Hondo Minerals Corp - FORM 10-Q - March 14, 2012

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EX-31.02 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - Hondo Minerals Corpex-31_02.htm
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EX-31.01 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - Hondo Minerals Corpex-31_01.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-Q
 
x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2012
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______ to _______

Commission File Number 333-161868
 
HONDO MINERALS CORPORATION
 (Exact name of registrant as specified in its charter)
 
Nevada
  
26-1240056
(State of incorporation)
  
(I.R.S. Employer Identification No.)
 
15303 N. Dallas Parkway, Suite 1050
Addison, Texas 75001
(Address of principal executive offices)
 
(214) 444-7444
(Registrant’s telephone number)
 
Copy of all Communications to:
Zouvas Law Group, P.C.
2368 Second Avenue, 1st Floor
San Diego, CA 92101
Phone: 619-688-1715
Fax: 619-688-1716
 
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.
x  Yes     o    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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   o  Yes      o   No (Not required)

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

Large Accelerated Filer
 o  
Accelerated Filer
o
         
Non-Accelerated Filer
 x  
Smaller Reporting Company
 o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o   Yes   x   No
 
As of January 31, 2012, there were 66,294,690 shares of the registrant’s $0.001 par value common stock issued and outstanding.
 
 
 
 
HONDO MINERALS CORPORATION*

TABLE OF CONTENTS
 
Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Hondo Minerals Corporation (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
 
*Please note that throughout this Quarterly Report, and unless otherwise noted, the words “we,” “our,” “us,” the “Company,” or “HMNC” refers to Hondo Minerals Corporation.
 
 
 
 
 
 
ITEM 1.        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
F-1
 

Hondo Minerals Corporation

   
January 31,
    
July 31,
  
   
2012
    
2011
  
   
(unaudited)
    
(audited)
  
ASSETS
  
Current Assets:
            
Cash and cash equivalents
   $ 443,625     $ 2,052,048  
Other current assets
     39,795       59,386  
                 
Total Current Assets
     483,420       2,111,434  
                 
Properties, Equipment, and Buildings:
                
Vehicles
     67,183       67,183  
Office equipment
     205,831       56,428  
Mining equipment
     5,134,782       4,129,601  
Plant and buildings
     3,090,472       1,539,387  
Land and mineral properties, net of $920,000 allowance for
                
   impairment
     2,575,218       2,278,513  
Net of accumulated depreciation of $14,742 for 2012
                
  and zero for 2011
     (14,742 )     -  
                 
Total Properties, Equipment, and Buildings
     11,058,744       8,071,112  
                 
Other Assets
     9,994       100  
                 
TOTAL ASSETS
   $ 11,552,158     $ 10,182,646  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
  
Current Liabilities:
                
Accounts payable
   $ 340,573     $ 293,066  
Accounts payable - related parties
     -       15,259  
                 
Total Current Liabilities
     340,573       308,325  
                 
Shareholders’ Equity:
                
Common Stock, $0.001 par value, 200,000,000 shares authorized
66,294,690 and 57,711,390 shares issued and outstanding at
January 31, 2012 and July 31, 2011, respectively
     66,295       57,711  
Additional paid-in capital
     16,372,912       13,220,847  
Treasury stock, at cost
     (12,921 )     (12,921 )
Accumulated (deficit)
     (5,214,701 )     (3,391,316 )
                 
Total Shareholders’ Equity
     11,211,585       9,874,321  
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 11,552,158     $ 10,182,646  

The accompanying notes are an integral part of these financial statements.
 
 
F-2
 

Hondo Minerals Corporation
For the Three and Six Months Ended January 31, 2012 and 2011
(Unaudited)

                         
   
Three Months
    
Three Months
    
Six Months
    
Six Months
  
   
Ended
    
Ended
    
Ended
    
Ended
  
   
January 31, 2012
    
January 31, 2011
    
January 31, 2012
    
January 31, 2011
  
               
Operating Expenses
                        
Officers’ and directors’ fees
   $ 402,000     $ 54,100     $ 625,950     $ 116,900  
Professional fees
     192,882       10,209       309,092       11,709  
Corporate general and administrative
     697,457       78,462       888,343       185,451  
                                 
