PINX:AKGC Alaska Gold Corp Quarterly Report 10-Q Filing - 2/29/2012

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

FORM 10-Q

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

For the quarterly period ended February 29, 2012

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 000-51583

SONO RESOURCES, INC.
(Exact name of small business issuer as specified in its charter)

(775) 348-9330
Registrant’s telephone number, including area code

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]       No [   ]

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

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

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
36,153,278 shares of common stock as of April 18, 2012.

1

SONO RESOURCES, INC. AND SUBSIDIARY

Quarterly Report On Form 10-Q
For The Quarterly Period Ended
February 29, 2012

INDEX

2

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties outlined in our annual report on Form 10-K and 10-K/A for the year ended May 31, 2011, this quarterly report on Form 10-Q, and, from time to time, in other reports that we file with the Securities and Exchange Commission (the “SEC”). These factors or any of them may cause our actual results to differ materially from any forward-looking statement. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements in this quarterly report include, among others, statements regarding:

• our capital needs;
   
• business plans; and
   
• expectations.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Some of the risks and assumptions include:

• our need for additional financing;
   
• our limited operating history;
   
• our history of operating losses;
   
• our exploration activities may not result in commercially exploitable quantities of ore on our current or any future mineral properties;
   
• the risks inherent in the exploration for minerals such as geologic formation, weather, accidents, equipment failures and governmental restrictions;
   
• the competitive environment in which we operate;
   
• changes in governmental regulation and administrative practices;
   
• our dependence on key personnel;
   
• conflicts of interest of our directors and officers;
   
• our ability to fully implement our business plan;
   
• our ability to effectively manage our growth; and
   
• other regulatory, legislative and judicial developments.

We advise the reader that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Important factors that you should also consider, include, but are not limited to, the factors discussed under “Risk Factors” in our annual report on Form 10-K for the year ended May 31, 2011.

The forward-looking statements in this quarterly report are made as of the date of this quarterly report and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.

3

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The following unaudited interim consolidated financial statements of Sono Resources, Inc. (sometimes referred to as “we”, “us” or “our Company”) are included in this quarterly report on Form 10-Q:

It is the opinion of management that the unaudited interim consolidated financial statements for the nine months ended February 29, 2012 and 2011 include all adjustments necessary in order to ensure that the unaudited interim consolidated financial statements are not misleading. These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. Except where noted, these unaudited interim consolidated financial statements follow the same accounting policies and methods of their application as our Company’s audited annual financial statements for the year ended May 31, 2011. All adjustments are of a normal recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with our Company’s audited annual financial statements as of and for the year ended May 31, 2011.

4

SONO RESOURCES, INC. AND SUBSIDIARY
(formerly Geneva Resources Inc.)
(An Exploration Stage Company)

FINANCIAL STATEMENTS

February 29, 2012
(Unaudited)

F-1

SONO RESOURCES, INC. AND SUBSIDIARY
(formerly Geneva Resources Inc.)
(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

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

F-2

SONO RESOURCES, INC. AND SUBSIDIARY
(formerly Geneva Resources Inc.)
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

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

F-3

SONO RESOURCES, INC. AND SUBSIDIARY
(formerly Geneva Resources Inc.)
(An exploration stage company)
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS

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

F-4

SONO RESOURCES, INC. AND SUBSIDIARY
(formerly Geneva Resources Inc.)
(An exploration stage company)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED

SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES

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

F-5

Basis of Presentation
These consolidated financial statements are presented in United States dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s May 31, 2011 audited financial statements. The results of operations for the periods ended February 29, 2012 and the same period last year are not necessarily indicative of the operating results for the full years.

Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended May 31, 2011 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. The unaudited consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K/A. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended February 29, 2012 are not necessarily indicative of the results that may be expected for the year ending May 31, 2012.

Going concern
To date the Company has generated minimal revenues from its business operations and has incurred operating losses since inception of ($11,485,310). As at February 29, 2012, the Company has a working capital deficit of $1,065,216. The Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company intends to continue to fund its mineral exploration business by way of private placements and advances from related parties as may be required. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Bonnyridge (PTY) Ltd., a Botswana company, acquired effective August 2, 2011 (refer to Note 3). All significant inter-company transactions and account balances have been eliminated upon consolidation.

Use of Estimates and Assumptions
Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the period. Accordingly, actual results could differ from those estimates.

Mineral Property Expenditures
The Company is primarily engaged in the acquisition, exploration and development of mineral properties.

Mineral property acquisition costs are capitalized in accordance with FASB ASC 930-805, “Extractive Activities-Mining,” when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met. In the event that mineral property acquisition costs are paid with Company shares, those shares are recorded at the estimated fair value at the time the shares are due in accordance with the terms of the property agreements.

F-6

Mineral property exploration costs are expensed as incurred.

When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized.

Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.

Prior to the date of these consolidated financial statements, the Company has incurred only property option payments and exploration costs which have been expensed.

To date the Company has not established any proven or probable reserves on its mineral properties.

Asset Retirement Obligations
The Company has adopted the provisions of FASB ASC 410-20 “Asset Retirement and Environmental Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. The adoption of this standard has had no effect on the Company's financial position or results of operations. As of February 29, 2012, any potential costs relating to the ultimate disposition of the Company's mineral property interests are not yet determinable.

Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Net Income (Loss) per Share
The Company computes income (loss) per share in accordance with FASB ASC 260-10, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the consolidated statement of operations. Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

Foreign Currency Translation
The consolidated financial statements are presented in United States dollars. In accordance with FASB ASC 830-10, “Foreign Currency Matters,” foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.

Stock-based Compensation
On June 1, 2006, the Company adopted FASB ASC 718-10, “Compensation-Stock Compensation,” under this method, compensation cost recognized for the year ended May 31, 2007 included: a) compensation cost for all share-based payments granted prior to, but not yet vested as of May 31, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to May 31, 2006, based on the grant-date fair value estimated in accordance with the provisions of FASB ASC 718-10. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital upon adoption of FASB ASC 718-10. The results for the prior periods were not restated.

F-7

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

Fair Value of Financial Instruments
In accordance with the requirements of FASB ASC 820-10, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities approximate their carrying value due to the short-term maturity of the instruments.

Botswana leases
On March 14, 2011 the Company entered into a formal Share Purchase Agreement (the “Agreement”) with Tignish (PTY) Ltd., a Botswana company (the “Vendor”), to purchase 95 percent of the issued and outstanding shares (the “Shares”) of Bonnyridge (PTY) Ltd., also a Botswana company (“Bonnyridge”), which is the legal and beneficial owner of three mineral license blocks located in Northwestern Botswana, Africa (the “Property”).

In accordance with the terms of the Agreement, and in order to purchase the Shares, the Company was required to provide the Vendor with: (i) an initial cash payment of $200,000 by April 20, 2011 (paid); (ii) a further cash payment of $100,000 on or before closing; and (iii) 6,500,000 restricted common shares of the Company at closing; and which closing was required to occur prior to April 29, 2011 unless otherwise mutually determined. The closing date was subsequently extended to provide adequate time to obtain final regulatory approvals in Botswana. These regulatory approvals were obtained on July 22, 2011. The further cash payment of $100,000 was paid on July 29, 2011 and the 6,500,000 restricted common shares of the Company were issued to the Vendor on August 2, 2011.

In addition to the consideration payable above, under this purchase agreement Sono was required to pay a further $600,000 in cash over a three-year period.

On August 11, 2011 Sono agreed to acquire the remaining 5% Shares of Bonnyridge by paying $100,000 (paid September 23 2011) in cash and issuing 1,000,000 additional restricted common shares from treasury (issued on August 30, 2011); thereby also eliminating the additional cash payments of $600,000 as referred to above.

For the period from August 2, 2001 to August 11, 2011, Bonnyridge had no significant operations or cash flows and accordingly the above transactions have been accounted for as a single business combination effective August 2, 2011 using the purchase method.

F-8

The fair value of the assets acquired and liabilities assumed effective August 2, 2011 are as follows:

The results of operations and cash flows presented include those of the Company for all periods presented and those of Bonnyridge for all periods subsequent to August 2, 2011.

Botswana Licenses Purchase and Sale Agreement

During the period ended November 30, 2011 we entered into a Purchase and Sale Agreement (the “Agreement”), dated effective September 14, 2011, with Pinette (Proprietary) Limited (“Pinette”), a company incorporated under the laws of the Republic of Botswana and Marc Paul Lindsay, the principal and a 50% indirect beneficial shareholder of Pinette. The Agreement provides for the acquisition by our Company from Pinette of three mineral exploration licenses in northwest Botswana totalling 1872.7 square kilometers (the “Licenses”).

Pursuant to the terms of the Agreement, the consideration to be paid by our Company to Pinette for the Licenses shall consist of a cash payment of CDN$100,000 ( US$98,000) together with 250,000 shares of our Company's common stock, payable as: (i) a refundable deposit of CDN$50,000 ( US$49,000) payable within 10 business days of execution of the Agreement ( paid); (ii) CDN$50,000 US$49,000) payable on Closing (which shall be October 15, 2011 unless otherwise agreed to by the parties. The parties agreed to extend the Closing Date to February 15, 2012 to allow adequate time to obtain regulatory approvals. The parties further agreed to extend the Closing Date to May 31, 2012.); and (iii) 250,000 common shares of the Company to be issued to Pinette on Closing. As of February 29, 2012, the Company has paid US$50,000 in cash payment for the refundable deposit.

(a) Capital Stock

On August 2, 2011, the Company issued 6,500,000 common shares at $0.60 per share totalling $3,900,000, for the purchase of 95% of the shares of Bonnyridge Pty (Note 3).

On August 30, 2011, the Company issued 1,000,000 common shares at $0.59 per share totalling $590,000, for the purchase of the remaining 5% shares of Bonnyridge Pty (Note 3).

F-9

At a special meeting of shareholders of the Company held on January 19, 2012, the Company's shareholders approved a proposal to amend the Company's Articles of Incorporation to increase the Company's authorized shares of common stock from 50,000,000 shares of common stock to 1,000,000,000 shares of common stock with the same par value of $0.001 per share.

