UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[×]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended August 31, 2010 or
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number: 000-53142

CHANCERY RESOURCES, INC.

(Exact name of registrant as specified in its charter)


	Nevada		26-4567259

	(State or other jurisdiction		(IRS Employer
	of incorporation)		Identification Number)



4400 Westgrove Drive, Suite 104, Dallas, Texas		75001

(Address of principal executive offices)		(Zip Code)

972-655-9870

Registrant’s telephone number, including area code

(Former Name or Former Address, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [×] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [×] No

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 32,250,000 as of October 14, 2010.

Consolidated Balance Sheets

(Unaudited)

August 31,

November 30,

ASSETS

2010 2008

Current Assets

Cash $ 355 $ 1,638

Prepaid expenses - 110,471

Total Assets $ 355 $ 112,109

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities

Bank indebtedness	$ 225	$ 8,872
Accounts payable and accrued liabilities	190,275	159,394
Loan payable, less unamortized discount of $7,670 and $14,077	44,917	44,917

Due to related parties 54,310 6,680

Total Current Liabilities 289,727 219,863

Loans payable 82,330 75,923

Total Liabilities 372,057 295,786

Commitments and Contingencies

Stockholders’ Deficit

Preferred stock: 2,500,000,000 shares authorized, $0.00001 par value;

no shares issued and outstanding (November 30, 2008 – None issued)

–

Series A convertible preferred stock: 40,000,000 shares authorized, $0.00001 par value;

31,000,000 shares issued and outstanding

310

Common stock: 2,500,000,000 shares authorized, $0.00001 par value;

32,250,000 shares issued and outstanding

322

Additional paid-in capital

1,163,227

1,088,418

Donated capital

18,000

13,500

Accumulated other comprehensive loss

(165)

–

Deficit accumulated during the exploration stage (1,553,396) (1,286,227)

Total Stockholders’ Deficit

(371,702)

(183,677)

Total Liabilities and Stockholders’ Deficit

$ 355

$ 112,109

Consolidated Statements of Operations

(Unaudited)

For the Three Months Ended

For the Nine Months Ended

Accumulated from September 12, 2006 (Date of Inception)

Expenses

August 31, August 31, August 31, August 31, to August 31,

2009 2008 2009 2008 2009

General and administrative	$ 38,727	$ 28,027	$ 57,306	$ 63,480	$ 187,706
Consulting fees	62,052	–	184,809	–	194,809
Management services	–	1,500	–	4,500	12,750
Impairment of mineral property costs	–	70,000	444	120,000	1,121,074
Mineral property costs	13,703	–	13,703	–	19,778
Rent	1,500	-	4,500	1,794	10,872
Total Operating Expenses	115,982	99,527	260,762	189,774	1,546,989
Interest Expense	2,151	-	6,407	-	6,407
Net Loss	(118,133)	(99,527)	(267,169)	(189,774)	(1,553,396)
Net Loss Per Share – Basic and Diluted	$ (0.00)	$ (0.00)	$ (0.01)	$ (0.00)	N/A
Weighted Average Common Shares Outstanding	32,250,000	30,250,000	32,250,000	109,010,000	N/A

Statement of Other Comprehensive Loss:

Net Loss

(118,133)

(99,527)

(267,169)

(189,774)

(1,553,396)

Foreign currency translation adjustment

(93)

–

(165)

–

(165)

Total Comprehensive Loss

$ (118,226)

$ (99,527)

$ (267,334)

$ (189,774)

$(1,553,561)

Consolidated Statements of Cash Flows

(Unaudited)

For the Nine Months Ended August 31,

Accumulated from

September 12, 2006 (Date of Inception)

2009 2008

Cash Flows From Operating Activities

Net loss for the period Adjustments to reconcile net loss to net cash used in operating activities: Donated services and expenses	$ (267,169) 4,500	$(189,744) 4,500	$(1,553,396) 18,000
Impairment of mineral property costs	444	120,000	1,117,374
Amortization of discount	6,407		9,103
Share-based compensation	184,809	–	194,809
Changes in operating assets and liabilities: Prepaid expenses	471	488	-
Accounts payable and accrued liabilities	30,881	12,171	40,275
Net Cash Used In Operating Activities	(39,657)	(52,585)	(173,835)
Cash Flows From Investing Activities
Mineral property costs	(444)	(50,000)	(50,444)
Net Cash Used In Investing Activities	(444)	(50,000)
Cash Flows From Financing Activities
Advances from related party	47,630	22,088	119,524
Bank indebtedness	(8,647)	–	225

