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SURE > SEC Filings for SURE > Form 10-Q/A on 22-Jul-2013All Recent SEC Filings

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Form 10-Q/A for SONORA RESOURCES CORP.


22-Jul-2013

Quarterly Report


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

Forward-Looking Statements and Associated Risks.

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

? our plan of operations;

? our future exploration programs and results;

? our expectations regarding the impact of various accounting policies;

? our future capital expenditures; and

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

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

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

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

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


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

? risks related to commodity price fluctuations;

? the uncertainty of profitability based upon our limited history;

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

? risks related to environmental regulation and liability;

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

? risks related to tax assessments;

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

? the risks in the section entitled "Risk Factors".

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

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

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

Plan of Operation

Sonora Resources Corp. (the "Company" or "Sonora Resources") was incorporated under the laws of the State of Nevada on December 3, 2007. We are a mining exploration company focused on the acquisition and development of prospective silver and gold opportunities in Mexico.

On March 15, 2013, we closed the Asset Purchase Agreement ("Purchase Agreement") with Yale to purchase all of the right, title and interest in and to the Los Amoles 2 and Los Amoles 3 Fracc.1 properties, consisting of 2,166 hectares located in the State of Sonora Mexico (the "Property"). Yale will use all commercially reasonable efforts to acquire title to the Los Amoles 4 property which is approximately an additional 2,200 hectares adjoining the Los Amoles 3 property. We purchased the Property from Yale by issuing 1,000,000 of restricted SURE common shares and paying US$200,000 in cash.

We acquired a 100% interest in the Property from Yale and canceled the Option Agreement dated November 26, 2010. Pursuant to the Option Agreement, Sonora would have been required to incur the remaining exploration expenditures and to issue the remaining 200,000 common shares to acquire a 70% undivided beneficial and legal interest in the Property. We have commenced an underground work program at the Los Amoles property and completed a geologic report to define the potential vein structure and outcroppings and prepare for a planned drilling program in 2013.

We also have mining option agreements in (i) the Jalisco Group of Properties, consisting of mining claims totaling 5,240 hectares located in Jalisco; and (ii) the Ayones Group of Properties consisting of numerous mining claims totaling 48 hectares in Jalisco. The Company did not pay the $175,000 due February 10, 2013 to IMMSA Grupo México under the August 10, 2011 Mining Option Agreement. The Company expects to renegotiate the 2011 Mining Option Agreement with IMMSA Grupo México.

Also, also have five mining concessions on 721 hectares surrounding the Ayones Group of Properties, called the Corazon Property. We have a letter of intent with the Liz Property located in Ayutla, Jalisco State, Mexico. Sonora Resources is based in Guadalupe, Zacatecas, Mexico. We have concluded phase one field work at the Corazon property and we intend to produce silver and gold at our Corazon and Liz properties in 2013.

We are currently in the development stage as defined in ASC 915 "Accounting and Reporting for Development Stage Enterprises" and have minimal operations.


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We have incurred a cumulative net loss since inception on December 3, 2007 to February 28, 2013 of $2,299,000 and have no source of operating revenue. While our management believes that we will be successful in our planned operating activities under our business plan and capital raising activities, there can be no assurance that we will be successful in the mining development and exploration business or the raising of sufficient capital such that we will generate adequate revenues to earn a profit or sustain its operations.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates our continuation as a going concern. We have not established a source of revenues sufficient to cover its operating costs, and as such, have incurred an operating loss since inception. Further, as of February 28, 2013, we have working capital of $254,000. These and other factors raise doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

On July 12, 2011, we established a 100% owned subsidiary, Finder Plata S.A. de C.V. ("Finder Plata") for the development of our exploration business in Mexico.

