Banner Resources 10QSB 2007 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-QSB

(Mark One)

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2006

qTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Transition Period from ___________ to _____________

Commission File Number:  000-51939

BANNER RESOURCES INC.

(Exact name of registrant as specified on its charter)

NEVADA	98-0446606
(State or other jurisdiction of	(IRS. Employer
incorporation or organization)	Identification No.)
206-595 Howe Street
Vancouver, B.C. Canada	V7R 3Y9
(Name and address of principal executive offices)	(Zip Code)

(604) 681-2575

(Registrant’s telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.               Yesx  Noq

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

Large accelerated filerq        Accelerated filerq        Non-accelerated filerx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yesx  Noq

2

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be field by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.  Yesq   Noq

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:

7,445,000 shares issued and outstanding as of February 14, 2007

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PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

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FORWARD-LOOKING STATEMENTS

We use words like “expects,” “believes,” “intends,” “anticipates,” “plans,” “targets,” “projects” or “estimates” in this report. When used, these words and other, similar words and phrases or statements that an event, action or result “will,” “may,” “could,” or “should” occur, be taken or be achieved identify “forward-looking” statements. This report contains “forward-looking information” which may include, but is not limited to, statements with respect to the following:

• the timing of regulatory and permitting matters;

• the timing and outcome of our exploration;

•        the estimation of mineral resources and the realization of mineral reserves, if any, based on mineral resource estimates;

• estimates related to costs of exploration expenditures;

• requirements for additional capital and our ability to raise additional capital;

•        government regulation of mining operations, environmental risks, reclamation and rehabilitation expenses;

• title disputes or claims;

• limitations of insurance coverage; and

• the future price of gold, silver or other metals.

Such forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected.

Our management has included projections and estimates in this report, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the Securities and Exchange Commission or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

We qualify all the forward-looking statements contained in this report by the foregoing cautionary statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

Overview

Banner Resources Inc. was incorporated under the laws of the state of Nevada on January 24, 2005. We have commenced limited business operations and we are considered an exploration stage company. To date, our activities include organizational matters, preliminary property investigations on the Chita claims, negotiating and purchasing those claims, obtaining a geology report on the Chita claims and the preparation and filing of the registration statement of which this prospectus is a part. In connection with the organization of our Company, the founding shareholders of our Company contributed an aggregate of US$5,875 cash in exchange for a total of 5,875,000 shares. As consideration for the acquisition of the Chita claims, we issued 320,000 shares of common stock to Valor Mines Inc.

We own a 100% interest in seven mineral claims (Chita claims) consisting of an aggregate of 70 units, subject to a 2.5% Net Smelter Return royalty. We can acquire 1.5% of the Net Smelter Return for $1.0 million within 12 months from commencement of commercial production. We agreed to pay Valor Mines advance royalties of approximately $25,000 annually commencing February 1, 2008. If we fail to pay these advance royalties by February 1, 2008, we will have to transfer ownership of the Chita claims back to Valor. We acquired the Chita claims by issuing 320,000 shares of common stock to Valor Mines Inc. The Chita claims are registered in the name of our wholly owned subsidiary, Banner Exploration Ltd.

Between April and July 2005, we raised $22,500 cash from the sale of restricted stock and converted $15,000 of loans payable into stock by issuing 750,000 restricted stock to 10 persons at $0.05 per share. During our present exploration stage, Mr. Krause, our president and secretary-treasurer, will only be devoting approximately 8 hours per week of his time to our business. We do not foresee this limited involvement as negatively impacting our company over the next 12 months as all exploratory work is being performed by an outside consultant. If, however, the demands of our business require more time of Mr. Krause, such as raising additional capital or addressing unforeseen issues with regard to our exploration efforts, they are prepared to adjust their timetables to devote more time to our business. However, they may not be able to devote sufficient time to the management of our business, as and when needed.

We are actively reviewing additional natural resources properties in Canada, USA and Africa. However, we have no current plans, arrangements or intentions to acquire any specific property. We have no current plans, arrangements or intentions to enter into a joint venture with any specific party. However, we are always open to speak to third parties to see if we would be inclined to enter into a joint venture.

We filed a registration statement on Form SB-2 and a post-effective amendment on July 19, 2006, in connection with the offer and sale of up to 8,445,000 shares of our common stock, of which 5,445,000 shares are offered by the persons named in the prospectus under the caption “selling shareholders”. Up to 3,000,000 shares of our common stock were being sold by us, at a price of $0.10 per share on a self-underwritten, best efforts basis, with no minimum. On September 15, 2006, we accepted subscriptions from two investors and issued 500,000 shares of common stock at $0.20 per share for gross proceeds of $100,000. Our offering of 3,000,000 shares, of which 2,500,000 were still available for sale, ended on or about December 1, 2006.

