Item 1. Business
This annual 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, including the risks in the section entitled “Risk 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 financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this current report and unless otherwise indicated, the terms "we", "us", "our", “Company”, and “Chancery” mean Chancery Resources, Inc. and our wholly owned subsidiaries Chancery Mining Canada Ltd. and Minera Chancery Columbia, unless otherwise indicated.
General Overview and Business Development over the Last Three Years
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 106, Dallas, Texas 75001. Our telephone number is 972-655-9870.
Since October 2006, we held the rights to nine Mineral Titles Online cells referred to as the Hunter property, through Geoffrey Gachallan, a former director and officer of our company, who held the property for us in trust. On September 9, 2008, our rights to the claim expired.
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.
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.
Effective April 4, 2008, we entered into an amending agreement with Altos de Amador wherein the terms of profit split have been amended 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 $210,000, 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 an additional $370,000. There are currently some governmental requirements that need to be fulfilled for the El Cafetal mining title. These requirements include the present title owner amending a PTO report to comply with certain specifications and paying certain annual governmental fees, all of which are currently being completed.
To date, we have not made the final $150,000 payment as required by the mining acquisition agreement. We plan to hold such payment until the above title requirements have been complied with and or alternatively to pay the outstanding governmental fees due on the El Cafetal mine and deduct these amounts from the final $150,000 payment. 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.
On 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. Effective December 15, 2010 the company has decided to sell the “El Cafetal” property
On October 16, 2008, Rafael A. Pinedo and Jeffrey Fanning were appointed as directors of our company.
Subsequent to such appointments, on October 16, 2008, Juan Restrepo Gutierrez resigned as president and a director of our company and Rafael A. Pinedo was appointed president. Mr. Restrepo remains as chief executive officer, chief financial officer, secretary and treasurer. In addition, Mr. Fanning was appointed vice president of exploration. Our board of directors now consists of Rafael A. Pinedo and Jeffery Fanning.
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. Effective November 15, 2010 the company will pursue other Resources opportunities in 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.
Effective November 15,2010; the company will start pursuing new opportunities on Rare Metals in BC Canada.
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 16th, 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
HCL
10/04/2011
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 CB Resources Ltd. who has agreed to hold the claim in trust on behalf of Chancery Resources. As October 06, 2008, it’s not yet been determined whether there are proven or probable reserves on the property.
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 totaling 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:
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:
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.
Requirements for Title
Title to the property has already been granted CB Resources Ltd., who holds the claim in trust for our company. To obtain a Free Miner's Certificate, which is required to hold a mining claim in British Columbia, Section 8(1) of the B.C. Mineral Tenure Act (MTA) stipulates that a corporation must be registered under the British Columbia Business Corporations Act. Section 8(2) of the MTA stipulates that an individual applicant must either be a resident of Canada or be authorized to work in Canada. As the corporation is not registered in British Columbia the claim is held in trust for the Company by CB Resources Ltd., a corporation registered under the British Columbia Business Corporations Act. The mineral title claim has been registered with the Government of British Columbia.
Fiddler Creek Property
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
Fiddler Creek
01/19/2012
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.
El Cafetal Mine
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.
Competition
We are a mineral resource exploration company. We compete with other mineral resource exploration companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration. This competition could adversely impact on our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.
Compliance with Government Regulation
We are committed to complying with and are, to our knowledge, in compliance with, all governmental and environmental regulations applicable to our company and our properties. Permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. We cannot predict the extent to which these requirements will affect our company or our properties if we identify the existence of minerals in commercially exploitable quantities. In addition, future legislation and regulation could cause additional expense, capital expenditure, restrictions and delays in the exploration of our properties.
Subsidiaries
Other than Chancery Mining Canada Ltd. and Minera Chancery Colombia, we do not have any other subsidiaries.
Research and Development Expenditures
We have incurred $Nil in research and development expenditures over the last fiscal year.
Employees
Currently, we have two employees. We do not expect any material changes in the number of employees over the next 12 month period.
We engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our exploration programs.
Intellectual Property
We do not own, either legally or beneficially, any patent or trademark.
Item 1A.
Item 1A. Risk Factors
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.
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.
Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".
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.
Risks Associated With Mining
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 them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.
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.
Risks Related To Our Company
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 had cash in the amount of $323 as of November 30, 2010. At November 30, 2010, we had working capital deficit of $378,907. We incurred a net loss of $275,883 for the year ended November 30, 2010 and $1,562,110 since inception on September 12, 2006. 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 February 26, 2010, 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.
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 prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of their shares.
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.
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 1B.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Item 2. Properties
Executive Offices
As of the date of this current report, administrative and mailing offices are located at 4400 Westgrove Drive, Suite 106, Dallas, Texas 75001. We believe these facilities are adequate for our current needs and that alternate facilities on similar terms would be readily available if needed. We also keep an administration and geology office on the 3rd Floor, 422 Richards Street Vancouver, B.C. V6B2Z3.
Mineral Properties
As of the date of this annual report on Form 10-K, we hold or have the rights to acquire the following properties: El Cafetal Mine, the HCL Property and the Fiddler Creek Property. For detailed descriptions of these properties, please see the section entitled “Business” above.
Item 3.
Item 3. Legal Proceedings
We know of no material, existing or pending legal proceedings against us, 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 company.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common shares are quoted on the Over-the-Counter Bulletin Board under the symbol “CCRY.” The following quotations, obtained from Yahoo Finance, reflect the high and low bids for our common shares based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The high and low bid prices of our common stock for the periods indicated below are as follows:
(1) Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.
(2) No trades occurred during this period.
Our common shares are issued in registered form. Empire Stock Transfer Inc., 7251 West Lake Mead Boulevard, Suite 300, Las Vegas, Nevada 89128-8351 (Telephone: (775) 562-4091; Facsimile: (775) 974-1444 is the registrar and transfer agent for our common shares.
On November 15, 2010, the shareholders' list showed 32 registered shareholders, 32,250,000 common shares and no Series A Preferred Shares outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.
Equity Compensation Plan Information
On February 9, 2009, our directors approved the adoption of the 2009 Stock Option Plan which permits our company to issue up to 6,450,000 shares of our common stock to directors, officers, employees and consultants of our company.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
We did not sell any equity securities which were not registered under the Securities Act during the year ended November 30, 2008 that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended November 30, 2008.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during our fourth quarter of our fiscal year ended November 30, 2010.
Item 6.
Item 6. Selected Financial Data
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Plan of Operation
Management plans to continue exploration of the El Cafetal property at the same time that the Company undertakes efforts to place the property into production. As we intend to sale or continue exploration at the El Cafetal Project for the foreseeable future, we are moving forward with our plans to make improvements to the property, which will include recondition of current equipments and acquisition of some new parts and materials. The Company recently completed preliminary sampling and chemical analyses on the El Cafatel property. The Company also intends to begin exploration of the HCL and Fiddler Creek property as fieldwork season 2011 starts for more detailed sampling and mapping of the area. Our ultimate objective is to become a producer of gold, silver and possibly other associated base metals. We are unable at this time to predict when, if ever, that objective will be achieved.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment over the next twelve months.
Personnel Plan
We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors). We do and will continue to outsource contract employment as needed.
Off-Balance Sheet Arrangements
There are 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 investors.
Our principal capital resources have been through the subscription and issuance of common stock, although we have also used stockholder loans and advances from related parties.
Results of Operations for the Years Ended November 30, 2010 and 2008
The following summary of our results of operations should be read in conjunction with our nonaudited financial statements for the years ended November 30, 2009 and 2008.
Our operating results for the years ended November 30, 2009 and 2008 are summarized as follows:
Revenues
We have not earned any revenues since our inception and we do not anticipate earning revenues in the near future.
