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 November 30, 2010.
Status: Exploration stage company incorporated in Nevada. The company is engaged in the acquisition and exploration of mineral resources in Canada, 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 | Three Months Ended Nov 30, 2010 | Nine Months Ended Nov 30, 2010 | Balance Sheet (Nov 30, 2010) |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | ($15,593) | ($35,668) | N/A |
| Cash Balance | N/A | N/A | $0 |
| Total Assets | N/A | N/A | $0 |
| Total Liabilities | N/A | N/A | $49,071 |
| Working Capital | N/A | N/A | ($49,071) Deficit |
| Accumulated Deficit | N/A | N/A | ($124,871) |
| Shares Outstanding | 130,110,000 | 130,110,000 | 130,110,000 |
Cash Flow (Nine Months Ended Nov 30, 2010):
- Net cash used in operating activities: ($8,285)
- Net cash used in investing activities: $0
- Net cash provided by financing activities: $8,189 (Proceeds from related party loans)
Material Changes vs. Prior Period
- Net Loss Increase: Net loss for the nine months ended November 30, 2010, was $35,668, a significant increase from $10,842 in the same period in 2009. This was primarily driven by a rise in professional fees from $9,500 to $29,970.
- Cash Depletion: Cash balance decreased from $96 at the beginning of the period to $0 at November 30, 2010.
- Liabilities: Total current liabilities increased from $13,500 (Feb 28, 2010) to $49,071 (Nov 30, 2010), driven by an increase in accounts payable and related party loans.
- Mineral Claim Status: The company's previous mineral claim lapsed in January 2010. A new agreement was entered into in February 2010 to hold the re-staked "Emmy Claim" in trust, expiring February 4, 2011.
Outlook, Risks, and Subsequent Events
Going Concern: The filing explicitly states substantial doubt about the company's ability to continue as a going concern due to accumulated losses and a working capital deficiency. Continued operations depend on generating profitable operations or obtaining necessary financing.
Subsequent Event: Following the period end, the company received a convertible loan of $60,500 for working capital. The loan is unsecured, non-interest bearing, and convertible into common stock at a rate of one share for every $0.01 of debt.
Future Plans: Management plans to engage a geologist for a Phase I program (mapping, sampling) estimated at $10,000, with further investigation costs estimated at $25,000. The company anticipates relying on related-party loans and equity sales to fund these activities.
Risks:
- No assurance that commercially viable minerals exist on the property.
- Dependence on external financing; failure to raise capital could halt operations.
- Regulatory risks regarding environmental compliance and mining permits.
- High competition for mineral exploration properties.
Investor Verification Checklist
- Capital Adequacy: Verify the utilization of the $60,500 subsequent convertible loan and whether it is sufficient to cover the estimated $35,000+ in immediate exploration costs.
- Claim Validity: Confirm the status of the "Emmy Claim" and the trust agreement with Teuton Resources Corp., noting the expiration date of February 4, 2011.
- Related Party Dependence: Review the terms of the $18,689 in outstanding related party loans and the new $60,500 convertible loan to assess dilution risks and repayment obligations.
- Professional Fees: Investigate the specific nature of the $29,970 in professional fees incurred in the nine-month period to ensure they align with operational progress.
- Geological Potential: Assess the credibility of the geological reports and the likelihood of discovering economically recoverable reserves given the company's exploration-stage status.