10-Q 1 hmnc-10q_013113.htm QUARTERLY REPORT hmnc-10q_013113.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, 2013

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______ to _______

Commission File Number 000-54326
 
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)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x     No  o
 
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).  x 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  o      Smaller Reporting Company    x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   o Yes     x No

As of March 18, 2013, there were 105,553,855 shares of the registrant’s $0.001 par value common stock issued and outstanding.

 
 

 

 
HONDO MINERALS CORPORATION

TABLE OF CONTENTS
     
  
Page
   
PART I.                 FINANCIAL INFORMATION
 
  
 
ITEM 1.
  3
ITEM 2.
  4
ITEM 3.
   6
ITEM 4.
   8
  
 
PART II.               OTHER INFORMATION
 
  
 
ITEM 1.
  9
ITEM 1A.
   9
ITEM 2.
   9
ITEM 3.
  10
ITEM 4.
  10
ITEM 5.
  10
ITEM 6.
  11
  
 

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.


 
2

 

 PART I - FINANCIAL INFORMATION
 
ITEM 1. 
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
3

 



HONDO MINERALS CORPORATION
CONSOLIDATED BALANCE SHEETS
   
January 31,
   
July 31,
 
   
2013
   
2012
 
   
(unaudited)
   
(audited)
 
         
(Restated)
 
ASSETS
 
Current Assets:
           
Cash and cash equivalents
  $ 4,819     $ 22,118  
Other current assets
    65,000       32,402  
                 
Total Current Assets
    69,819       54,520  
                 
Properties, Equipment, and Buildings:
               
Vehicles
    67,183       67,183  
Office equipment
    226,986       226,986  
Mining equipment
    4,330,329       6,249,238  
Plant and buildings
    4,896,772       4,904,272  
Land and mineral properties, net of $920,000 allowance for
               
   impairment
    2,574,318       2,574,318  
Accumulated depreciation
    (59,140 )     (37,213 )
                 
Total Properties, Equipment, and Buildings
    12,036,448       13,984,784  
                 
Other Assets
    9,994       9,994  
                 
TOTAL ASSETS
  $ 12,116,261     $ 14,049,298  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current Liabilities:
               
Cash overdraft
  $ 69,534     $ -  
Senior loan payable, net of $134,357 and $403,071 debt discount
               
    at January 31, 2013 and July 31, 2012, respectively
    1,115,643       846,929  
Promissory notes payable
    1,455,000       125,000  
Note payable - related party
    178,218       21,686  
Accounts payable and accrued liabilities
    371,659       112,531  
Accounts payable - related parties
    -       101,263  
Total Current Liabilities
    3,190,054       1,207,409  
                 
Common Stock Liability
    1,668,554       1,668,554  
Derivative Liability
    1,646,709       949,110  
                 
Total Liabilities
    6,505,317       3,825,073  

Shareholders' Equity:
           
Common Stock, $0.001 par value, 200,000,000 shares authorized
           
   100,487,880 and 82,546,170 shares issued and outstanding at
           
   January 31, 2013 and July 31, 2012, respectively
    100,488       82,546  
Additional paid-in capital
    23,395,855       20,969,828  
Treasury stock, at cost
    (12,921 )     (12,921 )
Accumulated (deficit)
    (17,872,478 )     (10,815,228 )
                 
Total Shareholders' Equity
    5,610,944       10,224,225  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  $ 12,116,261     $ 14,049,298  
                 
The accompanying notes are an integral part of these financial statements.
 
   

 
F-1

 
HONDO MINERALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months ended January 31, 2013 and 2012
(Unaudited)

                         
   
Three Months
   
Three Months
   
Six Months
   
Six Months
 
   
Ended
   
Ended
   
Ended
   
Ended
 
   
January 31, 2013
   
January 31, 2012
   
January 31, 2013
   
January 31, 2012
 
               
Cost of Revenue
  $ (207,407 )   $     $ (643,806 )   $  
Gross Loss
    (207,407 )           (643,806 )      
                                 
Operating Expenses
                               
  Officers' and directors' fees
    272,250       402,000       577,750     $ 625,950  
Professional fees
    346,140       192,882       1,732,049       309,092  
Derivative expense
    689,836             697,599        
  Corporate general and administrative
    563,435       697,457       1,050,942       888,343  
Total Operating Expenses
    (1,871,661 )     (1,292,339 )     (4,058,340 )     (1,823,385 )
                                 
