667 options vest on April 29, 2009, 41,667 options vest on October 29, 2009, 41,667 options vest on April 29, 2010 and 41,667 options vest on October 29, 2010.

We have no written employment agreements with our officers and directors other than with one of our directors, Mr. Quiroz. Compensation was determined after discussion about expected time commitments, remuneration paid by comparable organizations and the flexibility provided to the Company by not having extended terms and other terms typical of employment agreements. We have no plans or packages providing for compensation of officers after resignation or retirement.

Options Granted During the Last Fiscal Year

On April 29, 2008, the board of directors approved the granting of stock options according to the 2008 Nonqualified Stock Option Plan (“2008 Option Plan”) whereby the board is authorized to grant to employees and other related persons stock options to purchase an aggregate of up to 6,000,000 shares of the Company's common stock. All of the options were granted and vest, pursuant to the terms of the 2008 Option Plan in six equal installments, with the first installment vesting at the date of grant, the second installment vesting October 29, 2008, the third installment vesting April 29, 2009, the fourth installment vesting October 29, 2009, the fifth installment vesting April 29, 2010 and the last installment vesting October 29, 2010.

On February 10, 2009, the board of directors approved the granting of stock options according to the 2008 Option Plan. All of the options were granted and vest, pursuant to the terms of the 2008 Option Plan in six equal installments, with the first installment vesting at the date of grant, the second installment vesting August 10, 2009, the third installment vesting February 10, 2010, the fourth installment vesting August 10, 2010, the fifth installment vesting February 10, 2011 and the last installment vesting August 10, 2011.

As of February 28, 2009, the Company granted 2,805,000 options under the 2008 Option Plan.

Aggregate Option Exercises in Last Fiscal Year

None of the named executive officers exercised options during the year ended February 28, 2009.

Director Compensation

We do not currently compensate our directors for their services as directors. Directors are reimbursed for their reasonable out-of-pocket expenses incurred while attending board or committee meetings. The following table provides the compensation information for the one-year period ended February 28, 2009 for each member of the Board of Directors.

Name

Fees Earned or Paid in Cash ($)

Stock Awards ($)

Option Awards ($)

Non-equity Incentive Plan Compensation ($)

Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)

Steven A. Sanders

32,807⁽¹⁾

32,807

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Manuel Flores	-	-	32,807⁽²⁾	-	-	-	32,807


(1)	Mr. Sanders received 200,000 options under the 2008 Nonqualified Stock Option Plan. The total outstanding options granted to Mr. Sanders as of February 28, 2009 were 350,000 of which, 266,667 were yet to be vested.


(2)	Mr. Flores received 200,000 options under the 2008 Nonqualified Stock Option Plan. The total outstanding options granted to Mr. Flores as of February 28, 2009 were 550,000 of which, 312,500 were yet to be vested.

Employment Agreements

The Company entered into an employment agreement with Francisco Quiroz of calle Las Matrinas 6510, colonia Haciendas del Valle C.P. 31217, Chihuahua, Chihuahua, Mexico, dated March 1, 2007. Mr. Quiroz is hired as the Company’s president for an initial term of three years, until February 28, 2010, unless terminated earlier, with an annual salary of $132,000 and $24,000 of living out allowance paid by Sunburst Mining.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information regarding the beneficial ownership of our common stock as of May 31, 2009. The information in this table provides the ownership information for each person known by us to be the beneficial owner of more than 5% of our common stock; each of our directors; each of our executive officers; and our executive officers and directors as a group.

Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them. Common stock beneficially owned and percentage ownership is based on 34,845,493 shares outstanding on May 31, 2009, and assuming the exercise of any options, which are presently exercisable as of May 31, 2009.



Name and Address	Amount and Nature of Beneficial Owner	Percent of Class
Cede & Co. (5) PO Box 222 Bowling Green Station New York NY 10274	16,115,765	45.23%

Mario Ayub Pascual Orozco # 2117-A Chihuahua, Chih. 31310 Mexico	2,485,333⁽⁴⁾	6.98%

North Mining Investment Corp. Meierhofstrasse 2 FL 9490 Vaduz/Principality of Liechtenstein	1,980,000	5.56%

OHAG Holdings Ltd. 501 Madison Ave 14^th Floor New York NY 10022	2,500,000	7.02%

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Name and Address	Amount and Nature of Beneficial Owner	Percent of Class


Francisco Quiroz (1) Calle Las Matrinas 6510 Colonia Haciendas del Valle CP 31217 Chihuahua, Mexico	1,141,667⁽¹⁾	3.20%

Manuel Flores Mision de Chinipas #6121 Campanario Chihuahua, Chih. 31238 Mexico	323,667⁽²⁾	0.91%
Steven A. Sanders (1) 431 East 20^th Street New York, New York 10010	773,333⁽³⁾	2.17%

All officers and directors as a group (3 in number)	2,238,667	6.28%


(1)	Includes 1,000,000 shares owned by Mr. Quiroz. Also includes 141,667 vested options owned by Mr. Quiroz.