Proceeds from the sale of common stock - - 105,050

Net Cash Provided By Financing Activities 38,983 20,000 224,799

Effect of Exchange Rate Changes on Cash

(165)

–

(165)

Decrease in Cash

(1,283)

(80,527)

355

Cash - Beginning of Period

1,638

98,531

Cash - End of Period

$ 355

$ 18,004

355

Supplemental Disclosures

Interest paid

Income taxes paid

$ –

Notes to the Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

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

Effective this quarter, the Company implemented SFAS No. 165, “Subsequent Events” (“SFAS 165”). This standard establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The adoption of SFAS 165 did not impact the Company’s financial position or results of operations. The Company evaluated all events or transactions that occurred after August 31, 2009 up through October 20, 2009, the date the Company issued these consolidated financial statements. During this period, the Company did not have any material recognizable subsequent events.

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

2. Going Concern

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenue since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity or debt financing to continue operations, and the attainment of profitable operations. As at August

31, 2010, the Company has a working capital deficit of $289,372 and has accumulated losses of $1,553,396 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

3. Related Party Transactions

a) For the nine months ended August 31, 2010, the Company recognized $Nil (August 31, 2008 - $4,500) for donated services provided by the former President of the Company.

b) For the nine months ended August 31, 2010, the Company incurred $4,500 (August 31, 2008 - $1,794) in donated rent to a company controlled by the President of the Company, and is indebted to the President for

$51,780 (November 30, 2008 - $4,150) for advances and expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and due on demand.

c) As of August 31, 2010, the Company is indebted to the Chief Executive Officer of the Company for $2,530 (November 30, 2008 - $2,530) for expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and due on demand.

4. Loans Payable

a) As of August 31, 2010, the Company is indebted to the former President of the Company for $44,917 (November 30, 2008 - $44,917) for cash advances and expenses paid for on behalf of the Company, which is non-interest bearing, unsecured and due on demand.

b) On August 8, 2008, the Company received a $20,000 loan which is non-interest bearing, unsecured and due on August 8, 2010.

c) On July 25, 2008, the Company received a $70,000 loan which is non-interest bearing, unsecured and due on July 25, 2010. An implicit interest rate of 15% was recognized resulting in an discount of $14,077 on the date of the loan. For the nine-months ended As at August 31, 2010,

5. Mineral Properties

a) On January 19, 2009, the Company acquired through its wholly-owned subsidiary Chancery Canada, a

100% interest in certain mineral interests located in British Columbia, Canada known as the Fiddler Creek Property by the purchase of a Free Miner Certificate for $444 (CDN$500). As at August 31, 2009, the Company recognized an impairment loss of $444, as it has not yet been determined whether there are proven or probable reserves on the property.

6. Commitments

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

7. Common Stock

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

b) On November 6, 2008, the Company entered into a consulting agreement with a Director of the Company, for the provision of management and operational services for a period of one year. In consideration for these services, the Company issued 1,000,000 shares of restricted common stock with a fair value of $240,000. For the nine months ended August 31, 2009, $184,809 (August 31, 2008 - $Nil) was charged to operations.

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

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our", "our company" and “Chancery” mean Chancery Resources, Inc. and our wholly owned subsidiaries Chancery Mining Canada Ltd. and Minera Chancery Columbia, unless otherwise indicated.

General Overview

We were incorporated in the State of Nevada on September 12, 2006. We are an exploration stage corporation. An exploration stage corporation is one that is engaged in the search from mineral deposits or reserves which are not in either the development or production stage.

We maintain our statutory registered agent's office at The Corporation Trust Company of Nevada, 6100 Neil Road, Suite 500, Reno, Nevada 89511 and our business office and mailing address is 4400 Westgrove Drive, Suite 104, Dallas, Texas 75001. Our telephone number is (214) 288-9897.

Since October 2006, we held the rights to nine Mineral Titles Online cells referred to as the Hunter property, through Geoffrey Gachallan, a former director and officer of our company, who held the property for us in trust. On September 9, 2008, our rights to the claim expired.

On March 19, 2008, we entered into a mining acquisition agreement with Altos de Amador S.A., wherein we have agreed to purchase a 100% interest in certain mineral claims in Valparaiso, Antioquia, Colombia, known as the El Cafetal Mine.

