UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

| |  | QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| |  | ---------------------------------------------------------------------------------

For the quarterly period ended:   June
30, 2006

| |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
| |  | ----------------------------------------------------------------------------------------

Commission file number:   000-51939

BANNER RESOURCES INC.

---

(Exact name of small business issuer as specified in
its charter)

|Nevada
(State or other jurisdiction of
incorporation or organization) | 98-0446606
(I.R.S. Employer Identification No.)
|--------------------------------------------------------------------- | -----------------------------------------------

|902 Kings AvenueWest Vancouver, British Columbia, Canada
(Address of principal executive offices) | V7T 2B7
(zip code)
|------------------------------------------------------------------------------------------------- | ------------------

Issuers Telephone Number:  
(604) 926-0508

Check
whether the issuer (1) filed all reports  required to be filed by Section 13 or 15(d) of
the Securities  Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the  registrant  was required to file such  reports),  and (2) has been
subject to such filing requirements for the past 90 days.

Yes          No

As of August 14, 2006 there were 6,945,000  shares of common stock outstanding.

Transitional Small Business
Disclosure Format (check one)

Yes          No

---

BANNER RESOURCES INC.
JUNE 30, 2006INDEX

|PART
I - FINANCIAL INFORMATION | Page No.(s)
|------------------------------ | -----------

| | Item 1. | Financial Statements (unaudited) | 
| | ------- | -------------------------------- | 

| |  | Balance Sheets, June 30, 2006 and March 31, 2006 | 1
| |  | ------------------------------------------------ | -

| |  | Statements of Operations for the three month periods ended June, 2006 and 2005
and from the date of inception on January 24, 2005 through June 30, 2006 | 2
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- | -

| |  | Statements of Cash Flows for the three month period ended June, 2006 and 2005 | 3
| |  | ----------------------------------------------------------------------------- | -

| |  | Notes to Financial Statements | 4
| |  | ----------------------------- | -

| | Item 2. | Managements Discussion and Analysis of Financial Condition or Plan of Operation | 7
| | ------- | -------------------------------------------------------------------------------- | -

| | Item 3. | Controls and Procedures | 10
| | ------- | ----------------------- | --

|PART
II - OTHER INFORMATION | 
|--------------------------- | 

| | Item 1. | Legal Proceedings. | 11
| | ------- | ------------------ | --

| | Item 1A. | Risk Factors | 11
| | -------- | ------------ | --

| | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 11
| | ------- | ------------------------------------------------------------ | --

| | Item 3. | Defaults
Upon Senior Securities. | 11
| | ------- | -------------------------------- | --

| | Item 4. | Submission of
Matters to Vote of Security Holders. | 11
| | ------- | -------------------------------------------------- | --

| | Item 5. | Other Information | 11
| | ------- | ----------------- | --

| | Item 6. | Exhibits | 11
| | ------- | -------- | --

|SIGNATURES |  | 12
|---------- |  | --

---

Banner Resources Inc.
(An Exploration Stage Company) 
Consolidated Balance Sheets(Expressed in U.S. dollars) 
(Unaudited)

|                                                 | June 30,
2006
$ | March 31,
2006
$
|------------------------------------------------ | --------------- | ----------------
|                                                
|ASSETS                                           |                 |                 
|Current Assets                                   |                
|Cash                                             |                 | 68              
|Prepaid expenses                                 |                 | 1,000           
|                                                
|Total Assets                                     |                 | 1,068           
|                                                
|LIABILITIES AND STOCKHOLDERS' DEFICIT            |                
|Current Liabilities                              |                
|Accounts payable                                 |                 | 23,760          
|Accrued liabilities                              |                 | 900             
|Due to related party (Note 4(b))                 |                 | 5,231           
|Loans payable (Note 5)                           |                 | 14,640          
|                                                
|Total Liabilities                                |                 | 44,531          
|                                                
|Contingencies and Commitments (Notes 1 and 3)    |                
|Stockholders' Deficit                            |                
|Common Stock                                     |                
|Authorized: 75,000,000 shares, par value $0.001  |                
|Issued: 6,945,000 shares                         |                 | 6,945           
|Additional Paid-in Capital                       |                 | 36,750          
|Donated Capital (Note 4(a))                      |                 | 10,266          
|Accumulated Other Comprehensive Loss             |                 | (555            
|Deficit Accumulated During the Exploration Stage |                 | (96,869         
|                                                
|Total Stockholders' Deficit                      |                 | (43,463         
|                                                
|Total Liabilities and Stockholders' Deficit      |                 | 1,068           
|                                                

