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 May 31, 2009.
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 properties in Canada. It has no operating revenues and has incurred losses since inception.
Key Financial Metrics
| Metric | Three Months Ended May 31, 2009 | Three Months Ended May 31, 2008 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(7,665) | $(13,785) |
| Cash Balance (End of Period) | $2,872 | $31,939 |
| Net Cash Used in Operations | $(165) | $(13,785) |
| Net Cash Provided by Financing | $3,000 | $41,000 |
| Total Assets | $2,872 | N/A (Balance sheet not provided for 2008) |
| Total Liabilities | $11,500 | N/A |
| Working Capital Deficit | $(8,628) | N/A |
| Accumulated Deficit (Inception to Date) | $(84,428) | N/A |
Debt and Liquidity: As of May 31, 2009, the company held $2,872 in cash against total current liabilities of $11,500. Liabilities consist of $7,500 in accrued liabilities and $4,000 in related party loans. The company has a working capital deficit of $8,628.
Material Changes vs. Prior Period
- Net Loss Reduction: Net loss decreased to $7,665 from $13,785 in the prior year quarter. This improvement was primarily due to the absence of an $8,000 write-off of mineral property acquisition costs recorded in the 2008 period.
- Expense Composition: Professional fees increased to $7,500 (2009) from $5,450 (2008), driven by accrued fees for the 2009 annual audit and 10-K filing.
- Cash Position: Cash on hand decreased significantly from $31,939 in May 2008 to $2,872 in May 2009, despite a net cash increase of $2,835 during the quarter funded by a related party loan.
- Financing Activity: The company raised $3,000 via a related party loan in the current quarter, compared to $41,000 raised through a private placement of common stock in the prior year quarter.
Outlook, Risks, and Management Commentary
Going Concern: Management and auditors have expressed substantial doubt about the company's ability to continue as a going concern. The company has an accumulated deficit of $84,428 and relies on future financing to meet obligations.
Plan of Operations: The company plans to spend approximately $47,000 over the next twelve months. This includes $10,000 for Phase I exploration, $25,000 for Phase II, and $12,000 for general and administrative expenses. Management anticipates current cash ($2,872) is insufficient to fund these plans.
Financing Needs: The company expects to fund operations through equity financing (sale of common stock) or loans from related parties. Debt financing is considered unlikely due to a lack of tangible assets for collateral. There is no assurance that additional funding will be secured.
Exploration Status: The company holds a mineral claim in British Columbia (Emmy Claim). A geological report recommends a Phase I program costing $10,000. No economically viable reserves have been discovered to date.
Risks: Failure to secure financing will result in the abandonment of mineral claims and business failure. There is no assurance that exploration will yield commercially viable minerals.
Investor Verification Checklist
- Capital Adequacy: Verify if the company has secured the estimated $47,000 required for the next 12 months of operations, given current cash of only $2,872.
- Related Party Transactions: Review the terms of the $4,000 related party loan and the $7,500 in accrued liabilities to understand repayment obligations.
- Property Status: Confirm the current standing of the British Columbia mineral claim and the timeline for the proposed Phase I exploration program.
- Going Concern: Assess the likelihood of the company obtaining equity financing given the lack of revenue and tangible assets.
- Share Dilution: Note that future funding is expected to come from equity sales, which will dilute existing shareholders.