Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended November 30, 2009
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _________ to _________
Commission File Number: 333-155789
DEER BAY RESOURCES INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
#401-2366 Wall Street
Vancouver, British Columbia, Canada V6H 4Z1
(Address of principal executive offices) (Zip Code)
#678-1333 W Broadway Street
Vancouver, British Columbia, Canada V6H 4C1
(Former address of principal executive offices) (Zip Code)
(604) 734-2605
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by mark whether the registrant has submitted electronically and posted
on its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: As of January 14, 2010, there
were 130,110,000 shares of common stock, par value $0.0001, outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
It is the opinion of management that the interim financial statements for the
three months and nine months ended November 30, 2009 includes all adjustments
necessary in order to ensure that the interim unaudited financial statements are
not misleading. Our interim unaudited financial statements are stated in United
States dollars and are prepared in accordance with United States generally
accepted accounting principles.
2
Deer Bay Resources Inc.
(An Exploration Stage Company)
Balance Sheets
November 30, February 28,
2009 2009
------- -------
$ $
(Unaudited)
Assets
Current Assets
Cash 277 37
------- -------
Total Assets 277 37
======= =======
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable 6,582 --
Related party loans 5,500 1,000
------- -------
Total Current Liabilities 12,082 1,000
------- -------
Stockholders' Equity (Deficit)
Capital stock
Authorized:
200,000,000 common shares with a par value of $0.0001
Issued and outstanding:
130,110,000 common shares issued and outstanding 13,011 13,011
Additional paid-in-capital 62,789 62,789
Deficit accumulated during the exploration stage (87,605) (76,763)
------- -------
Total stockholders' equity (deficit) (11,805) (963)
------- -------
Total liabilities and stockholders' equity (deficit) 277 37
======= =======
Nature of operations and continuance of business (Note 1)
See Accompanying Notes
3
Deer Bay Resources, Inc.
(An Exploration Stage Company)
Statements of Operations
(Unaudited)
Cumulative from
Three Months Three Months Nine Months Nine Months August 25, 2004
Ended Ended Ended Ended (Inception) to
November 30, November 30, November 30, November 30, November 30,
2009 2008 2009 2008 2009
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
Revenue -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Expenses
Bank charges 13 24 96 100 630
Mineral property costs -- -- -- 8,000 15,500
Office expenses -- -- 80 534 1,725
Professional fees 2,000 8,535 9,500 16,759 52,580
Transfer agent and filing fees 82 610 1,166 10,810 15,069
------------ ------------ ------------ ------------ ------------
Net Loss (2,095) (9,169) (10,842) (36,203) (85,504)
============ ============ ============ ============ ============
Loss per share - Basic and diluted -- -- -- --
============ ============ ============ ============
Weighted Average Number of Common
Shares Outstanding 130,110,000 76,219,000 130,110,000 128,077,000
============ ============ ============ ============
See Accompanying Notes
4
Deer Bay Resources Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
Nine Months Nine Months
Ended Ended
November 30, November 30,
2009 2008
------- -------
$ $
Cash flows from operating activities
Net loss (10,842) (36,203)
Adjustments to reconcile net loss to net cash
Accounts payable and accrued liabilities 6,582 (1,850)
------- -------
Net cash used in operations (4,260) (38,053)
------- -------
Cash from financing activities
Proceeds from officer's loan 4,500 --
Common shares issued for cash -- 46,000
------- -------
Net cash provided by financing activities 4,500 46,000
------- -------
Net increase (decrease) in cash 240 7,947
Cash - beginning of period 37 4,724
------- -------
Cash - end of period 277 12,671
======= =======
Supplemental cash flow information:
Cash paid for:
Interest -- --
Taxes -- --
======= =======
See Accompanying Notes
5
Deer Bay Resources Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
1. NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS
Deer Bay Resources Inc. ("the Company") was incorporated under the laws of
State of Nevada, U.S. on August 25, 2004. The Company's principal business
is the acquisition and exploration of mineral resources. The Company has
not presently determined whether its properties contain mineral reserves
that are economically recoverable. We have not produced any significant
revenues from our principal business or commenced significant operations
and are considered an exploration stage company as defined by SEC Guide 7
with reference to Financial Accounting Standards Board (FASB) issued
Accounting Standards Codification (ASC) topic 915.
On April 29, 2008 the Company's articles of incorporation were amended to
increase the authorized share capital to 200,000,000 common shares and
change the par value to $0.0001. This amendment was applied retroactively
to all share, and per share, amounts.
These financial statements have been prepared on a going concern basis
which assumes the Company will be able to realize its assets and discharge
its liabilities in the normal course of business for the foreseeable
future. The Company has incurred losses since inception resulting in an
accumulated deficit of $87,605 as at November 30, 2009 and a working
capital deficiency of $10,842 as at November 30, 2009. Further losses are
anticipated in the development of its business raising substantial doubt
about the Company's ability to continue as a going concern. The ability to
continue as a going concern is dependent upon the Company generating
profitable operations in the future and/or to obtain the necessary
financing to meet its obligations and repay its liabilities arising from
normal business operations when they come due.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS
The interim unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for
interim financial information and with the instructions for Securities and
Exchange Commission ("SEC") Form 10-Q. They do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Therefore, these financial
statements should be read in conjunction with the Company's audited
financial statements and notes thereto for the year ended February 28,
2009, included in the Company's Annual Report on Form 10K filed on June 15,
2009.