For the offering of 5,445,000 shares by the selling shareholders, the Company plans to periodically update the registration statement.

Our principal office is located at 206-595 Howe Street, Vancouver, British Columbia, V6C 2T5, and our phone number is (604) 681-2575.

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Plan of Operations

Our plan of operations is to carry out exploration work on the Chita claims and to ascertain the quantities of base and precious metals. We will not be able to determine whether or not our mineral claims contain a mineral deposit, or reserve, until appropriate exploratory work is done and an economic evaluation based on that work concludes economic viability. We are presently in the exploration stage and there is no assurance that a mineral deposit exists on the mineral claims until appropriate geological exploration is done and a final comprehensive evaluation is concluded. There are no proven mineral reserves on the mineral claims and our proposed exploration program is entirely exploratory in nature.

The property that is the subject of our mineral claims is undeveloped and do not contain any open-pit or underground mines. There is no mining plant or equipment located on the property.

We will have to engage qualified geologists to conduct the mineral exploration program under industry standards. They will be responsible for hiring personnel and for all appropriate worker-related costs and will bill us for their services. This work is applicable to assessment requirements for the claims. The work outlined in the budget set out above will cover an additional year of tenure maintenance.

The exploration program proposed by Banner is designed to determine whether mineralization (minerals of value occurring in rocks) exists to the extent that further exploration is recommended to outline any such discovered mineralized zones. It is uncertain at this time the precise quantity of minerals in the property that would justify actual mining operations. If we decide to abandon our mineral claims at any stage of our exploration program, we intend to acquire other properties and conduct similar exploration programs. Other properties may be located in the same mining district or we may decide to seek properties in other locations in the Province of British Columbia, the United States, Africa or another part of the world.

In February 2005, Mr. Glen Macdonald, P.Geo. was hired by Banner to provide an initial Geology Report on the Chita claims (the “Macdonald Report”). Mr. Macdonald has 29 years experience as a consulting geologist. He graduated from the University of British Columbia, Canada, with degrees in Economics in 1971 and Geology in 1973. He is a member of the Association of Professional Engineers and Geoscientists of the Province of British Columbia (No. 20464) and a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta (No. 36214). The purpose of this report was to evaluate the area of the claim group, and the prior exploration work conducted on the claims, and to recommend an exploration program.

Exploration in 2005

Mr. Macdonald recommended an initial exploration program consisting of geological sampling and mapping program on the property. In July 2005, we hired an independent geological consulting services company whose field crew carried out a program of mapping and sampling on the property and filed an assessment report with the BC Ministry of Energy and Mines which kept the Chita claims in good standing until July 25, 2006.

Exploration in 2006

In June and July 2006, the same independent geological consulting services company field crew carried out a follow-up program of sampling on the property. However, the 2006 exploration season in British Columbia was unusually busy and the independent geological consulting services company was unable to initiate its assessment report until December 2006. The company alternatively paid cash of Cdn$6621.66 in lieu of work on the property to keep the claim in good standing until December 21, 2006. The company then notified the BC Ministry of Energy and Mines on December 21, 2006, that it will be filing an assessment report within 90 days which will keep the Chita claims in good standing until May 29, 2007.

We have now concluded the field work of our initial exploration program and we expect to receive sample analysis and report in the first quarter of 2007.

Rock samples were selected from various rock units to be analyzed by thin section and whole rock chemical analysis. Several copper mineralized breccia samples were collected to be tested for gold content.

Further work is required to acquire additional samples from the anomalous areas and to trace them out along strike. Geological mapping of the rock units is required. It will be necessary to determine if the geological trend is going off the property and, if so, whether additional claims will be required.

The decision to conduct additional exploration on the Chita claims will be based on the results of the exploration program. The full scope and cost of this additional work will not be known until the completion of the recommended exploration program.

Recommended Exploration Program 2007

Depending on the results of the initial exploration program, if our geologist recommends a follow-up program in 2007, we plan to follow-up with more detailed mapping and sampling at an estimated minimum cost of $15,000, assuming adequate financing is available. We may conduct more detailed geophysical surveys utilizing more sensitive geophysical techniques to enhance the data that currently exists on the claims and focus specifically upon the presently known mineralized areas. We will do more prospecting to better understand the significance of the results of the earlier exploration programs and guide future work.