As consideration for the purchase, we have agreed to pay to Altos de Amador $270,000 cash, to be provided as follows:

(a) $50,000 to be provided on signing of the acquisition agreement (paid);

(b) $70,000 to be provided within 30 days of signing the acquisition agreement (paid); and

In addition, we have agreed to split profits from mining operations – 60% to our company and 40% to the vendor until such time as we have paid $210,000 of the purchase price, after which, profits shall be split 90% to our company and 10% to the vendor. We have the right to acquire the vendor’s 10% profit interest at any time for

$370,000.

Effective April 4, 2008, we entered into an amending agreement with Altos de Amador wherein the terms of profit split have been amended so that, upon commencement of mining operations, all profits from the sale of ore shall be split 60% to our company and 40% to the vendor. Upon our company having paid a further $210,000, in addition to the funds payable pursuant to the terms of the mining acquisition agreement, such profits shall then be split 90% to our company and 10% to the vendor. Our company will have the right to acquire the vendor’s 10% profit interest at any time upon payment of an additional $370,000. There are currently some governmental requirements that need to be fulfilled for the El Cafetal mining title. These requirements include the present title owner amending a PTO report to comply with certain specifications and paying certain annual governmental fees, all of which are currently being completed.

To date, we have not made the final $150,000 payment as required by the mining acquisition agreement. We plan to hold such payment until the above title requirements have been complied with and or alternatively to pay the outstanding governmental fees due on the El Cafetal mine and deduct these amounts from the final $150,000 payment. As our initial mining acquisition agreement with Altos de Amador is no longer in good standing due to certain misrepresentation on warranties and representations made on Altos de Amador’s side, we have signed a Mining Acquisition Agreement on April 14, 2009 directly with the owners of the property, Inversiones Midas Limitada, to continue negotiations, which has a final payment of $150,000 minus payments to the outstanding governmental fees due on the El Cafetal mine with no timeframe period for payment.

Effective April 14, 2009, we entered into an agreement with Inversiones Midas wherein the terms of profit split so that, upon commencement of mining operations, all profits from the sale of ore shall be split 60% to our company and 40% to the vendor. Upon our company having paid a further 720 million Colombian pesos (estimated value of land and equipment), Inversiones Midas agrees to give and transfer 50% ownership of the Mining title, in addition to the funds payable pursuant to the terms of the mining acquisition agreement, such profits shall then be split 90% to our company and 10% to the vendor. Our company will have the right to acquire the vendor’s 10% profit interest at any time upon payment of additional 780 million Colombian pesos, and then the remaining 50% of the Title ownership will be transferred to our company.

On October 16, 2008, Rafael A. Pinedo and Jeffrey Fanning were appointed as directors of our company.

Subsequent to such appointments, on October 16, 2008, Juan Restrepo Gutierrez resigned as president and a director of our company and Rafael A. Pinedo was appointed president. Mr. Restrepo remains as chief executive officer, chief financial officer, secretary and treasurer. In addition, Mr. Fanning was appointed vice president of exploration. Our board of directors now consists of Rafael A. Pinedo and Jeffery Fanning.

On November 4, 2008, our board of directors designated 40,000,000 shares of our preferred stock as the Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into shares of our common stock on the basis of one (1) share of Series A Preferred Stock for one-fifth (1/5) of one share of our Common Stock;

On November 6, 2008, we entered into a consulting agreement with Rafael Pinedo, our President. The term of the agreement is for a period of one year and in consideration for the services to be provided we have agreed to issue

1,000,000 restricted shares of our common stock to Mr. Pinedo.

On November 6, 2008, we entered into a mineral property acquisition agreement with CB Resources Ltd., BNP Resources LLC and Rafael Pinedo to acquire certain mineral property interests known as the HCL Property (the HCL Property is comprised in part by our formerly owned Hunter Property). The closing of the transactions contemplated in the mineral property acquisition agreement occurred on November 6, 2008. In accordance with the closing of the mineral property acquisition agreement, we agreed to issue 1,000,000 restricted shares of our common stock to CB Resources Ltd., 25,000,000 restricted shares of our Series A Preferred Stock to Rafael Pinedo and

6,000,000 restricted shares of our Series A Preferred Stock to BNP Resources LLC. Due to land ownership restrictions under British Columbia laws, we entered into a trust agreement with CB Resources Ltd., wherein CB Resources Ltd. agreed to hold the mineral property interests in trust for our company.