(2)	Includes 32,000 shares owned by Mr. Flores. Also includes 291,667 vested options, which are owned by Mr. Flores.


(3)	Includes 665,000 shares owned by Dusford Overseas Investments Ltd. of which, Mr. Sanders is a shareholder. Also includes 108,333 vested options, which are owned by Mr. Sanders.


(4)	Includes 1,952,000 shares held by MRT Investments Inc., which is controlled by Mr. Ayub. Also includes 533,333 vested options owned by Mr. Ayub.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On March 25, 2009, the Company issued 200,000 warrants to Dusford pursuant to OHAG fund raising activity.

Indemnification of Officers and Directors

Our articles of incorporation, as amended, provide that, to the fullest extent permitted by Colorado law, our directors or officers shall not be personally liable to us or our shareholders for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our articles of incorporation, as amended, is to eliminate our rights and our shareholders’ rights (through shareholders' derivative suits on behalf of our company) to recover damages against a director or officer for breach of

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the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our Articles of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act" or "Securities Act") may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

Exclusion of Liability

Pursuant to the Colorado Corporation Code, the Company’s articles of incorporation exclude personal liability for its directors for monetary damages based upon any violation of their fiduciary duties as directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, acts in violation of Section 7-5-114 of the Colorado Corporation Code, or any transaction from which a director receives an improper personal benefit. This exclusion of liability does not limit any right which a director may have to be indemnified and does not affect any director's liability under federal or applicable state securities laws.

Conflicts of Interest

None of the officers of the Company will devote more than a portion of their time to the affairs of the Company. There will be occasions when the time requirements of the Company’s business conflict with the demands of the officers’ other business and investment activities. Such conflicts may require that the Company attempt to employ additional personnel. There is no assurance that the services of such persons will be available or that they can be obtained upon terms favorable to the Company.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed by Meyler & Company LLC for the audit of the Company’s annual financial statements were $52,000 for the fiscal year ended February 28, 2009 and $40,000 for the fiscal year ended February 29, 2008. The aggregate fees billed by Meyler & Company LLC for review of the Company's financial statements included in its quarterly reports on Form 10-QSB were $31,800 during the year ended February 28, 2009 and $7,500 during the year ended February 29, 2008.

Audit-Related Fees

The aggregate fees billed by Meyler & Company LLC for assurance and related services that were related to its audit or review of the Company's financial statements were $2,628 and zero during the fiscal years ending February 28, 2009 or February 29, 2008.

Tax Fees

The aggregate fees billed by Meyler & Company LLC for tax compliance, advice and planning were $nil for the fiscal year ended February 28, 2009 and $nil for the fiscal year ended February 29, 2008.

All Other Fees

Meyler & Company LLC did not bill the Company for any products and services other than the foregoing during the fiscal years ended February 28, 2009 and February 29, 2008.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The following exhibits are filed in reference:

10.1 Compensatory arrangements of certain directors (herein incorporated by reference from our current report on Form 8-K dated November 17, 2008 filed with the Securities and Exchange commission on November 18, 2008).

10.2

Entry into a material definitive agreement for development of Cieneguita project with Minera Rio Tinto (herein incorporated by reference from our current report on Form 8-K dated February 17, 2009 filed with the Securities and Exchange Commission on February 18, 2009).

31.1 Certification of Acting Principal Executive Officer of Mexoro Minerals Ltd. pursuant to Rule 13a-14(a)/15d-14(a).*

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

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

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

*filed herewith

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MEXORO MINERALS LTD.

By:/s/Barry Quiroz

Barry Quiroz, President, COO and Director

Date: June 12, 2009

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:/s/Barry Quiroz

Barry Quiroz, President, Acting Principal Executive Officer,

Acting Principal Financial Officer and Director

Date: August 25 , 2009

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Pan American Goldfields (MXOM) Inactive 10-K/A2009 FY Annual report (amended)