Loss from Operations
     (1,292,339 )     (142,771 )     (1,823,385 )     (314,060 )
                                 
Other Income (Expense)
                                
Other income
     -       -       -       15,930  
Interest expense
     -       (10,682 )     -       (26,862 )
                                 
Net (Loss)
   $ (1,292,339 )   $ (153,453 )   $ (1,823,385 )   $ (324,992 )
                                 
(Loss) per share
                                
Basic and fully diluted:
                                
Weighted average number Of shares outstanding
     63,000,323        37,430,202        61,028,407        33,606,890   
(Loss) per share
   $ (0.02 )   $ (0.00 )   $ (0.03 )   $ (0.01 )

The accompanying notes are an integral part of these financial statements.
 
 
F-3
 
 
Hondo Minerals Corporation
For the Six Months Ended January 31, 2012 and 2011
(Unaudited)

   
2012
    
2011
  
   
Cash flows from operating activities:
            
  Net (loss)
   $ (1,823,385 )   $ (324,992 )
  Adjustments to reconcile net (loss) to net cash used in operating activities:
                
      Depreciation expense
     14,742       -  
      Common stock issued for services
     165,300       53,776  
      Common stock issued for officers’ and directors’ fees
     625,950       116,900  
      Common stock issued for interest-related party
     -       26,862  
      Donated management services
     -       3,000  
  Changes in current assets and liabilities:
                
      Accounts receivable
     -       4,200  
      Other current assets
     19,591       (3,000 )
      Accounts payable
     47,506       11,075  
      Accounts payable - related parties
     (15,259 )     (17,219 )
                 
Net cash (used) in operating activities
     (965,555 )     (129,398 )
                 
Cash flows from investing activities:
                
      Purchase of vehicles
     -       (7,500 )
      Purchase of office equipment
     (149,403 )     (3,781 )
      Purchase of mining equipment
     (1,005,181 )     (11,200 )
      Purchase of buildings
     (1,252,385 )     (63,065 )
      Purchase of land and mining properties
     (296,705 )     (183,991 )
      Deposit on office space
     (9,894 )     -  
                 
Net cash (used) in investing activities
     (2,713,568 )     (269,537 )
                 
Cash flows from financing activities
                
      Proceeds from shareholder loans
     -       350,367  
      Sale of common stock
     2,070,700       140,000  
                 
Net cash provided by financing activities
     2,070,700       490,367  
                 
Net (decrease) increase in cash and cash equivalents
     (1,608,423 )     91,432  
Cash and cash equivalents, beginning of period
     2,052,048       10,638  
                 
Cash and cash equivalents, end of period
   $ 443,625     $ 102,070  

The accompanying notes are an integral part of these financial statements
(Continued)
 
 
F-4
 

Hondo Minerals Corporation
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Six Months Ended January 31, 2012 and 2011
Unaudited
(Continued)

   
2012
    
2011
  
Supplemental cash flow disclosures:
            
Cash paid during the year for:
            
Interest
   $ -     $ -  
Income Taxes
   $ -     $ -  
                 
Non-cash investing and financing activities:
                
Common stock issued for mining equipment
   $ -     $ 40,000  
Common stock issued for buildings
     298,700       -  
Acquisition of mining equipment
     -       (40,000 )
 Acquisition of buildings
     (298,700 )     -  
 Common stock issued for payment of short-term loans--related party
     -       395,250  
Payment of short-loan loan--related party
     -       (395,250 )
Shares issued as part of raising capital
     2,262       -  
 Decrease in additional paid in capital for shares issued as part of raising capital
     (2,262 )     -  
    $ -     $ -  

The accompanying notes are an integral part of these financial statements

 
F-5
 
 
Note 1 – Nature of Operations

Tycore Ventures Inc. (“Tycore”) was incorporated in the State of Nevada on September 25, 2007 to engage in the acquisition, exploration and development of natural resource properties. On February 22, 2011, Tycore changed its name to Hondo Minerals Corporation (the “Company”).