This increase in the Company's authorized shares of common stock will become effective upon the Company filing a Certificate of Amendment with the Nevada Secretary of State

Private Placement
On November 15, 2011, the Company closed a private placement of 2,480,000 units of the Company (each, a "Unit") at US$0.50 per Unit, for total gross proceeds of US$1,064,925, net of offering cost. Each Unit consists of one common share and one share purchase warrant of the Company, with each warrant exercisable to purchase one additional common share at US$0.75 per share for a period of 24 months from closing. The Company issued 2,480,000 common shares at $0.50 per share.

On November 15, 2011, in connection with the closing of the above private placement, and in accordance with the terms of an agency agreement between the Company and an agent (the "Agent"), the Company issued to the Agent 248,000 Options ("Agent's Options") exercisable into 248,000 units (each, an "Agent's Units") at a price of $0.50 per Agent's Unit for a period of 24 months from closing. Each Agent's Unit is comprised of one common share and one warrant ("Agent's Warrant"), with each Agent's Warrant being exercisable for one additional common share (each an "Agent's Warrant Share") at an exercise price of $0.75 per Agent's Warrant Share for a period of 24 months from closing. As of February 29, 2012, the 248,000 Agent’s Options remain outstanding and unexercised. Please see Note 4 (c) for additional information.

(b) Warrants

The Company’s share purchase warrant activity for the period ended February 29, 2012 is summarized as follows:

(c) Stock options

On September 17, 2011, the Company granted 2,275,000 stock options to officers and directors of the Company at $0.50 per share. The term of these options are ten years. The total fair value of these options at the date of grant was $1,296,750 and was estimated using the Black-Scholes option pricing model with an expected life of 10 years, a risk free interest rate of 2.08%, a dividend yield of 0%, and expected volatility of 260%.

On November 30, 2011, the Company granted 300,000 stock options to consultants at $0.50 per share. The term of these options are five years. The total fair value of these options at the date of grant was $123,000 and was estimated using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 2.08%, a dividend yield of 0%, and expected volatility of 260%.

F-10

(c) Stock options (continued)

On November 15, 2011, in connection with the closing of the above private placement, and in accordance with the terms of an agency agreement between the Company and an agent (the "Agent"), the Company issued to the Agent 248,000 Options ("Agent's Options") exercisable into 248,000 units (each, an "Agent's Units") at a price of $0.50 per Agent's Unit for a period of 24 months from closing. The total fair value of these options at the date of grant was $121,520 and since the options have been accounted for as the offering costs related to the private placement and reduction of the equity, the impact on the financial statement is nil.

The Company’s stock option activity for the period ended February 29, 2012 is summarized as follows:

During the year ended May 31, 2011 two shareholders advanced the Company $322,500 (net of repayments of $5,000). These amounts were unsecured, bear interest at 5% per annum and have a two year term. Interest and principal are due at the end of the term of the loan. During the nine months ended February 29, 2012, a further $590,000 was advanced on the same terms and repayments of $537,500 were made. As of February 29, 2012, a total of $388,979 in principal and accrued interest is due to the shareholders.

During the year ended May 31, 2011, the Company advanced $6,000 to Morgan Creek Energy Corp., a company with certain directors in common with the Company. These advances are non-interest bearing, unsecured and without specific terms or repayment.

During the period ended February, 29, 2012, Bonnyridge has advances from its prior shareholders. These advances are non-interest bearing, unsecured and without specific terms or repayment. As of February 29, 2012, the outstanding balance is $140,305.

F-11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition, changes in financial condition and results of operations for the three and nine months ended February 29, 2012 and February 28, 2011 should be read in conjunction with our unaudited interim consolidated financial statements and related notes for the three and nine months ended February 29, 2012 and February 28, 2011. The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under the section entitled “Risk Factors” below and elsewhere throughout this quarterly report.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s May 31, 2011 audited financial statements. The results of operations for the periods ended February 29, 2012 and the same period last year are not necessarily indicative of the operating results for the full years.

Overview of our Business

We are currently engaged in the business of exploration of precious metals with a focus on the exploration and development of gold deposits in North America and internationally. As of the date of this quarterly report, our mineral interests consist mainly of prospecting licenses on exploration stage properties as discussed below. We have not established any proven or probable reserves on our mineral property interests.

We were incorporated under the laws of the State of Nevada on April 5, 2004 under the name “Revelstoke Industries, Inc.” for the purpose of reclaiming and stabilizing land in preparation for construction in Canada. Effective November 27, 2006, we changed our name to “Geneva Gold Corp.” Subsequently, effective March 1, 2007, we changed our name to “Geneva Resources, Inc.” On February 10, 2011 we merged with our wholly-owned subsidiary, Sono Resources, Inc., pursuant to Articles of Merger that the Company filed with the Nevada Secretary of State. This merger became effective March 11, 2011 and we changed our name to Sono Resources, Inc. We are an exploration stage enterprise, as defined in FASB ASC 915 “Development Stage Entities.”

Our principal offices are located at Suite 125, 2533 N. Carson Street, Carson City, Nevada 89706; our telephone number is (775) 348-9330. The principal offices of Bonnyridge (Pty) Ltd., our wholly-owned subsidiary, are located at Acumen Park, Plot 50370, Fairgrounds Office Park, P.O. Box 1157, Gaborone, Botswana.