On November 12, 2008, we incorporated a wholly owned subsidiary pursuant to the laws of the Province of British

Columbia under the name Chancery Mining Canada Ltd.

On January 19, 2009, we acquired through our wholly owned subsidiary, Chancery Mining Canada Ltd., an undivided one hundred percent (100%) interest in certain mineral interests located in British Columbia, Canada known as the Fiddler Creek Property.

The Fiddler Creek Property is comprised of 25 mineral claims, totaling 465.74 hectares located within the Omineca Mining Division in northwestern British Columbia. The acquired block of claims counts with records of a past producer “Fiddler Creek,” which describes the geology of the Property as an area that is underlain by argillites of the Jurassic to Cretaceous Bowser Lake Group, in which auriferous quartz veins are probable sources for placer gold along Fiddler Creek (BC Minfile 103I206). The deposit types that historically predominate in the Fiddler-Doreen area are Silver, Gold, Lead and Zinc. Geophysical, soil, rock and core samples will be analyzed soon; an exploration program recommended by a qualified geology person will be released when finalized.

On January 30, 2009, we incorporated a wholly owned subsidiary pursuant to the laws of Columbia under the name

Minera Chancery Colombia.

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

On August 3rd, 2009, Vincent Higgins was appointed as independent director of our company.

Subsequent to such appointment, on August 4, 2009, Juan Restrepo Gutierrez resigned as chief executive officer and remains as chief operations officer, secretary and director of our company and Rafael A. Pinedo was appointed chief executive and ratified as president.

Mr. Higgins, age 43, is recognized international leader in training, leadership development, and multicultural team building. Founded the Institute for Effective Leadership. Served as the Director of the Lumen Institute, Dallas, Texas and founded the Dallas branch. Trilingual: English, Spanish, and Italian. Extensive experience in operations and growth of international non-profit organizations including institutional fundraising and networking. Obtained undergraduate degree in Physics, Summa Cum Laude at the University of Dallas, TX. Doctoral track in High Energy Physics, at Purdue University, West Lafayette, Indiana and degrees in Philosophy and Theology at the Pontifical University Regina Apostolorum, in Rome, Italy.

There are no family relationships with any of our directors and officers.

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.

Our Current Business

We are an exploration stage mining company engaged in the exploration of minerals on our properties.

Our current operational focus is to conduct exploration activities on our HCL Property, to complete the terms of the mining acquisition agreement with Altos de Amador S.A. for the El Cafetal Mine and to conduct exploration activities on our Fiddler Creek Property.

HCL Property

General Information

The HCL Property is a mining claim located in Merritt, British Columbia, Canada, and totals 415.04 hectares or

1,026 acres approximately.

The following is a list of tenure numbers, claim, and expiration date of our claims:

Tenure Number	Claim Name	No. MTO Cells	Expiration D
592560	HCL	20	10/04/200

A cell is an area, which appears electronically on the British Columbia Internet Minerals Titles Online Grid and was formerly called a claim. A claim is a grant from the Crown of the available land within the cells to the holder to remove and sell minerals. The online grid is the geographical basis for the cell. Formerly, the claim was established by sticking stakes in the ground to define the area and then recording the staking information. The staking system is now antiquated in British Columbia and has been replaced with the online grid. The claim is registered in the name of the CB Resources Ltd. who has agreed to hold the claim in trust on behalf of Chancery Resources. As October 06,

2008, it’s not yet been determined whether there are proven or probable reserves on the property. There are no native land claims that affect title to the property.

Location and Access

The HCL mineral claim is comprised of 20 contiguous cells totalling 415.0483 hectares. The center of the property is located at the latitude 50o 2' 14" N and the longitude is 120o 47' 1" W. The claim is motor vehicle accessible from the Town of Merritt, B.C. by traveling 19 miles east along Highway #5 beyond the Village of Quilchena, B.C. to the Minnie Lake cut-off and then for 18 miles south by gravel ranch roads to the mineral claim.

Below is map of the HCL Claim:

The linked image cannot be displayed. The file may have been moved, renamed, or deleted. Verify that the link points to the correct file and location.