On February 8, 2011, the two controlling shareholders of Tycore and Hondo Minerals, Inc. (“Hondo”) entered into an agreement to merge the two companies into a single entity.  By agreement, Tycore exchanged 17,783,888 shares of its common stock for all of the issued and outstanding common shares of Hondo.  The two controlling shareholders owned the following percentages of each company:
 
Company
  
Ownership Percentage
Tycore Ventures Inc.
     71.4 %
Hondo Minerals, Inc.
     58.0 %
 
Due to the common control, the historical basis of accounting of each company was maintained and the accompanying financial statements and historical accounting information represents combined amounts.

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report filed with the SEC on Form 10-K.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.  The results of operations for our interim period is not necessarily indicative of the results to be expected for the full year.  Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for the year ended July 31, 2011, as reported in the Form 10-K, have been omitted.

These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The Company anticipates future losses in the development of its business, raising substantial doubt about the Company’s ability to continue as a going concern.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and/or issuance of common shares.

Note 2 – Equity Transactions

On February 22, 2011 the Company increased its authorized shares of common stock from 75,000,000 to 200,000,000.  The par value remained the same at $.001.

During the six months ended January 31, 2012 the Company sold 4,141,400 shares of its common stock at $.50 per unit for net proceeds of approximately $2,070,000.  A unit consists of one share of common stock at a par value of $.001, a warrant to purchase one share of common stock at $2.00 per share, and a warrant to purchase one share of common stock at $3.00 per share.

As has been the Company’s custom, shares of the Company’s common stock were issued for the officers’ and directors’ fees, miscellaneous services, and acquisition of mining equipment and buildings.  During the six months ended January 31, 2012, 1,797,700 shares of the Company’s common stock were issued for these services.

In addition, the Company issued 2,262,000 shares of its common stock and 4,524,000 warrants to purchase common stock for consulting services in conjunction with raising capital.  The common stock was issued at par value ($.001 per share) and charged to additional paid in capital.  The warrants were granted on January 21, 2012 to individuals who provided consulting services in raising capital for the Company.  One half of the warrants are exercisable at $2.00 and the other half are exercisable at $3.00.  All unexercised warrants expire on January 20, 2014.  The warrants were valued at $1,782,456 using Black Scholes Valuation Model with the stock price on of the date of grant at $1.80 and a volatility of 55%.  The warrants are not recorded, as they were granted as part of raising capital for the Company.
.
 
F-6 
 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS
 
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our 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 those forward-looking statements.  You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms.  These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements.  Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

RESULTS OF OPERATIONS
 
Working Capital
 
  
  
January 31, 2012
    
January 31, 2011
  
Current Assets
   $ 483,420     $ 105,170  
Current Liabilities
   $ 340,573     $ 31,996  
Working Capital (Deficit)
   $ 142,847     $ 73,174  
 
Cash Flows
 
  
  
January 31, 2012
    
January 31, 2011
  
Cash Flows from (used in) Operating Activities
   $ (965,555 )   $ (129,538 )
Cash Flows Used In Investing Activities
   $ (2,713,568 )   $ (269,537 )
Cash Flows from (provided by) Financing Activities
   $ 2,070,700     $ 490,367  
Net Increase (decrease) in Cash During Period
   $ (1,608,423 )   $ 91,432  
 
Operating Revenues
 
We recorded no revenues for the three months ended January 31, 2012.  From the period of September 25, 2007 (inception) to January 31, 2012, we recorded no revenues.
  
Operating Expenses and Net Loss
 
Operating expenses for the three month period ended January 31, 2012 was $1,292,339 and is comprised of officer and director fees, professional fees, and corporate general and administrative expenses. Operating expenses for the three month period ended January 31, 2011 were $142,771 and comprised of officers’ and directors’ fees, professional fees and, corporate general and administrative expenses.
 
Operating expenses for the six month period ended January 31, 2012 was $1,823,385 and is comprised of officer and director fees, professional fees, and corporate general and administrative. Operating expenses for the six month period ended January 31, 2011 were $314,060 and is comprised of officers’ and directors’ fees, professional fees, and corporate general and administrative expenses.
 
Net loss for the three month period ended January 31, 2012 was $1,292,339 compared to net loss of $153,813 for the three month period ended January 31, 2011.  Net loss for the six month period ended January 31, 2012 was $1,823,385 compared to net loss of $324,992 for the six month period ended January 31, 2011.
 