Expenses
Our expenses for the year ended November 30, 2009 and November 30, 2008 are outlined in the table below:
The decrease in operating expenses for the year ended November 30, 2009, compared to the same period in fiscal 2008, was mainly due to a decrease in general and administrative expenses of $62,392 (2008: $83,263), a decrease in management services $Nil (2008:$5,500); an impairment of mineral property costs of $444 (2008: $1,116,930), an increase in consulting fees of $184,809 (2008: $10,000); an increase in rent $6,000 (2008: $2,544) and an increase in mineral property costs of $13,703 (2008: $6,000).
Liquidity and Financial Condition
As of November 30, 20010, our total assets were $323 and our total liabilities were $379,230 and we had a working capital deficit of $378,907. Our financial statements report a net loss of $1,562,110 for the year ended November 30, 2010, and a net loss of $1,286,227 for the period from September 12, 2006 (date of inception) to November 30, 2008.
We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard we have raised additional capital through equity offerings and loan transactions.
We had a working capital deficit of $378,907 as of November 30, 2010 compared to working capital deficit of $107,754 as of November 30, 2008.
Our principal sources of funds have been from sales of our common stock and short term loans.
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
Going Concern
We have not yet achieved profitable operations and are dependent on our ability to raise capital from stockholders or other sources to meet our obligations and repay our liabilities arising from normal business operations when they become due, in their report on our nonaudited financial statements for the year ended November 30, 2010.
Critical Accounting Policies
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 using the guidance in EITF 04-02, “Whether Mineral Rights Are Tangible or Intangible Assets”. The Company assesses the carrying costs for impairment under SFAS No. 144, “Accounting for Impairment or Disposal of Long Lived Assets” at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
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.
Recent Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60”. SFAS No. 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise’s risk-management activities. SFAS No. 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on the Company’s 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 the Company’s 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 is not expected to have a material effect on the Company's 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 the Company's 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 the Company’s financial statements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 8.
Item 8. Financial Statements and Supplementary Data
Chancery Resources, Inc.
(An Exploration Stage Company)
November 30, 2010
Chancery Resources, Inc.
(An Exploration Stage Company)
Consolidated Balance Sheets
(Expressed in US dollars)
(The Accompanying Notes are an Integral Part of These Financial Statements)
Chancery Resources, Inc.
(An Exploration Stage Company)
Consolidated Statements of Operations
(Expressed in US dollars)
For the
Year ended
For the
Year ended
Accumulated from
September 12, 2006
(Date of Inception)
November 30,
November 30,
to November 30,
$
$
$
Revenue
-
-
-
Expenses
General and administrative
62,392
83,263
192,792
Consulting fees
184,809
10,000
194,809
Management services
-
5,500
12,750
Impairment of mineral property costs
1,116,930
1,121,074
Mineral property costs
13,703
6,000
19,778
Rent
6,000
2,544
12,372
Total Operating Expenses
267,348
1,224,237
1,553,575
Interest Expense
8,535
-
8,535
Net Loss
(275,883)
(1,224,237)
(1,562,110)
Net Loss Per Share - Basic and Diluted
(0.01)
(0.01)
N/A
Weighted Average Common Shares Outstanding
32,250,000
89,390,000
N/A
Statement of Other Comprehensive Loss
Net Loss
(275,883)
(1,224,237)
(1,562,110)
Foreign currency translation adjustment
(156)
-
(156)
Total Comprehensive Loss
(276,039)
(1,224,237)
(1,562,266)
(The Accompanying Notes are an Integral Part of These Financial Statements)
Chancery Resources, Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Expressed in US dollars)
For the Year
Ended
November 30,
$
For the Year
Ended
November 30,
$
Accumulated from September 12, 2006 (Date of Inception)
to November 30, 2009
$
Cash Flows From Operating Activities
Net loss for the period
(275,883)
(1,224,237)
(1,562,110)
Adjustments to reconcile net loss to net cash used in operating activities:
Donated services and expenses
6,000
6,250
19,500
Impairment of mineral property costs
1,116,930
1,117,374
Amortization of discount
8,536
-
11,232
Share-based compensation
184,809
10,000
194,809
Changes in operating assets and liabilities:
Prepaid expenses
-
Accounts payable and accrued liabilities
35,890
5,674
45,284
Net Cash Used In Operating Activities
(39,733)
(85,141)
(173,911)
Cash Flows From Investing Activities
Mineral property costs
(444)
(50,000)
(50,444)
Net Cash Used In Investing Activities
