UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark One)
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended May 31, 2010 or
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________________ to __________________
 
Commission File Number 000-53142
 
CHANCERY RESOURCES, INC.
 (Exact name of registrant as specified in its charter)

Nevada
 
26-4567259
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

4400 Westgrove Drive, Suite 104, Dallas, Texas
 
75001
(Address of principal executive offices)
 
(Zip Code)
 
972-655-9870
 (Registrant’s telephone number, including area code)
 
N/A
 (Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
x YES       o NO
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act
 
o YES        x NO
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
 
o YES        o NO
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 32,250,000 common shares issued and outstanding as of May 31, 2010
Chancery Resources, Inc.
(An Exploration Stage Company)
 
May 31, 2010
 
 
Index
 
         
Consolidated Balance Sheets
    F–1  
         
Consolidated Statements of Expenses
    F–2  
         
Consolidated Statements of Cash Flows
    F–3  
         
Notes to the Consolidated Financial Statements
    F–4  


Chancery Resources, Inc.
(An Exploration Stage Company)
Consolidated Balance Sheets
(Unaudited)
 
 
   
May 31, 2010
$
   
November 30, 2009
$
 
             
ASSETS
           
             
Current Assets
           
             
Cash
    –       323  
                 
Total Assets
    –       323  
                 
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
               
                 
Current Liabilities
               
                 
Bank indebtedness
    294       260  
Accounts payable and accrued liabilities
    209,041       195,284  
Loan payable, less unamortized discount of $3,437 and $5,541 (Note 4)
    66,563       64,459  
Due to related parties (Note 3)
    54,310       54,310  
Loans payable (Note 4)
    64,917       64,917  
                 
Total Liabilities
    395,125       379,230  
                 
Contingencies and Commitments (Notes 1, 5 and 6)
               
                 
Stockholders’ Deficit
               
                 
Preferred stock: 2,500,000,000 shares authorized, $0.00001 par value;
no shares issued and outstanding (2009 – None issued)
    –       –  
                 
Series A convertible preferred stock: 40,000,000 shares authorized, $0.00001 par value;
31,000,000 shares issued and outstanding
    310       310  
                 
Common stock: 2,500,000,000 shares authorized, $0.00001 par value;
32,250,000 shares issued and outstanding
    322       322  
                 
Additional paid-in capital
    1,163,227       1,163,227  
                 
Donated capital (Note 3)
    21,000       19,500  
                 
Accumulated other comprehensive loss
    (160 )     (156 )
                 
Deficit accumulated during the exploration stage
    (1,579,824 )     (1,562,110 )
                 
Total Stockholders’ Deficit
    (395,125 )     (378,907 )
                 
Total Liabilities and Stockholders’ Deficit
    –       323  
 
(The Accompanying Notes are an Integral Part of These Consolidated Unaudited Financial Statements)
 
F - 1
 
Chancery Resources, Inc.
(An Exploration Stage Company)
Consolidated Statements of Operations
(Unaudited)
 
 
   
For the
Three Months Ended
   
For the
Three Months Ended
   
Accumulated from
September 12, 2006
(Date of Inception)
 
   
May 31,
   
May31,
   
to May 31
 
   
2010
   
2009
   
2010
 
   
$
   
$
   
$
 
                       
Revenue
    –       –       –  
                         
Expenses
                       
                         
General and administrative
    14,109       15,362       206,901  
Consulting fees
    –       30,000       194,809  
Management services
    –       –       12,750  
Impairment of mineral property costs
    –       444       1,121,074  
Mineral property costs
    –       –       19,778  
Rent
    1,500       1,500       13,872  
                         
Total Operating Expenses
    15,609       47,306       1,569,184  
                         
Interest Expense
    2,105       –       10,640  
                         
Net Loss
    (17,714       (47,306 )     (1,579,824 )
                         
Net Loss Per Share – Basic and Diluted
    –       –       N/A  
                         
Weighted Average Common Shares Outstanding
    32,250,000       32,250,000       N/A  
                         
