U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q





Mark One




x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended September 30 2010





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





For the transition period from ______ to _______





Commission File No. 000-53389





Denarii Resources Inc.(Name of small business issuer in its charter)
  Nevada

98-0491567(State or other jurisdiction of incorporation

or organization)

(I.R.S. Employer

Identification No.)
  711 S. Carson Street, Suite 4, Carson City, Nevada 89701
 (Address of principal executive offices)
  (949) 335-5159
   Securities registered pursuant to Section

12(b) of the Act:

Name of each exchange on which

registered:None
  Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, $0.001
 (Title of Class)


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




Yes x   No o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.




Yes o   Noo




Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.




Large accelerated filer
o
Accelerated filer
oNon-accelerated filer
o
Smaller reporting company
x




Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x





Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years.




N/A




Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court.  Yes o No o




Applicable Only to Corporate Registrants




Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:




Class
Outstanding as of November 15, 2010Common Stock, $0.001
61,900,000













DENARII RESOURCES INC.
  Form 10-Q


Part 1.
FINANCIAL INFORMATION

PageItem 1.
Financial Statements


3Balance Sheets (Unaudited)


3Statements of Operations (Unaudited)


4Statement of Changes in Stockholders’ Equity (Unaudited)Statements of Cash Flows (Unaudited)


5Notes to Financial Statements (Unaudited)


6Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations


9Item 3.
Quantitative and Qualitative Disclosures About Market Risk


14Item 4.
Controls and Procedures


14Part II.
OTHER INFORMATIONItem 1.
Legal Proceedings


17Item 1A.
Risk Factors


17Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds


17Item 3.
Defaults Upon Senior Securities


17Item 4
Removed and Reserved


17Item 5.
Other Information


17Item 6
Exhibits


18





2





PART I - FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS.





The interim financial statements included herein are unaudited but reflect, in management's opinion, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of our financial position and the results of our operations for the interim periods presented. Because of the nature of our business, the results of operations for the quarterly period ended June 30, 2010 are not necessarily indicative of the results that may be expected for the full fiscal year.




DENARII RESOURCES INC.(An exploration stage company)Condensed Balance SheetsUnaudited
  September 30


December 312010


2009ASSETSCurrent AssetsCash

$
-


$
-Prepaid Expense (Note 7)


-



-Total Current Assets


-



-Total Assets

$
-


$
-LIABILITIESCurrent LiabilitiesAccounts Payable - other

$
66,521


$
19,067Accounts Payable-Related parties


343,668



190,372Total Current Liabilities


410,189



209,439Total Liabilities


410,189



209,439STOCKHOLDERS' EQUITY100,000,000 Common Shares Authorized, $0.001 par value,61,900,000 and 60,900,000 issued at September 30, 2010 and December 31, 2009, respectively


61,900



60,900Shares issuable (Note 4)


3,700



-Additional Paid-in-Capital


463,330



213,900Discount on Issuance


(49,130
)


-Accumulated Deficit during Exploration stage


(889,989
)


(484,239
)Total Stockholders' Equity (Deficit)


(410,189
)


(209,439
)Total Liabilities and Stockholders' Equity

$
-


$
-


The accompanying notes are an integral part of these interim financial statements.
  3




DENARII RESOURCES INC.(An Exploration Stage Company)Condensed Statements of Operations(Stated in US Dollars)Unaudited
  Three Months Ended


Nine Months Ended


March 23, 2006

(Inception) to`

September 30


September 30


September 30


September 30


September 302010


2009


2010


2009


2010Restated





RestatedREVENUES

$
-


$
-


$
-


$
-


$
-OPERATING EXPENSESMineral claims


595



-



595



-



10,595Professional fees


77,141



18,295



262,261



48,845



607,804Office -General Expenses


3,897



11,574



13,456



20,243



20,466Office -General Expenses-Related Party


3,058



-



16,294



-



26,686Mgmt & Admin Fees-Related Party


21,000



15,000



63,000



30,000



108,000Rent-Related Party


7,500



7,500



22,500



15,000



45,000Travel-Related Party


-



9,950



27,645



28,589



71,438Total Operating Expenses


113,191



62,319



405,751



142,677



889,989NET LOSS BEFORE INCOME TAXES


(113,191
)