(444)
(50,000)
(50,444)
Cash Flows From Financing Activities
Advances from related party
47,630
29,376
119,524
Bank indebtedness
(8,612)
8,872
Proceed from the sale of common stock
-
-
105,050
Net Cash Provided By Financing Activities
39,018
38,248
224,834
Effect of Exchange Rate Changes on Cash
(156)
-
(156)
Increase (decrease) in Cash
(1,315)
(96,893)
Cash - Beginning of Period
1,638
98,531
-
Cash - End of Period
1,638
Supplemental Disclosures
Interest paid
-
-
-
Income taxes paid
-
-
-
Non-Cash Financing and Investing Activities
Promissory note issued for mineral property
-
70,000
70,000
Common stock issued for mineral property
-
120,000
120,000
Preferred stock issued for mineral property
-
744,000
744,000
Common stock issued for services and prepaid expenses
-
120,000
120,000
(The Accompanying Notes are an Integral Part of These Financial Statements)
Chancery Resources, Inc.
(An Exploration Stage Company)
Consolidated Statement of Stockholders’ Equity (Deficit)
For the Period from September 12, 2006 (Date of Inception) to November 30, 2010
(Expressed in US dollars)
On February 4, 2008, the Company effected a 25:1 forward stock split of the authorized, issued and outstanding common and preferred stock. All share amounts have been retroactively adjusted for all periods presented.
(The Accompanying Notes are an Integral Part of These Financial Statements)
Chancery Resources, Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
November 30, 2010
(Expressed in US dollars)
1.
Nature of Operations and Continuance of Business
Chancery Resources, Inc. (the “Company”) was incorporated in the State of Nevada on September 12, 2006. The Company is an Exploration Stage Company as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities”. The Company has acquired a mineral property located in the province of British Columbia, Canada, and has not yet determined whether this property contains reserves that are economically recoverable.
The Company incorporated a wholly-owned subsidiary Chancery Mining Canada Ltd. (“Chancery Canada”) on November 12, 2008 in the province of British Columbia , Canada, and incorporated another wholly-owned subsidiary Minera Chancery Colombia (“Chancery Colombia”) on January 30, 2009 in Medellin, Colombia. Both subsidiaries will focus on mining activities.
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 financing to continue operations, and the attainment of profitable operations. As at November 30, 2010, the Company has a working capital deficit of $378,907 and has accumulated losses of $1,562,110 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.
2.
Summary of Significant Accounting Policies
a)
Basis of Presentation
These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The financial statements include accounts of the Company and its wholly-owned subsidiaries, Chancery Canada and Chancery Colombia. All intercompany transactions and balances have been eliminated. The Company’s fiscal year-end is November 30.
b)
Use of Estimates
The preparation of financial statements in conformity with US 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. The Company regularly evaluates estimates and assumptions related to the recoverability of mineral property costs, imputed interest, donated expenses, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
d)
Earnings (Loss) Per Share
The Company computes net earnings (loss) per share in accordance with ASC 260 "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
Chancery Resources, Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
November 30, 2010
(Expressed in US dollars)
2.
Summary of Significant Accounting Policies (continued)
e)
Comprehensive Loss
ASC 220 “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at November 30, 2010, the Company’s only component of comprehensive loss was foreign currency translation adjustment.
f)
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 using the guidance in EITF 04-02, “Whether Mineral Rights Are Tangible or Intangible Assets”. The Company assesses the carrying costs for impairment under ASC 360 “Property, Plant, and Equipment” at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
g)
Long-lived Assets
In accordance with ASC 360 “Property, Plant, and Equipment”, 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.
h)
Asset Retirement Obligations
The Company follows the provisions of ASC 440 “Asset Retirement and Environmental Obligations”, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.
i)
Financial Instruments
ASC 820 “Fair Value Measurements” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
2. Summary of Significant Accounting Policies (continued)
i) Financial Instruments and Fair Value Measures (continued)
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, bank indebtedness, accounts payable, amounts due to a related party, and loans payable. Pursuant to ASC 820, the fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
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.
j)
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “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.
