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 March 31, 2009
[ ] 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: (352) 361-1659
(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 61,500,000 shares of common stock issued and outstanding at
May 12, 2009.
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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 March 31, 2009 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
March 31, December 31,
2009 2008
--------- ---------
(Audited)
Assets
Current assets
Cash $ -- $ --
--------- ---------
Total current assets -- --
Total Assets $ -- $ --
--------- ---------
Liabilities
Current liabilities
Accounts payable $ 26,520 $ 22,699
Accounts payable 620 --
--------- ---------
Total current liabilities 27,140 22,699
Long Term Liabilities -- --
--------- ---------
Total Liabilities 27,140 22,699
========= =========
Equity
100,000,000 Common Shares Authorized, 61,500,000
Shares Issued at $0.001 Per Share 61,500 61,500
Additional paid-in capital 223,300 223,300
Deficit accumulated during exploration stage (311,940) (307,499)
--------- ---------
Total stockholders equity (27,140) (22,699)
--------- ---------
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 For the
three month three month From inception
period ended period ended (March 23, 2006) to
March 31, March 31, March 31,
2009 2008 2009
----------- ----------- -----------
Revenue $ -- $ -- $ --
----------- ----------- -----------
Expenses
Recognition of an Impairment Loss
(Mineral Claims) -- -- 10,000
Accounting & Professional Fees 4,441 1,500 300,545
Corporate State Filing Fees -- 225 1,395
----------- ----------- -----------
Total Expenses 4,441 1,725 311,940
----------- ----------- -----------
Provision for Income Tax -- -- --
Net Income (Loss) $ (4,441) $ (1,725) $ (311,940)
=========== =========== ===========
Basic & Diluted (Loss) per Common Share (0.000) (0.000)
----------- -----------
Weighted Average Number of Common Shares 61,500,000 47,700,000
The accompanying notes are an integral part of these financial statements.
4
DENARII RESOURCES INC.
(An Exploration Stage Company)
STATEMENTS OF STOCKHOLDER'S EQUITY
From Inception (March 23, 2006) to March 31, 2009
(Stated in US Dollars)
Deficit
Accumulated
During
Common Stock Paid in Exploration Total
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Shares issued to founders - 45,012,000 $45,012 $(35,012) $ -- $ 10,000
March 23, 2006 at $0.0133
per share
Net (Loss) for period (22,826) (22,826)
----------- ------- -------- --------- ---------
Balance, December 31, 2006 45,012,000 45,012 (35,012) (22,826) (12,826)
Stock issued for cash -
July 1, 2007 at $0.01
per share 1,500,000 1,500 23,500 25,000
Stock issued for cash -
Sept 28, 2007 at $0.01
per share 1,188,000 1,188 18,612 19,800
Net (Loss) for period (41,575) (41,575)
----------- ------- -------- --------- ---------
Balance, December 31, 2007 47,700,000 47,700 7,100 (64,401) (9,601)
Stock issued for services -
April 15, 2008 600,000 600 9,400 10,000
Stock issued for cash -
June 2, 2008 at $0.01 per share 600,000 600 9,400 10,000
Stock issued for services -
June 2, 2008 12,000,000 12,000 188,000 200,000
Stock issued for cash -
October 10, 2008 at $0.01
per share 600,000 600 9,400 10,000
Net (Loss) for period (243,098) (243,098)
----------- ------- -------- --------- ---------
Balance, December 31, 2008 61,500,000 61,500 223,300 (307,499) (22,699)
Net (Loss) for period (4,441) (4,441)
----------- ------- -------- --------- ---------
Balance, March 31, 2009 61,500,000 $61,500 $223,300 $(311,940) $ (27,140)
=========== ======= ======== ========= =========
The accompanying notes are an integral part of these financial statements.
5
DENARII RESOURCES INC.
