Business Context and Reporting Period
Company: Deer Bay Resources Inc. (Note: Input metadata referenced "Cann American Corp.", but the filing text identifies the registrant as Deer Bay Resources Inc.)
Reporting Period: Quarterly period ended August 31, 2010.
Status: Exploration stage company incorporated in Nevada with principal offices in Vancouver, British Columbia. The company is engaged in the acquisition and exploration of mineral resources, specifically the "Emmy Claim" in British Columbia. It has no operating revenues and relies on equity sales and related-party loans for funding.
Key Financial Metrics
| Metric | Six Months Ended Aug 31, 2010 | Six Months Ended Aug 31, 2009 | As of Aug 31, 2010 |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(20,075) | $(8,741) | N/A |
| Cash Balance | N/A | N/A | $5 |
| Working Capital | N/A | N/A | $(33,478) Deficit |
| Total Assets | N/A | N/A | $5 |
| Total Liabilities | N/A | N/A | $33,483 |
| Accumulated Deficit | N/A | N/A | $(109,278) |
| Shares Outstanding | 130,110,000 | 130,110,000 | 130,110,000 |
Cash Flow Summary (Six Months Ended Aug 31, 2010):
- Net cash used in operating activities: $(7,591)
- Net cash used in investing activities: $0
- Net cash provided by financing activities: $7,500 (Proceeds from related party loans)
- Net decrease in cash: $(91)
Material Changes vs. Prior Period
- Expense Increase: Net loss for the six months ended August 31, 2010, increased to $20,075 from $8,741 in the prior year period. This was driven primarily by a significant increase in professional fees ($15,220 vs. $7,500) and transfer agent/filing fees ($4,310 vs. $1,084).
- Liability Growth: Total current liabilities rose from $13,500 (Feb 28, 2010) to $33,483 (Aug 31, 2010), largely due to an increase in accounts payable and related party loans.
- Asset Depletion: Cash on hand decreased from $96 to $5 during the six-month period.
- Property Status: The company's previous mineral claim lapsed in January 2010 and was re-staked by a third party in February 2010, requiring a new trust agreement and payment of $500.
Outlook, Risks, and Management Commentary
Going Concern: The filing explicitly states substantial doubt about the company's ability to continue as a going concern. The company has incurred losses since inception and requires additional financing to meet obligations and pursue exploration.
Future Financing: Management anticipates relying on loans from related parties and equity sales to fund operations. There is no assurance that additional financing will be available.
Exploration Plan: An updated geological report recommends a Phase I program (review of data, mapping, sampling) estimated at $10,000, followed by Phase II investigation ($25,000) and potential follow-up surveys ($50,000). No significant exploration work has been completed to date.
Risks:
- No assurance that commercially viable minerals exist on the property.
- High competition for mineral properties and capital.
- Regulatory risks regarding environmental compliance and permitting.
- Dilution risk from future equity issuances.
Investor Verification Checklist
- Cash Runway: Verify the company's ability to operate with only $5 in cash and a working capital deficit of $33,478.
- Related Party Dependence: Confirm the terms and repayment status of the $18,000 in related party loans (unsecured, non-interest bearing, due on demand).
- Property Validity: Verify the status of the "Emmy Claim" held in trust by Teuton Resources Corp. and the validity of the geological reports cited.
- Funding Requirements: Assess the feasibility of raising the estimated $85,000+ required for the proposed exploration phases.
- Shell Company Status: Note that the registrant is identified as a "shell company" in the filing header.