(Loss) from Operation
    (2,079,068 )     (1,292,339 )     (4,702,146 )     (1,823,385 )
                                 
Other (Expense)
                               
Loss on sale of equipment
    (1,537,771 )           (1,537,771 )      
Interest expense
    (383,346 )           (817,333 )      
                                 
Net (Loss)
  $ (4,000,185 )   $ (1,292,339 )   $ (7,057,250 )   $ (1,823,385 )
                                 
(Loss) per share
                               
Basic and fully diluted:
                               
Weighted average number
                               
   Of shares outstanding
    95,132,802       63,000,323       89,420,272       61,028,407  
(Loss) per share
  $ (0.04 )   $ (0.02 )   $ (0.08 )   $ (0.03 )
                                 

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


 
F-2

 
HONDO MINERALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended January 31, 2013 and 2012
(Unaudited)

   
2013
   
2012
 
Cash flows from operating activities:
           
  Net (loss)
  $ (7,057,250 )   $ (1,823,385 )
  Adjustments to reconcile net (loss) to net cash used in
               
      Operating activities:
               
      Depreciation expense
    21,927       14,742  
      Loss on sale of mining equipment
    1,537,771        
      Common stock issued for services
    923,875       165,300  
      Common stock issued for officers' and directors' fees
    515,250       625,950  
      Warrants granted for services
    608,202        
      Amortization of debt discount
    268,714        
      Interest expense on shareholder loan
    255,000        
      Derivative expense
    697,599        
      Interest expense on warrants granted for loan
    149,142        
  Changes in current assets and liabilities:
               
      Other current assets
    (32,598 )     19,591  
      Accounts payable
    259,128       47,506  
      Accounts payable - related parties
    (101,263 )     (15,259 )
                 
Net cash (used) in operating activities
    (1,954,503 )     (965,555 )
                 
Cash flows from investing activities:
               
      Purchase of office equipment
          (149,403 )
      Purchase of mining equipment
    (70,862 )     (1,005,181 )
      Purchase of buildings
          (1,252,385 )
      Purchase of land and mining properties
          (296,705 )
      Proceeds from sale of mining equipment
    452,000        
      Deposit on office space
          (9,894 )
                 
Net cash (used) in investing activities
    381,138       (2,713,568 )
                 
Cash flows from financing activities
               
      Cash overdraft
    69,534        
      Proceeds from promissory notes
    1,330,000        
      Proceeds from notes payable - related party
    158,332        
      Sale of common stock
          2,070,700  
      Payments on note payable - related party
    (1,800 )      
                 
Net cash provided by financing activities
    1,556,066       2,070,700  
                 
Net (decrease) in cash and cash equivalents
    (17,299 )     (1,608,423 )
Cash and cash equivalents, beginning of period
    22,118       2,052,048  
                 
Cash and cash equivalents, end of period
  $ 4,819     $ 443,625  

(Continued on F-4)
 
 
F-3

 
HONDO MINERALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended January 31, 2013 and 2012
 (Unaudited)
(CONTINUED)


   
2013
   
2012
 
Supplemental cash flow disclosures:
           
   Cash paid during the period for:
           
Interest
  $ 82,575     $  
  Income Taxes
  $     $  
                 
Non-cash investing and financing activities:
               
   Common stock (rescinded) issued for buildings
  $ 7,500     $ 298,700  
 Acquisition of buildings
    (7,500 )     (298,700 )
   Common stock issued for settlement of claims
    7,741        
   Decrease in paid in capital due to settlement of claims
    (7,741 )      
   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-4

 

 
Hondo Minerals Corporation
Notes to Consolidated Financial Statements
January 31, 2013
(Unaudited)

 
 
Note 1 – Organization and Business Activity
 
Hondo Minerals Corporation, formerly 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 (“Hondo” or the “Company”).
 
On February 8, 2011, the two controlling shareholders of Tycore and Hondo Minerals, Inc. (“HMI”) 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.  At the time of the merger the two controlling shareholders owned 71.4% of Tycore and 58.0% of HMI.  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 Company is engaged in the acquisition of mines, mining claims and mining real estate in the United States with mineral reserves consisting of precious metals or non-ferrous metals.  Since early 2010, HMI has been building and developing a plant designed to process precious and base metals in the Tennessee and Schuylkill Mines in the Wallapai Mining District near Chloride, Mohave County, Arizona.  The Company’s main focus is the processing of the tailings pile at the mouth of the Tennessee Mine which includes approximately a one million ton tailings pile containing various amounts of lead, zinc, gold, silver, and other concentrations of metal and is adjacent to the Schuylkill Mine.  Hondo also owns various mining claims in Colorado and Utah but none are operational as of January 31, 2013.