(62,319
)


(405,751
)


(142,677
)


(889,989
)PROVISION FOR INCOME TAX


-



-



-



-



-NET LOSS FOR THE PERIOD

$
(113,191
)

$
(62,319
)

$
(405,751
)

$
(142,677
)

$
(889,989
)BASIC AND DILUTED (LOSS)PER COMMON SHARE

$
(0.00
)

$
(0.00
)

$
(0.01
)

$
(0.00
)WEIGHTED AVERAGE NUMBEROF COMMON SHARES


61,900,000



60,900,000



61,757,143



60,748,352


The accompanying notes are an integral part of these interim financial statements.
  4


DENARII RESOURCES INC.(An exploration stage company)Condensed Statements of Cash FlowsUnaudited  For the nine month

period ended


For the nine month period ended


From inception (March 23, 2006)

throughSeptember 30,

2010


September 30,

2009


September 30,

2010RestatedOPERATING ACTIVITIESNet income (loss)

$
(405,751
)

$
(142,677
)

$
(889,989
)Recognition of an Impairment Loss(Mineral Claims)


-



-



10,000Accounts payable


47,454



10,295



66,521Common stock issued for services


140,000



-



350,000Expenses Paid on Company's behalf by related parties


218,297



132,382



408,668Net cash used in operating activities


-



-



(54,800
)INVESTING ACTIVITIESPurchase of mineral claim


-



-



(10,000
)Net cash used in investing activities


-



-



(10,000
)FINANCING ACTIVITIESCommon shares issued for cash@$0.01 per share


-



-



48,300Additional Paid-in capital










16,500Net cash provided by financing activities


-



-



64,800NET INCREASE (DECREASE)IN CASH AND CASH EQUIVALENTS


-



-



-CASH AND CASH EQUIVALENTS


-



-



-- BEGINNING OF PERIODCASH AND CASH EQUIVALENTS- END OF PERIOD

$
-


$
-


$
-SUPPLEMENTAL DISCLOSURESNON-CASH ACTIVITIES:Proceeds from Private Placement (paid to related parties)

$
65,000


$
-


$
65,000Reduction in Related Party Debt Paid with the Proceeds from the Private Placement

$
(40,000
)

$
-


$
(40,000
)Expenses Paid on Company's Behalf by Related Parties

$
193,296


$
132,382


$
383,668Common stock issued for services

$
140,000


$
-


$
350,000
 The accompanying notes are an integral part of these interim financial statements.
  5


DENARII RESOURCES INC.


(An Exploration Stage Company)


Notes to the Unaudited Condensed Interim Financial Statements


From Inception (March 23, 2006) to Sept 30, 2010


(Stated in US Dollars)





NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS





Denarii Resources, Inc. ("Denarii Resources" or the "Company") was organized under the laws of the State of Nevada on March 23, 2006 to explore mining claims and property in North America.





Our property, known as the McNab Molybdenum Property, is located on the west side of Howe Sound near the headwaters of McNab Creek, approximately 40 km northwest of Vancouver, BC. The McNab Molybdenum property comprises one mineral claim containing 12 cell claim units totaling 251.11 hectares.





The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America 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. These are condensed notes and should be read in conjunction with the audited financial statements from the year ending December 31, 2009.





On March 16, 2010 Stuart Carnie resigned as an officer and director. On March 19, 2010 Dennis Lorrig was appointed as an officer and director.





On June 16, 2010 the Company entered into an agreement to acquire an 80% interest in Touchstone Precious Metals Inc. On October 29, 2010 the company filed an 8K disclosing that the Company has rescinded the Acquisition Agreement with Touchstone Precious Metals Inc. and Touchstone Venture Ltd.





On July 29, 2010 Dennis Lorrig and Robert Malasek resigned as officers and directors.





On August 17, 2010 Dr. Stewart Jackson was appointed as an officer and director.




