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 June 30, 2008
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number: 333-135354
DENARII RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Nevada 98-0491567
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
502 E. John Street
Carson City, Nevada 89706 Telephone: (604) 685-7552
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Former Name, Address and Fiscal Year, If Changed Since Last Report
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. Yes [X] No [ ]
We had a total of 10,050,000 shares of common stock issued and outstanding at
July 31, 2008.
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The interim financial statements included herein are unaudited but reflect, in
management's opinion, all adjustments, consisting only of normal recurring
adjustments, that are necessary for a fair presentation of our financial
position and the results of our operations for the interim periods presented.
Because of the nature of our business, the results of operations for the
quarterly period ended June 30, 2008 are not necessarily indicative of the
results that may be expected for the full fiscal year.
2
DENARII RESOURCES INC.
(An Exploration Stage Company)
Balance Sheet
(Stated in US Dollars)
As of
June 30, December 31,
2008 2007
-------- --------
(Audited)
Assets
Current assets
Cash $ -- $ --
-------- --------
Total current assets -- --
-------- --------
Total Assets $ -- $ --
======== ========
Liabilities
Current liabilities
Accounts payable $ 15,181 $ 9,601
-------- --------
Total current liabilities 15,181 9,601
Long term liabilities -- --
-------- --------
Total Liabilities 15,181 9,601
======== ========
Equity
100,000,00 Common Shares Authorized, 10,050,000
Shares Issued at $0.001 Per Share 12,000 7,950
Additional paid-in capital 54,800 46,850
Deficit accumulated during exploration stage (81,981) (64,401)
-------- --------
Total stockholders equity (15,181) (9,601)
-------- --------
Total liabilites and stockholders equity $ -- $ --
======== ========
The accompanying notes are an integral part of these financial statements.
3
DENARII RESOURCES INC.
(An Exploration Stage Company)
Income Statement
(Stated in US Dollars)
For the three month For the six month
period ended period ended From inception
--------------------------- -------------------------- (March 23, 2006) to
June 30, June 30, June 30, June 30, December 31,
2008 2007 2008 2007 2007
---------- ---------- ---------- ---------- ----------
Revenue $ -- $ -- $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
Expenses
Recognition of an Impairment Loss
(Mineral Claims) -- -- -- -- 10,000
Accounting & Professional Fees 15,855 20,075 17,580 23,844 71,981
---------- ---------- ---------- ---------- ----------
Total Expenses 15,855 20,075 17,580 23,844 81,981
Provision for Income Tax -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Net Income (Loss) $ (15,855) $ (20,075) $ (17,580) $ (23,844) $ (81,981)
========== ========== ========== ========== ==========
Basic & Diluted (Loss) per Common Share (0.002) (0.003) (0.002) (0.003)
---------- ---------- ---------- ----------
Weighted Average Number of Common Shares 8,762,637 8,000,000 8,284,615 8,000,000
The accompanying notes are an integral part of these financial statements.
4
DENARII RESOURCES INC.
(An Exploration Stage Company)
Statements of Cash Flows
(Stated in US Dollars)
For the three month For the six month
period ended period ended From inception
--------------------------- -------------------------- (March 23, 2006) to
June 30, June 30, June 30, June 30, December 31,
2008 2007 2008 2007 2007
--------- --------- --------- --------- --------
OPERATING ACTIVITIES
Net income (loss) $ (15,855) $ (20,075) $ (17,580) $ (23,844) $(81,981)
Recognition of an Impairment Loss
(Mineral Claims) -- -- 10,000
Accounts payable 3,855 20,075 5,580 23,844 15,181
--------- --------- --------- --------- --------
NET CASH USED IN OPERATING ACTIVITIES (12,000) -- (12,000) -- (56,800)
INVESTING ACTIVITIES
Purchase of mineral claim -- -- -- -- (10,000)
--------- --------- --------- --------- --------
NET CASH USED IN INVESTING ACTIVITIES -- -- -- -- (10,000)
FINANCING ACTIVITIES
Common shares issued at founders
@ 0.001 per share 2,000 -- 2,100 -- 10,548
Additional paid-in capital 10,000 -- 9,900 -- 56,252
--------- --------- --------- --------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,000 -- 12,000 -- 66,800
Cash at beginning of period -- -- -- -- --
--------- --------- --------- --------- --------
CASH AT END OF PERIOD $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Cash Paid For:
Interest $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Income Tax $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Non-Cash Activities
Shares issued in Lieu of Payment for
Service $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Stock issued for accounts payable $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Stock issued for notes payable and interest $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Stock issued for convertible debentures and
interest $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Convertible debentures issued for services $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Warrants issued $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Stock issued for penalty on default of
convertible debentures $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Note payable issued for finance charges $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
Forgiveness of note payable and accrued
interest $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========
The accompanying notes are an integral part of these financial statements.
