Mr. John Zang reports

MORRO BAY FILES YEAR END FINANCIAL STATEMENTS

Morro Bay Resources Ltd. has filed its audited financial statements for the year ended Sept. 30, 2014, and the related management discussion and analysis of those financial statements. Copies of the financial statements and management discussion and analysis can be viewed SEDAR or on the company's website.

John Zang, chief executive officer of Morro Bay, stated: "The exploration expenditures Morro Bay made on the Penoles project during our first year of ownership uncovered a new significant discovery of a silver target at Jesus Maria. We were encouraged further when the latest drill program showed the presence of significant mineralization at San Rafael. These discoveries, along with the previously identified gold mineralization at El Capitan, make the Penoles project worth advancing forward."

During fiscal 2014, the company expended over $1.25-million on the Penoles project, located in the state of Durango, Mexico, fulfilling the project spending requirement outlined in the option agreement with Riverside Resources Ltd. Results of the drilling programs were released on June 9, 2014, June 23, 2014, and Oct. 24, 2014, indicating the presence of multiple near-surface mineralized zones. Management is very encouraged by the potential of the Penoles project and plans further drilling in 2015.

Subsequent to year-end, Morro Bay renegotiated and received an extension on its option agreement with Riverside for the Penoles project. The amended agreement removes the former requirement for the company to make a cash payment of approximately $1.35-million to Riverside and expires on March 31, 2015. In order for the company to earn a 51-per-cent interest in the project, Morro Bay is required to make payment of $750,000 to Riverside by March 31, 2015 (payable in cash or Morro Bay shares, at Morro Bay's election, provided that, if the value of Morro Bay shares is less than five cents, such payment must be made in cash).

Upon exercise of the option, a joint venture between Morro Bay and Riverside will be formed. That joint venture will see:

• Morro Bay be appointed as operator of the joint venture;
• Morro Bay is required to incur joint venture expenditures of $750,000 for each of the first three years (any amounts expended over $750,000 will be credited toward expenditure requirements of the following years);
• Riverside shall have a credit of $100,000 and $1.25-million (U.S.) against the first joint venture expenditures incurred by the joint venture;
• Should the joint venture fail to incur joint venture expenditures of at least $750,000 in each of the first three years, Riverside will have to right to acquire 100 per cent of Morro Bay's interest by returning to Morro Bay 80 per cent of the common shares issued by Morro Bay to Riverside.

In addition, assuming the exercise of the 51-per-cent option, the company retains the right to earn an additional 14 per cent (total interest of 65 per cent) in the Penoles project without change to the previously agreed upon terms. Refer to the management discussion and analysis for detailed disclosure.

As at Sept. 30, 2014, the company had cash and cash equivalents of $533,748 ($2,509,271 as at Sept. 30, 2013). Current cash and cash equivalents stand at approximately $267,000.

Qualified person and quality control/quality assurance

The scientific and technical data contained in this news release pertaining to the Penoles project was prepared under the supervision of Carl von Einsiedel, PGeo, who is responsible for ensuring that the geologic information provided in this news release is accurate. Mr. von Einsiedel is the exploration manager for Morro Bay and acts as a non-independent qualified person, as defined under National Instrument 43-101, Standards of Disclosure for Mineral Projects.

We seek Safe Harbor.