Statement of Other Comprehensive Loss
                       
Net Loss
    (17,714       (47,306 )     (1,579,824 )
Foreign currency translation adjustment
    (4       –       (160 )
                         
Total Comprehensive Loss
    (17,718       (47,306 )     (1,579,984 )
 
(The Accompanying Notes are an Integral Part of These Consolidated Unaudited Financial Statements)
 
F - 2
 
Chancery Resources, Inc.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
 
 
   
For the Year
Ended
November 30,
2009
$
   
For the Year
Ended
November 30,
2008
$
   
Accumulated from
September 12, 2006
(Date of Inception)
to November 30, 2009
$
 
                   
Cash Flows From Operating Activities
                 
                   
Net loss for the period
    (17,714 )     (47,306 )     (1,579,824 )
                         
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Donated services and expenses
    1,500       1,500       21,000  
Impairment of mineral property costs
    –       444       1,117,374  
Amortization of discount
    2,105       –       13,337  
Share-based compensation
    –       30,000       194,809  
                         
Changes in operating assets and liabilities:
                       
Prepaid expenses
    –       8       –  
Accounts payable and accrued liabilities
    13,756       2,883       59,040  
Loan payable
    –       2,105       –  
Due to related party
    –       1,250       –  
                         
Net Cash Used In Operating Activities
    (353 )     (9,116 )     (174,264 )
                         
Cash Flows From Investing Activities
                       
                         
Mineral property costs
    –       (444 )     (50,444 )
                         
Net Cash Used In Investing Activities
    –       (444 )     (50,444 )
                         
Cash Flows From Financing Activities
                       
                         
Advances from related party
    –       16,396       119,524  
Bank indebtedness
    34       (2,954 )     294  
Proceed from the sale of common stock
    –       –       105,050  
                         
Net Cash Provided By Financing Activities
    34       13,442       224,868  
                         
Effect of Exchange Rate Changes on Cash
    (4 )     (45 )     (160 )
                         
Increase (decrease) in Cash
    (323 )     3,837       –  
                         
Cash - Beginning of Period
    323       1,638       –  
                         
Cash - End of Period
    –       5,475       –  
                         
Supplemental Disclosures
                       
                         
Interest paid
    –       –       –  
Income taxes paid
    –       –       –  
                         
Non-Cash Financing and Investing Activities
                       
                         
Promissory note issued for mineral property
    –       –       70,000  
Common stock issued for mineral property
    –       –       120,000  
Preferred stock issued for mineral property
    –       –       744,000  
Common stock issued for services and prepaid expenses
    –       30,000       120,000  
 
(The Accompanying Notes are an Integral Part of These Consolidated Unaudited Financial Statements)
F - 3

Chancery Resources, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)


1.  
Basis of Presentation

The accompanying unaudited interim financial statements of Chancery Resources, Inc., have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Chancery's Annual Report filed with the SEC on Form 10-K.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.  Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2008 as reported in the Form 10-K have been omitted.

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

Certain prior year balances have been reclassed to conform with the current year presentation.

2.  
Going Concern
 
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenue since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity or debt financing to continue operations, and the attainment of profitable operations. As at May 31, 2010, the Company has a working capital deficit of $395,125 and has accumulated losses of $1,579,824 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

3.  
Related Party Transactions
 
a)
For the three months ended May 31, 2010, the Company incurred $1,500 (2008 - $1,500) in donated rent to a company controlled by the President of the Company, and is indebted to the President for $51,780 (November 30, 2009 - $51,780) for advances and expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and due on demand.
 
b)
As at May 31, 2010, the Company is indebted to the Chief Executive Officer of the Company for $2,530 (November 30, 2009 - $2,530) for expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and due on demand.
 