In mid-July 2012, the Company began processing tailings; however, the Company has yet to realize any revenues from those operations.  During the last half of July 2012, the Company processed approximately 125 tons of tailings and produced 94 carbon cells of metals.  Due to the processing issues with the equipment and the smelting process, the Company is unable to estimate any revenue from the carbon cells collected.

During the quarter, the Company processed material through a concentration process. After running through the concentration process various samples were sent for assay. Based on the result of these assays, the Company may be able to sell the concentration or refine it through the ELeach process.
 
The accompanying unaudited interim consolidated 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 consolidated financial statements and notes thereto contained in the Company’s annual report filed with the SEC on 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 consolidated financial statements that would substantially duplicate the disclosure contained in the audited consolidated financial statements for the year ended July 31, 2012, as reported in the Form 10-K, have been omitted.

There 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 has limited cash and, as yet, has not generated any revenues, 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 investors and/or issuance of common shares.

 
  F-5

 
 
Note 2 – Promissory Notes Payable

Since July 31, 2012, the Company has executed promissory notes totaling $1,330,000.  The notes carry an interest rate of 10% (ten percent) and are due on various dates from August 31, 2013 through December 31, 2013 with interest payments due quarterly.  4,400,000 common shares valued at $663,000 and warrants to purchase 8,425,000 common shares valued at $757,344 were issued related to these notes for consulting services and origination fees.

Note 3 – Restatement

The balance sheet as of July 31, 2012 presented in these financial statements has been restated to report the common shares issued in the settlement of a lawsuit as common stock liability and to record derivative expense.

In April 2012, the Company’s Board of Directors’ approved the settlement of a lawsuit through the issuance of the Company’s common stock pursuant to nonpayment of certain accounts payable and purchase obligations that the Company made in early 2012.  These obligations amounted to $1,668,554.  The number of shares to be issued for the obligation is to be determined through a “calculation period” determined through a calculation of volume of shares traded and 80% of the daily average share price.  This pricing period continues from the issuance date of April 26, 2012 until the Company’s aggregate trading volume of its common stock reaches $5,000,000.  As of January 31, 2013, the Company has issued 19,457,591 shares of the Company’s common stock and the Company’s trading volume for the “calculation period” approximated $5,000,000.  The Company owed 1,616,477 additional shares as of January 31, 2013.  The $1,668,554 obligation has been recorded as common stock liability and will remain a liability until such time as the exact number of common shares to be issued is determined.  The conversion of the liability is at a discount to the current market value.  The derivative liability was revalued at January 31, 2013 using an estimated number of shares due on the obligation at the current market rate using the Black-Scholes Merton valuation method.

Additional derivative expense of $697,599 was recorded for the six-month period ending on January 31, 2013.  The derivative liability/expense will change as the market value of the Company’s common stock changes.  The derivative expense was valued using the Black-Scholes-Merton valuation model using a volatility rate of 108.65% and a risk free rate of return of .08%.

Note 4 – Acquisition Offer
 
On November 20, 2012, Hondo Minerals received an unsolicitated offer from Magnolia Hill, LLC, to purchase all of the Company's common stock and assets. The offer as presented was for $0.62 per share ina combination of cash and stock. The unsolicitated offer for the outstanding shares of HMNC's has not yet commenced.

In December 11, 2012, Hondo Minerals received an unsolicited offer from Crowncorp Investment Corporation, a Texas corporation (“Purchaser”) to purchase HMNC’s wholly owned subsidiary, Hondo Minerals, Inc., which holds 100% of the HMNC’s assets. The offer as presented was for an aggregate all cash purchase price of $75,000,000. The unsolicited offer for the outstanding shares of HMNC has not yet commenced.

Note 5 – Subsequent Event

In accordance with ASC 855-10 the Company has analyzed its operations subsequent to January 31, 2013 to the date these financial statements were issued, and has determined that it does not have any additional material subsequent events to disclose in these financial statements.
   
 
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.

GENERAL
 
Corporate History
 
Hondo Minerals Corporation, formerly 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 (“Hondo” or the “Company”).
 
