10-Q 1 hmnc-10q_043012.htm QUARTERLY REPORT hmnc-10q_043012.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 April 30, 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 April 30, 2012, there were 73,481,790 shares of the registrant’s $0.001 par value common stock issued and outstanding.
 
 
 
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.
 
 
 
 
 
Hondo Minerals Corporation
CONSOLIDATED BALANCE SHEETS
 
   
April 30,
    
July 31,
  
   
2012
    
2011
  
   
(unaudited)
    
(audited)
  
ASSETS
            
Current Assets:
            
Cash and cash equivalents
   $ 759,476     $ 2,052,048  
Other current assets
     30,179       59,386  
                 
Total Current Assets
     789,655       2,111,434  
                 
Properties, Equipment, and Buildings:
                
Vehicles
     67,183       67,183  
Office equipment
     212,915       56,428  
Mining equipment
     6,151,081       4,129,601  
Plant and buildings
     4,110,113       1,539,387  
Land and mineral properties, net of $920,000 allowance for
                
   impairment
     2,575,218       2,278,513  
Accumulated depreciation
     (26,250 )     —  
                 
Total Properties, Equipment, and Buildings
     13,090,260       8,071,112  
                 
Other Assets
     9,994       100  
                 
TOTAL ASSETS
   $ 13,889,909     $ 10,182,646  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
Current Liabilities:
                
Senior loan payable, net of $415,856 valuation of warrants
   $ 584,144     $ —  
Accounts payable
     20,749       293,066  
Accounts payable - related parties
     168,036       15,259  
                 
Total Current Liabilities
     772,929       308,325  
                 
Shareholders' Equity:
                
Common stock, $0.001 par value, 200,000,000 shares authorized
                
   73,481,790 and 57,711,390 shares issued and outstanding at
                
 April 30, 2012 and July 31, 2011, respectively
     73,482       57,711  
Additional paid-in capital
     18,827,436       13,220,847  
Treasury stock, at cost
     (12,921 )     (12,921 )
Accumulated (deficit)
     (5,771,017 )     (3,391,316 )
                 
Total Shareholders' Equity
     13,116,980       9,874,321  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
   $ 13,889,909     $ 10,182,646  
                 
The accompanying notes are an integral part of these financial statements.
 
 
F-2 
 

Hondo Minerals Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended April 30, 2012 and 2011
(Unaudited)
 
                         
   
Three Months
    
Three Months
    
Nine Months
    
Nine Months
  
   
Ended
    
Ended
    
Ended
    
Ended
  
   
April 30, 2012
    
April 30, 2011
    
April 30, 2012
    
April 30, 2011
  
                         
Operating Expenses
                        
Officers' and directors' fees
   $ 149,300     $ 270,900     $ 775,250     $ 387,800  
Professional fees
     161,439       192,917       470,531       204,626  
Corporate general and administrative
     245,577       (71,052 )     1,133,920       108,210  
                                 
Loss from Operations
     (556,316 )     (392,765 )     (2,379,701 )     (700,636 )
                                 
Other Income (Expense)
                                
Other income
     —       15,930       —       15,930  
Interest expense
     —       —       —       (26,862 )
                                 
Net (Loss)
   $ (556,316 )   $ (376,835 )   $ (2,379,701 )   $ (711,568 )
                                 
(Loss) per share
                                
Basic and fully diluted:
                                
Weighted average number
                                
of shares outstanding
     67,259,290       31,442,327       63,250,940       29,682,415  
(Loss) per share
   $ (0.01 )   $ (0.01 )   $ (0.04 )   $ (0.02 )
 
The accompanying notes are an integral part of these financial statements.
 
 
F-3 
 

Hondo Minerals Corporation
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Nine Months Ended April 30, 2012 and 2011
(Unaudited)
 
             
   
2012
    
2011
  
             
Cash flows from operating activities:
            
  Net (loss)
   $ (2,379,701 )   $ (711,568 )
  Adjustments to reconcile net (loss) to net cash used in
                
    operating activities:
                
      Depreciation expense
     26,250       —  
      Common stock issued for services
     278,050       31,275  
      Common stock issued for officers' and directors' fees
     775,250       116,900  
      Common stock issued for interest-related party
     —       26,862  
      Common stock issued for payment of accounts payable
     —       395,250  
  Changes in current assets and liabilities:
                