5
DENARII RESOURCES INC.
(An Exploration Stage Company)
Footnotes to the Financial Statements
From Inception (March 23, 2006) to June 30, 2008
(Stated in US Dollars)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Denarii Resources, Inc. ("Denarii Resources" or the "Company") was
organized under the laws of the State of Nevada on March 23, 2006 to
explore mining claims and property in North America.
Our property, known as the McNab Molybdenum Property, is located on the
west side of Howe Sound near the headwaters of McNab Creek, approximately
40 km northwest of Vancouver, BC. The McNab Molybdenum property comprises
two mineral claims containing 16 cell claim units totalling 334.809
hectares.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year-end.
b. Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement
exists, goods delivered, the contract price is fixed or determinable, and
collectibility is reasonably assured.
c. Income Taxes
The Company prepares its tax returns on the accrual basis. The Company
accounts for income taxes under the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("Statement 109"). Under
Statement 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
d. Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
e. Assets
The company has no cash as of June 30, 2008.
6
Mineral Property
In 2006 the Company purchased mining claims located in the McNab Molybdenum
Property, located near the headwaters of McNab Creek, approximately 40 km
northwest of Vancouver, BC. Access to the property is presently via water
or helicopter. The property consists of 334.809 hectares
The company plans to development these claims by performing reconnaissance
geological mapping, prospecting and rock sampling. Further development will
include sample drilling and reporting of drilling results. These
development costs are estimated to be approximately $250,000. The company
will have to raise money to cover these development and exploratory costs.
In accordance with FASB No. 89 paragraph 14 "Additional Disclosure by
Enterprises with Mineral Resources Assets" the Company since inception
(March 23, 2006) has yet to establish proven or probable mining reserves
and has no quantities of proved mineral reserves or probable mineral
reserves. Moreover, the Company has not purchased or sold proved or
probable minerals reserves since inception. Due to the fact that we have no
proven or probable mining reserves the Company will record our exploration
and development costs within operating expenses, as opposed to capitalizing
those costs.
f. Income
Income represents all of the company's revenue less all its expenses in the
period incurred. The Company has no revenues as of June 30, 2008 and has
paid expenses of $81,981 since inception. For the six month period ended
June 30, 2008 it has incurred expenses of $17,580.
In accordance with FASB/ FAS 142 option 12, paragraph 11 "Intangible Assets
Subject to Amortization", a recognized intangible asset shall be amortized
over its useful life to the reporting entity unless that life is determined
to be indefinite. If an intangible asset has been has a finite useful life,
but the precise length of that life is not known, that intangible asset
shall be amortized over the best estimate of its useful life. The method of
amortization shall reflect the pattern in which the economic benefits of
the intangible asset are consumed or otherwise used up. If that pattern
cannot be reliable determined, a straight-line amortization method shall be
used. An intangible asset shall not be written down or off in the period of
acquisition unless it becomes impaired during that period.
The Company has determined that its McNab Molybdenum property is to be held
and used for impairment, as per SFAS 144: "Accounting for the Impairment of
Long-Live Assets." Impairment is the condition that exists when the
carrying amount of a long-lived asset (asset group) exceeds its fair value.
An impairment loss shall be recognized only if the carrying amount of a
long- lived asset (asset group) is not recoverable and exceeds its fair
value. The carrying amount of a long-lived asset (asset group) is not
recoverable if it exceeds the sum of the undisclosed cash flows expected to
result from the use and eventual disposition of the asset (asset group).
Our determination is based on the Company's current period operating loss
combined with the Company's history of operating losses and our projection
that demonstrates continuing losses associated with the McNab Molybdenum.
7
In accordance with FASB 144, 25, "An impairment loss recognized for a
long-lived asset (asset group) to be held and used shall be included in
income from continuing operations before income taxes in the income
statement of a business enterprise and in income from continuing operations
in the statement of activities of a not-for-profit organization. If a
subtotal such as "income from operations" is presented, it shall include
the amount of that loss." The Company has recognized the impairment of a
long-lived asset by declaring that amount as a loss in income from
operations in accordance with an interpretation of FASB 144.