Chancery Resources, Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
November 30, 2010
(Expressed in US dollars)
2.
Summary of Significant Accounting Policies (continued)
k)
Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in Canadian dollars and management has adopted ASC 830 “Foreign Currency Translation Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
l)
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, “Compensation - Stock Based Compensation” 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.
m)
Recent Accounting Pronouncements
In May 2009, FASB issued ASC 855, Subsequent Events, which establishes general standards of for the evaluation, recognition and disclosure of events and transactions that occur after the balance sheet date. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The standard, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, is effective for interim or annual periods ending after June 15, 2009. The adoption of ASC 855 did not have a material effect on the Company’s financial statements
In June 2009, the FASB issued guidance now codified as ASC 105, Generally Accepted Accounting Principles, as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP, aside from those issued by the SEC. ASC 105 does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. The adoption of ASC 105 did not have a material impact on the Company’s financial statements, but did eliminate all references to pre-codification standards.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Chancery Resources, Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
November 30, 2010
(Expressed in US dollars)
2.
Summary of Significant Accounting Policies (continued)
Chancery Resources, Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
November 30, 2010
(Expressed in US dollars)
Chancery Resources, Inc.
(An Exploration Stage Company)
Notes to the Financial Statements
November 30, 2010
(Expressed in US dollars)
8.
Income Taxes
The Company has a net operating loss carry-forward of approximately $1,538,000 available to offset taxable income in future years which commence expiring in fiscal 2026.
The Company is subject to United States income taxes at a rate of 35%. The reconciliation of the provision for income taxes at the United States statutory rate compared to the Company’s income tax expense as reported is as follows:
Year Ended
November 30,
$
Year Ended
November 30,
$
Income tax recovery at statutory rate
96,559
428,483
Donated services and expenses
(2,100)
(2,188)
Valuation allowance change
(94,459)
(426,295)
Provision for income taxes
-
-
The significant components of deferred income tax assets and liabilities as at November 30, 2010 are as follows:
November 30,
$
November 30,
$
Net operating losses carried forward
539,913
445,454
Valuation allowance
(539,913)
(445,454)
Net deferred income tax asset
-
-
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and interim periods, including the interim period up through the date the relationship ended.
Item 9A(T).
Item 9A(T). Controls and Procedures
Management’s Report on Disclosure 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 and chief executive officer (who is acting as our principal executive officer and our principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.
As of November 30, 2010, the end of our fiscal year covered by this report, we carried out an evaluation, under the supervision and with the participation of our president and chief executive officer (who is acting as our principal executive officer and our principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and chief executive officer (who is acting as our principal executive officer and our principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States.
This annual report does not include an attestation report of our company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit our company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the year ended November 30, 2009 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Rafael A. Pinedo
Mr. Pinedo has over 20 years of experience in the areas of consulting, engineering, and energy. Since December 3, 1998, Mr. Pinedo has served as Chairman of Pilgrim Petroleum Corporation (PGPM.OTC and PHV on the Frankfurt Stock Exchange), an oil and gas exploration company based out of Dallas, Texas. Since December 31, 2003, Mr. Pinedo has also served as president and director of engineering and operations, for American Petroleum Corp, an Irving, and Texas based operating company, and managing director of American BNP Resources LP based in Midland, Texas. Mr. Pinedo is Chairman of Arcland Energy Corporation (OTC: ACLY) a Dallas Texas exploration company. In addition Mr. Pinedo also was a director of CB Resources Ltd. (CNQ.ICD) a Canadian public company based in Vancouver, Canada and director at Mineral Hills Industries Ltd. a Canadian public company (TSXV.MHI), he has assisted as consultant and investor on a number of public companies in the United States, Canada and United Kingdom in energy and mineral exploration operations.