      Accounts receivable
     —       4,200  
      Other current assets
     29,207       —  
      Accounts payable
     (272,318 )     (63,023 )
      Accounts payable - related parties
     152,777       —  
                 
Net cash (used) in operating activities
     (1,390,485 )     (200,104 )
                 
Cash flows from investing activities:
                
      Purchase of vehicles
     —       (56,633 )
      Purchase of office equipment
     (156,487 )     —  
      Purchase of mining equipment
     (2,021,480 )     (224,713 )
      Purchase of buildings
     (2,204,976 )     (669,412 )
      Purchase of land and mining properties
     (296,705 )     (216,387 )
      Deposit on office space
     (9,893 )     —  
                 
Net cash (used) in investing activities
     (4,689,541 )     (1,167,145 )
                 
Cash flows from financing activities
                
      Proceeds from shareholder loans
     1,000,000       143,307  
      Sale of common stock
     3,787,454       2,486,200  
                 
Net cash provided by financing activities
     4,787,454       2,629,507  
                 
Net (decrease) increase in cash and cash equivalents
     (1,292,572 )     1,262,258  
Cash and cash equivalents, beginning of period
     2,052,048       10,638  
                 
Cash and cash equivalents, end of period
   $ 759,476     $ 1,272,896  
 
The accompanying notes are an integral part of these financial statements
(Continued)
 
 
F-4 
 
 
Hondo Minerals Corporation
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Nine Months Ended April 30, 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
   $ —     $ 62,500  
Common stock issued for buildings
     365,750       —  
Acquisition of mining equipment
     —       (62,500 )
Acquisition of buildings
     (365,750 )     —  
   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 )     —  
Valuation of warrants associated to debt
     (415,856 )     —  
Issuance of warrants associated to debt
     415,856       —  
    $ —     $ —  
 
The accompanying notes are an integral part of these financial statements
 
 
F-5 
 
 
Hondo Minerals Corporation
Notes to Consolidated Financial Statements
April 30, 2012
Unaudited
 
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.

 
F-6 
 
 
Hondo Minerals Corporation
Notes to Consolidated Financial Statements
April 30, 2012
Unaudited
 
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 nine months ended April 30, 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 nine months ended April 30, 2012, 2,096,300 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.

On April 19, 2012, Hondo Minerals Corporation (the “Company”) issued an aggregate of 6,500,000 shares of the Company’s common stock, par value $0.001 per share (the “Initial Shares”), to Ironridge Global IV, Ltd. (“Ironridge”), in settlement of $1,648,554.39 in bona fide accounts payable of the Company (the “Accounts Payable”).  The Initial Shares were issued pursuant to an Order for Approval of Stipulation for Settlement of Claims (the “Order”) between the Company and Ironridge, in settlement of the Accounts Payable which had been purchased by Ironridge from certain creditors.  In addition, the Order provides that for every ten million shares of the Company’s Common Stock that trade during the a defined calculation period, or if at any time during such period a daily VWAP is below 80% of the closing price on the day before the issuance date, the Company will immediately issue additional shares (each, an “Additional Issuance”), subject to a 9.99% beneficial ownership limitation specified in the Order. The transaction thereby substantially reduced the Company’s liabilities, including its outstanding accounts payable balance.

 
F-7 
 
.
Hondo Minerals Corporation
Notes to Consolidated Financial Statements
April 30, 2012
Unaudited
 

Note 2 – Equity Transactions (continued)
 
During the month of April, the Company received $1,000,000 cash proceeds through a senior loan agreement.  In connection with the $1,000,000 senior loan payable were one million Class ‘G’ warrants and one million Class ‘H’ warrants.  The Class ‘G’ warrants have an exercise price of $0.50, while the Class ‘H’ warrants have an exercise price of $0.75; both classes of warrant may be exercisable for the purchase of three shares of the Company’s common stock.  All unexercised warrants expire on April 30, 2014.  These warrants were valued at $415,856 using the Black-Scholes-Merton Valuation Model with the stock price on the date of the grant at either $0.43 for warrants associated to the senior loan dated April 26, 2012, or $0.35 for warrants associated to the senior loan dated April 30, 2012.  The expected volatility was calculated at 76.06%, while the risk-free rate-of-return of 0.26% was based on a two-year Nominal Treasury constant maturity.

Since these warrants are associated with the debt, the value of the warrants will be amortized as a discount to the debt over the life of the debt, which according to the senior loan agreement is one year at 10% annual simple interest.  Furthermore, due to the late date of the senior loan agreement and the attached warrants, no amortization was recorded as of April 30, 2012.