Key Market Priorities

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

Primary Market Risks

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

Results of Operations

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

(dollars in thousands)

For the Three Months ended February 28, 2013 compared to the Three Months ended February 29, 2012

                                         Three Months Ended,
                  February 28,       February 29,
                      2013               2012           $ Variance       % Variance

Revenue          $            -     $            -     $          -
Cost of sales                 -                  -                -
Gross profit                  -                  -                -
General and
administrative
expenses                     96                159              (63 )           39.6 %
Exploration
expenses                      5                 17              (12 )           70.6 %
Operating loss             (101 )             (176 )             75             42.6 %
Other income
(expense):

Interest
expense                       -               (122 )            122            100.0 %
Foreign
exchange gain                 -                  -                -              0.0 %
Total other
expense                       -               (122 )            122            100.0 %
Net loss                   (101 )             (298 )            197             66.1 %

We have not generated any revenues during the three months ended February 28, 2013 and February 29, 2012.

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

General and administrative expenses for the three months ended February 28, 2013 decreased $63,000 to $96,000 as compared to $159,000 for the three months ended February 29, 2012.


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Exploration expenses for the three months ended February 28, 2013 decreased $12,000 to $5,000 as compared to $17,000 for the three months ended February 29, 2012.

Net loss for the three months ended February 28, 2013 was $101,000 as compared to a net loss of $298,000 for the three months ended February 29, 2012.

Liquidity and Capital Resources

As of February 28, 2013, we had cash of $231,000 and working capital of $254,000 as compared to cash of $293,000 and a working capital of $347,000 as of November 30, 2012. This decrease in our working capital is primarily due to operating losses. We have incurred operating losses since inception, and this is likely to continue until we mine the Corazon property.

We require funds to enable us to address our minimum current and ongoing expenses. Presently, we do not generate any revenue and expect to incur significant operating and capital expenses. Management projects that we may require an additional approximately $4,584,250 to fund our operating expenditures for the next twelve month period for the Los Amoles, Jalisco, Ayones and Corazon, Mexico properties. Details are as follows:

Expenditures                            Amount
Mining exploration expenses           $ 4,296,250
General and administration expenses       288,000
  Total                               $ 4,584,250

Operating Activities

Net cash used in operating activities for the three month period ended February 28, 2013 was $64,000, compared with net cash used of $145,000 for the three month period ended February 29, 2012. This amount was primarily related to a net loss of $101,000, offset by non-cash expenses of $17,000.

Investing Activities

Net cash used in investing activities for the three month period ended February 28, 2013 was $34,000. This related to a $30,000 payment, on February 15, 2012, related to the acquisition of the Los Amoles property which closed March 15, 2013.

Financing Activities

Net cash provided by financing activities for the three month period ended February 28, 2013 was $30,000. This is due to the issuance of a demand promissory note for $30,000.

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

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

Our unaudited contractual cash obligations as of February 28, 2013 are summarized in the table below:

                                                   Less Than                                       Greater Than
Contractual Cash Obligations         Total          1 Year         1-3 Years       3-5 Years         5 Years
Operating leases                  $         0     $         0     $         0     $         0     $            0
Capital lease obligations                   0               0               0               0                  0
Note payable                           30,000          30,000               0               0                  0
Mining expenditures                 8,545,250       4,296,250       2,249,000       2,000,000                  0
Acquisitions                                0               0               0               0                  0
                                  $ 8,575,250     $ 4,326,250     $ 2,249,000     $ 2,000,000     $            0


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Off-Balance Sheet Arrangements

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

Critical Accounting Policies

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

Foreign Currency Translation

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

Mineral Properties

Costs of acquiring mineral properties are capitalized by project area upon purchase of the associated claims. Costs to maintain the mineral rights and leases and explore are expensed as incurred. When a property reaches the production stage, the related capitalized costs will be amortized, using the units of production method on the basis of periodic estimates of ore reserves.

Mineral properties are periodically assessed for impairment of value and any diminution in value.

Stock-Based Compensation

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

Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment in accordance with FASB ASC 360, Property, Plant, and Equipment. Under FASB ASC 360, these assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount, if any, when the carrying value of the asset exceeds the fair value. As of February 28, 2013, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

Going Concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual financial statements for the year ended November 30, 2012, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.


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

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

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