Liquidity and Capital Resources
 
At January 31, 2012 the Company’s cash balance was $443,625 compared to $102,070 as at January 31, 2011. The increase in cash is attributed to the sale of common stock. 
 
 
9
 
 
We may need to raise funds in the future to fund possible acquisitions or further production. Additional funding will likely come from equity financing from the sale of our common stock. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company.  We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise additional funding from the sale of our common stock.  There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing.
 
Cashflow from Operating Activities
 
During the period ended January 31, 2012, the Company used $965,555 of cash for operating activities compared to the use of $129,398 of cash for operating activities during the period ended January 31, 2011.
 
Cashflow from Investing Activities

During the period ended January 31, 2012, the Company used $2,713,568 of cash for investing activities compared to the use of $269,537 of cash for operating activities during the period ended January 31, 2011.
 
Cashflow from Financing Activities
 
During the period ended January 31, 2012 the Company received $2,070,700 of cash from financing activities compared to $490,367 for the period ended January 31, 2011.  The change in cash flows from financing activities is attributed to sale of common stock.
 
Quarterly Developments

On January 5, 2012 the Company announced preliminary success with its processing facility at the Old Tennessee Mine in Chloride, Arizona. The company is producing commercial quantities of pregnant leached solution (PLS) using its exclusive eLeach process. Metal is being extracted from the PLS using its Renocell electroplating systems. The company has filled two of its Renocells with metals and is currently drying the Renocells which is the final step in preparation for metal extraction. Once the Renocells are dry and extraction is complete, the metals will be ready to be poured

On January 10, 2012 the Company announced it has successfully completed its first metals pour of precious and base metals dore at the processing facility at the Old Tennessee Mine in Chloride, Arizona. We expect to sell metals in dore bar form in the near future. Hondo Minerals also anticipates the ramping up of precious and base metals production to continue through the first quarter of this year with the goal of processing 150 - 200 tons of tailings per day by year end

On January 18, 2012 the Company announced assay results from recently poured dore bars. Accordingly, these early test results indicate gold content was at or above the company’s previously projected range for commercial production of 1 ounce of gold per ton of tailings processed.

In recent weeks, the company has completed the commercial processing facility, proven the efficiency of the proprietary eLeach process, and found gold in the range of previous estimates. The company will continue to test these first dore bars for additional precious metals, in order to both better characterize the tailings pile, and to fine-tune its extraction process.

This first sample testing was aimed specifically for gold content, and is the culmination of several milestones already reached in the first quarter of 2012.

Initial testing for the sample materials was completed with industry leading instrumentation including the Thermo Scientific iCAP 6300 ICP mass spectrometer and the Oxford Instruments X-8000 XRF Laboratory analyzer.

The ICP or Inductively Coupled Plasma Optical Emission Spectrometer is well established, multi-element analyzer that is currently trained to read 71 elements as low as parts per billion.

The XRF or X-ray Fluorescence works by exposing samples to a beam of X-rays. The atoms of the sample absorb the energy and become temporarily excited. In turn the excited sample emits secondary X-rays with each element emitting unique energy. The tool measures the intensity of the emitted X-rays and provides reliable qualitative and quantitative results.

Subsequent Developments
 
On February 8, 2012 The Company announced that it now expects to generate between $36 and $41 million in revenue from the sale of gold, silver and other metals in 2012. This expected level of revenue is projected to yield net income in a range of $8 million to $11 million for the full year 2012. The company expects to generate between $1 million and $2 million of revenue in the first quarter of 2012, with production ramping to its originally planned level by the second half of the year.

 
10
 
 
On March 8, 2012, the Company announced that it has begun using its proprietary E-Leach extraction technology to evaluate several mining companies resources around the world.   The Initial executed agreements represent the first success in the company’s expanded business model, which contemplates supplying its proprietary extraction technology to mine operators under joint ventures or licensing arrangements. To date, E-Leach has only been used at Hondo’s flagship property, the Old Tennessee Mine in Chloride, Arizona.

Going Concern
 
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.
 
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 are material to stockholders.
 
Future Financings
 
We will continue 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 existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

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. A complete summary of these policies is included in the notes to 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.