Note 3 - Subsequent Events

Transactions have been evaluated from the date of the financial statements through the date the financial statements were available for issuance.  Subsequent to the quarter-ended date of April 30, 2012, the Company received an additional $250,000 cash proceeds through the senior loan agreement, also with warrants attached.


 
F-8 
 
 
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
   
April 30, 2012
    
April 30, 2011
  
Current Assets
   $ 789,655     $ 1,272,895  
Current Liabilities
   $ 772,929     $ 20,000  
Working Capital (Deficit)
   $ 16,726     $ 1,252,895  
Cash Flows
   
April 30, 2012
    
April 30, 2011
  
Cash Flows from (used in) Operating Activities
   $ (1,390,485 )   $ (200,104 )
Cash Flows Used In Investing Activities
   $ (4,689,541 )   $ (1,167,145 )
Cash Flows from (provided by) Financing Activities
   $ 4,787,454     $ 2,629,507  
Net Increase (decrease) in Cash During Period
   $ (1,292,572 )   $ 1,262,258  

Operating Revenues

We recorded no revenues for the three months ended April 30, 2012. From the period of September 25, 2007 (inception) to April 30, 2012, we recorded no revenues.

Operating Expenses and Net Loss

Operating expenses for the three month period ended April 30, 2012 was $556,316 and is comprised of officer and director fees, professional fees, and corporate general and administrative expenses. Operating expenses for the three month period ended April 30, 2011 were $392,765 and comprised of officer and director fees, professional fees and, corporate general and administrative expenses.

Operating expenses for the nine month period ended April 30, 2012 was $2,379,701 and is comprised of officer and director fees, professional fees, and corporate general and administrative. Operating expenses for the nine month period ended April 30, 2011 were $700,636 and is comprised of officer and director fees, professional fees, and corporate general and administrative expenses.

Net loss for the three month period ended April 30, 2012 was $556,316 compared to net loss of $376,835 for the three month period ended April 30, 2011. Net loss for the nine month period ended April 30, 2012 was $2,379,701 compared to net loss of $711,568 for the nine month period ended April 30, 2011.

Liquidity and Capital Resources

At April 30, 2012 the Company's cash balance was $759,476 compared to $2,052,048 as at April 30, 2011. 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.
 
 
9
 

Cashflow from Operating Activities

During the period ended April 30, 2012, the Company used $1,390,485 of cash for operating activities compared to the use of $200,104 of cash for operating activities during the period ended April 30, 2011.

Cashflow from Investing Activities
 
During the period ended April 30, 2012, the Company used $4,689,541 of cash for investing activities compared to the use of $1,167,145 of cash for operating activities during the period ended April 30, 2011.

Cashflow from Financing Activities

During the period ended April 30, 2012 the Company received $4,787,454 of cash from financing activities compared to $2,486,200 for the period ended April 30, 2011. The change in cash flows from financing activities is attributed to sale of common stock.
 
Quarterly 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. 
 
The company is not currently on pace to meet the projections issued on February 8, 2012 because of subsequent delays in manufacturing and delivery of RenoCell system and additional equipment from other manufactures. A more detailed discussion of these developments is discussed in the Subsequent Developments of this filing and hereby incorporated herein.
 
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.

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.

During the nine months ended April 30, 2012 the Company sold 4,141,400 shares of its common stock at $.50 per unit for net proceeds of $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.

During the month of April, the Company received $1,000,000 cash proceeds through a senior loan agreement.  In connection with the $1,000,000 senior loan payable were one million Class ‘G’ warrants and one million Class ‘H’ warrants.  The Class ‘G’ warrants have an exercise price of $0.50, while the Class ‘H’ warrants have an exercise price of $0.75; both classes of warrant may be exercisable for the purchase of three shares of the Company’s common stock.  All unexercised warrants expire on April 30, 2014.  These warrants were valued at $415,856 using the Black-Scholes-Merton Valuation Model with the stock price on the date of the grant at either $0.43 for warrants associated to the senior loan dated April 26, 2012, or $0.35 for warrants associated to the senior loan dated April 30, 2012.  The expected volatility was calculated at 76.06%, while the risk-free rate-of-return of 0.26% was based on a two-year Nominal Treasury constant maturity.