Physiography

The Town of Merritt, British Columbia which lies 37 miles by road northwest of the HCL mineral claim offers much of the necessary infrastructure required to base and carry-out an exploration program (accommodations, communications, equipment and supplies). Merritt B.C. is highway accessible from Vancouver, B.C. in a few hours

by traveling over the Coquihalla (toll section) highway, in the time it takes to travel 200 miles. The overnight Greyhound bus service is a popular way to send-in samples and to receive additional equipment and supplies. The claim area ranges in elevation from 2,850 feet to 3,400 feet mean sea level. The physiographic setting of the property can be described as rounded, open range, plateau terrain that has been surficially altered both by the erosional and the depositional (drift cover) effects of glaciation. Thickness of drift cover in the valleys may vary considerably. Fresh water lakes and streams are abundant in the area. Below is a map of the HCL Property location:

The linked image cannot be displayed. The file may have been moved, renamed, or deleted. Verify that the link points to the correct file and location.

Location, History and Land Tenure

The geology of the HCL mineral claim may be described as being underlain by units of the Nicola Group. Some or all of these units may be found to host economic mineralization. The property geological setting offers good underlying possibilities and all overburden areas should be checked if a field program is undertaken. The deposit types that historically predominate in the general area are, as the larger target, as a porphyry-type base metal (copper-gold-palladium or copper-molybdenum) occurrence with peripheral base and precious metal occurrences as veins and/or contact zones of mineralization. The most prolific host in this area is the Nicola Group andesitic tuffs that are often skarned or altered. Any occurrences of Princeton Group sediments, i.e. shales, sanstone, etc. should be checked thoroughly for coal occurrences and possibly coal-bed methane gas possibilities.

Requirements for Title

Title to the property has already been granted CB Resources Ltd., who holds the claim in trust for our company. To obtain a Free Miner's Certificate, which is required to hold a mining claim in British Columbia, Section 8(1) of the B.C. Mineral Tenure Act (MTA) stipulates that a corporation must be registered under the British Columbia Business Corporations Act. Section 8(2) of the MTA stipulates that an individual applicant must either be a resident of Canada or be authorized to work in Canada. As the corporation is not registered in British Columbia the claim is

held in trust for the Company by CB Resources Ltd., a corporation registered under the British Columbia Business

Corporations Act. The mineral title claim has been registered with the Government of British Columbia.

Fiddler Creek Property

General Information

The Fiddler Creek Property is comprised of 25 mineral claims, totalling 465.74 hectares located within the Omineca Mining Division in northwestern British Columbia. The acquired block of claims counts with records of a past producer “Fiddler Creek,” which describes the geology of the Property as an area that is underlain by argillites of the Jurassic to Cretaceous Bowser Lake Group, in which auriferous quartz veins are probable sources for placer gold along Fiddler Creek (BC Minfile 103I206). The deposit types that historically predominate in the Fiddler-Doreen area are Silver, Gold, Lead and Zinc. Geophysical, soil, rock and core samples will be analyzed soon; an exploration program recommended by a qualify geology person will be released when finalized.

The following is a list of tenure number, claim name, and expiration date of our claims:

Tenure Number	Claim Name	No. MTO Cells	Expiration D
597810	Fiddler Creek	25	01/19/201

Below is a map of the Fiddler Creek Property:

The linked image cannot be displayed. The file may have been moved, renamed, or deleted. Verify that the link points to the correct file and location.

Climate and Local Resources

The climate in the area is temperate with significant coastal influence coming from the west up the Skeena valley as well as from the southwest up the Kitimat valley. The northern location allows for long hours of daylight during the summer, while significant snowfall occurs during winter season, which limits fieldwork. Field season is comprised between June and early September.

The closest airport is the Terrace airport, which receives daily flights from Vancouver and serves as a transportation hub for the area. The Canadian National Railway and Yellowhead Highway (Highway 16) go through Terrace along the Skeena River and connect the interior of B.C. to the ocean ports of Prince Rupert and Kitimat.

El Cafetal Mine

General Information

The El Cafetal Mine is located in the River basin of the Honda stream, on the Eastern flank of the Western Mountain range, in the municipality of Valparaiso, Antioquia, Colombia.

The property covers an area of 135 hectares. The geology of the zone includes sedimentary rocks and basaltic lava and Andesite of Tertiary age with several veins and veins with different thicknesses and sulfide concentrations up to

80%.