NOTE 2 - GOING CONCERN





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, the Company has accumulated a loss and is new. This raises substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.




As shown in the accompanying interim financial statements, the Company has incurred a net loss of $889,989 for the period from March 23, 2006 (inception) to September 30, 2010 and has not generated any revenues. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of acquisitions. Management has plans to seek additional capital through a private placement and public offering of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.




6





NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





a. Advertising and Promotion Costs.





The Company expenses advertising and promotion when incurred.  The company has incurred $105 in advertising and promotion costs in the quarter ended March 31, 2010, $2,204 in the quarter ended June 30, 2010, $0 in the quarter ended September 30, 2010.





b. Recent Accounting Pronouncements





The Company has evaluated all of the recent accounting pronouncements through the filing date of these financial statements and feels that none of them will have a material effect on the Company’s interim financial statements.





NOTE 4 – SHARE CAPITAL





a) Authorized:





100,000,000 common shares with a par value of $0.001.





b) Issued:





On March 17, 2009 the Company completed a forward stock split of its common stock on a ratio of six new shares for every one old share of the Company (6:1). All references to issued common shares take into account the forward stock split that has been retroactively stated.





On March 23, 2006 the company issued to the founders 48,000,000 common shares of stock for $10,000. The cost per share was $0.0002.





The company had two private placements both at $0.0167 per share. The first was on July 1, 2007, 1,500,000 common shares for $25,000 and the second on September 28, 2007, 1,188,000 common shares for $19,800.





On October 3, 2007, 2,988,000 founder shares were cancelled.


On June 2, 2008 the company issued 600,000 shares at $0.0167 per share.





On June 2, 2008 the company issued 12,000,000 shares for services valued at $200,000. The cost per share was $0.0167.





On March 11, 2009 the company issued 600,000 shares for services valued at $10,000. The cost per share was $0.0167.





On February 09, 2010 the company issued 1,000,000 shares for services valued at $140,000. The cost per share was $0.140.





Effective April 14, 2010, the Company sold 1,700,000 shares of the Company’s common stock and 1,700,000 warrants to purchase shares of the Company’s common stock at a price of $0.0147 per share. The fair market value was $0.0289, which reflects a discount of $0.0142 per share. The proceeds were used to pay expenses on behalf of the Company.





Effective May 26, 2010, the Company sold 2,000,000 shares of the Company's common stock at a discounted price of $0.02.  The fair market value was $0.0325, which reflects a discount of $0.0125 per share. The proceeds were used to pay expenses on behalf of the Company.




7





NOTE 5 – WARRANTS





The Company has 1,700,000 warrants issued in conjunction with our April 14, 2010 share issuance.  These warrants grant the holder the right to purchase up to 1,700,000 common shares for $0.02 per share, and they expire April 14, 2012.  None have been exercised, so all 1,700,000 are outstanding as of September 30, 2010. The cost of these warrants have been treated as a cost of issue, and netted against the proceeds.





NOTE 6 – PAYABLE TO RELATED PARTY





The company owes $343,668 to related parties.  The terms of the payables are no interest and due on demand.





NOTE 7 – RECLASSIFICATION





$5,500 of prior period “Accounts Payable – Related Parties” balances have been reclassified to “Accounts Payable – Other” in the current financial statements. Management believes that the individual who is owed the funds is no longer considered a related party in the current period.





NOTE 8 – CONSULTING AGREEMENT





In the quarter ended March 31, 2010 the company entered into a consulting agreement with Mirador Consulting Inc., (Mirador) a Florida corporation, whereby Mirador received 1,000,000 shares of the company and provided management consulting, business advisory, shareholder information and public relations services over a six month period under certain terms and conditions.  These shares were restricted for a six month period from February 09, 2010. The cost of $140,000 was expensed over a six month period from February 01, 2010 through July 31, 2010.





NOTE 9 – SUBSEQUENT EVENTS





On October 29, 2010 the company filed an 8K disclosing that the Company has rescinded the Acquisition Agreement with Touchstone Precious Metals Inc. and Touchstone Venture Ltd.