F - 4

4.  
Loans Payable

 
a)
As of May 31, 2010, the Company is indebted to the former President of the Company for $44,917 (November 30, 2009 - $44,917) for cash advances and expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and due on demand.
 
b)
 On August 8, 2008, the Company received a $20,000 loan which is non-interest bearing, unsecured and due on August 8, 2010.
 
c)
On July 25, 2008, the Company received a $70,000 loan which is non-interest bearing, unsecured and due on July 25, 2010. As at November 30, 2009, an implicit interest rate of 15% was recognized resulting in a discount of $17,069 on the date of the loan. As at February 28, 2010, the Company has accreted $13,632 of the discount bring the carrying value of the loan to $66,563.

5.  
Mineral Properties

On January 19, 2009, the Company acquired through its wholly-owned subsidiary Chancery Canada, a 100% interest in certain mineral interests located in British Columbia, Canada known as the Fiddler Creek Property. As at August 31, 2009, the Company recognized an impairment loss of $444, as it has not yet been determined whether there are proven or probable reserves on the property.

6.  
Commitments

On February 1, 2009, the Company entered into an agreement with a consultant to prepare a technical report of a mining property in consideration for the lesser of $700 per day or $5,000.

7.  
Common Stock

On February 9, 2009, the Company approved the adoption of the 2009 Stock Option Plan which permits the Company to issue up to 6,450,000 shares of common stock to directors, officers, employees and consultants of the Company.

F - 5
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
FORWARD-LOOKING STATEMENTS
 
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
 
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
 
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common shares" refer to the common shares in our capital stock.
 
As used in this quarterly report, the terms "we", "us", "our", "our company" and “Chancery” mean Chancery Resources, Inc. and our wholly owned subsidiaries Chancery Mining Canada Ltd. and Minera Chancery Colombia SA, unless otherwise indicated.
 
General Overview
 
We were incorporated in the State of Nevada on September 12, 2006. We are an exploration stage corporation. An exploration stage corporation is one that is engaged in the search from mineral deposits or reserves which are not in either the development or production stage.
 
We maintain our statutory registered agent's office at The Corporation Trust Company of Nevada, 6100 Neil Road, Suite 500, Reno, Nevada 89511 and our business office and mailing address is 4400 Westgrove Drive, Suite 104, Dallas, Texas 75001. Our telephone number is (972) 655-9890.
 
On March 19, 2008, we entered into a mining acquisition agreement with Altos de Amador S.A., wherein we have agreed to purchase a 100% interest in certain mineral claims in Valparaiso, Antioquia, Colombia, known as the El Cafetal Mine.
 
As consideration for the purchase, we have agreed to pay to Altos de Amador $270,000 cash, to be provided as follows:

 
(a)
$50,000 to be provided on signing of the acquisition agreement (paid);
     
 
(b)
$70,000 to be provided within 30 days of signing the acquisition agreement (paid); and
     
 
(c)
$150,000 to be provided within 90 days of signing the acquisition agreement.
 
3
In addition, we have agreed to split profits from mining operations – 60% to our company and 40% to the vendor until such time as we have paid $210,000 of the purchase price, after which, profits shall be split 90% to our company and 10% to the vendor. We have the right to acquire the vendor’s 10% profit interest at any time for $370,000.
 
To date,. As our initial mining acquisition agreement with Altos de Amador is no longer in good standing due to certain misrepresentation on warranties and representations made on Altos de Amador’s side, we have signed a Mining Acquisition Agreement on April 14 th , 2009 directly with the owners of the property, Inversiones Midas Limitada, to continue negotiations, which has a final payment of $150,000 minus payments to the outstanding governmental fees due on the El Cafetal mine with no timeframe period for payment.
 
Effective April 14, 2009, we entered into an agreement with Inversiones Midas wherein the terms of profit split so that, upon commencement of mining operations, all profits from the sale of ore shall be split 60% to our company and 40% to the vendor. Upon our company having paid a further 720 million Colombian pesos (estimated value of land and equipment), Inversiones Midas agrees to give and transfer 50% ownership of the Mining title, in addition to the funds payable pursuant to the terms of the mining acquisition agreement, such profits shall then be split 90% to our company and 10% to the vendor. Our company will have the right to acquire the vendor’s 10% profit interest at any time upon payment of additional 780 million Colombian pesos, and then the remaining 50% of the Title ownership will be transferred to our company.
 