(An Exploration Stage Company)
Statements of Cash Flows
(Stated in US Dollars)
For the For the
three month three month From inception
period ended period ended (March 23, 2006) to
March 31, March 31, March 31,
2009 2008 2009
---------- ---------- ----------
OPERATING ACTIVITIES
Net income (loss) $ (4,441) $ (1,725) $ (311,940)
Recognition of an Impairment Loss
(Mineral Claims) -- -- 10,000
Accounts payable 3,821 1,725 26,520
Related Party Loan 620 -- 620
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES -- -- (274,800)
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 -- -- 61,500
Additional paid-in capital -- -- 223,300
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- 284,800
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 $ -- $ -- $ 220,000
========== ========== ==========
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.
6
DENARII RESOURCES INC.
(An Exploration Stage Company)
Footnotes to the Financial Statements
From Inception to March 31, 2009
(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 includes 4 cell claim
units totalling 83.702 hectares.
The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at March 31, 2009, and for all periods
presented herein, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
2007 audited financial statements. The results of operations for the periods
ended March 31, 2009 and 2008 are not necessarily indicative of the operating
results for the full years.
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
collectability 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
7
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 March 31, 2009.
In accordance with FASB No. 89 paragraph 14 "Additional Disclosure by
Enterprises with Mineral Resources Assets" the Company since inception 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 March 31, 2009 and has paid
expenses of $311,940 since inception. For the three-month period ending March
31, 2009 it has incurred expenses of $4,441.
g. Recent Account Pronouncements
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.
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.
8
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, DETERMINING
WHETHER INSTRUMENTS GRANTED IN SHARE-BASED PAYMENT TRANSACTIONS ARE
PARTICIPATING SECURITIES, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the
computation of earnings per share under the two-class method as described in
FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share."
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited. We
are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF
03-6-1 would have material effect on our consolidated financial position and
results of operations if adopted.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation
of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company's financial position, statements of operations, or cash flows at this
time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162
sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB's amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company's financial position, statements of operations, or cash flows at
this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities--an
amendment of FASB Statement No. 133. This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company has not yet
adopted the provisions of SFAS No. 161, but does not expect it to have a
material impact on its consolidated financial position, results of operations or
cash flows.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular,
9
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behavior may not be widely available by December 31, 2007. Accordingly,
the staff will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. The Company currently uses the
simplified method for "plain vanilla" share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This statement
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This statement improves
comparability by eliminating that diversity. This statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this statement
is the same as that of the related Statement 141 (revised 2007). The Company
will adopt this Statement beginning March 1, 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations'. This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in Statement 141. This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, Noncontrolling Interests in Consolidated Financial
Statements. The Company will adopt this statement beginning March 1, 2009. It is
not believed that this will have an impact on the Company's consolidated
financial position, results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities--Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many financial
10
instruments and certain other items at fair value. This option is available to
all entities. Most of the provisions in FAS 159 are elective; however, an
amendment to FAS 115 Accounting for Certain Investments in Debt and Equity
Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not report
net income. SFAS No. 159 is effective as of the beginning of an entity's first
fiscal year that begins after November 15, 2007. Early adoption is permitted as
of the beginning of the previous fiscal year provided that the entity makes that
choice in the first 120 days of that fiscal year and also elects to apply the
provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS
No. 159 beginning March 1, 2008 and is currently evaluating the potential impact
the adoption of this pronouncement will have on its consolidated financial
statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this statement does not require any
new fair value measurements. However, for some entities, the application of this
statement will change current practice. This statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including financial statements for an interim
period within that fiscal year. The Company will adopt this statement March 1,
2009, and it is not believed that this will have an impact on the Company's
consolidated financial position, results of operations or cash flows.
h. 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 March 31, 2009, 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. As of March 31, 2009 the company had no cash.
j. Liabilities
Liabilities are made up of current liabilities and long-term liabilities.
Current liabilities include accounts payable of $26,520. There are no long-term
liabilities outstanding for the company.
11
Share Capital
a) Authorized:
100,000,000 common shares with a par value of $0.001
b) Issued:
The company issued to the founders 48,000,000 common shares of stock for
$10,000. On October 3, 2007, 2,988,000 of these common shares where cancelled
for a net of founders shares of 45,012,000. The net per share costs was
$0.00013333. The company had two private placements both at $0.10 per share. The
first was on July 1, 2007, 1,500,000 common shares for $25,000 and the second on
September 28, 2007, 1,188,000 common shares for $19,800.