On October 29, 2010 the company filed an 8K disclosing the Company has rescinded the Purchase Agreement with Maria Ines Moraga Latapiat regarding the rights located in Lota Bay, Chile.





On November 12, 2010 the company filed an 8K disclosing that the company entered into a series of convertible notes in various amounts with Falco Investments Inc.





The Company’s management has evaluated subsequent events through the filing date of these financial statements and believes there are no further subsequent events to report.




8




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.





FORWARD LOOKING STATEMENTS.





The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements involve risks and uncertainties, including statements regarding Denarii Resources Inc.'s (the "Company") capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan”,” intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined below, and, from time to time, in other reports the Company files with the SEC.  These factors may cause the Company's actual results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements.  The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.





As used in this quarterly report, the terms "we," "us," "our," and "our company" mean Denarii Resources Inc. unless otherwise indicated.  All dollar amounts in this quarterly report are in U.S. dollars unless otherwise stated.





OVERVIEW





Denarii Resources Inc. ("Denarii" or the "Company") was organized under the laws of the State of Nevada on March 23, 2006, to explore mining claims and property in North America.





Our property, known as McNabb Molybdenum,  is located on the west side of Howe Sound near the headwaters of McNab Creek, approximately 40 km northwest of Vancouver, BC. The McNabb Molybdenum property comprises one mineral claim containing 12 cell claim units totaling 251.11 hectares.





We are an exploration stage company and we have not realized any revenues to date.  We do not have sufficient capital to enable us to commence and complete our exploration program. We will require financing in order to conduct the exploration program described in the section entitled, "Business of the Issuer."





Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "Denarii," refers to Denarii Resources Inc.




CURRENT BUSINESS OPERATIONS





Termination of a Material Definitive Agreement – Purchase Agreement





Effective on September 25, 2009 (the “Effective Date”), we entered into an agreement for purchase (the “Purchase Agreement”) with Maria Ines Moraga Latapiat (“Latapiat”). In accordance with the terms and provisions of the Purchase Agreement, we were to acquire from Latapiat two coal concessions which Latapiat owned the rights to located in Lota Bay, Chile, approximately 300 miles South of Santiago, Chile (the “Concessions”). We were to further issue 10,000,000 shares of our common stock to Latapiat.





After several months of researching the acquisition of the Concessions, we have been unable to receive the adequate financial and technical information needed to make an informed decision as to whether to proceed with the acquisition of the Concessions. Latapiat was unable to provide the required documentation as a result of the loss of such information and documentation resulting from the earth quake in Chile on February 27, 2010. Therefore, after considerable due diligence, we have determined that it is in our best interests and our shareholders to rescind the Purchase Agreement and to not further the acquisition of the Concessions. As of the date of this Quarterly Report, the 10,000,000 shares of our common stock have not been issued to Latapiat.




9





Termination of a Material Definitive Agreement – Acquisition Agreement





Effective on June 3, 2010 (the “Effective Date”), we entered into a corporate acquisition agreement (the “Acquisition Agreement”) with  Touchstone Precious Metals Inc. and Touchstone Ventures Ltd. (“Touchstone”). In accordance with the terms and provisions of the Acquisition Agreement, we were to acquire an eighty percent (80%) interest in Touchstone (the “Touchstone Interest”) represented by acquisition by us of shares of common stock of Touchstone. We were to earn our Touchstone Interest as we funded an approved work program of approximately $400,000, which funds were to be monitored and disbursed by a committee represented by three persons (the “Committee”). In further accordance with the terms and provisions of the Acquisition Agreement, we had thirty days from the Effective Date to fund $75,000 of the work program and sixty days from the Effective Date to place the balance of the $400,000 into the escrow account of Touchstone.





Upon completion of our due diligence, we have determined that it is in our best interests and our shareholders to rescind the Acquisition Agreement and to not further the acquisition of the Touchstone Interest.