On November 4, 2008, our board of directors designated 40,000,000 shares of our preferred stock as the Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into shares of our common stock on the basis of one (1) share of Series A Preferred Stock for one-fifth (1/5) of one share of our Common Stock;
 
On November 6, 2008, we entered into a consulting agreement with Rafael Pinedo, our President. The term of the agreement is for a period of one year and in consideration for the services to be provided we have agreed to issue 1,000,000 restricted shares of our common stock to Mr. Pinedo.
 
On November 6, 2008, we entered into a mineral property acquisition agreement with CB Resources Ltd., BNP Resources LLC and Rafael Pinedo to acquire certain mineral property interests known as the HCL Property (the HCL Property is comprised in part by our formerly owned Hunter Property). The closing of the transactions contemplated in the mineral property acquisition agreement occurred on November 6, 2008. In accordance with the closing of the mineral property acquisition agreement, we agreed to issue 1,000,000 restricted shares of our common stock to CB Resources Ltd., 25,000,000 restricted shares of our Series A Preferred Stock to Rafael Pinedo and 6,000,000 restricted shares of our Series A Preferred Stock to BNP Resources LLC. Due to land ownership restrictions under British Columbia laws, we entered into a trust agreement with CB Resources Ltd., wherein CB Resources Ltd. agreed to hold the mineral property interests in trust for our company.
 
On November 12, 2008, we incorporated a wholly owned subsidiary pursuant to the laws of the Province of British Columbia under the name Chancery Mining Canada Ltd.
 
On January 19, 2009, we acquired through our wholly owned subsidiary, Chancery Mining Canada Ltd., an undivided one hundred percent (100%) interest in certain mineral interests located in British Columbia, Canada known as the Fiddler Creek Property.
 
The Fiddler Creek Property is comprised of 25 mineral claims, totaling 465.74 hectares located within the Omineca Mining Division in northwestern British Columbia. The acquired block of claims counts with records of a past producer “Fiddler Creek,” which describes the geology of the Property as an area that is underlain by argillites of the Jurassic to Cretaceous Bowser Lake Group, in which auriferous quartz veins are probable sources for placer gold along Fiddler Creek (BC Minfile 103I206). The deposit types that historically predominate in the Fiddler-Doreen area are Silver, Gold, Lead and Zinc. Geophysical, soil, rock and core samples will be analyzed soon; an exploration program recommended by a qualified geology person will be released when finalized.
 
On January 30, 2009, we incorporated a wholly owned subsidiary pursuant to the laws of Columbia under the name Minera Chancery Colombia.

On July 24, 2009, Chancery Resources, Inc. (the "Company") received a NI 43-101 Canadian Compliant Geological report on the El Cafetal Property as prepared and submitted by James R. Reeves, Reg., P.Geo., in his capacity as a geological consultant to the Company. Technical Report was formatted on Canadian National Instrument 43-101 ("NI 43-101"), which is a mineral resource classification scheme that provides strict guidelines for the public disclosure of scientific and technical information relating to mineral properties.

 On August 3rd, 2009, Vincent Higgins was appointed as independent director of our company.
Subsequent to such appointment, on August 4, 2009, Juan Restrepo Gutierrez resigned as chief executive officer and remains as chief operations officer, secretary and director of our company and Rafael A. Pinedo was appointed chief executive and ratified as president.
 
There are no family relationships with any of our directors and officers.

October 16th , 2009, the Company dismissed Manning Elliott, as its independent registered public accounting firm and, on October 16 th , 2009, engaged Malone & Bailey, PC, from Houston Texas as its new independent registered public accounting firm.

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.
 