The mineralization consists of several veins with thicknesses between 0.15 and 1.1 m, composed by quartz, pyrite and partly free gold fitted in andesite lava, the strips of 0.15 m of thickness with great sulfide concentrations are common mainly pyrite up to an 80% with intermediate zones of rock with scattered sulfides, in the endorsements the salband are common to conform a mineralized zone up to 1.1 m.

We recently completed preliminary sampling and chemical analyses on the El Cafatel property. Our management is awaiting the results from the preliminary sampling program and will update shareholders in the near future.

Results of Operations

Three Months Ended August 31, 2009 and August 31, 2008

The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended August 31, 2009 which are included herein.

Our operating results for the three months ended August 28, 2009, for the three months ended August 31, 2008 and the changes between those periods for the respective items are summarized as follows:

Three Months Ended August 31,

2009

Three Months Ended August 31,

2008

Change Between Three Month Period

Ended

August 31, 2009 and August 31, 2008

Revenue $ Nil $ Nil $ Nil

General and administrative 38,727 28,027 10,700

Consulting fees 62,052 - 62,052

Management services - 1,500 (1,500) Impairment of mineral property costs - 70,000 (70,00) Mineral property costs 13,703 - 13,703

Rent 1,500 - 1,500

Net Loss (115,982) (99,527) (16,455)

Our accumulated losses increased to $1,458,752 as of August 31, 2010. Our financial statements report a net loss of

$267,169 for the nine month period ended August 31, 2009 compared to a net loss of $189,774 for the nine month period ended August 31, 2008.

As at August 31, 2009, we had $289,727 in current liabilities. Our net cash at August 31, 2009 was $355 compared to $1,638 at November 30, 2008.

Equity Compensation

We currently do not have any stock option or equity compensation plans or arrangements.

Liquidity and Financial Condition Working Capital
	At August 31, 2009	At November 30, 2008
Current assets	$ 355	$ 112,109
Current liabilities	289,727	219,863
Working capital	$ (289,372 )	$ (107,754 )
Cash Flows
	Nine Mon August 31, 2009	ths Ended August 31, 2008
Net cash used in operating activities	$ (39,657 )	$ (50,527 )
Net cash used in investing activities	(444 )	(50,000)
Net cash provided by financing activities	38,983	20,000
Net increase (decrease) in cash during period	$ (1,283)	$ (80,527 )

As of August 31, 2009, our company had working capital deficiency of $289,372. We estimate our operating expenses and working capital requirements for the next twelve month period to be as follows:

Estimated Funding Required During the Twelve Month Period Ending August 31, 2010

General and administrative	$ 60,000
Exploration Expenses	$ 449,135
Professional fees	$ 35,000
Total	544,135

We plan to raise additional capital required to meet immediate short-term needs and to meet the balance of our estimated funding requirements for the twelve months, primarily through the private placement of our securities.

We are not aware of any known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way.

Future Financings

We will require additional financing in order to enable us to proceed with the continued exploration of our current properties, including approximately $95,000 over the next 12 months to pay for our ongoing operating expenses. These expenses include audit, legal and office expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we will require additional financing in order to continue operations and to repay our liabilities. There is no assurance that any party will advance additional funds to us in order to enable us to sustain our plan of operations or to repay our liabilities.

We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

We presently do not have any arrangements for additional financing for the expansion of our exploration operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

Going Concern

We have suffered recurring losses from operations. The continuation of our company as a going concern is dependent upon our company attaining and maintaining profitable operations and raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our company discontinue operations.

Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended November 30, 2008, our independent auditors included an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Off-Balance Sheet Arrangements

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

Application of Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

Mineral Property Costs

The Company has been in the exploration stage since its inception and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred

using the guidance in EITF 04-02, “Whether Mineral Rights Are Tangible or Intangible Assets”. The Company assesses the carrying costs for impairment under SFAS No. 144, “Accounting for Impairment or Disposal of Long Lived Assets” at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

Long-lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Financial Instruments

The fair values of financial instruments, which include cash, accounts payable and accrued liabilities, amounts due to a related party and loans payable, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company’s operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Stock-based Compensation

The Company records stock-based compensation in accordance with SFAS No. 123R, “Share Based Payments”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

Recent Accounting Pronouncements

In June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”. FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-

class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.”

FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15,

2008 and earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on our company’s consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The adoption o

Large accelerated filer

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Non-accelerated filer

Smaller reporting company

CHANCERY RESOURCES, INC. 10-Q