RESULTS OF OPERATIONS





Nine Month Period Ended August 31, 2010 Compared to Nine Month Period Ended August 31, 2009




Our net loss for the nine month period ended August 31, 2010 was ($405,751) compared to a net loss of ($142,677) during the nine month period ended August 31, 2009, an increase of $263,074. During the nine month periods ended August 31, 2010 and 2009, we did not generate any revenue.





During the nine month period ended August 31, 2010, we incurred operating expenses of $405,751 compared to $142,677 incurred during the nine month period ended August 31, 2009, an increase of $263,074. The increase in operating expenses was primarily attributable to the following items: (i) professional fees of $262,261 (2009: $48,845); (ii) office – general expenses related party of $16,294 (2009: $-0-); (iii) management and administration fees – related party of $63,000 (2009: $30,000); and (iv) rent of $22,500 (2009: $15,000).





Operating expenses incurred during the nine month period ended September 30, 2010 compared to the nine month period ended September 30, 2009 increased primarily due to the increase in professional fees and office – general expenses – related party and management and administrative fees – related party associated with the increase in the scale and scope of our operations. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing and consulting costs.





Our net loss during the nine month period ended September 30, 2010 was ($405,751) or $0.01 per share compared to a net loss of ($142,677) or $0.00 per share during the nine month period ended September 30, 2009. The weighted average number of shares outstanding was 61,757,143 for the nine month period ended August 31, 2010 compared to 60,748,352 for the six month period ended September 30, 2009.




Three Month Period Ended September 30, 2010 Compared to Three Month Period Ended September 30, 2009.





Our net loss for the three month period ended September 30, 2010 was ($113,191) compared to a net loss of ($62,319) during the three month period ended September 30, 2009, an increase of $50,872. During the three month periods ended September 30, 2010 and 2009, we did not generate any revenue.




10





During the three month period ended September 30, 2010, we incurred operating expenses of $113,191 compared to $62,319 incurred during the three month period ended September 30, 2009, an increase of $50,872. The increase in operating expenses was primarily attributable to the following items: (i) professional fees of $77,141 (2009: $18,295); (ii) management and administrative fees – related party of $21,000 (2009: $15,000); and (iii) officer – general expenses – related party of $3,058 (2009: $-0-).





Operating expenses incurred during three month period ended September 30, 2010 compared to the three month period ended September 30, 2009 increased primarily due to the increase in professional fees and office- general expenses – related party and management and administrative fees – related party due to the increase in the scale and scope of our operations.





Our net loss during the three month period ended September 30, 2010 was ($113,191) or $0.00 per share compared to a net loss of ($62,319) or $0.00 per share during the three month period ended September 30, 2009. The weighted average number of shares outstanding was 61,900,000 the three month period ended September 30, 2010 compared to 60,900,000 for the three month period ended September 30, 2009.




We anticipate that we will not earn revenues until such time as we have entered into commercial production, if any, of our mineral properties. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on our properties, or if such resources are discovered, that we will enter into commercial production of our mineral properties.





LIQUIDITY AND CAPITAL RESOURCES





Nine Month Period Ended September 30, 2010





As of September 30, 2010, our current assets were $-0- and our current liabilities were $410,189, which resulted in a working capital deficit of $410,189. As of September 30, 2010, our current liabilities consisted of: (i) $66,521 in accounts payable – other; and (ii) $343,668 in accounts payable – related parties.





As of September 30, 2010, our total assets were $-0-. This remains unchanged from fiscal year ended December 31, 2009.





As of September 30, 2010, our total liabilities were $410,189 comprised entirely of current liabilities. The increase in liabilities during the nine month period ended September 30, 2010 from fiscal year ended December 31, 2009 was primarily due to the increase in accounts payable – related parties.





Stockholders’ deficit increased from ($209,439) as of December 31, 2009 to ($410,189) as of September 30, 2010 primarily due to losses incurred from operations during the period.




11





Cash Flows from Operating Activities





We have not generated positive cash flows from operating activities. For the nine month period ended September 30, 2010, net cash flows used in operating activities was $-0- compared to $-0- used during the nine month period ended September 30, 2009. Net cash flows used in operating activities consisted primarily of a net loss of ($405,751) (2009: $142,677), which was partially offset by $47,454 (2009: $10,295) in accounts payable, $140,000 (2009: $-0-) in common stock issued for services and $218,297 (2009: $132,382) in expenses paid by related parties.