Our Current Business
 
We are an exploration stage mining company engaged in the exploration of minerals on our properties.
 
 
Our current operational focus is to conduct exploration activities on our HCL Property, to complete the terms of the mining acquisition agreement with Altos de Amador S.A. for the El Cafetal Mine and to conduct exploration activities on our Fiddler Creek Property.
 
HCL Property
 
General Information
 
The HCL Property is a mining claim located in Merritt, British Columbia, Canada, and totals 415.04 hectares or 1,026 acres approximately.
 
The following is a list of tenure numbers, claim, and expiration date of our claims:

Tenure Number
Claim Name
No. MTO Cells
Expiration Date
752702
HCL
20
04/04/2011
 
A cell is an area, which appears electronically on the British Columbia Internet Minerals Titles Online Grid and was formerly called a claim. A claim is a grant from the Crown of the available land within the cells to the holder to remove and sell minerals. The online grid is the geographical basis for the cell. Formerly, the claim was established by sticking stakes in the ground to define the area and then recording the staking information. The staking system is now antiquated in British Columbia and has been replaced with the online grid. The claim is registered in the name of the Chancery Mining Canada Ltd. There are no native land claims that affect title to the property.
 
Location and Access
 
The HCL mineral claim is comprised of 20 contiguous cells totalling 415.0483 hectares. The center of the property is located at the latitude 50o 2' 14" N and the longitude is 120o 47' 1" W. The claim is motor vehicle accessible from the Town of Merritt, B.C. by traveling 19 miles east along Highway #5 beyond the Village of Quilchena, B.C. to the Minnie Lake cut-off and then for 18 miles south by gravel ranch roads to the mineral claim.
 
Below is map of the HCL Claim:
 
 
6
 
Physiography
 
The Town of Merritt, British Columbia which lies 37 miles by road northwest of the HCL mineral claim offers much of the necessary infrastructure required to base and carry-out an exploration program (accommodations, communications, equipment and supplies). Merritt B.C. is highway accessible from Vancouver, B.C. in a few hours by traveling over the Coquihalla (toll section) highway, in the time it takes to travel 200 miles. The overnight Greyhound bus service is a popular way to send-in samples and to receive additional equipment and supplies. The claim area ranges in elevation from 2,850 feet to 3,400 feet mean sea level. The physiographic setting of the property can be described as rounded, open range, plateau terrain that has been surficially altered both by the erosional and the depositional (drift cover) effects of glaciation. Thickness of drift cover in the valleys may vary considerably. Fresh water lakes and streams are abundant in the area. Below is a map of the HCL Property location:
 
 
7
 
Location, History and Land Tenure
 
The geology of the HCL mineral claim may be described as being underlain by units of the Nicola Group. Some or all of these units may be found to host economic mineralization. The property geological setting offers good underlying possibilities and all overburden areas should be checked if a field program is undertaken. The deposit types that historically predominate in the general area are, as the larger target, as a porphyry-type base metal (copper-gold-palladium or copper-molybdenum) occurrence with peripheral base and precious metal occurrences as veins and/or contact zones of mineralization. The most prolific host in this area is the Nicola Group andesitic tuffs that are often skarned or altered. Any occurrences of Princeton Group sediments, i.e. shales, sanstone, etc. should be checked thoroughly for coal occurrences and possibly coal-bed methane gas possibilities.
 
General Information
 
The Fiddler Creek Property is comprised of 25 mineral claims, totaling 465.74 hectares located within the Omineca Mining Division in northwestern British Columbia. The acquired block of claims counts with records of a past producer “Fiddler Creek,” which describes the geology of the Property as an area that is underlain by argillites of the Jurassic to Cretaceous Bowser Lake Group, in which auriferous quartz veins are probable sources for placer gold along Fiddler Creek (BC Minfile 103I206). The deposit types that historically predominate in the Fiddler-Doreen area are Silver, Gold, Lead and Zinc. Geophysical, soil, rock and core samples will be analyzed soon; an exploration program recommended by a qualify geology person will be released when finalized.
 