Mineral Properties

Vilcoro Gold Property

On February 23, 2007, we entered into a Property Option Agreement with St. Elias Mines Ltd., (“St. Elias”) a publicly traded company on the TSX-V exchange, to acquire not less than an undivided 66% legal, beneficial and registerable interest in certain mining leases in Peru comprised of approximately 600 hectares in Peru.

On December 1, 2007, we entered into an extension agreement with St. Elias (the “December Extension Agreement”). The December Extension Agreement (i) acknowledged that in accordance with the terms and provisions of the Property Option Agreement, we must incur and pay exploration expenditures of not less than $500,000 prior to January 17, 2008, and (ii) provided an extension until March 31, 2008 to incur and pay such Exploration Expenditures. On June 4, 2008, an indefinite extension was granted by St. Elias to pay such Exploration Expenditures, based on the Operator’s work on schedule.

Under the terms of the Property Option Agreement, and in order to exercise its Option to acquire the properties, we were required to make the following non-refundable cash payments to St. Elias totaling $350,000 in the following manner:

5

We were also required to incur costs totaling $2,500,000 as follows:

Also under the terms of the Property Option Agreement, St. Elias would be the operator of the properties and would receive an 8% operator fee on all exploration expenditures. Once we exercised the Option defined above, we agreed to pay 100% of all ongoing exploration, development and production costs until commercial production and we had the right to receive 100% of any cash flow from commercial production of the properties until we had recouped our production costs, after which the cash flow would be allocated 66% to us and 34% to St. Elias.

On November 10, 2008, we commenced legal proceedings in the Supreme Court of British Columbia, Canada against each of St. Elias and John Brophy, P. Geol. We sought rescission of the Property Option Agreement and the return of all funds and shares advanced by us to St. Elias. We alleged that St. Elias failed to properly discharge its duty as an operator of the Vilcoro Property and also alleged that each of St. Elias and Mr. Brophy failed to provide us with complete and accurate information relating to the ownership of the Vilcoro Property and to the ownership of the adjacent property, including failing to disclose that Mr. Brophy and his wife had an interest in the Vilcoro Property and the adjacent property. We also alleged that St. Elias used some of the exploration funds provided by us to fund the exploration of the adjoining property.

A statement of Defense was filed by St. Elias and Mr. Brophy on December 23, 2008, denying the majority of the allegations made by us. In addition St. Elias and John Brophy also filed a counterclaim against us for abuse of process and punitive damages.

On May 5, 2010, we entered into a mutual release with St. Elias pursuant to which St. Elias and we agreed to release one another from all causes of action, claims and demands of any nature of kind whatsoever arising out of or in any way related to any of the subject matter of the Statement of Claim. As part of the mutual release St. Elias agreed to return to us the 12,500 shares of common stock that we previously issued to St. Elias. On July 12, 2010, the 12,500 shares were returned to treasury and cancelled.

During fiscal 2009, we recorded a mineral property recovery of $50,000 in connection with the return of funds originally paid into trust to fund exploration activities.

San Juan Property

On November 16, 2006, we entered into a Property Option Agreement with Petaquilla Minerals Ltd (“Petaquilla”). Petaquilla therein granted us the sole and exclusive option to acquire up to a 70% undivided interest in and to five exploration concessions situated in the Republic of Panama owned and controlled by Petaquilla’s wholly-owned subsidiary.

During 2007, certain disputes arose between us and Petaquilla which were resolved during 2008 by way of a settlement agreement (the “Settlement”), mutual release and the ultimate termination of the original option agreement. Pursuant to the terms of the Settlement: (i) Petaquilla issued 100,000 shares of its common stock to us, subject to pooling and release in four equal monthly tranches commencing no later than December 31, 2008 and certain other conditions, (ii) the 1,000,000 shares of the restricted common stock that we previously issued to Petaquilla were returned to us; and (iii) the $100,000 that we previously paid in order to exercise the initial portion of the Option was returned to us.

As of May 31, 2008, we had received $100,000 and the return of the 1,000,000 restricted shares of our common stock with an estimated fair value of $5,440,000. In addition, we recorded the 100,000 common shares of Petaquilla, with an estimated fair value of $270,000, as accounts receivable as of May 31, 2008. The total proceeds of $5,810,000 was included in amounts recorded as gain on settlements during 2008.

6

During fiscal 2009, we received the 100,000 common shares receivable from Petaquilla, previously valued at $270,000. As of May 31, 2009, the 100,000 shares received had an estimated fair value of $55,000 ($0.55 per share). During 2010, we sold the shares for net proceeds to us of $54,810 for a loss on disposal of $215,190.

Amelia and San Martin

On November 20, 2009, we entered into a Letter Agreement with Glenn Patrick Schmitz (“Optionor”) in connection with the proposed acquisition of an 80% interest in 39 mineral concessions located near Domyeko in Chile. The parties agreed to complete their due diligence and the execution of a Formal Agreement within 60 days of the execution of the Letter Agreement. The material terms and conditions (based on successful due diligence as defined) set out in the term sheet were as follows:

Based on the results of the due diligence, we decided not to proceed with this proposed acquisition and made a request for a refund of the $5,000 deposit. As of May 31, 2010, the $5,000 was written off to loss on option deposit based on uncertainty as to collection.

