Business Context and Reporting Period
Company: Deer Bay Resources Inc. (Note: Input metadata referenced "Cann American Corp.", but the filing text identifies the issuer as Deer Bay Resources Inc.)
Filing Type: Form 10-K (Annual Report)
Period Ended: February 28, 2009
Business Stage: Exploration stage mineral resource company.
Operations: The Company is engaged in the acquisition and exploration of mineral properties in North America. Its primary asset is a 100% interest in the "Emmy Claim" located in British Columbia, Canada. A previous claim in Ontario, Canada, has expired. The Company has no revenue-generating operations and relies on equity financing and related-party loans.
Key Financial Metrics
| Metric | Fiscal Year 2009 | Fiscal Year 2008 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(46,687) | $(11,925) |
| Total Assets | $37 | $4,724 |
| Total Liabilities | $1,000 | $5,000 |
| Stockholders' Equity (Deficit) | $(963) | $(276) |
| Cash and Cash Equivalents | $37 | $4,724 |
| Working Capital | $(963) | $(276) |
| Shares Outstanding | 130,110,000 | 7,610,000 |
Cash Flow Summary (FY 2009):
- Net cash used in operating activities: $(43,687)
- Net cash used in investing activities: $(8,000) (Acquisition of mineral property)
- Net cash provided by financing activities: $47,000 (Proceeds from share issuance and officer's loan)
Material Changes vs. Prior Period
- Increased Losses: Net loss increased by $34,762 (approx. 292%) compared to the prior year, driven primarily by increased professional fees ($25,889 vs. $10,500) and the incurrence of mineral property costs ($8,000 vs. $0).
- Capital Structure: Significant dilution occurred with the issuance of 122.5 million shares during the fiscal year through three private placement offerings, raising approximately $46,000. Shares outstanding increased from 7.61 million to 130.11 million.
- Liquidity Decline: Cash on hand decreased from $4,724 to $37 due to operational burn and property acquisition costs, despite financing inflows.
- Asset Base: Total assets decreased significantly as cash was depleted and no new tangible assets were capitalized beyond the write-off of mineral property costs.
Outlook, Risks, and Management Commentary
Going Concern: The independent auditors have issued a report expressing substantial doubt about the Company's ability to continue as a going concern. The Company has incurred recurring losses and has an accumulated deficit of $76,763. Continuation is dependent on raising additional capital and generating profitable operations.
Plan of Operation:
- Management intends to apply for a trading symbol on the OTC Bulletin Board.
- Plans to commence Phase I of an exploration program on the British Columbia Claim in Fall 2009 at an estimated cost of $70,000.
- Anticipates approximately $12,000 in general and administrative expenses for the next 12 months.
Key Risks:
- Financing: No assurance that additional funding can be raised on acceptable terms or at all.
- Exploration Risk: No commercially viable mineral reserves have been discovered; exploration is speculative.
- Internal Controls: Management concluded that disclosure controls and internal controls over financial reporting were not effective as of February 28, 2009, primarily due to the lack of an audit committee.
- Concentration of Control: The sole director and officer (Garry Wong) owns approximately 68% of the outstanding common stock.
Investor Verification Checklist
- Capital Adequacy: Verify if the Company has secured the estimated $70,000 required for the Phase I exploration program, given current cash of only $37.
- Going Concern Status: Confirm the Company's ability to meet the $167 annual maintenance fee for the British Columbia mineral claim to prevent lapse of title.
- Internal Controls: Monitor progress on the establishment of an audit committee to remediate the material weakness in internal controls.
- Share Dilution: Assess the impact of potential future equity issuances required to fund operations, given the recent 1,600% increase in share count.
- Property Title: Verify the status of the British Columbia claim and ensure no defects in title exist, as the Ontario claim previously expired.