Jeffrey Fanning
Mr. Fanning has over 16 years of experience in engineering, field services and consulting. Mr. Fanning is currently president of Lariat Energy Corp. a field and exploration service company and was vice-president of operations at Pilgrim Petroleum Corp. (OTC.PGPM) until December 2006. Mr. Fanning worked as an operations manager for American BNP Resources LLC a drilling and operating company. Prior to this, Mr. Fanning has been involve in property development and further strategic property acquisitions and assisted a number of public companies in developing their operating plans for their exploration operations.
Juan Restrepo Gutierrez
Mr. Restrepo Gutierrez acts as general manager of Mineral and Geological Consulting Company since October 2006. Prior to that Mr. Restrepo Gutierrez worked in the tire and retreading industry where he served as a production manager, general manager and a consultant for several companies. Mr. Restrepo Gutierrez also worked in the electronic maintenance industry and has experience in the no ferrous foundry industry where he acted as a manager for several years.
Mr. Restrepo Gutierrez has a Bachelor of Geology and a Master of Science in Geology from the University of South Florida, Tampa. He has taken specialization courses in project management, sales and service management, strategic marketing management and quality control under ISO 9000. He taught Optical Mineralogy and Igneous and Metamorphic Petrology at the Universidad Nacional de Colombia. Mr. Restrepo Gutierrez has also taught courses at the Universidad Pontificia Bolivariana and Colegiatura Colombiana de Diseño.
On August 3rd, 2009, Vincent Higgins was appointed as independent director of our company.
Mr. Higgins, age 43, is recognized international leader in training, leadership development, and multicultural team building. Founded the Institute for Effective Leadership. Served as the Director of the Lumen Institute, Dallas, Texas and founded the Dallas branch. Trilingual: English, Spanish, and Italian. Extensive experience in operations and growth of international non-profit organizations including institutional fundraising and networking. Obtained undergraduate degree in Physics, Summa Cum Laude at the University of Dallas, TX. Doctoral track in High Energy Physics, at Purdue University, West Lafayette, Indiana and degrees in Philosophy and Theology at the Pontifical University Regina Apostolorum, in Rome, Italy
Family Relationships
There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offences;
3.
being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended November 30, 2009, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with, with the exception of the following:
(1)
The executive officer, director or holder of 10% or more of our common stock filed a late Form 3 - Initial Statement of Beneficial Ownership of Securities.
(2)
The executive officer, director or holder of 10% or more of our common stock failed to file a Form 4 - Statement of Changes in Beneficial Ownership of Securities.
Code of Ethics
We adopted a Code of Ethics applicable to all of our directors, officers, employees and consultants, which is a "code of ethics" as defined by applicable rules of the SEC. Our Code of Ethics is attached as an exhibit to our annual report on Form 10-K filed on February 28, 2008. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our chief executive officer, chief financial officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.
Audit Committee and Audit Committee Financial Expert
Our board of directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We believe that the members of our board of directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committees can be adequately performed by our board of directors.
Item 11.
Item 11. Executive Compensation
The particulars of the compensation paid to the following persons:
(a)
our principal executive officer;
(b)
each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended November 30, 2009 and 2008; and
(c)
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended November 30, 2009 and 2008,
who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:
(1)
Mr. Restrepo Gutierrez was appointed as our President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a Director on January 9, 2008. On October 16, 2008, Mr. Restrepo Gutierrez resigned as a director and President.
(2)
Mr. Gachallan resigned as our President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of on January 9, 2008.
(3)
Mr. Pinedo was appointed as our President and a Director on October 16, 2008.
(4)
Mr. Fanning was appointed as our Vice President of Exploration and a Director on October 16, 2008.
(5)
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 issued 1,000,000 restricted shares of our common stock to Mr. Pinedo.
Other than as set out below, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of directors.
