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, 2010.
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 resources, 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 May 31, 2010 | Three Months Ended May 31, 2009 | Balance Sheet (May 31, 2010) |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(14,401) | $(7,665) | N/A |
| Cash Balance | N/A | N/A | $1,074 |
| Total Assets | N/A | N/A | $1,074 |
| Total Liabilities | N/A | N/A | $28,880 |
| Working Capital | N/A | N/A | $(27,806) Deficit |
| Accumulated Deficit | N/A | N/A | $(103,605) |
| Shares Outstanding | 130,110,000 | 130,110,000 | 130,110,000 |
Debt and Liquidity: The company has no long-term debt. Current liabilities consist of accounts payable ($10,880) and related party loans ($18,000). Liquidity is critically low with only $1,074 in cash.
Material Changes vs. Prior Period
- Net Loss Increase: Net loss increased from $7,665 in the prior year period to $14,401, primarily due to higher professional fees ($10,720 vs. $7,500) for audits and filings, and increased transfer agent fees ($3,660 vs. $120).
- Operating Cash Flow: Net cash used in operating activities increased significantly to $6,522 from $165 in the prior year, driven by the higher net loss.
- Financing Activity: The company raised $7,500 in proceeds from related party loans during the quarter, compared to $3,000 in the prior year period.
- Asset Position: Cash increased from $96 at the end of the previous fiscal year (Feb 28, 2010) to $1,074, solely due to the related party financing.
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 incurred losses since inception and requires additional financing to meet obligations.
Future Operations: The company plans to conduct a Phase I geological review and mapping program on the Emmy Claim, estimated to cost $10,000, with further exploration potentially requiring $25,000 to $50,000. Funding for these activities is not secured.
Risks:
- Financing Risk: No assurance exists that the company can raise necessary capital through equity or debt.
- Exploration Risk: There is no assurance that commercially viable minerals exist on the property.
- Regulatory Risk: Operations are subject to extensive environmental and mining regulations which could impose substantial costs or delays.
Unusual Items: The company is classified as a "shell company" for SEC reporting purposes. The primary asset is a mineral claim held in trust by a third party (Teuton Resources Corp.) after the original claim lapsed and was re-staked.
Investor Verification Checklist
- Capital Adequacy: Verify if the company has secured the estimated $10,000–$50,000 required for the proposed geological exploration program.
- Related Party Dependence: Confirm the terms and repayment status of the $18,000 in loans from the President and a shareholder, which constitute the majority of liabilities.
- Asset Validity: Verify the status of the "Emmy Claim" and the trust agreement with Teuton Resources Corp. to ensure the company retains rights to the property.
- Going Concern Status: Assess the likelihood of the company obtaining financing before the current cash balance ($1,074) is depleted.