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EX-32.1 - CERTIFICATION - ARX Gold Corpdaulton_10q-ex3201.htm
EX-99.1 - EXTENSION AGREEMENT - ARX Gold Corpdaulton_10q-ex9901.htm
EX-31.1 - CERTIFICATION - ARX Gold Corpdaulton_10q-ex3101.htm
EX-31.2 - CERTIFICATION - ARX Gold Corpdaulton_10q-ex3102.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2010
OR

 
[_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ______________.

DAULTON CAPITAL CORP.
(Exact name of Registrant as specified in its charter)

Nevada
None
30-0459858
(State or other jurisdiction of incorporation)
(Commission File No.)
(IRS Employer Identification No.)

3960 Howard Hughes Parkway, Suite 500, Las Vegas, Nevada 89169
(Address of principal executive offices, including Zip Code)

Registrant's telephone number, including area code: (888) 387-1403

N/A
(Former name or former address if changed since last report)

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) had been subject to such filing requirements for the past 90 days.    Yes [X]    No [_]

Indicate by check mark whether the Registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the 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 Exchange Act Rule 12b-2 of the Exchange Act).    Yes [_]    No [X]

Class of Stock
No. Shares Outstanding
Date
     
Common
57,600,000
January 31, 2010
     




 
 

 

Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
January 31, 2010
(Unaudited)

 
 
PAGE
PART I.
FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements
1
 
  
Consolidated Balance Sheet as of January 31, 2010 (unaudited)
1
 
  
Consolidated Statement of Operations for the period ending
2
  
January 31, 2010 (unaudited)
 
 
  
Consolidated Statement of Cash Flows for the period ending
3
  
January 31, 2010 (unaudited)
 
 
  
Consolidated Statement of  Shareholders’ Deficit for the period ending
4
  
January 31, 2010 (unaudited)
 
 
  
Notes to Consolidated Financial Statements (unaudited)
5
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
11
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
14
     
Item 4.
Controls and Procedures
14
     
Item 4(T).
Controls and Procedures
14
     
PART II.
OTHER INFORMATION
14
     
Item 1.
Legal Proceedings
14
     
Item 1A.
Risk Factors
15
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
15
     
Item 3.
Defaults Upon Senior Securities
15
     
Item 4.
Submission of Matters to a Vote of Security Holders
15
     
Item 5.
Other Information
15
     
Item 6.
Exhibits
 

 
 

 
 

DAULTON CAPITAL CORPORATION
(A Development Stage Company)
Balance Sheet
 
ASSETS  
             
   
January 31,
   
April 30,
 
   
2010
   
2009
 
   
(Unaudited)
       
Current Assets
           
Cash and Cash Equivalents
  $ 942     $ -  
Accounts Receivable
    -       -  
Prepaid Rent
    -       750  
      942       750  
Other Assets
               
Oil and Gas Working Interest:  Mayberry No. 1
    100,000       100,000  
Oil and Gas Working Interest:  Glencoe Wells
    90,000       90,000  
      190,000       190,000  
                 
TOTAL ASSETS
  $ 190,942     $ 190,750  
                 
LIABILITIES & STOCKHOLDERS' EQUITY
 
                 
Current Liabilities
               
Subscriptions Received
    10,164       -  
Loans from Officers
    45,292       -  
                 
      55,456       -  
                 
Commitments and contingencies (Note 5)
               
                 
Stockholders' Equity
               
Preferred Stock, $0.001 par value, 5,000,000 shares authorized;
none outstanding as at January 31, 2009 and April 30, 2008.
               
Common Stock, $0.001 par value, 200,000,000 shares authorized, 
57,600,000 shares issued and outstanding as at January 31, 2010
57,600,000 shares issued and outstanding as at April 30, 2009
    57,600       57,600  
Additional paid-in capital
    208,900       196,454  
Deficit accumulated in the development stage
    (131,014 )     (63,304 )
                 
Total Stockholders' Equity
    135,486       190,750  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 190,942     $ 190,750  

The accompanying notes are an integral part of these financial statements

 
1

 
 
DAULTON CAPITAL CORPORATION
 (A Development Stage Company)
 Statement of Operations
 (Unaudited)
                               
                           
For the period
 
                           
of Inception,
 
                           
from Jan. 8,
 
   
For the 3 months ended
   
For the 9 months ended
   
2008 through
 
   
January 31,
   
January 31,
   
January 31,
 
   
2010
   
2009
   
2010
   
2009
   
2010
 
                               
Revenues
                             
Crude Oil Production
  $ -     $ 7,994     $ -     $ 11,352     $ 17,189  
                                         
Costs and Expenses
                                       
                                         
Salary & Wages
    45,000       -       45,000       -       45,000  
Consulting
    -       9,128       -       9,128       9,128  
Professional Fees
    17,147       11,205       17,147       31,469       60,616  
Occupancy Expense
    246       3,000       996       7,500       10,746  
Stock Transfer Fees
    -       2,810       -       5,678       5,954  
Other General & Administrative
    4,567       2,492       4,567       9,018       16,759  
                                         