The accompanying notes are an integral part of these consolidated financial statements

1

---

Banner Resources Inc. 
(An Exploration Stage Company) 
Consolidated Statements of Operations(Expressed in U.S. dollars)
(Unaudited)

|                                        | Accumulated     
      From         
 January 24,2005   
(Date of Inception)
  to June 30,      
      2006         
        $ | For the        
Three Months Ended
 June 30,         
    2006          
      $ | For the  
Three Months
       Ended
 June 30,   
    2005    
      $
|--------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------- | ---------------------------------------------------------------------
|                                       
|Revenue                                 |                                                                                                                                |                                                                                 |                                                                      
|                                       
|Expenses                                |                                                                                                                               
|Consulting                              |                                                                                                                                | 1,919                                                                            |                                                                      
|General and administrative              |                                                                                                                                | 3,545                                                                            |                                                                      
|Management fees (Note 4(a))             |                                                                                                                                | 17,000                                                                           |                                                                      
|Mineral property costs                  |                                                                                                                                | 15,000                                                                           |                                                                      
|Rent (Note 4(a))                        |                                                                                                                                | 11,854                                                                           |                                                                      
|Professional services                   |                                                                                                                                | 42,286                                                                           |                                                                      
|Travel                                  |                                                                                                                                | 5,265                                                                            |                                                                      
|                                       
|Total Expenses                          |                                                                                                                                | 96,869                                                                           |                                                                      
|                                       
|Net Loss                                |                                                                                                                                | (96,869                                                                          | )                                                                    
|Other Comprehensive Loss                |                                                                                                                               
|Foreign Currency Translation Adjustment |                                                                                                                                | (555                                                                             | )                                                                    
|                                       
|Comprehensive Loss                      |                                                                                                                                | (97,424                                                                          | )                                                                    
|                                       
|Net Loss Per Share - Basic and Diluted  |                                                                                                                                |                                                                                 |                                                                      
|                                       
|Weighted Average Shares Outstanding     |                                                                                                                                |                                                                                 |                                                                      
|                                       

The accompanying notes are an integral part of these consolidated financial statements

2

---

Banner Resources Inc. 
(An Exploration Stage Company) 
Consolidated Statements of Cash Flows(Expressed in U.S. dollars)
(Unaudited)

|                                                               | For the
Three Months
Ended
June 30,
2006
$ | For the
Three Months
Ended
June 30,
2005
$
|-------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------
|                                                              
|Operating Activities                                           |                                            |                                           
|Net loss                                                       |                                            | (12,402                                   
|Adjustment to reconcile net loss to net cash used in operating |                                           
|activities                                                     |                                           
|Donated services                                               |                                            | 4,500                                     
|Changes in operating assets and liabilities                    |                                           
|Prepaid expenses                                               |                                            | (1,000                                    
|Accounts payable and accrued liabilities                       |                                            | 2,982                                     
|Due to related parties                                         |                                            |                                          
|                                                              
|Net Cash Used in Operating Activities                          |                                            | (5,920                                    
|                                                              
|Financing Activities                                           |                                           
|Loans payable                                                  |                                            | (15,000                                   
|Common stock issued for cash                                   |                                            |                                          
|                                                              
|Net Cash Provided by Financing Activities                      |                                            |                                          
|                                                              
|Effect of Exchange Rate Changes on Cash                        |                                            | (395                                      
|                                                              
|Decrease in Cash                                               |                                            | (6,315                                    
|Cash - Beginning of Period                                     |                                            | 6,383                                     
|                                                              
|Cash - End of Period                                           |                                            | 68                                        
|                                                              
|Supplemental Disclosures:                                      |                                           
|Interest paid                                                  |                                            |                                          
|Income taxes paid                                              |                                            |                                          
|                                                              

The accompanying notes are an integral part of these consolidated financial statements