Cash Flows from Investing Activities





For the nine month period ended September 30, 2010, net cash flows used in investing activities was $-0- compared to net cash flows used in investing activities of $-0- for the nine month period ended September 30, 2009.





Cash Flows from Financing Activities





For the nine month period ended September 30, 2010, net cash flows used in financing activities was $-0- compared to net cash flows used in financing activities of $-0- for the nine month period ended September 30, 2009.




12





PLAN OF OPERATION AND FUNDING





Based on our current operating plan, we do not expect to generate revenue that is sufficient to cover our expenses for at least the next year. In addition, we do not have sufficient cash and cash equivalents to execute our operations for the next year. We will need to obtain additional financing to operate our business for the next twelve months. We will raise the capital necessary to fund our business through a private placement and public offering of our common stock.  Additional financing, whether through public or private equity or debt financing, arrangements with shareholders or other sources to fund operations, may not be available, or if available, may be on terms unacceptable to us. Our ability to maintain sufficient liquidity is dependent on our ability to raise additional capital. If we issue additional equity securities to raise funds, the ownership percentage of our existing shareholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. Debt incurred by us would be senior to equity in the ability of debt holders to make claims on our assets. The terms of any debt issued could impose restrictions on our operations.  If adequate funds are not available to satisfy either short or long-term capital requirements, our operations and liquidity could be materially adversely affected and we could be forced to cease operations.





MATERIAL COMMITMENTS





Convertible Promissory Notes




Effective on October 21, 2010 (the “Effective Date”), we entered into a series of convertible promissory notes in various principal amounts (collectively, the “Convertible Promissory Notes”) with Falco Investments Inc. (the “Creditor”). The aggregate amount represented in principal loaned to us from the Creditor is $324,313.49.




In accordance with the terms and provisions of the Convertible Promissory Notes, the Convertible Promissory Notes are unsecured, shall bear interest at the rate of 12% compounded annually on the principal amount commencing on the date of the respective quarterly period. Each Convertible Promissory Note is convertible at the election of the Creditor into shares of our common stock at the rate of $0.01 per share (which conversion price is a 20% discount from the trading price of our common stock on the OTC Bulletin Board on October 21, 2010). The Convertible Promissory Notes, principal amounts and quarterly periods are listed below and have been reflected on our reviewed and/or audited financial statements:




Date of Quarterly Period

Principal AmountJune 30, 2009

$
64,607.37September 30, 2009


67,774.83December 31, 2009


38,635.21March 31,2010


60,186.33June 30, 2010


38,708.53September 30, 2010


54,401.22




PURCHASE OF SIGNIFICANT EQUIPMENT





We do not intend to purchase any significant equipment during the next twelve months.





OFF-BALANCE SHEET ARRANGEMENTS





We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.




13





GOING CONCERN





The independent auditors' report accompanying our December 31, 2009 and December 31, 2008 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.





ITEM III. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse change in foreign currency and interest rates.




Exchange Rate




Our reporting currency is United States Dollars (“USD”).  In the event we acquire any properties outside of the United States, the fluctuation of exchange rates may have positive or negative impacts on our results of operations. However, since all of our properties are currently located within the United States, any potential revenue and expenses will be denominated in U.S. Dollar, and the net income effect of appreciation and devaluation of the currency against the U.S. Dollar would be limited to our costs of acquisition of property.




Interest Rate




Interest rates in the United States are generally stable. Any potential future loans will relate mainly to acquisition of properties and will be mainly short-term. However our debt may be likely to rise in connection with expansion and if interest rates were to rise at the same time, this could become a significant impact on our operating and financing activities. We have not entered into derivative contracts either to hedge existing risks for speculative purposes.