Botswana Share Purchase Agreement

During the year ended May 31, 2011, we entered into a formal Share Purchase Agreement, as amended, (the “Share Purchase Agreement”) with Tignish (PTY) Ltd., a Botswana company (the “Vendor”), to purchase 95 percent of the issued and outstanding shares of Bonnyridge (PTY) Ltd., also a Botswana company (“Bonnyridge”), which is the legal and beneficial owner of three mineral license blocks located in Northwestern Botswana, Africa (the “Property”).

Effective July 25, 2011, we completed the acquisition from the Vendor of 950 common shares of Bonnyridge (the “Purchased Shares”), representing 95% of the issued and outstanding shares of Bonnyridge. Pursuant to the Share Purchase Agreement, the Vendor has sold, and the Company has purchased, the Purchased Shares for the following consideration: (i) an initial cash payment of US$200,000 (paid April 20, 2011); (ii) a further cash payment of US$100,000 (paid July 29, 2011); and (iii) 6,500,000 restricted common shares of the Company (issued August 2, 2011). In order to maintain its Property interests, Bonnyridge continued to be obligated to provide the Vendor with USD$900,000 payable in three instalments of USD$300,000 per year over a three-year period and, in addition, carry out an exploration program on the 2,965.6 square km of mineral rights covering the Property with an expenditure commitment over the three-year period of approximately USD$1,750,000. As such, Sono became obligated to pay such $900,000 in cash over a three-year period ($300,000 of which was covered by the two cash payments described above).

The foregoing description of the Share Purchase Agreement and the four amending agreements do not purport to be complete and are qualified in their entirety by reference to the Share Purchase Agreement and the four amending agreements that were filed as Exhibits to our current reports on Form 8-K filed with the SEC on April 7, 2011, April 29, 2011, May 25, 2011, June 21, 2011 and July 27, 2011, respectively, and incorporated by reference herein.

Effective on August 11, 2011, we entered into an agreement in principle to acquire the remaining 5% of the shares of Bonnyridge to hold 100% of its shares. Sono has now acquired the remaining 5% of the shares by paying $100,000 in cash (paid September 7, 2011) and issuing 1,000,000 additional shares from treasury (issued August 30, 2011); thereby also eliminating the additional cash payments of $600,000, which had been required under the Share Purchase Agreement described above.

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The foregoing description of the agreement in principle does not purport to be complete and is qualified in its entirety by reference to the agreement in principle which was filed as an Exhibit to our current report on Form 8-K filed with the SEC on August 17, 2011, and is incorporated by reference herein.

Botswana Licenses Purchase and Sale Agreement

During the period ended November 30, 2011 we entered into a Purchase and Sale Agreement (the “Agreement”), dated effective September 14, 2011, with Pinette (Proprietary) Limited (“Pinette”), a company incorporated under the laws of the Republic of Botswana and Marc Paul Lindsay, the principal and a 50% indirect beneficial owner of Pinette. The Agreement provides for the acquisition by our Company from Pinette of three mineral exploration licenses in northwest Botswana totalling 1872.7 square kilometers (the “Licenses”).

Pursuant to the terms of the Agreement, the consideration to be paid by our Company to Pinette for the Licenses shall consist of a cash payment of CDN$100,000 (US$98,000) together with 250,000 shares of our Company’s common stock, payable as: (i) a refundable deposit of CDN$50,000 (US$49,000) payable within 10 business days of execution of the Agreement; (ii) CDN$50,000 (US$49,000) payable on Closing (originally agreed to be by October 15, 2011 unless otherwise agreed to by the parties; the parties subsequently agreed to an extension of the Closing Date to February 15, 2012 and a further extension of the Closing Date to May 31, 2012 to allow for regulatory approvals); and (iii) 250,000 common shares of the Company to be issued to Pinette on Closing. As of February 29, 2012, the Company has paid US$50,000 in cash payment for the refundable deposit.

The foregoing description of the Purchase and Sale Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase and Sale Agreement which was filed as an Exhibit to our current report on Form 8-K filed with the SEC on September 20, 2011, and is incorporated by reference herein.

Proposed Future Business Operations

Our current strategy is to complete further acquisitions of other mineral property opportunities which fall within the criteria of providing a geological basis for development of mining initiatives that can provide near term revenue potential and production cash flows to create expanding reserves. We anticipate that our ongoing efforts, subject to adequate funding being available, will continue to be focused on successfully concluding negotiations for additional interests in mineral properties. We plan to build a strategic base of producing mineral properties.

Our ability to continue to complete planned exploration activities and expand acquisitions and explore mining opportunities is dependent on adequate capital resources being available and further sources of debt and equity being obtained. However, there can be no assurance that further sources of debt or equity will be available or on acceptable terms.

Development of Mineral Properties

The requirement to raise further funding for mineral exploration and development for the next twelve months and beyond may be dependent on the outcome of geological and engineering testing occurring over this interval on potential properties. If future results provide the basis to continue development and geological studies indicate high probabilities of sufficient mineral production quantities, we will attempt to raise capital to further our programs, build production infrastructure, and raise additional capital for further acquisitions. This includes the following activity:

• Target further leases for exploration potential and obtain further funding to acquire new development targets.
   
• Review all available information and studies.
   
• Digitize all available factual information.
   