3

---

Banner Resources Inc. 
(An Exploration Stage Company) 
Notes to Consolidated Financial Statements(Unaudited)

|1. |  | Exploration
Stage Company
|-- |  | -------------------------

| | The
Company was incorporated in the State of Nevada on January 24, 2005. The Company has
acquired a 100% interest in 70 mineral claim units located in the Clinton Mining Division,
British Columbia.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is an Exploration Stage Company, as defined by Statement of Financial Accounting
Standard (SFAS) No.7 Accounting and Reporting by Development
Stage Enterprises. The Companys principal business is the acquisition and
exploration of mineral resources. The Company has not presently determined whether its
properties contain mineral reserves that are economically recoverable.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 never generated revenue 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 to determine the existence,
discovery and successful exploitation of economically recoverable reserves in its resource
properties, confirmation of the Companys interests in the underlying properties, and
the attainment of profitable operations. As at June 30 the Company has a working capital
deficit of $43,463, and has accumulated losses of $96,869 since inception. These 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. These factors raise substantial
doubt regarding the Companys ability to continue as a going concern.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company filed am amended SB-2 Registration Statement (SB-2) to register up to
3,000,000 common shares at a price of $0.10 per share for gross proceeds of up to
$300,000, that was declared effective on August 1, 2006. The offering will be open for a
period of nine months from the effective date of the SB-2, on a best efforts basis. The
SB-2 also registered up to 5,445,000 common shares for resale by existing shareholders of
the Company. The Company will not receive any proceeds from the resale of common shares by
the selling stockholders.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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. These financial statements include accounts of the Company and its wholly-owned
subsidiary, Banner Exploration Ltd., a company incorporated in the Province of British
Columbia, Canada, on January 26, 2005. All intercompany transactions and balances have
been eliminated. The Companys fiscal year end is March 31.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | Use
of Estimates
| | -- |  | ----------------

| | The
preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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) |  | Basic
and Diluted Net Income (Loss) Per Share
| | -- |  | ---------------------------------------------

| | The
Company computes net income (loss) per share in accordance with SFAS No. 128, Earnings
per Share (SFAS 128). SFAS 128 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 income (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 including
stock options, 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

---

|2. |  | Summary
of Significant Accounting Policies (continued)
|-- |  | ------------------------------------------------------

| | e) |  | Financial
Instruments
| | -- |  | ---------------------

| | The
fair values of cash, accounts payable, accrued liabilities and due to related party,
approximate their carrying values due to the immediate or short-term maturity of these
financial instruments.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | f) |  | Foreign
Currency Transactions/Balances
| | -- |  | --------------------------------------

| | The
Companys functional currency is the United States dollar. The financial statements
of the Company are translated to United States dollars in accordance with SFAS No. 52
Foreign Currency Translation (SFAS No. 52). Monetary assets and
liabilities denominated in foreign currencies are translated using the exchange rate
prevailing at the balance sheet date. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included in the
determination of income. Foreign currency transactions are primarily undertaken in
Canadian dollars. The Company has not, to the date of these financials statements,
entered into derivative instruments to offset the impact of foreign currency
fluctuations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
functional currency of the wholly-owned subsidiary is the Canadian dollar. The financial
statements of the subsidiary are translated to United States dollars in accordance with
SFAS No. 52 using period-end rates of exchange for assets and liabilities, and average
rates of exchange for the year for revenues and expenses. Translation gains (losses) are
recorded in accumulated other comprehensive income (loss) as a component of stockholders equity.
Foreign currency transaction gains and losses are included in current operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | g) |  | Mineral
Property Costs
| | -- |  | ----------------------

| | The
Company has been in the exploration stage since its inception on January 24, 2005, 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 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | h) |  | Comprehensive
Loss
| | -- |  | ------------------

| | SFAS
No. 130, Reporting Comprehensive Income establishes standards for the
reporting and display of comprehensive loss and its components in the financial
statements. As at June 30, 2006, the Companys only component of comprehensive loss
was foreign currency translation adjustments.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | i) |  | Income
Taxes
| | -- |  | ------------

| | Potential
benefits of income tax losses are not recognized in the accounts until realization is
more likely than not. The Company has adopted SFAS No. 109 Accounting for Income
Taxes as of its inception. Pursuant to SFAS No. 109 the Company is required to
compute tax asset benefits for net operating losses carried forward. Potential benefit of
net operating losses have not been recognized in these financial statements because the
Company cannot be assured it is more likely than not it will utilize the net operating
losses carried forward in future years.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | j) |  | Donated
Services
| | -- |  | ----------------

| | The
Company recognizes professional services donated to the Company based upon their fair
value. During the period ended June 30, 2006, the Company recognized donated management
services of $3,000 and donated rent of $1,500.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | k) |  | Stock-based
Compensation
| | -- |  | ------------------------