Total Expenses
    66,960       28,635       67,710       62,793       148,203  
                                         
Operating Loss
    (66,960 )     (20,641 )     (67,710 )     (51,441 )     (131,014 )
                                         
                                         
Net Income (Loss)
  $ (66,960 )   $ (20,641 )   $ (67,710 )   $ (51,441 )   $ (131,014 )
                                         
Net Income (Loss) per share,
basic and diluted
  $ (0.001 )   $ (0.000 )   $ (0.001 )   $ (0.001 )        
                                         
Weighted average number of shares outstanding,
basic and diluted
    57,600,000       57,600,000       57,600,000       54,660,868          

The accompanying notes are an integral part of these financial statements

 
2

 
 
DAULTON CAPITAL CORPORATION
 (A Development Stage Company)
 Statement of Cash Flows
 (Unaudited)
 
                           
For the period
 
                           
of Inception,
 
                           
from Jan. 8,
 
   
For the 3 months ended
   
For the 9 months ended
   
2008 through
 
   
January 31,
   
January 31,
   
January 31,
 
   
2010
   
2009
   
2010
   
2009
   
2010
 
                               
Cash Flows From Operating Activities
                         
Net Income (Loss)
  $ (66,960 )   $ (20,641 )   $ (67,710 )   $ (51,441 )   $ (131,014 )
Adjustments to reconcile net loss to
net cash used by operating activities:
                    .                  
Change in operating assets and liabilities:
                                 
Accounts receivable
                            5,387          
Accounts Payable
                                       
Prepaids
                    750                  
Subscriptions Received
    10,164               10,164               10,164  
Net Cash provided by (used by) operating activities
    (56,796 )     (20,641 )     (56,796 )     (46,054 )     (120,850 )
                                         
Cash Flows From Investing activities
                                 
Purchase working interest in wells
                            (90,000 )     (190,000 )
Net Cash (used by) Investing Activities
    -       -       -       (90,000 )     (190,000 )
                                         
Cash Flows From Financing Activities
                                 
Proceeds from the sale of Stock
                            90,000       254,054  
Proceeds of loans from officers
    45,292               45,292               45,292  
Contribution of capital
    12,446               12,446               12,446  
Net Cash provided by Financing Activities
    57,738       -       57,738       90,000       311,792  
                                         
Net Increase (Decrease) in Cash
    942       (20,641 )     942       (46,054 )     942  
                                         
Cash at beginning of period
    -       20,910       -       46,323       -  
                                         
Cash at end of period
  $ 942     $ 269     $ 942     $ 269     $ 942  
                                         
 Cash Paid For:
                                       
Interest
  $ -     $ -     $ -     $ -     $ -  
Income Taxes
  $ -     $ -     $ -     $ -     $ -  

The accompanying notes are an integral part of these financial statements

 
3

 
 
DAULTON CAPITAL CORPORATION
 (A Development Stage Company)
 Statement of Stockholders' Equity (Deficit)
 For the period from Inception, January 8, 2008, to January 31, 2010
 (Unaudited)
 
                     
Accumulated
       
               
Additional
   
Deficit During
       
   
Common Stock
   
Paid-in
   
Development
       
   
Shares
   
Amount
   
Capital
   
Stage
   
Total
 
                               
Balances at Inception, Jan. 8, 2008
    -     $ -     $ -     $ -     $ -  
Common stock issued for cash on
                                       
January 14, 2008 at $0.098 per share
    28,800,000       28,800       (11,223 )             17,577  
Common stock issued for cash on
                                       
February 21, 2008 at $0.0977 per share
    24,000,000       24,000       122,477               146,477  
Net loss, period ended April 30, 2008
                            (11,594 )     (11,594 )
                                         
Balances at April 30, 2008
    52,800,000     $ 52,800     $ 111,254     $ (11,594 )   $ 52,460  
                                         
Common stock issued for purchase
                                       
of a working interest in wells at
                                       
$0.30 per share October 16, 2008
    4,800,000       4,800       85,200               90,000  
                                         
Net loss, year ended April 30, 2009
                            (51,710 )     (51,710 )
                                         
Balances at April 30, 2009
    57,600,000     $ 57,600     $ 196,454     $ (63,304 )   $ 190,750  
                                         
Capital contributed
                    12,446               12,446  
Net loss, 9 months ended January 31, 2010
                      (67,710 )     (67,710 )
                                         
Balances at January 31, 2010
    57,600,000     $ 57,600     $ 208,900     $ (131,014 )   $ 135,486  

The accompanying notes are an integral part of these financial statements
 
4


 
Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
January 31, 2009
(Unaudited)

1.
Basis of Presentation and Nature of Operations

These unaudited interim financial statements as of and for the nine months ended January 31, 2010 reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the period presented in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.