The financial statements included herein are unaudited; however, they
contain all normal recurring accruals and adjustments that, in the opinion
of management, are necessary to present fairly the Company's financial
position at November 30, 2009, and the results of its operations and cash
flows for the nine months ended November 30, 2009 and 2008. The results of
operations for the three months and nine months ended November 30, 2009 are
not necessarily indicative of the results to be expected for future
quarters or the full year.
USE OF ESTIMATES
The preparation of financial statements in accordance with United States
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses in the reporting period. The Company
regularly evaluates estimates and assumptions related to donated services
and expenses, and deferred income tax asset valuation allowances. The
Company bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other
sources. The actual results experienced by the Company may differ
materially and adversely from the Company's estimates. To the extent there
are material differences between the estimates and the actual results,
future results of operations will be affected.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with maturity of three
months or less at the time of issuance to be cash equivalents.
MINERAL CLAIM PAYMENTS AND EXPLORATION EXPENDITURES
The Company is primarily engaged in the acquisition and exploration of
mining properties. Mineral property exploration costs are expensed as
incurred. Mineral property acquisition costs are initially capitalized when
incurred. We assess the carrying cost for impairment under the FASB ASC
topic 360 at each fiscal quarter end. When it has been determined that a
mineral property can be economically developed as a result of establishing
proven and probable reserves, the costs subsequently incurred to develop
such property are capitalized. Such costs will be amortized using the
units-of-production method over the established life of the proven and
probable reserves. If mineral properties are subsequently abandoned or
impaired, any capitalized costs will be charged to operations.
6
Deer Bay Resources Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
LONG-LIVED ASSETS
The Company tests long-lived assets or asset groups for recoverability when
events or changes in circumstances indicate that their carrying amount may
not be recoverable. Circumstances which could trigger a review include, but
are not limited to: significant decreases in the market price of the asset;
significant adverse changes in the business climate or legal factors;
accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of the asset; current period
cash flow or operating losses combined with a history of losses or a
forecast of continuing losses associated with the use of the asset; and
current expectation that the asset will more likely than not be sold or
disposed significantly before the end of its estimated useful life.
Recoverability is assessed based on the carrying amount of the asset and
its fair value which is generally determined based on the sum of the
undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances.
An impairment loss is recognized when the carrying amount is not
recoverable and exceeds fair value.
FINANCIAL INSTRUMENTS
The fair values of financial instruments, which include cash, note payable
and due to related party were estimated to approximate their carrying
values due to the immediate or short-term maturity of these financial
instruments. Foreign currency transactions are primarily undertaken in
Canadian dollars. The financial risk is the risk to the Company's
operations that arise from fluctuations in foreign exchange rates and the
degree of volatility of these rates. Currently, the Company does not use
derivative instruments to reduce its exposure to foreign currency risk.
FOREIGN CURRENCY TRANSLATION
The Company's functional and reporting currency is the United States
dollar. Monetary assets and liabilities denominated in foreign currencies
are translated in accordance with ASC 820, using the exchange rate
prevailing at the balance sheet date. Gains and losses arising on
settlement of foreign currency denominated transactions or balances are
included in the determination of income. Foreign currency transactions are
primarily undertaken in Canadian dollars. The Company has not, to the date
of these financials statements, entered into derivative instruments to
offset the impact of foreign currency fluctuations.
NEW ACCOUNTING STANDARDS ADOPTED DURING THE YEAR ENDED FEBRUARY 28, 2010
On November 30, 2009, the Company adopted FASB ASC 105 -- GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES, which established the FASB Accounting
Standards Codification ("the Codification"), as the single official source
of authoritative, nongovernmental, U.S. GAAP. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. The FASB will no longer issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts;
instead the FASB will issue Accounting Standards Updates. Accounting
Standards Updates will not be authoritative in their own right as they will
only serve to update the Codification. These changes and the Codification
itself do not change GAAP. The Codification is designed to simplify U.S.
GAAP into a single, topically ordered structure. All guidance contained in
the Codification carries an equal level of authority. The Codification is
effective for interim and annual periods ending after September 15, 2009.
Accordingly, the Company refers to the Codification in respect of the
appropriate accounting standards throughout this document as "FASB ASC".
Other than the manner in which new accounting guidance is referenced, the
adoption of these changes had no impact on the Company's financial
statements.
On August 31, 2009, the Company adopted the changes issued by FASB ASC
topic 855 to subsequent events. ASC 855 establishes authoritative
accounting and disclosure guidance for recognized and non-recognized
subsequent events that occur after the balance sheet date but before
financial statements are issued. ASC 855 also requires disclosure of the
date through which an entity has evaluated subsequent events and the basis
for that date. The adoption of the changes to ASC 855 had no impact on the
Company's financial statements.