| | Prior
to January 1, 2006, the Company accounted for stock-based awards under the recognition
and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees using the intrinsic value method of accounting,
under which compensation expense was only recognized if the exercise price of the Companys
employee stock options was less than the market price of the underlying common stock on
the date of grant. Effective January 1, 2006, the Company adopted the fair value
recognition provisions of SFAS No. 123R Share Based Payments, using
the modified retrospective transition method. The Company has not issued any stock
options or share based payments since its inception. Accordingly, there was no effect on
the Companys reported loss from operations, cash flows or loss per share as a
result of adopting SFAS No 123R.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5

---

|2. |  | Summary
of Significant Accounting Principles (continued)
|-- |  | --------------------------------------------------------

| | l) |  | Recent
Accounting Pronouncements
| | -- |  | --------------------------------

| | The
FASB has issued SFAS No. 155 Accounting for Certain Hybrid Financial Instruments and
SFAS No. 156 Accounting forServicing of Financial Assets, but
they will not have any relationship to the operations of the Company. Therefore a
description and its impact for each on the Companys operations and financial
position have not been disclosed.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | m) |  | Interim
Financial Statements
| | -- |  | ----------------------------

| | The
unaudited interim consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States for interim financial
information, and are presented in United States dollars. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting principles
for complete financial statements. The unaudited interim consolidated financial
statements have been prepared in accordance with the accounting principles and policies
described in the Companys annual financial statements for the year ended March 31,
2006, and should be read in conjunction with those statements. In the opinion of
management, all adjustments (consisting of normal and recurring accruals) considered
necessary for fair presentation of the Companys financial position, results of
operations and cash flows have been included. Operating results for the three-month
period ended June 30, 2006 are not necessarily indicative of the results that may be
expected for the year ended March 31, 2007.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Mineral
Property
|-- |  | ----------------

| | On
February 1, 2005, the Company acquired a 100% interest in seven mineral claims consisting
of 70 mineral claim units located in Clinton Mining Division, British Columbia, Canada, in
consideration for the issuance of 320,000 common shares at a fair value price of $.001 per
share or $320 in total. The fair value of these common shares was determined to be $0.001
per share based on the cash sale of common stock on February 28, 2005 being the closest
date shares were issued. The purchase price of $320 was charged to operations as mineral
property costs as proven or probable reserves have not been established on the mineral
property. The Company must pay the former owner of the mineral claims a 21⁄2% Net
Smelter Royalty upon commencement of commercial production. However, the Company can
acquire 11⁄2% of the Net Smelter Return for $1,000,000 within 12 months from
commencement of commercial production. An advance royalty payment of $25,000 will be
payable annually commencing on February 1, 2008. If the Company does not make the advance
royalty payment on February 1, 2008, the claims will be returned to the vendor. If the
royalty of $25,000 is paid on February 1, 2008, this amount will be charged to operations
if proven or probable reserves have not been found.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | Related
Party Transactions
|-- |  | --------------------------

| | a) |  | During
the three month period ended June 30, 2006, the Company recognized a
                    total of $3,000 for donated services at $1,000 per month and $1,500
for donated                     rent at $500 per month provided by the President of the
Company.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | As
at June 30, 2006, the Company has an amount owing of $5,231 to the former
                    President of the Company for rent and management services incurred on
behalf of                     the Company. The amount is non-interest bearing, unsecured,
and due on demand.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | Loans
Payable
|-- |  | -------------

| | During
the year ended March 31, 2006, the Company received unsecured cash loans of $14,640. These
loans are non-interest bearing, and have no specific terms of repayment. These remain
outstanding as at June 30, 2006.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

# FORWARD-LOOKING
STATEMENTS

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

| |  |  | the
timing of regulatory and permitting matters;
| | - |  | ------------------------------------------------

| |  |  | the
timing and outcome of our exploration;
| | - |  | ------------------------------------------

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

| |  |  | estimates
related to costs of exploration expenditures;
| | - |  | -------------------------------------------------------

| |  |  | requirements
 for additional  capital and our ability to raise additional capital;
| | - |  | ----------------------------------------------------------------------------------

| |  |  | government
regulation of mining operations, environmental risks, reclamation and rehabilitation
expenses;
| | - |  | ---------------------------------------------------------------------------------------------------------

| |  |  | title
disputes or claims;
| | - |  | -------------------------

| |  |  | limitations
of insurance coverage; and
| | - |  | --------------------------------------

| |  |  | the
future price of gold, silver or other metals.
| | - |  | -------------------------------------------------