The following is a list of tenure number, claim name, and expiration date of our claims:

Tenure Number
Claim Name
No. MTO Cells
Expiration Date
752682
Fiddler Creek
25
04/19/2011
 
Below is a map of the Fiddler Creek Property:
 
 
Climate and Local Resources
 
The climate in the area is temperate with significant coastal influence coming from the west up the Skeena valley as well as from the southwest up the Kitimat valley. The northern location allows for long hours of daylight during the summer, while significant snowfall occurs during winter season, which limits fieldwork. Field season is comprised between June and early September.
 
The closest airport is the Terrace airport, which receives daily flights from Vancouver and serves as a transportation hub for the area. The Canadian National Railway and Yellowhead Highway (Highway 16) go through Terrace along the Skeena River and connect the interior of B.C. to the ocean ports of Prince Rupert and Kitimat.
 
8
 
 
General Information
 
The El Cafetal Mine is located in the River basin of the Honda stream, on the Eastern flank of the Western Mountain range, in the municipality of Valparaiso, Antioquia, Colombia.
 
The property covers an area of 135 hectares. The geology of the zone includes sedimentary rocks and basaltic lava and Andesite of Tertiary age with several veins and veins with different thicknesses and sulfide concentrations up to 80%.
 
The mineralization consists of several veins with thicknesses between 0.15 and 1.1 m, composed by quartz, pyrite and partly free gold fitted in andesite lava, the strips of 0.15 m of thickness with great sulfide concentrations are common mainly pyrite up to an 80% with intermediate zones of rock with scattered sulfides, in the endorsements the salband are common to conform a mineralized zone up to 1.1 m.
 
We recently completed preliminary sampling and chemical analyses on the El Cafatel property. Our management is awaiting the results from the preliminary sampling program and will update shareholders in the near future.
 
Results of Operations
 
Three Months Ended August 31, 2009 and August 31, 2008
 
The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended August 31, 2009 which are included herein.
 
Our operating results for the three months ended August 28, 2009, for the three months ended August 31, 2008 and the changes between those periods for the respective items are summarized as follows:
 
Our accumulated losses increased to $1,579,824 as of May 31, 2010. Our financial statements report a net loss of $395,125   for the period ended May 31, 2010 compared to a net loss of $378,907 for the nine month period ended Nov 31, 2009.
 
As at August 31, 2009, we had $289,727 in current liabilities. Our net cash  at August 31, 2009 was $355 compared to $1,638 at November 30, 2008.
 
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We currently do not have any stock option or equity compensation plans or arrangements.
 
Liquidity and Financial Condition
 
Working Capital

   
At
   
At
 
   
May 31,
   
November 30,
 
   
2010
   
2009
 
Current assets
  $ -     $ 323  
Current liabilities
    395,125       379,230  
Working capital
  $ (395,125 )   $ (378,907 )
 
Cash Flows

   
Nine Months Ended
 
   
May,
   
November 30
 
   
2010
   
2009
 
Net cash used in operating activities
  $ (353 )   $ (9116 )
Net cash used in investing activities
    -       (444 )
Net cash provided by financing activities
    34       13,442  
Net increase (decrease) in cash during period
  $ (323 )   $ 3,837  
 
As of May 31, 2010, our company had working capital deficiency of $395,125. We estimate our operating expenses and working capital requirements for the next twelve month period to be as follows:
 
Estimated Funding Required During the Twelve Month Period Ending May 31, 201 1

General and administrative
  $ 60,000  
Exploration Expenses
  $ 449,135  
Professional fees
  $ 35,000  
Total
    544,135  
 
We plan to raise additional capital required to meet immediate short-term needs and to meet the balance of our estimated funding requirements for the twelve months, primarily through the private placement of our securities.
 
We are not aware of any known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way.
 