ITEM IV. CONTROLS AND PROCEDURES





FINANCIAL DISCLOSURE CONTROLS AND PROCEDURES





Evaluation of 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/chief executive officer and our secretary, treasurer/chief financial officer to allow for timely decisions regarding required disclosure.





As of September 30, 2010, we carried out an evaluation, under the supervision and with the participation of our president/chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president/chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective in providing reasonable assurance in the reliability of our financial reports as of the end of the period covered by this quarterly report.  Effectiveness of disclosure controls was primarily a function of our current scale and scope of operations which are relatively non-complex with a limited volume of transactions and capital resources.




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EVALUATION OF INTERNAL CONTROLS AND PROCEDURES OVER FINANCIAL REPORTING





Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:





1.
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;





2.
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and





3.
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.





As of September 30, 2010, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments.  Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below.  This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.





The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:





1.
Lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;




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2.
Inadequate segregation of duties consistent with control objectives; and





3.
Ineffective controls over period end financial disclosure and reporting processes.





The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, 2010.





Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results.  However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.





Management’s Remediation Initiatives





In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:





1.
We plan to form an audit committee, which we expect to be partially, if not fully, implemented by December 31, 2010.





2.
We are seeking to add additional personnel, who may be appointed to our board of directors as outside members and/or serve in a capacity to allow us to better segregate job responsibilities.





3.
We have developed internal control procedures over financial disclosure and reporting.  However, these procedures are, and will continue to be, ineffective without additional personnel.





Changes in internal controls over financial reporting





There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.





AUDIT COMMITTEE





Our Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by our Board of Directors. In the event the Merger Agreement is not consummated, we intend to establish an audit committee during fiscal year 2010. When established, the audit committee's primary function will be to provide advice with respect to our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.




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PART II. OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS.





We are not a party to any material legal proceedings and to our knowledge; no such proceedings are threatened or contemplated.





ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.





Not applicable.





ITEM 3. DEFAULTS UPON SENIOR SECURITIES.





None.





ITEM 4. REMOVED AND RESERVED





ITEM 5. OTHER INFORMATION.





None.




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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.




Exhibit Number

Description of Exhibit3.1

Articles of Incorporation (1)3.2

Bylaws (1)10.1

Convertible Promissory Note between Denarii Resources Inc. and Falco Investments Inc. dated October 21, 2010 in the principal amount of $64,607.37. (2)10.2

Convertible Promissory Note between Denarii Resources Inc. and Falco Investments Inc. dated October 21, 2010 in the principal amount of $67,774.88. (2)10.3

Convertible Promissory Note between Denarii Resources Inc. and Falco Investments Inc. dated October 21, 2010 in the principal amount of $38,635.21. (2)10.4

Convertible Promissory Note between Denarii Resources Inc. and Falco Investments Inc. dated October 21, 2010 in the principal amount of $60,186.33. (2)10.5

Convertible Promissory Note between Denarii Resources Inc. and Falco Investments Inc. dated October 21, 2010 in the principal amount of $38,708.53. (2)10.6

Convertible Promissory Note between Denarii Resources Inc. and Falco Investments Inc. dated October 21, 2010 in the principal amount of $54,401.22. (2)31.1

Certification by Chief Executive Officer and ChiefFinancial Officer required by Rule 13a-14(a) orRule 15d-14(a) of the Exchange Act, promulgatedpursuant to Section 302 of the Sarbanes-Oxley Actof 2002, filed herewith32.1

Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) orRule 15d-14(b) of the Exchange Act and Section 1350of Chapter 63 of Title 18 of the United States Code,promulgated pursuant to Section 906 of theSarbanes-Oxley Act of 2002 filed herewith


(1)  Filed with the SEC as an exhibit to our Form SB-1 Registration Statement originally filed on March 23, 2006.





(2)  Filed as an exhibit to the Current Report filed on November 7, 2010 with the Securities and Exchange Commission.




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SIGNATURES





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




Date: November 17, 2010Signature

Title

DateBy: /s/ DR. STEWART A. JACKSON

Chief Executive Officer, President, Secretary and

November 17, 2010Dr. Stewart A. Jackson

Director(PrincipalExecutive Officer)




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