• Completion of a NI 43-101 Compliant Report with a qualified geologist familiar with mineralization in the respective area.
   
• Determine feasibility and amenability of extracting the minerals.
   
• Create investor communications materials, corporate identity.

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• Raise funding for mineral development.

Competition

We operate in a highly competitive industry, competing with other mining and exploration companies, and institutional and individual investors, which are actively seeking metal and mineral based exploration properties throughout the world together with the equipment, labor and materials required to exploit such properties. Many of our competitors have financial resources, staff and facilities substantially greater than ours. The principal area of competition is encountered in the financial ability to cost effectively acquire prime metal and minerals exploration prospects and then exploit such prospects. Competition for the acquisition of metal and minerals exploration properties is intense, with many properties available in a competitive bidding process in which we may lack technological information or expertise available to other bidders. Therefore, we may not be successful in acquiring and developing profitable properties in the face of this competition. No assurance can be given that a sufficient number of suitable metal and minerals exploration properties will be available for acquisition and development.

Minerals Exploration Regulation

Our minerals exploration activities are, or will be, subject to extensive foreign laws and regulations governing prospecting, development, production, exports, taxes, labor standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, mine safety, toxic substances and other matters. Minerals exploration is also subject to risks and liabilities associated with pollution of the environment and disposal of waste products occurring as a result of mineral exploration and production. Compliance with these laws and regulations may impose substantial costs on us and will subject us to significant potential liabilities. Changes in these regulations could require us to expend significant resources to comply with new laws or regulations or changes to current requirements and could have a material adverse effect on our business operations.

Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations. In general, our exploration and production activities are subject to certain foreign regulations and may be subject to federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations does not appear to have a future material effect on our operations or financial condition to date. Specifically, we may be subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. However, such laws and regulations, whether foreign or local, are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry and our current operations have not expanded to a point where either compliance or cost of compliance with environmental regulation is a significant issue for us. Costs have not been incurred to date with respect to compliance with environmental laws but such costs may be expected to increase with an increase in scale and scope of exploration.

Minerals exploration operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our business operations. Minerals exploration operations are subject to foreign, federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Minerals exploration operations are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, state, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may elect not to insure against due to prohibitive premium costs and other reasons. As of the date of this Quarterly Report, we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in the future and this may affect our ability to expand or maintain our operations.

Research and Development Activities

No research and development expenditures have been incurred, either on our account or sponsored by customers, during the past three years.

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Employees

We do not employ any persons on a full-time or on a part-time basis. Peter Wilson is our President/Chief Executive Officer and William D. Thomas is our Treasurer/Chief Financial Officer. These individuals are primarily responsible for all our day-to-day operations. Other services are provided by outsourcing, consultant, and special purpose contracts.

Stock Incentive Plan

On September 17, 2011, our Board of Directors authorized and approved the adoption of the 2011 Stock Incentive Plan, effective September 17, 2011, under which an aggregate of 3,000,000 of our shares may be issued. On the same date, our Board of Directors unanimously approved and granted in aggregate 2,275,000 fully vested stock options under the 2011 Stock Incentive Plan to certain of our directors and executive officers at an exercise price of $0.50 per share and an expiry date of ten years from the date of grant. On November 30, 2011, the Company granted 300,000 stock options to consultants at an exercise price of $0.50 per share and an expiry date of 5 years from the date of grant.

Subsidiaries

The Company has one wholly owned subsidiary, Bonnyridge (Pty) Ltd., a Botswana company.

Patents and Trademarks

We do not own, either legally or beneficially, any patent or trademark.

Plan of Operations

Our plan of operations over the next twelve months is to focus on the exploration of our newly acquired Bonnyridge copper/silver concession area located within the central portion of the Kalahari Copper Belt in Botswana. We are implementing a complementary exploration technique, namely analyzing for mobile metal ions - a method using soil samples to detect mineralization at depth where small concentrations of metals coating sand grains are brought to the surface by the action of water in the soil. The procedure of analyzing mobile metal ions or MMI is used to chemically strip off the adhered elements, which have migrated upwards from depth, from the surface of soil grains and then determine the low-level range of metal ion concentrations, which are commonly in the parts per billion range. By measuring mobile metal ions in surface soils, the technology has provided sharp anomalies over deeper seated ore deposits below the Kalahari in other areas. Utilizing this method, we anticipate reducing exploration costs by improving target generation for follow-up high resolution airborne and ground geophysics and drilling. We commenced our drilling program in the first quarter of calendar year 2012.

We estimate that our exploration costs for the next twelve months will be approximately $1,500,000. In addition, we estimate that our other expenses during that period will be approximately $300,000, for total estimated expenditures of $1,800,000. As at February 29, 2012, we had cash on hand of $338 total current assets of $56,567, and a working capital deficit of $1,065,216. As such, we will require additional capital in order to pursue our plan of operations.

Results of Operations

The following table sets forth our results of operations from inception (April 5, 2004) to February 29, 2012 as well as for the three and nine month periods ended February 29, 2012 and 2011.

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Nine Months Ended February 29, 2012 Compared to Nine Months Ended February 28, 2011

Our net loss during the nine months ended February 29, 2012 was ($2,996,130) compared to net loss of ($202,854) for nine months ended February 28, 2011 (an increase in net loss of $2,793,276). During the nine months ended February 29, 2012 and February 28, 2011, respectively, we did not generate any revenue.

