SEC Filing Summary: Deer Bay Resources Inc. (10-Q)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended November 30, 2009, for Deer Bay Resources Inc., a Nevada corporation classified as an exploration stage company. The company is engaged in the acquisition and exploration of mineral resources, specifically holding a 100% interest in the "Emmy Claim" located in British Columbia, Canada. The company has not generated any revenue since its inception in August 2004 and has not determined if its properties contain economically recoverable mineral reserves.
Key Financial Metrics
| Metric | Nine Months Ended Nov 30, 2009 | Nine Months Ended Nov 30, 2008 | Balance Sheet (Nov 30, 2009) |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(10,842) | $(36,203) | N/A |
| Cash and Cash Equivalents | N/A | N/A | $277 |
| Total Assets | N/A | N/A | $277 |
| Total Liabilities | N/A | N/A | $12,082 |
| Working Capital Deficit | N/A | N/A | $(11,805) |
| Accumulated Deficit | N/A | N/A | $(87,605) |
| Net Cash Used in Operations | $(4,260) | $(38,053) | N/A |
| Net Cash Provided by Financing | $4,500 | $46,000 | N/A |
Note: The company reported no revenue, gross margin, or operating margin. Debt consists of related party loans totaling $5,500 and accounts payable of $6,582.
Material Changes vs. Prior Period
- Expense Reduction: Net loss decreased significantly from $36,203 in the prior nine-month period to $10,842. This reduction was primarily driven by a decrease in professional fees (from $16,759 to $9,500) and the absence of an $8,000 write-off of mineral property acquisition costs that occurred in the prior period.
- Cash Flow Improvement: Net cash used in operating activities improved from $38,053 to $4,260, largely due to the lower net loss and an increase in accounts payable/accrued liabilities.
- Financing Shift: In the current period, the company funded operations via a $4,500 loan from an officer, whereas the prior period relied on a $46,000 private placement of common stock.
- Liquidity Position: Cash on hand increased slightly from $37 to $277, but total liabilities increased from $1,000 to $12,082, resulting in a working capital deficit of $11,805.
Outlook, Risks, and Management Commentary
- Going Concern: Management explicitly states there is 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.
- Plan of Operations: The company plans to spend approximately $47,000 over the next 12 months ($10,000 for Phase I exploration, $25,000 for Phase II, and $12,000 for G&A). With only $277 in cash, the company anticipates it cannot fund these plans without raising additional capital.
- Financing Strategy: The company expects to raise funds through equity financing (sale of common stock) or related party loans. Management notes that debt financing is unlikely due to a lack of tangible assets for collateral. There is no assurance that funding will be secured.
- Exploration Status: A geological report recommends a Phase I program of mapping and sampling. The company has not yet commenced this work due to funding constraints.
- Risks: Key risks include the failure to secure financing, the inability to discover economically viable mineral reserves, and the potential expiration of mineral claims if funding is not obtained.
Investor Verification Checklist
- Cash Runway: Verify the company's ability to survive with only $277 in cash against a working capital deficit of $11,805.
- Financing Arrangements: Confirm if any definitive agreements for equity financing or loans have been secured to fund the proposed $47,000 exploration budget.
- Claim Status: Verify the status of the "Emmy Claim" (expiry date listed as January 25, 2010 in the text) and whether maintenance fees have been paid to prevent expiration.
- Related Party Transactions: Review the terms of the $5,500 related party loan and the $4,500 officer loan to understand repayment obligations and interest rates.
- Shell Company Status: Note that the company is identified as a "shell company" in the filing, which may impact trading status and regulatory requirements.