Future Financings
 
We will require additional financing in order to enable us to proceed with the continued exploration of our current properties, including approximately $165,000 over the next 12 months to pay for our ongoing operating expenses. These expenses include audit, legal and office expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we will require additional financing in order to continue operations and to repay our liabilities. There is no assurance that any party will advance additional funds to us in order to enable us to sustain our plan of operations or to repay our liabilities.
 
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
 
 
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Contractual Obligations
 
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
 
Going Concern
 
We have suffered recurring losses from operations. The continuation of our company as a going concern is dependent upon our company attaining and maintaining profitable operations and raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our company discontinue operations.
 
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended November 30, 2009, our independent auditors included an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
 
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
 
Off-Balance Sheet Arrangements
 
We have no 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.
 
Application of Critical Accounting Policies
 
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.
 
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
 
Mineral Property Costs
 
The Company has been in the exploration stage since its inception and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred
 
 
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Long-lived Assets
 
In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
 
Financial Instruments
 
The fair values of financial instruments, which include cash, accounts payable and accrued liabilities, amounts due to a related party and loans payable, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company’s operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.
 
Income Taxes
 
The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
 
Stock-based Compensation
 
The Company records stock-based compensation in accordance with SFAS No. 123R, “Share Based Payments”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
 
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Recent Accounting Pronouncements
 
In June 2008, the Financial Accounting Standards Board (“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 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. The adoption of this statement is not expected to have a material effect on our company’s consolidated financial statements.
 
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”.  SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The adoption of this statement is not expected to have a material effect on our company’s consolidated financial statements.
 
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133”. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required 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 SFAS No. 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. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement did not have a material effect on our company's consolidated financial statements.
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”. SFAS No. 141 (revised 2007) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141 (revised 2007) 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. The adoption of this statement is not expected to have a material effect on our company's consolidated financial statements.
 
In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements Liabilities – an Amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the Non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, and earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on our company’s consolidated financial statements.
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. 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 a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement did not have a material effect on our company's consolidated financial statements.
 
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement did not have a material effect on our company's consolidated financial statements.
 
 
Item 3. Quantitative Disclosures About Market Risks
 
As a “smaller reporting company”, we are not required to provide the information required by this Item.
 
Item 4T. Controls and Procedures.
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 , as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer) our chief financial officer (our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
 
Under the supervision and with the participation of our management, including our president (our principal executive officer) our chief financial officer (our principal financial officer and principal accounting officer), we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our president (our principal executive officer) our chief financial officer (our principal financial officer and principal accounting officer) concluded as of the evaluation date that our disclosure controls and procedures were not effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.  Management’s conclusion was based on the fact that the auditors identified several adjustments to our financial statements for the period ended February, 2010.
 
Additionally, there were no changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date. We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken.
 
PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
 
Item 1A. Risk Factors
 
Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
 
Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.
 
14
 
RISKS RELATED TO OUR BUSINESS
 
All of our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral resource on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business could fail.
 
Despite exploration work on our mineral properties, we have not established that any of them contain any mineral reserve, nor can there be any assurance that we will be able to do so. If we do not, our business could fail.
 
A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7 (which can be viewed over the Internet at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7 ) as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a "reserve" that meets the requirements of the Securities and Exchange Commission's Industry Guide 7 is extremely remote; in all probability our mineral resource property does not contain any 'reserve' and any funds that we spend on exploration will probably be lost.
 
Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.
 
The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.
 
Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our properties, our business may fail.
 
Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could fail.
 
We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain
 
15
 
If we establish the existence of a mineral resource on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could fail.
 
If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.
 
Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our company.
 
Mineral exploration, development and production involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our company.
 
Mineral prices are subject to dramatic and unpredictable fluctuations.
 
We expect to derive revenues, if any, either from the sale of our mineral resource properties or from the extraction and sale of precious and base metals such as gold, silver and copper. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond our control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious metals, and therefore the economic viability of any of our exploration properties and projects, cannot accurately be predicted.
 