Recently Issued Accounting Pronouncements

In March 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-11 (“ASU No. 2010-11”), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company’s adoption of provisions of ASU No. 2010-11 did not have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB issued ASU 2010-10 (“ASU No. 2010-10”), “Consolidation (Topic 810): Amendments for Certain Investment Funds.” The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted. The Company’s adoption of provisions of ASU No. 2010-10 did not have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB issued ASU 2010-09 (“ASU No. 2010-09”), “Subsequent Events (ASC Topic 855): Amendments to Certain Recognition and Disclosure Requirements.”  ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The Company’s adoption of provisions of ASU No. 2010-09 did not have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB issued ASU 2010-06 (“ASU No. 2010-06”), “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The Company’s adoption of provisions of ASU No. 2010-06 did not have a material effect on the financial position, results of operations or cash flows of the Company.

 
11
 
 
In January 2010, the FASB issued an amendment to ASC Topic 505, “Equity”, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The Company’s adoption of the amendment to ASC Topic 505 did not have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB issued an amendment to ASC Topic 820, “Fair Value Measurements and Disclosure”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The Company’s adoption of the amendment to ASC Topic 820 did not have a material effect on the financial position, results of operations or cash flows of the Company.

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risks includes, but is not limited to, the following risks: changes in commodity price risks and equity price risks. We do not use derivative financial instruments as part of an overall strategy to manage market risk.

Equity Price Risk

We have in the past sought and will likely in the future seek to acquire additional funding by sale of common stock and other equity instruments. Movements in the price of our common stock have been volatile in the past and may also be volatile in the future. As a result, there is a risk that we may not be able to sell common stock or other equity at an acceptable price to meet future funding requirements.

Commodity Price Risk

We currently have only limited production but expect to produce increasing amounts of gold, silver, other precious and base metals in this fiscal year. As we increase production and sales, changes in the price of gold and other minerals could significantly affect our results of operations and cash flows.
 
Gold prices may fluctuate widely from time to time and are affected by numerous factors, including the following: expectations with respect to the rate of inflation, exchange rates, interest rates, global and regional political and economic circumstances and governmental policies, including those with respect to gold holdings by central banks. The demand for, and supply of, gold affect gold prices, but not necessarily in the same manner as demand and supply affect the prices of other commodities. The supply of gold consists of a combination of new mine production and existing stocks of bullion and fabricated gold held by governments, public and private financial institutions, industrial organizations and private individuals. The demand for gold primarily consists of jewelry and investments. Additionally, hedging activities by producers, consumers, financial institutions and individuals can affect gold supply and demand. While gold can be readily sold on numerous markets throughout the world, its market value cannot be predicted for any particular time. We do not presently expect to hedge the sale of any of our anticipated production.
 
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”).

 
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Based on this evaluation, our principal executive and principal financial and accounting officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of January 31, 2012.

Audit committee

The Company has established an independent audit committee of the Board of Directors, which consists of Ben Botello as Audit Committee Chairman, with Skip Headen and Howard Siegel as Audit Committee Members. The audit committee’s duties are to recommend to the Company’s Board of Directors the engagement of an independent registered public accounting firm to audit the Company’s financial statements and to review the Company’s accounting and auditing principles. The audit committee would review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent registered public accounting firm, including their recommendations to improve the system of accounting and internal controls.  The audit committee will, at all times, be comprised exclusively of directors who are, in the opinion of the Company’s Board of Directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.

Compensation committee

The Company has established an independent compensation committee of the Board of Directors, which consists of Howard Siegel as Compensation Committee Chairman, with Skip Headen and Ben Botello as Compensation Committee Members.  The compensation committee reviews and approves the Company’s salary and benefits policies, including compensation of executive officers.


Changes in Internal Control over Financial Reporting

On December 12, 2011, Skip Headen resigned from all corporate offices with the Company.  Mr. Headen will still serve as an Independent Director for the Company. The resignation did not involve any disagreement with the Company.

On December 12, 2011, the Board appointed Chris Larson as Chief Financial Officer, Secretary and as a Member of the Board of Directors of the Company.


