SEC Filing Summary: Deer Bay Resources Inc. (10-K)
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: Fiscal year ended February 28, 2010.
Status: Exploration-stage company incorporated in Nevada with principal offices in Vancouver, British Columbia. The company is classified as a "shell company" and a "smaller reporting company."
Operations: The company holds a 100% interest in the "Emmy Claim," a mineral property in British Columbia, Canada. It has no revenue-generating operations, no employees other than its sole officer/director (Garry E. Wong), and no subsidiaries.
Key Financial Metrics
| Metric | Fiscal Year 2010 | Fiscal Year 2009 | Cumulative (Inception to 2/28/10) |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net Loss | $(12,441) | $(46,687) | $(89,204) |
| Total Assets | $96 | $37 | N/A |
| Total Liabilities | $13,500 | $1,000 | N/A |
| Working Capital Deficit | $(13,404) | $(963) | N/A |
| Cash on Hand | $96 | $37 | N/A |
| Related Party Loans | $10,500 | $1,000 | N/A |
Capital Structure: 130,110,000 common shares issued and outstanding. No stock options or warrants outstanding.
Material Changes vs. Prior Period
- Expense Reduction: Total operating expenses decreased significantly from $46,687 in 2009 to $12,441 in 2010. This was primarily driven by a reduction in professional fees (from $25,889 to $10,500) and transfer agent/filing fees (from $12,106 to $1,246), attributed to the completion of initial registration costs in the prior year.
- Liability Increase: Total liabilities increased from $1,000 to $13,500, driven by an increase in related party loans from the President and a shareholder (from $1,000 to $10,500) and the accrual of $3,000 in accounts payable.
- Asset Base: Cash increased marginally from $37 to $96. The company holds no mineral assets on the balance sheet as exploration costs are expensed as incurred.
Outlook, Risks, and Management Commentary
Going Concern: The independent auditors have expressed substantial doubt about the company's ability to continue as a going concern. The company has a working capital deficit of $13,404 and cash of only $96, which is insufficient to fund operations or the recommended exploration program for the next 12 months.
Plan of Operations: Management plans to raise additional capital through equity or debt offerings to fund a Phase I exploration program (estimated cost $10,000) and Phase II (estimated cost $25,000). General and administrative expenses are projected at approximately $1,000 per month.
Key Risks:
- Financing: No assurance that additional financing will be available. Without it, the business will fail.
- Exploration: High risk that no commercially exploitable minerals will be found on the Emmy Claim.
- Market Liquidity: No active trading market exists for the common stock; shares are quoted on the OTC Bulletin Board but have no bid/ask price. The stock is subject to SEC "Penny Stock" regulations.
- Management Concentration: The company relies entirely on Garry E. Wong, who devotes only ~20% of his time to the company.
- Internal Controls: Management identified material weaknesses in internal controls, including a lack of segregation of duties and no written internal control manual.
Investor Verification Checklist
- Capital Adequacy: Verify if the company has secured the necessary funding to cover the $13,404 working capital deficit and the $35,000+ estimated exploration costs.
- Claim Status: Confirm the legal standing of the "Emmy Claim" held in trust by Teuton Resources Corp. and the validity of the re-staking agreement.
- Related Party Transactions: Review the terms of the $10,500 in loans from the President and a shareholder (unsecured, non-interest bearing, due on demand).
- Stock Liquidity: Assess the feasibility of selling shares given the lack of an active market and "Penny Stock" restrictions.
- Management Capacity: Evaluate the risk associated with a sole officer who is a practicing attorney with other business interests and limited time commitment.