Subsequent Developments
 
Subsequent to the quarter-ended date of April 30, 2012, the Company received an additional $250,000 cash proceeds through the senior loan agreement, also with warrants attached.
 
As also discussed in the subsequent issuances discussion of Part II of this filing and incorporated herein, on June 7, 2012, the Company issued an aggregate of 2,400,000 shares of common stock, par value $0.001 per share (the “Final Shares”), to Ironridge Global IV, Ltd. (“Ironridge”), in the additional issuance necessary to perfect the settlement of $1,648,544.39 in bona fide accounts payable of the Company.  The Final Shares were issued pursuant  to an Order for Approval of Stipulation for Settlement of Claims (the “Order”) between the Company and Ironridge, in settlement of the Accounts Payable which had been purchased by Ironridge from certain creditors.

As referenced on this Form 10-Q in Quarterly Developments, the Company has experienced substantial delays in the delivery and implementation of the RenoCell system. However, as of June 7, 2012, the Company has finally received and installed its 24 Bank RenoCell system and other extraction equipment and testing has begun on the entire production circuit for initial operation. During the period of the delay the Company doubled its potential processing capacity with the installation of the additional equipment.
 
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.
 
 
10
 
 
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.

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.
 
 
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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.
 

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 April 30, 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.

 
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Changes in Internal Control over Financial Reporting

None.

PART II - OTHER INFORMATION

 
LEGAL PROCEEDINGS

On April 18, 2012, Hondo Minerals Corporation (the “Company”) was engaged in litigation by Ironridge Global IV, Ltd. (“Ironridge”), for settlement of the Accounts Payable which had been purchased by Ironridge from certain creditors.  The Company was able to settle this suit with a settlement of $1,648,554.39 payable in shares of the Company.  The Settlement Shares were issued pursuant to an Order for Approval of Stipulation for Settlement of Claims (the “Order”) between the Company and Ironridge.  The last shares issued in full release and settlement of this claim occurred on June 7, 2012, making this suit completely resolved.

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.

 
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:
 
On April 19, 2012, Hondo Minerals Corporation (the “Company”) issued an aggregate of 6,500,000 shares of the Company’s common stock, par value $0.001 per share (the “Initial Shares”), to Ironridge Global IV, Ltd. (“Ironridge”), in initial settlement of $1,648,554.39 in bona fide accounts payable of the Company (the “Accounts Payable”). The Initial Shares were issued pursuant to an Order for Approval of Stipulation for Settlement of Claims (the “Order”) between the Company and Ironridge, in settlement of the Accounts Payable which had been purchased by Ironridge from certain creditors.

For the period ending April 30, 2012, 2,096,300 shares of the Company’s common stock were issued for officers’ and directors’ fees.

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.

2.  
Subsequent Issuances:

On June 7, 2012, Hondo Minerals Corporation (the “Company”) issued an aggregate of 2,4 00,000 shares of the Company’s common stock, par value $0.001 per share (the “Final Shares”), to Ironridge Global IV, Ltd. (“Ironridge”), in  the additional issuance necessary to perfect settlement of $1,648,554.39 in bona fide accounts payable of the Company (the “Accounts Payable”). The Final Shares were issued pursuant to an Order for Approval of Stipulation for Settlement of Claims (the “Order”) between the Company and Ironridge, in settlement of the Accounts Payable which had been purchased by Ironridge from certain creditors.  This Final Issuance is pursuant to and previously referenced in the Company’s Current Report on Form 8-K filed with the Commission on 4/25/2012 which described in more detail.
 
DEFAULTS UPON SENIOR SECURITIES
   
 
NONE.
 
 
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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
   
 
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.
95.1 Mine Safety Disclosures. 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:  June 14, 2012
/s/ William R. Miertschin
 
By: William R. Miertschin
 
Its: President and CEO
   
Dated:  June14, 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:  June 14, 2012
  
/s/  William R. Miertschin
   
By:  William R. Miertschin
   
Its:  Director
     
Dated:  June 14, 2012
  
/s/ Chris Larson
   
By: Chris Larson
   
Its: Director
     
Dated:  June 14, 2012
  
/s/  J.C. “Skip” Headen
   
By:  J.C. “Skip” Headen
   
Its:  Director
     
Dated:  June 14, 2012
  
/s/  Ben Botello
   
By:  Ben Botello
   
Its: Director
     
Dated:  June 14, 2012
  
/s/  Howard Siegel
   
By:  Howard Siegel
   
Its:  Director
 
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