LEGAL PROCEEDINGS
 
On May 25, 2011, John Theodore Anderson (“Plaintiff”) filed a Complaint against the Company in the United States District Court, District of Nevada.  The Plaintiff alleged a breach of contract and sought money damages against the Company. On August 8, 2011, a judgment was entered in favor of Hondo Minerals, Inc., William R. Miertschin, Richard M. Hewitt, Advanced Natural Tech. Services, Rhena Drury, Ivan Webb, Wild Quail Resources, Inc. against Plaintiff, John Theodore Anderson. Mr. Anderson appealed the decision. On October 18, 2011, Mr. Anderson’s appeal was denied and the judgment against Mr. Anderson was affirmed. The Company is considering filing a lawsuit against Mr. Anderson for Abuse of Process, among other torts.

Other than the foregoing, we know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

RISK FACTORS
 
Our Annual Report on Form 10-K for the fiscal year ended July 31, 2011 includes a detailed discussion of our risk factors.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 1.
Quarterly Issuances:
 
 
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During the six months ended January 31, 2012 the Company sold 4,141,400 shares of its common stock at $.50 per unit for net proceeds of approximately $2,070,000.  A unit consists of one share of common stock at a par value of $.001, a warrant to purchase one share of common stock at $2.00 per share, and a warrant to purchase one share of common stock at $3.00 per share.

 2.
Subsequent Issuances:
 
On February 27, 2012, shares of the Company’s common stock were issued for the officers’ and directors’ fees, miscellaneous services, and acquisition of mining equipment and buildings.  During the six months ended January 31, 2012, 1,797,700 shares of the Company’s common stock were issued for these services.

Additionally, on February 27, 2012, the Company issued 2,262,000 shares of its common stock and 4,524,000 warrants to purchase common stock for consulting services in conjunction with raising capital.  The common stock was issued at par value ($.001 per share) and charged to additional paid in capital.  The warrants were issued on February 27, 2012 to individuals who provided consulting services in raising capital for the Company.  One half of the warrants are exercisable at $2.00 and the other half are exercisable at $3.00.  All unexercised warrants expire on January 20, 2014.  The warrants were valued at $1,782,456 using Black Scholes Valuation Model with the stock price on of the date of grant at $1.80 and a volatility of 55%.  The warrants are not recorded, as they were granted as part of raising capital for the Company.

DEFAULTS UPON SENIOR SECURITIES
   
 
NONE.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   
 
NONE.

OTHER INFORMATION
   
 
NONE

EXHIBITS
 
Exhibit
Number
Description
Filed
3.1
Articles of Incorporation filed with the Nevada Secretary of State on September 25, 2007.*
Incorporated by reference as Exhibits to the Form S-1 filed on September 11, 2009.
3.1 (a)
Amendment to Articles of Incorporation filed with the Nevada Secretary of State on February 22, 2011
Incorporated by reference as Exhibit to the Form 8-K filed on March 8, 2011.
3.2
Bylaws *
Incorporated by reference as Exhibits to the Form S-1 filed on September 11, 2009.
21.1
List of Subsidiaries**
Filed with the SEC on February 9, 2011 as part of our Current Report on Form 8-K.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
     
101.INS XBRL Instance Document  
101.SCH XBRL Taxonomy Extension Schema Document  
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document  
101.DEF XBRL Taxonomy Extension Definition Linkbase Document  
101.LAB XBRL Taxonomy Extension Label Linkbase Document  
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document  
 
 
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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
HONDO MINERALS CORPORATION
   
Dated:  March 13, 2012
/s/ William R. Miertschin
 
By: William R. Miertschin
 
Its: President and CEO
   
Dated:  March 13, 2012
/s/ Chris Larson
 
By: Chris Larson
 
Its: CFO

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Dated:  March 13, 2012
  
/s/  William R. Miertschin
   
By:  William R. Miertschin
   
Its:  Director
     
Dated:  March 13, 2012
  
/s/ Chris Larson
   
By: Chris Larson
   
Its: Director
     
Dated:  March 13, 2012
  
/s/  J.C. “Skip” Headen
   
By:  J.C. “Skip” Headen
   
Its:  Director
     
Dated:  March 13, 2012
  
/s/  Ben Botello
   
By:  Ben Botello
   
Its: Director
     
Dated:  March 13, 2012
  
/s/  Howard Siegel
   
By:  Howard Siegel
   
Its:  Director
 
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