On August 31, 2009, the Company adopted the changes issued by FASB ASC
topic 825 on determining fair value when the volume and level of activity
for the asset or liability have significantly decreased and identifying
transactions that are not orderly. ASC 825 provides additional guidance for
estimating fair value when the volume and level of activity for the asset
or liability have significantly decreased and includes guidance for
identifying circumstances that indicate a transaction is not orderly. This
guidance is necessary to maintain the overall objective of fair value
measurements, which is that fair value which is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date under
current market conditions. The adoption of the changes to ASC 825 had no
impact on the Company's financial statements.
On August 31, 2009, the Company adopted the changes issued by the FASB to
recognition and presentation of other-than-temporary impairments. These
changes amend existing other-than-temporary impairment guidance for debt
securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities. The adoption of these changes had no impact on the
Company's financial statements.
7
Deer Bay Resources Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
On August 31, 2009, the Company adopted the changes issued by the FASB for
interim disclosures about fair value of financial instruments. These
changes require a publicly traded company to include disclosures about the
fair value of its financial instruments whenever it issues summarized
financial information for interim reporting periods. Such disclosures
include the fair value of all financial instruments, for which it is
practicable to estimate that value, whether recognized or not recognized in
the statement of financial position; the related carrying amount of these
financial instruments; and the method(s) and significant assumptions used
to estimate the fair value. Other than the required disclosures, the
adoption of these changes had no impact on the Company's financial
statements.
On March 1, 2009, the Company adopted changes issued by the FASB to the
fair value option for financial assets and liabilities. These changes
permit measurement of certain financial assets and financial liabilities at
fair value. If the fair value option is elected, the unrealized gains and
losses are reported in earnings at each reporting date. Generally, the fair
value option may be elected on an instrument-by-instrument basis, as long
as it is applied to the instrument in its entirety. The fair value option
election is irrevocable, unless a new election date occurs. The adoption of
these changes had no material impact on the Company's financial statements,
as we did not elect the fair value option for any of the Company's
financial assets or liabilities.
On March 1, 2009, the Company adopted the changes issued by FASB ASC topic
805 for business combinations. These changes require an acquirer to
recognize the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquired business at the acquisition date,
measured at their fair values as of that date, with limited exceptions.
This statement also requires the acquirer in a business combination
achieved in stages to recognize the identifiable assets and liabilities, as
well as the non-controlling interest in the acquired business, at the full
amounts of their fair values. ASC 805 makes various other amendments to
authoritative literature intended to provide additional guidance or to
confirm the guidance in that literature to that provided in this statement.
Our adoption of the changes to ASC 805 had no impact on the Company's
financial statements. However, we expect the changes to ASC 805 will have
an impact on our accounting for future business combinations, but the
effect is dependent upon making acquisitions in the future.
On March 1, 2009, the Company adopted the changes issued by FASB ASC topic
810-10 for non-controlling interests in consolidated financial statements.
ASC 810-10 states that accounting and reporting for minority interests are
to be re-characterized as non-controlling interests and classified as a
component of equity. The calculation of earnings per share continues to be
based on income amounts attributable to the parent. ASC 810-10 applies to
all entities that prepare consolidated financial statements, except
not-for-profit organizations, but affects only those entities that have an
outstanding non-controlling interest in one or more subsidiaries or that
deconsolidate a subsidiary. Our adoption of the changes to ASC 810-10 had
no impact on the Company's financial statements.
On March 1, 2009, the Company adopted the changes issued by FASB ASC topic
815-10-50 for disclosures about derivative instruments and hedging
activities. ASC 815-10-50 changes the disclosure requirements for
derivative instruments and hedging activities. Entities are required to
provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged
items are accounted for, and (c) how derivative instruments and related
hedged items affect an entity's financial position, financial performance,
and cash flows. Our adoption of the changes to ASC 815-10-50 did not have
an impact on our current or comparative consolidated financial statements.
On March 1, 2009, the Company adopted changes issued by the FASB to
accounting for intangible assets. These changes amend the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset in order to
improve the consistency between the useful life of a recognized intangible
asset outside of a business combination and the period of expected cash
flows used to measure the fair value of an intangible asset in a business
combination. The adoption of these changes had no impact on the Company's
financial statements.
On March 1, 2009, the Company adopted the changes issued by the FASB to the
hierarchy of generally accepted accounting principles. These changes
identify the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with GAAP.
Adoption of these changes had no impact on the Company's financial
statements.
On March 1, 2009, the Company adopted the changes issued by the FASB on
accounting for convertible debt instruments that may be settled in cash
upon conversion (including partial cash settlement). These changes specify
that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity's
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. The adoption of these changes had no impact on the
Company's results of operations or financial position.
On March 1, 2009, the Company adopted the changes issued by the FASB to
whether an instrument (or embedded feature) is indexed to an entity's own
stock. These changes provide a new two-step model to be applied in
determining whether a financial instrument or an embedded feature is
indexed to an issuer's own stock and thus able to qualify for scope
exception. The adoption of these changes did not have an impact on the
Company's financial statements.