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 issued 1,000,000 restricted shares of our common stock to Mr. Pinedo.
Stock Option Grants to our Named Executive Officers
As at November 30, 2009, our company did not have a stock option plan and our company did not grant any stock options to any named executive officers during the years ended November 30, 2009 or 2008.
On February 9, 2009, our directors approved the adoption of the 2009 Stock Option Plan which permits our company to issue up to 6,450,000 shares of our common stock to directors, officers, employees and consultants of our company.
Outstanding Equity Awards at Fiscal Year End
There were no outstanding equity awards granted to any named executive officer as of November 30, 2009 or 2008.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values
There were no options outstanding, and hence no options exercised, by any named executive officers during the years ended November 30, 2009 or 2008.
Compensation of Directors
We do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of February 23, 2010, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and
investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on February 23, 2009. As of February 23, 2010, there were 32,250,000 shares of our company’s common stock issued and outstanding.
(2)
Includes 5,000,000 shares of common stock issuable to Rafael A. Pinedo upon exchange of 25,000,000 shares of our Series A Preferred Stock.
(3)
BNP Resources LLP is controlled by Jeffrey Fanning, a director of our company.
(4)
Includes 1,200,000 shares of common stock issuable to BNP Resources LLP upon exchange of 6,000,000 shares of our Series A Preferred Stock.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended November 30, 2009, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year end for the last three completed fiscal years.
For the year ended November 30, 2009, the Company recognized $5,500 (2007 - $6,000) for donated services provided by the former President of the Company and incurred $1,794 (2007 - $3,303) in rent to a company controlled by the former President of the Company.
For the year ended November 30, 2008, the Company incurred $750 (2007 - $Nil) in donated rent to a company controlled by the President of the Company, and is indebted to the President for $4,150 (2007 - $Nil) for advances and expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and due on demand.
As at November 30, 2008, the Company is indebted to the Chief Executive Officer of the Company for $2,530 (2007 - $Nil) for expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and due on demand.
On November 6, 2008, the Company entered into a consulting agreement with the President of the Company for services and was issued 1,000,000 shares of restricted common stock with a fair value of $120,000. (Refer to Note 6).
On May 27, 2008, the Company entered into a share cancellation and return to treasury agreement with the former President of the Company wherein he agreed to the return for cancellation 121,000,000 shares of common stock held by him. The former President was not offered any compensation for such cancellation.
Director Independence
We currently act with two directors, consisting of Rafael A. Pinedo and Juan Restrepo. We have determined that none of our directors is an “independent director” as defined in NASDAQ Marketplace Rule 4200(a)(15).
We do not have a standing audit, compensation or nominating committee, but our entire board of directors acts in such capacities. We believe that our members of our board of directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The board of directors of our company does not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee can be adequately performed by the board of directors. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development.
Item 14.
Item 14. Principal Accounting Fees and Services
The aggregate fees billed for the most recently completed fiscal year ended November 30, 2009 and for fiscal year ended November 30, 2008 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our annual report on Form 10-K and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
(a)
Financial Statements
(1)
Financial statements for our company are listed in the index under Item 8 of this document
(2)
All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.
(b)
Exhibits
*filed herewith.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHANCERY RESOURCES INC.
By: /s/ Rafael Pinedo
Rafael Pinedo, President and Director
(Principal Executive Officer)
February 28, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Rafael Pinedo
Rafael Pinedo, President and Director
(Principal Executive Officer)
February 28, 2011
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Rafael Pinedo, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Chancery Resources, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 28, 2011
/s/ Rafael Pinedo
Rafael Pinedo
President and Director
(Principal Executive Officer )
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Rafael Pinedo, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
the Annual Report on Form 10-K of Chancery Resources, Inc. for the year ended November 30, 2010 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Chancery Resources, Inc.
Dated: February 28, 2011
/s/ Rafael Pinedo
Rafael Pinedo
President and Director
(Principal Executive Officer)
Chancery Resources, Inc.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Chancery Resources, Inc. and will be retained by Chancery Resources, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2