 On February 8, 2011, the two controlling shareholders of Tycore and Hondo Minerals, Inc. (“HMI”) 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.  At the time of the merger the two controlling shareholders owned 71.4% of Tycore and 58.0% of HMI.
 
Business Overview
 
The Company is engaged in the acquisition of mines, mining claims and mining real estate in the United States with mineral reserves consisting of precious metals or non-ferrous metals.  Since early 2010, HMI has been building and developing a plant designed to process precious and base metals in the Tennessee and Schuylkill Mines in the Wallapai Mining District near Chloride, Mohave County, Arizona.  The Company’s main focus is the processing of the tailings pile at the mouth of the Tennessee Mine which includes approximately a one million ton tailings pile containing various amounts of lead, zinc, gold, silver, and other concentrations of metal and is adjacent to the Schuylkill Mine.  Hondo also owns various mining claims in Colorado and Utah but none are operational as of January 31, 2013.
 
In mid-July 2012, the Company began processing tailings; however, the Company has yet to realize any revenues from those operations.
 
During the quarter, the Company processed material through a concentration process. After running through the concentration process various samples were sent for assay.  Based on the result of these assays, the Company may be able to sell the concentration or refine it through the ELeach process.

RESULTS OF OPERATIONS

Working Capital
   
January 31,
 2013
   
July 31,
 2012
 
                 
Current Assets
 
$
69,819
   
$
54,520
 
Current Liabilities
 
$
3,190,054
   
$
1,207,409
 
Working Capital (Deficit)
 
$
(17,872,478)
   
$
(10,815,228)
 

 

 
 
Operating Expenses and Net Loss

Operating expenses for the three month period ended January 31, 2013 were $1,871,661 and is comprised of officer and director fees, professional fees, derivative expense, and corporate general and administrative expenses. Operating expenses for the three month period ended January 31, 2012 were $1,292,339 and comprised of officer and director fees, professional fees and, corporate general and administrative expenses.

Net loss for the three month period ended January 31, 2013 was $4,000,185 compared to net loss of $1,292,339 for the three month period ended January 31, 2012.

Operating expenses for the six month period ended January 31, 2013 was $4,058,340 and is comprised of officer and director fees, professional fees, derivative expense, and corporate general and administrative expenses. Operating expenses for the six month period ended January 31, 2012 were $1,823,385 and comprised of officer and director fees, professional fees and, corporate general and administrative expenses.

Net loss for the six month period ended January 31, 2013 was $(7,057,250) compared to net loss of $(1,823,385) for the six month period ended January 31, 2012.

Liquidity and Capital Resources

At January 31, 2013, the Company's cash balance was $4,819 compared to $22,118 as at July 31, 2012. The decrease in cash is attributed to operating and investing activities exceeding financing activities.
 
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, 2013, the Company used $(1,954,503) of cash for operating activities compared to the use of $(965,555) of cash for operating activities during the period ended January 31, 2012.

Cashflow from Investing Activities
 
During the period ended January 31, 2013, the Company provided $381,138 of cash for investing activities compared to the use of $(2,713,568) of cash for investing activities during the period ended January 31, 2012.

Cashflow from Financing Activities

During the period ended January 31, 2013 the Company received $1,556,066 of cash from financing activities compared to $2,070,700 for the period ended January 31, 2012. The change in cash flows from financing activities is attributed to sale of common stock.
 
Cashflow Net Increase (decrease) in Cash During Period

During the period ended January 31, 2013, the Company had a Net (decrease) of $(17,299) compared to $(1,608,423) during the period ended January 31, 2012.

Quarterly Developments

On November 26, 2012 the Company received an unsolicited offer to purchase all of the Company's common stock and assets. The offer as presented was for $0.62 per share in combination of cash and in stock. The letter of intent is subject to due diligence by both parties. Other requirements of the letter of intent included: 
 
  
Hondo Minerals complete a 43-101 reserve report relating to the minerals at the Tennessee Schuykill Mine property in Chloride, Arizona which is to be prepared and issued by an independent third party.
 
 
5

 
  
Verification of the E-Leach technology as a process relating to the leaching of precious metals.
    
Verification of the status of rights regarding patents covering the leaching process. 

On December 11, 2012 the Company received a second unsolicited offer from a private investment group to purchase all of the assets of the Company’s wholly owned subsidiary, Hondo Minerals, Inc., which holds 100% of the Company’s assets. The offer as presented was for $75 million in cash. The letter of intent is subject to due diligence by both parties.
 