On March 1, 2009, the Company adopted the changes issued by the FASB to
determine whether instruments granted in share-based payment transactions
are participating securities. These changes address the question of whether
instruments granted in share-based payment transactions are participating
securities prior to vesting. This guidance indicates that unvested
share-based payment awards that contain rights to dividend payments should
be included in earnings per share calculations. The adoption of these
changes had no impact on the Company's results of operations or financial
position.
8
Deer Bay Resources Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
On March 1, 2009, the Company adopted the changes issued by the FASB to
equity method investment accounting considerations. These changes clarify
the accounting for certain transactions and impairment considerations
involving equity method investments. The intent of these changes is to
provide guidance on (i) determining the initial carrying value of an equity
method investment, (ii) performing an impairment assessment of an
underlying indefinite-lived intangible asset of an equity method
investment, (iii) accounting for an equity method investee's issuance of
shares, and (iv) accounting for a change in an investment from the equity
method to the cost method. The adoption of these changes had no impact on
our current or prior consolidated financial position or results of
operations.
On March 1, 2009, the Company adopted the changes issued by the FASB to
disclosures by public entities (enterprises) about transfers of financial
assets and interest in variable interest entities. These changes require
additional disclosure about transfers of financial assets and an
enterprise's involvement with variable interest entities. The adoption of
these changes did not have an impact on the Company's financial statements.
On March 1, 2009, the Company adopted the changes issued by the FASB to
employers' disclosures about pensions and other postretirement benefits.
These changes require enhanced disclosures about the plans for assets of a
Company's defined benefit pension and other postretirement plans. The
enhanced disclosures are intended to provide users of financial statements
with a greater understanding of: (1) how investment allocation decisions
are made, including the factors that are pertinent to an understanding of
investment policies and strategies; (2) the major categories of plan
assets; (3) the inputs and valuation techniques used to measure the fair
value of plan assets; (4) the effect of fair value measurements using
significant unobservable inputs (Level 3) on changes in plan assets for the
period; and (5) significant concentrations of risk within plan assets. The
adoption of these changes did not have an impact on the Company's financial
statements.
In April 2009, the FASB issued an update to FASB ASC 805, "Business
Combinations", that clarifies and amends FASB ASC 805, as it applies to all
assets acquired and liabilities assumed in a business combination that
arise from contingencies. This update addresses initial recognition and
measurement issues, subsequent measurement and accounting, and disclosures
regarding these assets and liabilities arising from contingencies in a
business combination. The Company adopted this Statement on September 1,
2009. Implementation of this update to FASB ASC 805 did not have any impact
on the Company's consolidated financial statements.
In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly"
("FSP FAS 157-4;"), to address challenges in estimating fair value when the
volume and level of activity for an asset or liability have significantly
decreased. This FSP emphasizes that even if there has been a significant
decrease in the volume and level of activity for the asset or liability and
regardless of the valuation technique(s) used, the objective of a fair
value measurement remains the same. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction (that is, not a forced liquidation or distressed sale) between
market participants at the measurement date under current market
conditions. This FSP is effective for interim and annual reporting periods
ending after June 15, 2009. The Company adopted this Statement on September
1, 2009. Implementation of this Standard did not have any impact on the
Company's consolidated financial statements.
In May 2009, the FASB issued FASB ASC 855, "Subsequent Events". This
Statement addresses accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are issued or
available to be issued. FASB ASC 855 requires disclosure of the date
through which an entity has evaluated subsequent events and the basis for
that date, the date issued or date available to be issued. The Company
adopted this Statement in the fourth quarter of 2009.
NEW ACCOUNTING STANDARDS TO BE ADOPTED ARE AS FOLLOWS:
In June 2009, the FASB issued ASC topic 860-20 for changes to the
accounting for transfers of financial assets. These changes remove the
concept of a qualifying special-purpose entity and remove the exception
from the application of variable interest accounting to variable interest
entities that are qualifying special-purpose entities; limits the
circumstances in which a transferor derecognizes a portion or component of
a financial asset; defines a participating interest; requires a transferor
to recognize and initially measure at fair value all assets obtained and
liabilities incurred as a result of a transfer accounted for as a sale; and
requires enhanced disclosure; among others. These changes become effective
for the Company on March 1, 2010. The adoption of these changes is not
expected to have an impact on our financial statements. As of November 30,
2009 this pronouncement has not been added to the Codification.
In June 2009, the FASB issued changes to the accounting for variable
interest entities. These changes require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or
interests give it a controlling financial interest in a variable interest
entity; to require ongoing reassessments of whether an enterprise is the
primary beneficiary of a variable interest entity; to eliminate the
quantitative approach previously required for determining the primary
beneficiary of a variable interest entity; to add an additional
reconsideration event for determining whether an entity is a variable
interest entity when any changes in facts and circumstances occur such that
holders of the equity investment at risk, as a group, lose the power from
voting rights or similar rights of those investments to direct the
activities of the entity that most significantly impact the entity's
economic performance; and to require enhanced disclosures that will provide
users of financial statements with more transparent information about an
enterprise's involvement in a variable interest entity. This Statement
shall be effective for the Company on March 1, 2010. Earlier application is
prohibited. The Company does not anticipate any significant financial
impact from adoption of this accounting pronouncement. As of November 30,
2009, the pronouncement has not been added to the Codification.