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

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

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

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

# Overview

Banner
Resources Inc. was incorporated under the laws of the state of Nevada on January 24, 2005.
We have commenced limited business operations and we are considered an exploration stage
company. To date, our activities include organizational matters, preliminary property
investigations on the Chita claims, negotiating and purchasing those claims, obtaining a
geology report on the Chita claims and the preparation and filing of the registration
statement of which this prospectus is a part. In connection with the organization of our
Company, the founding shareholders of our Company contributed an aggregate of US$5,875
cash in exchange for a total of 5,875,000 shares. As consideration for the acquisition of
the Chita claims, we issued 320,000 shares of common stock to Valor Mines Inc. We have no
significant assets.

We
own a 100% interest in seven mineral claims (Chita claims) consisting of an aggregate of
70 units, subject to a 2.5% Net Smelter Return royalty. We can acquire 1.5% of the Net
Smelter Return for $1.0 million within 12 months from commencement of commercial
production. We agreed to pay Valor Mines advance royalties of approximately

7

---

$25,000 annually commencing February
1, 2008. If we fail to pay these advance royalties by February 1, 2008, we will have to
transfer ownership of the Chita claims back to Valor. We acquired the Chita claims by
issuing 320,000 shares of common stock to Valor Mines Inc. The Chita claims are
registered in the name of our wholly owned subsidiary, Banner Exploration Ltd.

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

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

We
filed a registration statement on Form SB-2 and a post-effective amendment on July 19,
2006, in connection with the offer and sale of up to 8,445,000 shares of our common stock,
of which 5,445,000 shares are offered by the persons named in the prospectus under the
caption selling shareholders. Up to 3,000,000 shares of our common stock are
being sold by us, at a price of $0.10 per share on a self-underwritten, best efforts
basis, with no minimum. Our offering of 3,000,000 shares will end on or about
December 1, 2006 unless we sell all the offered shares or we elect to terminate the
offering prior to that final date. For the offering of 5,445,000 shares by the selling
shareholders, the Company plans to update the registration statement for a period ending
on or about December 1, 2006. We have not sold any securities under the prospectus as
of the date of this report.

Our
principal office is located at 902 Kings Avenue, West Vancouver, British Columbia, V7T
2B7, and our phone number is (604) 926-0508.

# Plan of Operation

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

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

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

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

In
February 2005, Mr. Glen Macdonald, P.Geo. was hired by Banner to provide an initial
Geology Report on the Chita claims (the Macdonald Report). Mr. Macdonald has
29 years experience as a consulting geologist. He graduated

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from the University of British
Columbia, Canada, with degrees in Economics in 1971 and Geology in 1973. He is a member
of the Association of Professional Engineers and Geoscientists of the Province of British
Columbia (No. 20464) and a member of the Association of Professional Engineers,
Geologists and Geophysicists of Alberta (No. 36214). The purpose of this report was to
evaluate the area of the claim group, and the prior exploration work conducted on the
claims, and to recommend an exploration program.

| | Exploration in 2005
| | -------------------

Mr. Macdonald recommended an initial exploration program consisting of geological
          sampling and mapping program on the property. In July 2005, we hired an
          independent geological consulting services company whose field crew carried out
          a program of mapping and sampling on the property and filed an assessment report
          with the BC Ministry of Energy and Mines which keeps the Chita claims in good
          standing until July 25, 2006, extended through August 31, 2006.  We have concluded the field work of our initial
          exploration program and we expect to receive sample analysis and report in the
          fourth quarter of 2006.

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

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

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

| | Recommended
Exploration Program for 2006/2007
| | ---------------------------------------------

Depending
on the results of the initial exploration program, if our geologist recommends a follow-up
program in 2006/2007, we plan to follow-up with more detailed mapping and sampling at an
estimated minimum cost of $15,000, assuming adequate financing is available. We may
conduct more detailed geophysical surveys utilizing more sensitive geophysical techniques
to enhance the data that currently exists on the claims and focus specifically upon the
presently known mineralized areas. We will do more prospecting to better understand the
significance of the results of the earlier exploration programs and guide future work.

