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: Six months ended August 31, 2009 (Interim Unaudited)
Business Stage: Exploration stage company engaged in the acquisition and exploration of mineral properties in Canada.
Operations: The company has no operating revenues. It holds one active mineral claim (the "Emmy Claim") in British Columbia, Canada. A previous claim in Ontario has expired.
Key Financial Metrics
| Metric | Six Months Ended Aug 31, 2009 | Six Months Ended Aug 31, 2008 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(8,741) | $(32,034) |
| Cash Balance (End of Period) | $296 | $19,214 |
| Net Cash Used in Operations | $(4,241) | $(26,510) |
| Total Assets | $296 | $19,214 (Beginning of period) |
| Total Liabilities | $10,000 | $1,000 (Beginning of period) |
| Working Capital Deficit | $(9,704) | $(963) (Beginning of period) |
| Accumulated Deficit | $(85,504) | $(76,763) (Beginning of period) |
Capital Structure: 130,110,000 common shares outstanding as of October 1, 2009.
Material Changes vs. Prior Period
- Expense Reduction: Net loss decreased significantly from $32,034 in the prior year period to $8,741. This was primarily due to a reduction in professional fees (from $13,224 to $7,500) and the absence of an $8,000 write-off of mineral property acquisition costs that occurred in the prior period.
- Liquidity Deterioration: Cash on hand dropped from $19,214 at the end of the prior period to $296. The company utilized cash for operations and did not raise equity capital in the current period, unlike the prior period where $41,000 was raised via private placement.
- Liability Increase: Total liabilities increased from $1,000 to $10,000, driven by an increase in related party loans (from $1,000 to $5,500) and the accrual of accounts payable ($4,500).
Outlook, Risks, and Management Commentary
Going Concern: The filing explicitly states substantial doubt about the company's ability to continue as a going concern. The company has incurred losses since inception and relies on additional financing to meet obligations.
Plan of Operations: Management estimates expenditures of approximately $47,000 over the next twelve months ($10,000 for Phase I exploration, $25,000 for Phase II, and $12,000 for G&A). With only $296 in cash, the company anticipates a funding shortfall of approximately $57,000.
Financing Strategy: The company intends to fund operations through existing cash (insufficient), loans from directors, or a private placement of common stock. Management notes that debt financing is unlikely due to a lack of tangible assets to secure loans.
Risks:
- No assurance of discovering economically viable mineral reserves.
- Failure to secure additional equity financing will force the abandonment of mineral claims.
- One of two mineral claims (Ontario) has expired; the remaining claim (BC) requires significant further exploration.
Investor Verification Checklist
- Capital Adequacy: Verify if the company has secured the estimated $57,000 required to fund operations for the next 12 months, given the current cash balance of $296.
- Related Party Loans: Review the terms of the $5,500 in related party loans to determine if they are interest-bearing, convertible, or demand loans.
- Claim Status: Confirm the current standing and expiry date of the British Columbia "Emmy Claim" (listed as expiring January 25, 2010 in the text).
- Exploration Progress: Assess whether the Phase I geological review ($10,000) has been completed or if funds have been raised to initiate it.
- Share Dilution: Monitor for upcoming private placements, as equity financing will likely result in significant dilution to existing shareholders.