9
Deer Bay Resources Inc.
(An Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
On June 30, 2009, the FASB issued Accounting Standard Update (ASU) No.
2009-01 (Topic 105) - Generally Accepted Accounting Principles - amendments
based on - Statement of Financial Accounting Standards No. 168 - The FASB
Accounting and Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles. Beginning with this Statement the FASB will
no longer issue new standards in the form of Statements, FASB Staff
Positions, or Emerging Issues Task Force Abstracts. Instead, it will issue
Accounting Standard Updates. This ASU includes FASB Statement No. 168 in
its entirety. While ASU's will not be considered authoritative in their own
right, they will serve to update the Codification, provide the bases for
conclusions and changes in the Codification, and provide background
information about the guidance. The Codification modifies the GAAP
hierarchy to include only two levels of GAAP: authoritative and
non-authoritative. ASU No. 2009-01 is effective for financial statements
issued for the interim and annual periods ending after September 15, 2009,
and the Company does not expect any significant financial impact upon
adoption.
In August 2009, the FASB issued Accounting Standards Update (ASU) 2009-05
for changes to measuring liabilities at fair value. These changes clarify
existing guidance that in circumstances in which a quoted price in an
active market for the identical liability is not available, an entity is
required to measure fair value using either a valuation technique that uses
a quoted price of either a similar liability or a quoted price of an
identical or similar liability when traded as an asset, or another
valuation technique that is consistent with the principles of fair value
measurements, such as an income approach (e.g., present value technique).
This guidance also states that both a quoted price in an active market for
the identical liability and a quoted price for the identical liability when
traded as an asset in an active market when no adjustments to the quoted
price of the asset are required are Level 1 fair value measurements. These
changes become effective for the Company on November 1, 2009. The Company
does not anticipate the adoption of these changes will have an impact on
the Company's financial statements.
In October 2009, the FASB issued ASU 2009-13 for changes to
mULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS A CONSENSUS OF THE FASB EMERGING
ISSUES TASK FORCE, which amends ASC topic 605, Revenue Recognition, to
require companies to allocate revenue in multiple-element arrangements
based on an element's estimated selling price if vendor-specific or other
third-party evidence of value is not available. ASU 2009-13 is effective
for us on November 1, 2010. Earlier application is permitted. We do not
anticipate the adoption of these changes will have an impact on the
Company's financial statements.
3. MINERAL INTERESTS
On March 18, 2008, the Company entered into a mineral property purchase
agreement with Laurence Stephenson to acquire a 100% interest in the Emory
Creek mineral claim located in the New Westminster Mining Division, BC for
total consideration of $8,000. This mining interest is held in trust for
the Company by the vendor of the property. Upon request from the Company
the title will be recorded in the name of the Company with the appropriate
mining recorder.
4. SUBSEQUENT EVENTS
In accordance with ASC 855 management evaluated all activity of the Company
through January 14, 2010 (the issue date of the financial statements) and
concluded that no subsequent events have occurred that would require
recognition or disclosure in the financial statements.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of our financial condition, changes in financial
condition, plan of operations and results of operations should be read in
conjunction with our unaudited interim financial statements from our inception
(August 25, 2004) to November 30, 2009 and the nine months ended November 30,
2009 and 2008, together with the notes thereto included in this Form 10-Q. The
discussion contains forward-looking statements that involve risks, uncertainties
and assumptions. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors, including, but
not limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements as that term is
defined in Section 27A of the United States Securities Act of 1933 and Section
21E of the United States Securities Exchange Act of 1934. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should",
"expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or
"continue" or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors" in Part II, ITEM 1A of this quarterly report below, that may
cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our interim unaudited financial statements are stated in United States dollars
and are prepared in accordance with United States generally accepted accounting
principles. The following discussion should be read in conjunction with our
interim unaudited financial statements and the related notes that appear
elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are
expressed in United States dollars. All references to "common shares" refer to
the common shares in our capital stock. As used in this quarterly report, the
terms "we", "us" and "our" refer to Deer Bay Resources Inc.
OVERVIEW
We are a natural resource exploration and production company currently engaged
in the exploration, acquisition and development of mineral properties in Canada.
We have no revenues, have incurred losses since our incorporation on August 25,
2004, and have relied upon the sale of our securities in unregistered private
placement transactions and loans from related parties to fund our operations.
For the foreseeable future, we will continue to be dependent on additional
financing in order to maintain our operations and to pursue our exploration
activities.
We were incorporated under the laws of Nevada effective August 25, 2004. Our
principal offices are located at 2366 Wall Street, Suite 401, Vancouver, BC,
Canada V6H 4Z1. Our telephone number is (604) 734-2605.