As of December 31, 2007, there are Forty Seven Million Seven Hundred Thousand
(47,700,000) shares issued and outstanding at a value of $0.001 per share
On April 15, 2008 the company issued 600,000 shares for services. On June 2,
2008 the company issued 600,000 shares at $0.01 per share. On June 2, 2008 the
company issued 12,000,000 for services. On October 10, 2008 the company issued
600,000 shares for services.
On March 17, 2009, the Company completed a forward stock split of its common
stock on a ratio of six shares for every one share of the Company. The record
date of the forward stock split was March 13, 2009, the payment date of the
forward split was March 16, 2009, and the ex-dividend date of the forward split
was March 17, 2009. The forward split was payable as a dividend, thereby
requiring no action by shareholders, nor any amendment to the articles of
incorporation of the Company.
As of March 31, 2009, there are sixty one million five hundred thousand
(61,500,000) 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.
k. Advertising
The company has not paid any advertising expenses to date.
l. Property
We have a mineral property, known as the McNab Molybdenum Property, 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 4 cell
claim units totaling 83.702 hectares.
12
We currently do not own any physical real estate. Our principal executive office
is located at 502 E. John Street Carson City, Nevada 89706.
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 $311,940 for the period from inception to March 31, 2009 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.
13
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 4 cell claim units totalling 83.702 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.
14
RESULTS OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2009.
The accompanying financial statements show that the Company has incurred a net
loss of $4,441 for the three month period ended March 31, 2009 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.
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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 March 31, 2009, we had approximately 177 stockholder(s) holding 61,500,000
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.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange
Act of 1934 as a process designed by, or under the supervision of, the company's
principal executive and principal financial officers and effected by the
company's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America and
includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and
directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Because of the
inherent limitations of internal control, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate, this risk.
As of March 31, 2009 management assessed the effectiveness of our internal
control over financial reporting based on the criteria for effective internal
control over financial reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") and SEC guidance on conducting such assessments. Based on
that evaluation, they concluded that, during the period covered by this report,
such internal controls and procedures were not effective to detect the
inappropriate application of US GAAP rules as more fully described below. This
was due to deficiencies that existed in the design or operation of our internal
controls over financial reporting that adversely affected our internal controls
and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public Company
Accounting Oversight Board were: (1) lack of a functioning audit committee due
to a lack of a majority of independent members and a lack of a majority of
outside directors on our board of directors, resulting in ineffective oversight
in the establishment and monitoring of required internal controls and
procedures; (2) inadequate segregation of duties consistent with control
objectives; and (3) ineffective controls over period end financial disclosure
and reporting processes. The aforementioned material weaknesses were identified
by our Chief Executive Officer in connection with the review of our financial
statements as of March 31, 2009
Management believes that the material weaknesses set forth in items (2) and (3)
above did not have an effect on our financial results. However, management
believes that the lack of a functioning audit committee and the lack of a
majority of outside directors on our board of directors results in ineffective
oversight in the establishment and monitoring of required internal controls and
procedures, which could result in a material misstatement in our financial
statements in future periods.
MANAGEMENT'S REMEDIATION INITIATIVES.
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives
and will increase our personnel resources and technical accounting expertise
within the accounting function when funds are available to us. And, we plan to
appoint one or more outside directors to our board of directors who shall be
appointed to an audit committee resulting in a fully functioning audit committee
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who will undertake the oversight in the establishment and monitoring of required
internal controls and procedures such as reviewing and approving estimates and
assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on our Board.
We anticipate that these initiatives will be at least partially, if not fully,
implemented by December 31, 2009. Additionally, we plan to test our updated
controls and remediate our deficiencies by December 31, 2009.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING.
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, which has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
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 March 31, 2009.
ITEM 5. OTHER INFORMATION.
None.
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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.
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: May 12, 2009
Denarii Resources Inc.
Signature Title Date
--------- ----- ----
By: /s/ Stuart Carnie Chief Executive Officer, May 12, 2009
- ------------------------- Chief Financial Officer,
Stuart Carnie President, Secretary, Treasurer
and Director (Principal Executive
Officer and Principal Accounting Officer)
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