Additionally, we have been reviewing a potentially expanded field season in 2007 (subject to final analysis, budget availability, and independent recommendations). We have been approached by our neighboring mineral tenure holders to join them in a regional airborne survey (dighem em / magnetic geophysical survey). The advantage to the Company is significant in that being a part of a large regional program is extremely cost effective (overall program in excess of $145,000) with our share being approximately $30,000. If we were to contract the same survey independently, we estimate that the cost would be closer to $50,000. We currently have sufficient capital to fund these projects.

Further, we are also reviewing a program (subject to final analysis, budget availability, and independent recommendations) for a trenching program which would allow geologists to sample “fresh rock” as the surface rocks are extremely weathered and leached (cretaceous period between 65 and 135 million years old). We estimate that this program will cost us approximately $100,000. We will be required to raise additional capital to fund this exploration program.

We do not have plans to purchase any significant equipment or change the number of our employees during the next 12 months. 

Results of Operations

During the quarter ended December 31, 2006, we had total expenses of $21,476, which included management fees of $3,000, rent of $1,500, professional service fees of $8,422, general and administrative expenses of $897, and mineral property costs of $7,657. We anticipate total expenses may increase during the first quarter of 2007, if an expanded exploration program is warranted.

During the quarter ended December 31, 2006, we had a comprehensive loss of $20,836 for the quarter ended December 31, 2006 to $10,247 for the same period in 2005.

During the nine month period ended December 31, 2006, we had total expenses of $51,365 ($60,429 – 2005), which included management fees of $9,000 ($9,000 - 2005), rent of $4,500 ($7,818 – 2005), professional service fees of $25,489 ($24,800 – 2005) and general and administrative expenses of $961 ($1,692 – 2005), and mineral property costs of $11,415 ($13,561 – 2005). We anticipate total expenses may increase during 2007, if we are able to raise capital to fund an expanded 2007 exploration program.

During the nine month period ended December 31, 2006, we had a comprehensive loss $51,208 to $60,747 for the same period in 2005.

Liquidity and Capital Resources

We had cash in the amount of $75,359 and prepaid expenses $1,000 as of December 31, 2006 and working capital of $27,126. Our cash requirements have been funded to date by small private placements of our equity securities and by loans from our officer and director.

Our sole officer and director, Robert Krause donated services and rent in the amount of $4,500 during the quarter. During the nine month period ended December 31, 2006, we used net cash of $31,181 for operating activities. Overall cash increased by $68,976 to $75,359 at December 31, 2006.

We have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Contractual Obligations

As of December 31, 2006, we had no non-cancelable contractual obligations.

ITEM 3. CONTROLS AND PROCEDURES

The Company’s controls and procedures have been adequately designed to ensure that information related to the Company is recorded, processed, summarized and reported on a timely basis. The controls and procedures are adequately designed to ensure that information required to be disclosed is accumulated and communicated to management, including the principal executive and principal financial officer as appropriate to allow timely decisions regarding required disclosure.

The Company’s President and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Company’s President and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information has been recorded, processed, summarized and reported on a timely basis, and that information required to be disclosed has been accumulated and communicated to them in a timely fashion to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended December 31, 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

During 2007, the Company will begin its efforts to comply with the Sarbanes-Oxley Act of 2002. The Company’s effective date for compliance is March 31, 2009.

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PART II – OTHER INFORMATION

Items 1 to 5.

Not applicable.

Item 6.

Exhibits

(a)

Exhibits

31.1

Certification of the President and Treasurer pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

32.1

Certification of the President and Treasurer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)

Reports on Form 8-K.

None

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on February 14, 2007

BANNER RESOURCES INC.

By­//s//“Robert Krause” //s//

Robert Krause

President and Treasurer

(Principal Executive Officer and

Principal Financial and Accounting Officer)

7

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Robert Krause, certify that:

1.

I have reviewed this quarterly report on Form 10-QSB of Banner Resources Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer is made known to me, particularly during the period in which this report is being prepared;

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d)

disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent function):

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a)

all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to aversely affect the small business issuer’s ability to record, process, summarize and report financial data; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal controls over financial reporting.

Dated:  February 14, 2007

By:

//s//“Robert Krause”

Robert Krause

President and Treasurer

(Principal Executive Officer and Principal

                Financial and Accounting Officer)

9

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARABANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Banner Resources Inc. (the “Company”) on Form 10-QSB for the three months ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Krause, President and Treasurer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) and 15(d) of the Securities and Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  February 14, 2007

By:

//s//“Robert Krause

Robert Krause

President and Treasurer

(Principal Executive Officer and Principal

                Financial and Accounting Officer)