The mining industry is highly competitive and there is no assurance that we will continue to be successful in acquiring mineral claims. If we cannot continue to acquire properties to explore for mineral resources, we may be required to reduce or cease operations.
 
The mineral exploration, development, and production industry is largely un-integrated. We compete with other exploration companies looking for mineral resource properties. While we compete with other exploration companies in the effort to locate and acquire mineral resource properties, we will not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of mineral products. Therefore, we will likely be able to sell any mineral products that we identify and produce.
 
In identifying and acquiring mineral resource properties, we compete with many companies possessing greater financial resources and technical facilities. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future. Accordingly, there can be no assurance that we will acquire any interest in additional mineral resource properties that might yield reserves or result in commercial mining operations.
 
16
 
 
We have a limited operating history on which to base an evaluation of our business and prospects.
 
We have been in the business of exploring mineral resource properties since September 2006 and we have not yet located any mineral reserve. As a result, we have never had any revenues from our operations. In addition, our operating history has been restricted to the acquisition and exploration of our mineral properties and this does not provide a meaningful basis for an evaluation of our prospects if we ever determine that we have a mineral reserve and commence the construction and operation of a mine. We have no way to evaluate the likelihood of whether our mineral properties contain any mineral reserve or, if they do that we will be able to build or operate a mine successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during the period when we are exploring our properties. We therefore expect to continue to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from mining operations and any dispositions of our properties, we will not be able to earn profits or continue operations. At this early stage of our operation, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition. There is no history upon which to base any assumption as to the likelihood that we will prove successful and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.
 
The fact that we have not earned any operating revenues since our incorporation raises substantial doubt about our ability to continue to explore our mineral properties as a going concern.
 
We have not generated any revenue from operations since our incorporation and we anticipate that we will continue to incur operating expenses without revenues unless and until we are able to identify a mineral resource in a commercially exploitable quantity on one or more of our mineral properties and we build and operate a mine. We estimate our average monthly operating expenses to be approximately $7,800 to $9,500, including mineral property costs, management services and administrative costs. Should the results of our planned exploration require us to increase our current operating budget, we may have to raise additional funds to meet our currently budgeted operating requirements for the next 12 months. As we cannot assure a lender that we will be able to successfully explore and develop our mineral properties, we will probably find it difficult to raise debt financing from traditional lending sources. We have traditionally raised our operating capital from sales of equity and debt securities, but there can be no assurance that we will continue to be able to do so. If we cannot raise the money that we need to continue exploration of our mineral properties, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these were to occur, there is a substantial risk that our business would fail.
 
These circumstances lead our independent registered public accounting firm, in their report dated August 31, 2009, to comment about our company’s ability to continue as a going concern. Management has plans to seek additional capital through a private placement and public offering of its capital stock. These conditions raise substantial doubt about our company’s ability to continue as a going concern. Although there are no assurances that management’s plans will be realized, management believes that our company will be able to continue operations in the future. The consolidated 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 our company cannot continue in existence.” We continue to experience net operating losses.
 
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Risks Associated with Our Common Stock
 
Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
 
Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority. Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading
 
Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
 
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
 
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The Financial Industry Regulatory Authority’ requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
 
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Other Risks
 
Trends, Risks and Uncertainties
 
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
None.
 
None.
 
Item 4. Submission of Matters to a Vote of Security Holders.
 
None.
 
Item 5. Other Information
 
None.
 
Item 6. Exhibits.
 
Exhibits required by Item 601 of Regulation S-K

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

   
CHANCERY RESOURCES, INC.
 
   
(Registrant)
 
       
       
Dated: Jul 15, 2010
 
/s/ Rafael Pinedo
 
   
Rafael Pinedo
 
   
President and Director
 
   
(Principal Executive Officer)
 
       
       
Dated: July 15, 2010
 
/s/ Juan Restrepo Gutierrez
 
   
Juan Restrepo Gutierrez
 
   
Secretary, Treasurer
 
   
(Principal Financial Officer)
 
       
 
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