During the nine months ended February 29, 2012, we incurred general and administrative expenses in the aggregate amount of $2,977,463 compared to $163,620 incurred during the nine months ended February 28, 2011 (an increase of $2,813,843). The general and administrative expenses incurred during the nine months ended February 29, 2012 consisted of: (i) office and general of $157,114 (2011: $28,097) which increased in 2012 due to increased exploration activity in Botswana; (ii) consulting fees of $115,813 (2011: $63,000) which increased in 2012 due to increased exploration activity in Botswana; (iii) management fees of $1,605,670(2011: $35,000) which increased in 2012 due to issuance of stock options and exploration activity in Botswana; (iv) marketing fees of $67,016( 2011: $Nil); (v) mineral property expenditures of $734,779 (2011: $Nil) which increased in 2012 due to the increased exploration activity in Botswana and (vi) professional fees of $297,071 (2011: $37,523) which increased in 2012 due to exploration activity in Botswana. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing and consulting costs.

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This resulted in a net operating loss of ($2,977,463) during the nine months ended February 29, 2012 compared to a net operating loss of ($163,620) during the nine months ended February 28, 2011.

During the nine months ended February 29, 2012, we recorded total other expense in the amount of ($18,667) compared to total other expense recorded during the nine months ended February 28, 2011 in the amount of ($39,234). The other expense incurred during the nine months ended February 29, 2012 consisted of: (i) interest expense of $(18,667) (2011: $(1,234)); and (ii) legal settlements of $Nil (2011: $(38,000)).

This resulted in a net loss of ($2,996,130) during the nine months ended February 29, 2012 compared to a net loss of ($202,854) during the nine months ended February 28, 2011.

During the nine months ended February 29, 2012, we recorded a foreign currency translation loss of $12,022 (2011: $Nil)

This resulted in a comprehensive loss of ($3,008,152) during the period ended February 29, 2012 compared to a comprehensive loss of ($202,854) during the nine months ended February 28, 2011.

The increase in comprehensive loss during nine months ended February 29, 2012 compared to the nine months ended February 28, 2011 is attributable primarily to higher general and administrative costs for consulting, professional, management fees, and exploration costs related to mineral property as we increased our business activity in Botswana.

Three Months Ended February 29, 2012 Compared to Three Months Ended February 28, 2011

Our comprehensive loss during the three months ended February 29, 2012 was ($438,501) compared to our comprehensive loss of ($59,155) for the three months ended February 28, 2011 (an increase in comprehensive loss of $379,346). During the three months ended February 29, 2012 and February 28, 2011, respectively, we did not generate any revenue.

During the three months ended February 29, 2012, we incurred general and administrative expenses in the aggregate amount of $393,322 compared to $58,292 incurred during the three months ended February 28, 2011 (an increase of $335,030). The general and administrative expenses incurred during the three months ended February 29, 2012 consisted of: (i) office and general of $36,072 (2011: $17,899) which increased in 2012 due to increased exploration activity in Botswana; (ii) consulting fees of $29,599 (2011: $21,000); (iii) management fees of $67,200 (2011: $Nil) which increased in 2012 due to issuance of stock options and exploration activity in Botswana; (iv) marketing fees of $14,675 (2011: $Nil); (v) mineral property expenditures of $216,755 (2011: $Nil) which increased in 2012 due to the increased exploration activity in Botswana and (vi) professional fees of $29,021 (2011: $19,393), which increased in 2012 due to exploration activity in Botswana. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing and consulting costs.

This resulted in a net operating loss of ($393,322) during the three months ended February 29, 2012 compared to a net operating loss of ($58,292) during the three months ended February 28, 2011.

During the three months ended February 29, 2012, we recorded total other expense in the amount of ($4,017) compared to total other expense recorded during the three months ended February 28, 2011 in the amount of ($863). The other expense incurred during the three months ended February 29, 2012 consisted of: (i) interest expense of $(4,017) (2011: $(863)).

This resulted in a net loss of ($397,339) during the three months ended February 29, 2012 compared to a net loss of ($59,155) during the three months ended February 28, 2011.

During the three months ended February 29, 2012, we recorded a foreign currency translation loss of $41,162 (2011: $Nil).

This resulted in a comprehensive loss of ($438,501) during the period ended February 29, 2012 compared to a comprehensive loss of ($59,155) during the three months ended February 28, 2011.

The increase in comprehensive loss during the three months ended February 29, 2012 compared to the three months ended February 28, 2011 is attributable primarily to higher general and administrative costs for consulting, professional, management fees, and exploration costs related to mineral property as we increased our business activity in Botswana.

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Liquidity and Capital Resources

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

As at February 29, 2012, our current assets were $56,567 and our current liabilities were $1,121,783 resulting in a working capital deficit of ($1,065,216). Our current assets as at February 29, 2012 consisted of $338 in cash, $6,000 due from a related company, $229 in prepaid expenses and $50,000 in deposits on mineral property. Our current liabilities consisted of $981,478 in accounts payable and accrued liabilities and $140,305 due to related parties.