OUR BUSINESS
Since inception, we were an exploration stage company engaged in the acquisition
and exploration of mineral properties. On April 26, 2005, we entered into a
mineral property purchase agreement to acquire a 100% interest in a mineral
claim located in the Scadding Township, Sudbury Mining Division, Ontario, Canada
for total consideration of $7,500. This claim has expired. On March 18, 2008, we
entered into a mineral property purchase agreement with Laurence Stephenson (the
"Stephenson Agreement") to acquire a 100% interest in a mineral claim known as
the Emmy Claim located in the Emory Creek area of the New Westminster Mining
Division, British Columbia, Canada (the "British Columbia Claim"). As of the
date of this Prospectus the British Columbia Claim is in good standing. We had
paid $5,000 to a geologist for analysis of the property underlying our British
Columbia Claim.
We had obtained a geological report on the property underlying our British
Columbia Claim. The geology report dated June 5, 2008 recommended that a Phase I
program of geological mapping, sampling and prospecting be undertaken to further
define areas of potential interest. The first priority should be a comprehensive
review of reports and maps pertaining to all past exploration work, including
surface surveys, drilling, trenching and underground exploration followed by a
field examination of the subject area. The review should include preparation of
compilations of all available maps and sections pertaining to the property
adjusted to common scales to permit accurate comparisons of data from different
projects. The geophysical data, in particular the chargeability surveys
previously carried our, should be professionally re-evaluated and an effort
should be made to re-locate the survey grids. Their positions along with those
of all known mineral occurrences, trenches, drill holes, adits and geographical
features should be established with the aid of GPS instruments. Completion of
this phase is expected to identify gaps in data and areas where additional
effort is needed and to permit design of an appropriate program of additional
work.
The nature and extent of any follow-up work will be contingent on the results of
the review but it is recommended that provision be made for a preliminary
program of geological mapping, fill-in soil sampling and possibly trenching
particularly in the areas of the chargeability anomalies. Consideration should
be given to the application of mobile metal ion geochemistry as an approach to
overcoming apparent difficulties with heavy overburden in parts of the property.
An estimate of the cost of the proposed initial review and field examination is
$10,000 along with an additional $25,000 of further geological investigation in
order to complete Phase II. Provision of an additional budget of $50,000 is
recommended for the contingent exploration work that would be required to
complete the follow-up surveys.
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EXPLORATION STAGE COMPANY
We are considered an exploration or exploratory stage company because we are
involved in the examination and investigation of land that we believe may
contain minerals for the purpose of discovering the presence of such minerals,
if any, and its extent. There is no assurance that commercially viable minerals
exist on the property underlying our British Columbia Claim, and a great deal of
further exploration will be required before a final evaluation as to the
economic and legal feasibility for our future exploration is determined. To
date, we have not discovered an economically viable reserve on the property
underlying our interests, and there is no assurance that we will discover one.
MINERAL PROPERTIES
On March 18, 2008, we entered into a mineral property purchase agreement with
Laurence Stephenson (the "Stephenson Agreement") to acquire a 100% interest in a
mineral claim known as the Emmy Claim located in the Emory Creek area of the New
Westminster Mining Division, British Columbia, Canada (the "British Columbia
Claim"). As of the date of this Annual Report, the British Columbia Claim is in
good standing.
During fiscal year ended February 28, 2009, we paid $5,000 to a geologist for
analysis of the property underlying our British Columbia Claim. We obtained a
geological report on the property underlying our British Columbia Claim. The
geology report dated June 5, 2008 recommended that a Phase I program of
geological mapping, sampling and prospecting be undertaken to further define
areas of potential interest. The first priority should be a comprehensive review
of reports and maps pertaining to all past exploration work, including surface
surveys, drilling, trenching and underground exploration followed by a field
examination of the subject area. The review should include preparation of
compilations of all available maps and sections pertaining to the property
adjusted to common scales to permit accurate comparisons of data from different
projects. The geophysical data, in particular the chargeability surveys
previously carried out, should be professionally re-evaluated and an effort
should be made to re-locate the survey grids. Their positions along with those
of all known mineral occurrences, trenches, drill holes, adits and geographical
features should be established with the aid of GPS instruments. Completion of
this phase is expected to identify gaps in data and areas where additional
effort is needed and to permit design of an appropriate program of additional
work.
The nature and extent of any follow-up work will be contingent on the results of
the review but it is recommended that provision be made for a preliminary
program of geological mapping, fill-in soil sampling and possibly trenching
particularly in the areas of the chargeability anomalies. Consideration should
be given to the application of mobile metal ion geochemistry as an approach to
overcoming apparent difficulties with heavy overburden in parts of the property.
An estimate of the cost of the proposed initial review and field examination is
$10,000 along with an additional $25,000 of further geological investigation in
order to complete Phase II. Provision of an additional budget of $50,000 is
recommended for the contingent exploration work that would be required to
complete the follow-up surveys.