For the six month
period ended
June 30,
2008
----------
Revenue $ --
----------
Expenses
Recognition of an Impairment Loss
(Mineral Claims) --
Accounting & Professional Fees 17,580
----------
Total Expenses 17,580
Provision for Income Tax --
----------
Net Income (Loss) $ (17,580)
==========
g. Basic Income (Loss) Per Share
In accordance with SFAS No. 128-"Earnings Per Share", the basic loss per
common share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding.
Diluted loss per common share is computed similar to basic loss per common
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were
dilutive. At June 30, 2008, the Company has no stock equivalents that were
anti-dilutive and excluded in the earnings per share computation.
i. Cash and Cash Equivalents
For purposes of the statement of cash flows, the company considers all
highly liquid investments purchased with maturity of three months or less
to be cash equivalents.
j. Liabilities
Liabilities are made up of current liabilities. Current liabilities include
accounts payable of $15,181 as of June 30, 2008.
8
Share Capital
a) Authorized:
100,000,000 common shares with a par value of $0.001
b) Issued:
The company issued to the founders 8,000,000 common shares of stock for
$10,000. On October 3, 2007, 298,000 of these common shares where cancelled
for a net of founders shares of 7,502,000. The net per share costs was
$0.00013333. The company has had multiple private placements. The first was
on July 1, 2007, 250,000 common shares for $25,000 at $0.10 per share. The
second on September 28, 2007, 198,000 common shares for $19,800 at $0.10
per share. The third private placement was on June 2, 2008 for 100,000
common shares for $10,000 at $0.10 per share. The company also issued
2,000,000 shares on June 2, 2008 to the director for services.
As of June 30, 2008, there are Ten Million Fifty Thousand (10,050,000)
shares issued and outstanding at a value of $0.001 per share
There are no preferred shares authorized. The Company has issued no
preferred shares.
The Company has no stock option plan, warrants or other dilutive
securities.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal
course of business. However, the Company has accumulated a loss and is new.
This raises substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from this uncertainty.
As shown in the accompanying financial statements, the Company has incurred
a net loss of $81,981 for the period from March 23, 2006 (inception) to
June 30, 2008 and has not generated any revenues. The future of the Company
is dependent upon its ability to obtain financing and upon future
profitable operations from the development of acquisitions. Management has
plans to seek additional capital through a private placement and public
offering of its common stock. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts of and classification of liabilities that might be
necessary in the event the Company cannot continue in existence.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS.
The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These forward-looking statements involve risks and uncertainties,
including statements regarding Denarii Resources Inc. 's (the "Company") capital
needs, business strategy and expectations. Any statements contained herein that
are not statements of historical facts may be deemed to be forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may", "will", "should", "expect", "plan", "intend",
"anticipate", "believe", "estimate", "predict", "potential" or "continue", the
negative of such terms or other comparable terminology. Actual events or results
may differ materially. In evaluating these statements, you should consider
various factors, including the risks outlined below, and, from time to time, in
other reports the Company files with the SEC. These factors may cause the
Company's actual results to differ materially from any forward-looking
statement. The Company disclaims any obligation to publicly update these
statements, or disclose any difference between its actual results and those
reflected in these statements. The information constitutes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.
As used in this quarterly report, the terms "we," "us," "our," and "our company"
mean Denarii Resources Inc. unless otherwise indicated. All dollar amounts in
this quarterly report are in U.S. dollars unless otherwise stated.
OVERVIEW.
Denarii Resources Inc. ("Denarii" or the "Company") was organized under the laws
of the State of Nevada on March 23, 2006, to explore mining claims and property
in North America.
The Company's property, known as McNabb Molybdenum, is located on the west side
of Howe Sound near the headwaters of McNab Creek, approximately 40 km northwest
of Vancouver, BC. The McNabb Molybdenum property comprises two mineral claims
containing 16 cell claim units totalling 334.809 hectares.
We are an exploration stage company and we have not realized any revenues to
date. We do not have sufficient capital to enable us to commence and complete
our exploration program. We will require financing in order to conduct the
exploration program described in the section entitled, "Business of the Issuer."
We are not a "blank check company," as we do not intend to participate in a
reverse acquisition or merger transaction. A "blank check company" is defined by
securities laws as a development stage company that has no specific business
plan or purpose or has indicated that its business plan is to engage in a merger
or acquisition with an unidentified company or companies, or other entity or
person.