Subsequent Developments
 
On February 4, 2013, the Arizona Department of Environmental Quality (“ADEQ”) issued a Permit Determination Letter to Hondo Minerals Corporation, a Nevada corporation (the “Company”), to advise the Company that its Tennessee Mine facility located in the Wallapai Mining District near Chloride, Mohave County, Arizona is not subject to any standards or other requirements under Sections 111 or 112 of the Clean Air Act, does not have the potential to emit air pollutants above significance levels, and does not require an Air Quality Control Permit.  

Additionally, on February 7, 2013, the ADEQ issued a letter to the Company to announce that it has closed the Notice of Violation (“NOV”) issued to the Company on June 11, 2012 and will not proceed with any further action against the Company in regards to this matter.  
 
On February 20, 2013 the Board of Directors, in accordance with its fiduciary obligations to its shareholders, continues to review and negotiate the terms of the unsolicited offer from Crowncorp Investment Corporation to purchase all of the assets of the Company's wholly owned subsidiary, Hondo Minerals, Inc., which holds 100% of the Company's assets, in exchange for $75 million in cash. To that end, the Company has engaged independent legal counsel to assist with its review, consideration and structuring of the proposed transaction.
 
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.

 
6

 
 
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.

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 have yet to make a sale. In the future, we expect to produce increasing amounts of gold, silver, other precious and base metals in the upcoming 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").

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, 2013.

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.

 
8

 
Changes in Internal Control over Financial Reporting

None.

PART II - OTHER INFORMATION
 
ITEM 1.
LEGAL PROCEEDINGS

On October 26, 2012, Ironridge Global Iv, Ltd. (“Ironridge”) filed an Ex Parte Application to enforce a provision of the Stipulated Settlement entered into with the Company on April 18, 2012. Ironridge moved for an order requiring the Company to issue additional shares to Ironridge in addition to the Settlement Shares already issued. The Company vehemently opposed enforcement of the Stipulated Settlement in open court on October 30, 2012. However, the Court ordered that Plaintiff prepare a Proposed Order and Judgment in accordance with the Stipulated Settlement and submit the documents for the Court’s approval. Upon receiving Plaintiff’s Proposed Order and Judgment, the Company filed an opposition to the entry of Plaintiff’s Proposed Order and Judgment on November 3, 2012 as contrary to public policy, unconscionable and void. This opposition was subsequently denied by the court and judgment was entered against the Company.

The Company then filed a motion to vacate judgment. During the interim time period, the Company refused to issue shares to Ironridge. Consequently, Ironridge brought a motion for a hearing for the Company to show cause why it shouldn’t be held in contempt of court for refusing to issue additional shares to Ironridge. Consequently, and prior to the hearing, the Company issued all requested shares and fees to Ironridge.

The motion to vacate judgment was heard in conjunction with the order to show cause hearing. The motion to vacate judgment was denied. The order to show cause became moot because the Company had already issued the shares. In a separate hearing Ironridge contended that the Company owed them attorney’s fees and “opportunity costs” in connection with share issuances. After submitting briefs to the court, the Company paid attorney’s fees that were owed and issued additional shares to Ironridge per the court order. However, the Company was not ordered to pay Ironridge’s alleged “opportunity costs.”

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, 2012 includes a detailed discussion of our risk factors.
 
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

   
Quarterly Issuances:
 
 
  1.
On November 29, 2012, the Company issued 3,540,711 free trading shares of common stock, exempt under Rule 145 (A) and 3(a)(10) of the Securities Act of 1933, to Ironridge Global IV, Ltd. as settlement of a legal proceeding, as reported in Part II, Item 1 of this Quarterly Report for the period ending January 31, 2013.
 
 
 
9

 
 
 
   
  2.
On December 4, 2012, the Company issued 4,200,000 free trading shares of common stock, exempt under Rule 145 (A) and 3(a)(10) of the Securities Act of 1933, to Ironridge Global IV, Ltd. as settlement of a legal proceeding, as reported in Part II, Item 1 of this Quarterly Report for the period ending January 31, 2013.
   
Subsequent Issuances:
 
  1.
On February 5, 2013, the Company issued 8,275,000 shares of restricted common stock for payment pursuant to certain Promissory Notes entered into by and between the Company and those persons receiving the shares.
   