PROPERTY DESCRIPTION
The property consists of one mineral claim representing 320 units listed in the
table below:
Claim Number and Name Area (in hectares) Expiry Date
--------------------- ----------------- -----------
#574831 Emmy 418 January 25, 2010
The British Columbia Claim consists of one mineral claim representing 320 units
listed in the table below: The Pacific Nickel Mine located in Southwestern BC
near Hope was a very significant producer of copper and nickel from an
ultramafic intrusive geologic environment. As one of the largest Canadian
sources of these metals outside of Sudbury, Ontario and Thompson, Manitoba, the
lack of exploration in this area makes it a unique underdeveloped mineral belt
that requires a concerted exploration program that should include geological
mapping; silt, soil and rock sampling, thin section analysis, and airborne
geophysics followed by diamond drilling.
The Emory Creek Claim is located five kilometers north of the mine area and
approximately eleven kilometers north of Hope B.C. on Map Sheet M092H053. There
is tremendous similarity and coincident features in the rock types and
geophysical imprint between the geology of the Pacific Nickel Mine area and the
ultra-mafic belt extending to the northwest and south west from it. It is
evident from the public and private record that this belt has not been subjected
to detailed recent exploration until now with numerous exploration companies
initiating large scale programs. Research into the mine area has provided some
excellent exploration features that should be looked for on the unexplored area.
EXPLORATION PROGRAM
We will engage a geologist to provide a further analysis of the British Columbia
Claim and potential for minerals. Our initial program should subsequently be to
prospect the property locating all signs of unreported previous work and record
the results by global positioning system (GPS) coordinates. After all previous
work areas have been accurately located, a geologist can rapidly produce a
detailed geological map of the British Columbia Claim delineating the favorable
areas. Samples should be carefully collected from all exposure of the formation
and analyses performed.
The requirement to raise further funding for exploration beyond that obtained
for the next nine month period continues to depend on the outcome of geological
and engineering testing occurring over this interval. If results provide the
basis to continue development and geological studies indicate high probabilities
of sufficient production quantities, we will attempt to raise capital to further
our mining program, build production infrastructure, and raise additional
capital for further land acquisitions. This includes the following activity:
* Review all available information and studies.
* Digitize all available factual information.
* Complete an NI 43-101 Compliant Report with a qualified geologist
familiar with mineralization.
* Determine feasibility and amenability of extracting the minerals via
an ISL operation.
12
* Create investor communications materials, corporate identity.
* Raise funding for mineral development.
* Target further leases for exploration potential and obtain further
funding to acquire new development targets.
PLAN OF OPERATIONS
Our plan of operations for the next twelve months is to complete the following
objectives within the time periods specified:
1. Complete phase one of our recommended exploration program on the property
underlying our interest at an estimated cost of $10,000. We expect to commence
our exploration program in the spring of 2010, depending on weather conditions
and the availability of personnel and equipment.
2. If warranted, complete Phase II at a cost of $25,000.
3. We anticipate spending approximately $1,000 per month in ongoing general and
administrative expenses per month for the next twelve months, for a total
anticipated expenditure of $12,000 over the next twelve months. The general and
administrative expenses for the year will consist primarily of professional fees
for the audit and legal work relating to our regulatory filings throughout the
year, as well as transfer agent fees and general office expenses.
Thus, we estimate that our expenditures over the next twelve months will be
approximately $47,000 ($10,000 to complete phase I of our recommended
exploration program, $25,000 to complete phase II and $12,000 to cover ongoing
general and administrative expenses. As at November 30, 2009, we had cash of
$277 and liabilities of $10,000. As such, we anticipate that our cash may not be
sufficient to enable us to complete phase I of our recommended exploration
program, and to pay for our general and administrative expenses for
approximately the next twelve months. In addition, we will require additional
financing if we determine to proceed with subsequent phases of our recommended
work program.
We anticipate that we will not generate any revenue within the next twelve
months. Accordingly, we will be required to obtain additional financing in order
to continue our plan of operations beyond the next twelve months. We believe
that debt financing will not be an alternative for funding additional
exploration as we do not have tangible assets to secure any debt financing. We
anticipate that additional funding will be in the form of equity financing from
the sale of our common stock. However, we do not have any financing arranged and
we cannot provide investors with any assurance that we will be able to raise
sufficient funding from the sale of our common stock to fund our exploration
program. In the absence of such financing, we will not be able to continue
exploration of the property underlying our interests and our business plan will
fail. Even if we are successful in obtaining equity financing to fund any
continuation of our exploration program, there is no assurance that we will
obtain the funding necessary to pursue any advanced exploration of the property
underlying our interests. If we do not continue to obtain additional financing,
we will be forced to abandon our mineral claims.
We may consider entering into a joint venture arrangement to provide the
required funding to develop the property underlying our interests. We have not
undertaken any efforts to locate a joint venture participant. Even if we
determined to pursue a joint venture participant, there is no assurance that any
third party would enter into a joint venture agreement with us in order to fund
exploration of the property underlying our interests. If we enter into a joint
venture arrangement, we would likely have to assign a percentage in our interest
to the joint venture participant.
RESULTS OF OPERATIONS
REVENUES
We have had no operating revenues since our incorporation on August 25, 2004 to
November 30, 2009.