Additionally,
we have been reviewing a potentially expanded field season in 2006 (subject to final
analysis, budget availability, and independent recommendations). We have been approached
by our neighboring mineral tenure holders to join them in a regional airborne survey
(dighem em / magnetic geophysical survey). The advantage to the Company is significant in
that being a part of a large regional program is extremely cost effective (overall program
in excess of $145,000) with our share being approximately $30,000. If we were to contract
the same survey independently the cost would be closer to $50,000. We do not currently
have sufficient capital to fund these projects, and we would be required to raise
additional financing.

Further,
we are also reviewing a program (subject to final analysis, budget availability, and
independent recommendations) for a trenching program which would allow geologists to
sample fresh rock as the surface rocks are extremely weathered and leached
(cretaceous period between 65 and 135 million years old). This program will cost us
approximately $100,000.

We
do not have plans to purchase any significant equipment or change the number of our
employees during the next 12 months. We estimate that we will be required to raise at
least $100,000 through debt or equity financing during the third or fourth of 2006 to continue as a going concern.

In
February 2006, we filed a registration statement to register 3,000,000 shares of our
common stock for offer and sale by us at $0.10 per share to raise up to $300,000 on a best
efforts basis. We intend to fund the exploration program with proceeds of our offering of
3,000,000 shares of common stock at $0.10 per share. As of the date of this report we have
not sold any shares in the registered offering. We anticipate we will successfully raise
financing during the third or fourth quarter of 2006 to finance our proposed exploration
programs.

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| | Results
of Operations
| | ---------------------

During
the quarter ended June 30, 2006, we had total expenses of $12,402, which included
management fees of $3,000 ($3,000  2005), rent of $1,500 ($4,717  2005),
profession service fees of $7,900 ($4,250  2005) and general and administrative
expenses of $2 ($2,057  2005). Total expenses declined $5,333 or 30% from $17,735
for the quarter ended June 30, 2005 to $12,402 for the same period in 2005, as we reduced
expenses due to lack of capital. We anticipate total expenses may increase during the
third and fourth quarter of 2006, if we are able to raise capital to fund our 2006/2007
exploration program.

During
the quarter ended June 30, 2006, we had a comprehensive loss of $12,797, compared to a
comprehensive loss of $17,885 during the same quarter in 2005.

| | Liquidity
and Capital Resources
| | -------------------------------

We
had cash in the amount of $68 as of June 30, 2006 and a working capital deficit of
$43,463. Our cash requirements have been funded to date by small private placements of our
equity securities and by loans from our officer and director.

We
did not raise any capital through the offer and sale of securities during the quarter
ended June 30, 2006. Our sole officer and director, Robert Krause donated services and
rent in the amount of $4,500 during the quarter. During the quarter ended June 30, 2006,
we used cash of $5,920 for operating activities and cash decreased by $395 due to effect
of currency exchange rates as our funds are held in Canadian dollars, reducing our cash on
hand to $68. If we are unable to raise additional capital during the third quarter of
2006, we may be unable to continue as a going concern.

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

# Off-Balance Sheet
Arrangements

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

# Contractual Obligations

As
of June 30, 2006, we had no non-cancelable contractual obligations.

# ITEM 3.    CONTROLS AND
PROCEDURES

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

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

There
have been no changes in the Companys internal control over financial reporting
during the fiscal quarter ended June 30, 2006 that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial
reporting.

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# PART II  OTHER
INFORMATION

# ITEM 1.    LEGAL PROCEEDINGS

None

# ITEM 2.    UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

# ITEM 3.    DEFAULT UPON SENIOR
SECURITIES

None

# ITEM 4.    SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS

None

# ITEM 5.    OTHER INFORMATION

None

# ITEM 6.    EXHIBITS

|ExhibitNumber |  | Description
|------------- |  | -----------

|31.1 |  | Certification
of Robert Krause, President and Treasurer, of Banner Resources Inc. pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|32.1 |  | Certification
of Robert Krause, President and Treasurer, of Banner Resources Inc., pursuant to 18
U.S.C. 1350.
|---- |  | --------------------------------------------------------------------------------------------------------------

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SIGNATURES

In accordance with Section 12 of the
Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| | Date:   August 14, 2006 BANNER RESOURCES INC.
By:  /s/ Robert Krause
        ___________________________________
        Robert Krause, President and Treasurer 
        (Principal Executive Officer and Principal Financial and
        Accounting Officer)
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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