  2.
On March 1, 2013, the Company issued 4,191,000 shares of restricted common stock for payment of consulting and services rendered to the company during the months of November and December 2012, and January of 2013 and for officer/director compensation for the months of November and December 2012, and January of 2013.
   
  3.
On March 18, 2013, the Company issued 1,616,477 free trading shares of common stock, exempt under Rule 145 (A) and 3(a)(10) of the Securities Act of 1933, to Ironridge Global IV, Ltd. as settlement of a legal proceeding, as reported in Part II, Item 1 of this Quarterly Report for the period ending January 31, 2013.
 
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

None. 
 
MINE SAFETY DISCLOSURES
   
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this quarterly report.

OTHER INFORMATION
   
Quarterly Events
 
  1.
As reported on Form 14-D (Amended) filed with the Commission on December 21, 2012, incorporated by reference herein, on November 20, 2012, the Company received an unsolicited offer from Magnolia Hill, LLC to purchase all of HMNC’s common stock and assets. The offer as presented was for $0.62 per share in a combination of both cash and stock. As of March 22, 2013, the Company’s Board of Directors is currently evaluating the offer, but the offer has not yet commenced. Further information regarding this offer is available at www.sec.gov.
   
  2.
As reported on Form 14-D (Amended) filed with the Commission on December 21, 2012, incorporated by reference herein, on December 11, 2012, the Company received a second unsolicited offer from Crowncorp Investment Corporation, a Texas corporation, to purchase all of the assets of the Company’s wholly owned subsidiary, Hondo Minerals, Inc., which holds 100% of the Company’s assets. The offer as presented was for an aggregate all cash purchase price of $75,000,000. As of March 22, 2013, the Company’s Board of Directors is currently evaluating the offer, but the offer has not yet commenced.  Further information regarding this offer is available at www.sec.gov.
 
 
10 

 
Subsequent Events
 
  1.
As reported on Form 8-K filed with the commission on February 25, 2013, incorporated by reference herein, on February 4, 2013, the Arizona Department of Environmental Quality (“ADEQ”) issued a Permit Determination Letter to Hondo Minerals Corporation, a Nevada corporation (the “Company”), to advise the Company that its Tennessee Mine facility located in the Wallapai Mining District near Chloride, Mohave County, Arizona is not subject to any standards or other requirements under Sections 111 or 112 of the Clean Air Act, does not have the potential to emit air pollutants above significance levels, and does not require an Air Quality Control Permit.  A true and correct copy of the Letter dated February 4, 2013 was furnished as Exhibit 99.1 to the Current Report on Form 8-K.
 
Additionally, on February 7, 2013, the ADEQ issued a letter to the Company to announce that it has closed the Notice of Violation (“NOV”) issued to the Company on June 11, 2012 and will not proceed with any further action against the Company in regards to this matter. A true and correct copy of the Letter dated February 7, 2013 was furnished as Exhibit 99.2 to the Current Report on Form 8-K.
 
ITEM 6.
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 an Exhibit 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 an Exhibit to the Form 8-K filed on March 8, 2011.
 3.2
 
Bylaws.
 
Incorporated by reference as an Exhibit to the Form 8-K filed on March 8, 2011.
 31.1
   
Filed herewith.
   
Filed herewith.
   
Filed herewith.
   
Filed herewith.
   
Filed herewith.
 101.INS*
 
XBRL Instance Document.
 
 Filed herewith.
 101.SCH*
 
XBRL Taxonomy Extension Schema Document.
 
 Filed herewith.
 101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 Filed herewith.
 101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 Filed herewith.
 101.LAB*
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 Filed herewith.
 101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase Document.
 
 Filed herewith.
 
*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 
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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
   
Date: March 22, 2013
/s/ William R. Miertschin
 
By: William R. Miertschin
 
Its: President and CEO
   
Date: March 22, 2013
/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:

Date: March 22, 2013
 
/s/  William R. Miertschin
   
By:  William R. Miertschin
   
Its:  Director
     
Date: March 22, 2013
 
/s/ Chris Larson
   
By: Chris Larson
   
Its: Director
     
Date: March 22 2013
 
/s/  J.C. “Skip” Headen
   
By:  J.C. “Skip” Headen
   
Its:  Director
     
Date: March 22, 2013
 
/s/  Ben Botello
   
By:  Ben Botello
   
Its: Director
     
Date: March 22, 2013
 
/s/  Howard Siegel
   
By:  Howard Siegel
   
Its:  Director

12