EXPENSES AND NET LOSS FOR THE NINE MONTHS ENDED NOVEMBER 30, 2009
Our general and administrative expenses for the nine months ended November 30,
2009 were $10,842 as compared to $36,203 for the comparative period. The
majority of expenses were $9,500 of professional fees associated with auditing
and filing the Company's 10-K for the year ended February 28, 2009 and the two
interim reviews as compared to $16,759 for the comparative period. In the
comparative period the Company wrote-off $8,000 of mineral property acquisition
costs.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of $277 and a working capital deficit of $11,805 as of November 30,
2009.
CASH USED IN OPERATING ACTIVITIES
Net cash used in operating activities for the nine months ended November 30,
2009 was $4,260 compared to $38,053. These balances are mainly made up of our
net loss as disclosed above adjusted for an increase in accrued liabilities of
$4,500 in the current period.
CASH USED IN INVESTING ACTIVITIES
Net cash used in investing activities was $Nil for the nine months ended
November 30, 2009 and 2008.
CASH FROM FINANCING ACTIVITIES
We have funded our business to date primarily from sales of our common stock and
loans from related parties. During the nine months ended November 30, 2009 we
received $4,500 in loans from related parties. During the nine months ended
November 30, 2008 we raised $46,000 pursuant to a private placement of our
common stock.
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CONTINUANCE OF BUSINESS
We have not attained profitable operations and are dependent upon obtaining
financing to pursue our proposed business plan. For these reasons our auditors
stated in their report dated June 15, 2009 for the years ended February 28, 2009
and February 29, 2008 that they have substantial doubt we will be able to
continue as a going concern.
FUTURE FINANCING
We anticipate continuing to rely on loans from related parties and equity sales
of our common shares in order to continue to fund our business operations.
Issuances of additional shares will result in dilution to our existing
shareholders. There is no assurance that we will achieve any additional sales of
our equity securities or arrange for debt or other financing to fund our planned
business plan.
OFF BALANCE-SHEET ARRANGEMENTS
As of November 30, 2009, we had no off-balance sheet arrangements.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in accordance with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses in the reporting period. The Company regularly evaluates estimates and
assumptions related to donated services and expenses, and deferred income tax
asset valuation allowances. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by the Company may differ materially and
adversely from the Company's estimates. To the extent there are material
differences between the estimates and the actual results, future results of
operations will be affected.
MINERAL CLAIM PAYMENTS AND EXPLORATION EXPENDITURES
The Company is primarily engaged in the acquisition and exploration of mining
properties. Mineral property exploration costs are expensed as incurred. Mineral
property acquisition costs are initially capitalized when incurred. We assess
the carrying cost for impairment under the FASB ASC topic 360 at each fiscal
quarter end. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs subsequently incurred to develop such property are capitalized. Such
costs will be amortized using the units-of-production method over the
established life of the proven and probable reserves. If mineral properties are
subsequently abandoned or impaired, any capitalized costs will be charged to
operations.
LONG-LIVED ASSETS
The Company tests long-lived assets or asset groups for recoverability when
events or changes in circumstances indicate that their carrying amount may not
be recoverable. Circumstances which could trigger a review include, but are not
limited to: significant decreases in the market price of the asset; significant
adverse changes in the business climate or legal factors; accumulation of costs
significantly in excess of the amount originally expected for the acquisition or
construction of the asset; current period cash flow or operating losses combined
with a history of losses or a forecast of continuing losses associated with the
use of the asset; and current expectation that the asset will more likely than
not be sold or disposed significantly before the end of its estimated useful
life.
Recoverability is assessed based on the carrying amount of the asset and its
fair value which is generally determined based on the sum of the undiscounted
cash flows expected to result from the use and the eventual disposal of the
asset, as well as specific appraisal in certain instances. An impairment loss is
recognized when the carrying amount is not recoverable and exceeds fair value.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable because we are a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the period covered by
this quarterly report, being November 30, 2009. This evaluation was carried out
under the supervision and with the participation of our management, including
our president (our principal executive officer, principal financial officer, and
principal accounting officer). Based upon that evaluation, our president
concluded that our disclosure controls and procedures are effective as at the
end of the period covered by this quarterly report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during the period covered by this quarterly report that have
materially affected, or are reasonably likely to materially affect our internal
controls over financial reporting.
14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against our company,
nor are we involved as a plaintiff in any material proceeding or pending
litigation. There are no proceedings in which our director and officer or
affiliates, or any registered or beneficial shareholder, is an adverse party or
has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS
Not applicable because we are a smaller reporting company.
ITEM 2. UNREGISTGERED SALES OF EQUITY SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are included with this Quarterly Report on Form 10-Q:
Exhibit Number Description of Exhibit
-------------- ----------------------
31.1 Rule 13a-14(a)/15(d)-14(a) Certification of Principal Executive
Officer and Principal Financial Officer
32.1 18 U.S.C. Section 1350 Certification of Principal Executive
Officer and Principal Financial Officer
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEER BAY RESOURCES INC.
By: /s/ Garry Wong
---------------------------------------------------------
Garry Wong
President, Secretary, Treasurer and Director
(Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
Date: January 14, 2010
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