Deficit accumulated during the exploration stage increased from ($8,489,180) as at May 31, 2011 to ($11,485,310) as at February 29, 2012.

Net Cash Used in Operating Activities

We have not generated positive cash flows from operating activities. For the nine months ended February 29, 2012, net cash used in operating activities was $(740,167) compared to net cash used in operating activities of $(94,952) for the nine months ended February 28, 2011. Net cash flow used in operating activities during the nine months ended February 29, 2012 consisted primarily of a net loss of ($2,996,130) adjusted by $1,419,750 for stock based compensation, $9,802 for depreciation expense, $429,675 for non cash mineral property expenditure, $387,002 for changes to accounts payable and accrued liabilities and $9,734 for accrued interest on shareholder’s loan. Net cash used in operating activities during the nine months ended February 28, 2011 consisted of a net loss of ($202,854) adjusted by non-legal cash settlements for $(2,000), changes in deposits of $(22,500), changes in accrued interest on shareholder’s loan of $1,234 and changes in accounts payable and accrued liabilities of $131,168.

Net Cash Used in Investing Activities

During the nine months ended February 29, 2012, net cash used in investing activities was $(371,374) comprised of $(121,374) for acquisition of fixed assets, $(50,000) for mineral property deposits and $(200,000) for mineral property expenditures-capitalized, as compared to net cash used in investing activities of $Nil during the nine months ended February 28, 2011.

Net Cash Provided by Financing Activities

During the nine months ended February 29, 2012, net cash provided from financing activities was $1,117,425 compared to net cash flow provided from financing activities of $102,500 for the nine months ended February 28, 2011. Net cash flow provided from financing activities during the nine months ended February 29, 2012 pertained primarily to $1,064,925 received as net proceeds on sale and subscriptions of common stock, and $590,000 from shareholder advances offset by repayments of shareholder advances of $(537,500).

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive exploration activities. For these reasons our auditors stated in their report on our audited financial statements for the year ended May 31, 2011 that they have substantial doubt we will be able to continue as a going concern.

Future Financings

We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned exploration activities.

Off-Balance Sheet Arrangements

We have no significant 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.

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Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.

Mineral Property Expenditures

The Company is primarily engaged in the acquisition, exploration and development of mineral properties.

Mineral property acquisition costs are capitalized in accordance with FASB ASC 930-805, “Extractive Activities-Mining,” when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met. In the event that mineral property acquisition costs are paid with Company shares, those shares are recorded at the estimated fair value at the time the shares are due in accordance with the terms of the property agreements.

Mineral property exploration costs are expensed as incurred.

When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized.

Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.

As of the date of these financial statements, the Company has incurred property acquisition costs that have been capitalized and property option payments and exploration costs which have been expensed.

To date the Company has not established any proven or probable reserves on its mineral properties.

Stock-based Compensation

On June 1, 2006, the Company adopted FASB ASC 718-10, “Compensation-Stock Compensation”, under this method, compensation cost recognized for the year ended May 31, 2007 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of May 31, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to May 31, 2006, based on the grant-date fair value estimated in accordance with the provisions of FASB ASC 718-10. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital upon adoption of FASB ASC 718-10. The results for the prior periods were not restated.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505-50 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to risks related to foreign currency exchange rate fluctuations. However, they have not had a material impact on our results of operations to date.

Our functional currency is the United States dollar. However, a portion of our business is transacted in other currencies (the Canadian dollar and the Botswana pula). As a result, we are subject to exposure from movements in foreign currency exchange rates. We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure to manage our foreign currency fluctuation risk.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, Peter Wilson (being our principal executive officer), and our Chief Financial Officer, William Thomas (being our principal financial and accounting officer), to allow for timely decisions regarding required disclosure. Our Chief Executive Officer and our Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for our Company.

Our management has evaluated the effectiveness of our disclosure controls and procedures as of February 29, 2012 (under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer), pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended. As part of such evaluation, management considered the matters discussed below relating to internal control over financial reporting. Based on this evaluation, our Company’s Chief Executive Officer and Chief Financial Officer have concluded that our Company’s disclosure controls and procedures were not effective as of February 29, 2012.

Changes in Internal Control over Financial Reporting

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, 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 and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
   
• 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 registrant are being made only in accordance with authorizations of management and directors of the registrant; and
   
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.

A material weakness is defined in Public Company Accounting Oversight Board Auditing Standard No. 5 as a significant deficiency, or a combination of significant deficiencies, in internal control over financial reporting that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

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There have not been any changes in our internal control over financial reporting that occurred during our fiscal quarter ended February 29, 2012 that have materially affected, or are likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this quarterly report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. We are not aware of any other legal proceedings pending or that have been threatened against us or our properties.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On February 15, 2012, we entered into a Second Amending Agreement to the Purchase and Sale Agreement among Pinette (Proprietary) Limited, Marc Paul Lindsay and our Company (the “Second Amending Agreement”), in order to correct the disclosure under background recital B that Marc Paul Lindsay is only a 50% indirect beneficial owner of Pinette (Proprietary) Limited and to further extend the closing date from February 15, 2012 to May 31, 2012. A copy of the Second Amending Agreement is attached hereto as Exhibit 10.36.

Item 6. Exhibits

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.