10
RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2008.
The accompanying financial statements show that the Company has incurred a net
loss of $17,580 for the six month period ended June 30, 2008 and has not yet
generated any revenues that can offset operating expenses. We anticipate that we
will not earn revenues until such time as we have entered into commercial
production, if any, of our mineral properties. We are presently in the
exploration stage of our business and we can provide no assurance that we will
discover commercially exploitable levels of mineral resources on our properties,
or if such resources are discovered, that we will enter into commercial
production of our mineral properties.
LIQUIDITY AND FINANCIAL CONDITION.
Based on our current operating plan, we do not expect to generate revenue that
is sufficient to cover our expenses for at least the next year. In addition, we
do not have sufficient cash and cash equivalents to execute our operations for
the next year. We will need to obtain additional financing to operate our
business for the next twelve months. We will raise the capital necessary to fund
our business through a private placement and public offering of our common
stock. Additional financing, whether through public or private equity or debt
financing, arrangements with shareholders or other sources to fund operations,
may not be available, or if available, may be on terms unacceptable to us. Our
ability to maintain sufficient liquidity is dependent on our ability to raise
additional capital. If we issue additional equity securities to raise funds, the
ownership percentage of our existing shareholders would be reduced. New
investors may demand rights, preferences or privileges senior to those of
existing holders of our common stock. Debt incurred by us would be senior to
equity in the ability of debt holders to make claims on our assets. The terms of
any debt issued could impose restrictions on our operations. If adequate funds
are not available to satisfy either short or long-term capital requirements, our
operations and liquidity could be materially adversely affected and we could be
forced to cease operations.
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 is material to
stockholders.
INFLATION.
In the opinion of management, inflation has not had a material effect on our
operations.
CONSULTANTS.
The Company currently has no stock option plan.
RESEARCH AND DEVELOPMENT EXPENDITURES.
We have not incurred any research or development expenditures since our
incorporation.
PATENTS AND TRADEMARKS.
We do not own, either legally or beneficially, any patent or trademark.
11
REGISTRATION STATEMENT.
On June 27, 2006, we filed a SB-1 with the Security and Exchange Commission as
defined in Rule 12b-2 (ss. 240.12b-2) of the Securities Exchange Act of 1934
(the "Exchange Act"). The purpose of this registration was to register a class
of securities under Section 12 (g) of the Exchange Act. In July of 2006, The
Company filed an amendment to the registration statement on the form SB-1.
HOLDERS OF OUR COMMON STOCK.
As of June 30, 2008, we had 177 stockholder(s) holding 10,050,000 shares of our
common stock.
DIVIDENDS.
There are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:
1. We would not be able to pay our debts as they become due in the usual
course of business; or
2. Our total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those receiving
the distribution.
We have not declared any dividends and we do not plan to declare any dividends
in the foreseeable future.
ITEM 3. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS
We evaluated the effectiveness of our disclosure controls and procedures as of
the date of this report. This evaluation was conducted by our President and
Chief Executive Officer, Chris Lori.
Disclosure controls are controls and other procedures that are designed to
ensure that information that we are required to disclose in the reports we file
pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported.
CHANGES IN INTERNAL CONTROLS.
There was no change in our internal controls or in other factors that could
affect these controls during our last fiscal quarter that has materially
affected, or is reasonably likely to materially affect our internal control over
financial reporting.
12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not a party to any material legal proceedings and to our knowledge, no
such proceedings are threatened or contemplated.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to our security holders for a vote during the period
ending June 30, 2008.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit Number Description of Exhibit
- -------------- ----------------------
3.1 Articles of Incorporation(1)
3.2 Bylaws(1)
31.1 Certification by Chief Executive Officer and Chief Financial
Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the
Exchange Act, promulgated pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith
32.1 Certification by Chief Executive Officer and Chief Financial
Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the
Exchange Act and Section 1350 of Chapter 63 of Title 18 of
the United States Code, promulgated pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 filed herewith
- ----------
(1) Filed with the SEC as an exhibit to our Form SB-1 Registration Statement
originally filed on March 23, 2006.
13
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: July 31, 2008
Signature Title Date
--------- ----- ----
By: /s/ CHRIS LORI Chief Executive Officer, July 31, 2008
- ------------------------- Chief Financial Officer,
Chris Lori President, Secretary, Treasurer
and Director (Principal Executive
Officer and Principal Accounting Officer)
14