These unaudited interim financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s April 30, 2009 report.   The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context.  The results of operations for the nine month period ended January 31, 2010 are not necessarily indicative of results for the entire year ending April 30, 2010.

Organization

Daulton Capital Corporation (the “Company”) was incorporated under the laws of the State of Nevada January 8, 2008. The Company was organized for the purpose of engaging in any activity or business not in conflict with the laws of the State of Nevada or of the United States of America.  The company became engaged in the oil and gas industry.

Current Business of the Company

In February, 2008 the Company purchased a 20% working interest /16% Net Revenue Interest in a producing oil well known at Mayberry No. 1,  located in an oil and gas leasehold estate in Creek County, Oklahoma.   In June, 2008 Semcrude, Inc., the collector of the oil produced by the well, reported bankruptcy under Chapter 11 of the Bankruptcy Code.  Payments to the Company for oil sold have been suspended.

On July 30, 2008 the Company purchased a 5% working interest / 4% net revenue interest in six oil wells known as the Glencoe Wells located in an oil and gas leasehold estate in Pawnee County, Oklahoma.   The purchase was paid in restricted common stock.
Volumetric calculations of the wells have not been performed.
 
Property Acquisition Costs:
 
   
Unproved
 
       
Mayberry No. 1 well
  $ 100,000  
Glencoe Wells
    90,000  
    $ 190,000  

Impairment of these long lived assets was considered under SFAS 121. The wells are shut in pending the resolution of issues that arose during bankruptcy proceedings.  The wells have not been depleted and are considered to retain their original value.   An adjustment for impairment is not considered necessary.
 
5

 
2.           Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period.  Actual results could differ materially from those estimates. Significant estimates made by management are, among others, realizability of long-lived assets, deferred taxes and stock option valuation.

Cash and equivalents

Cash and equivalents include investments with initial maturities of three months or less.

Fair Value of Financial Instruments

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures About Fair Value of Financial Instruments.”  SFAS No. 107 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value.  The carrying amounts of the Company’s financial instruments as of January 31, 2010 approximate their respective fair values, because of the short-term nature of these instruments.  Such instruments normally consist of cash, accounts payable and prepaid expenses. 

Income Taxes

The Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company generated a deferred tax credit through net operating loss carryforward.  However, a valuation allowance of 100% has been established, as the realization of the deferred tax credits is not reasonably certain, based on going concern considerations outlined as follows.

Recent Accounting Pronouncements

In May, 2009, the FASB issued SFAS No. 165, Subsequent Events, which established general accounting standards and disclosure for subsequent events.  In accordance with SFAS No. 165, the Company has evaluated subsequent events through the date the financial statements were filed.

In June, 2009, the FASB issued SFAS No. 168 – The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162.  SFAS 168 establishes the FASB Accounting Standards Codification as the single source of authoritative US generally accepted accounting principles recognized by the FASB to be applied to nongovernmental entities.  SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.   The adoption of SFAS 168 will not have an impact on the Company’s financial position, results of operations or cash flows.


6

 
Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.  There was limited activity in the first two quarters of the current fiscal year.  The company experienced a loss of $67,710 in the nine months ended January 31, 2010 and $131,014 since inception January 8, 2008. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.  If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its plans to generate revenue from well head machinery and oil and gas leases.   The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classifications or liabilities or other adjustments that might be necessary should the Company be unable to continue as a going concern.

Development-Stage Company

The Company is considered a development-stage company, with limited operating revenues during the periods presented, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 7.  SFAS.  No. 7 requires companies to report their operations, shareholders deficit and cash flows since inception through the date that revenues are generated from management’s intended operations, among other things.  Management has defined inception as January 8, 2008.  Since inception, the Company has incurred an operating loss of $131,014. The Company’s working capital has been generated through the sales of common stock and limited revenue from crude oil production.  Management has provided financial data since January 8, 2008 in the financial statements, as a means to provide readers of the Company’s financial information to make informed investment decisions.

Basic and Diluted Net Loss Per Share

Net loss per share is calculated in accordance with SFAS 128, Earnings Per Share for the period presented.  Basic net loss per share is based upon the weighted average number of common shares outstanding.  Diluted net loss per share is based on the assumption that all dilative convertible shares and stock options were converted or exercised.  Dilution is computed by applying the treasury stock method.  Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

The Company has no potentially dilutive securities outstanding as of January 31, 2010.

The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations for the nine months ended January 31, 2010 and  2009, respectively.  The weighted average number of shares outstanding as at January 31, 2009 has been restated to reflect the 4-to-1 forward stock splits of August 6, 2009.          
 
7

 
Numerator:
           
             
Basic and diluted net loss per share:
 
2010
   
2009
 
Net Loss
  $ ( 67,710 )   $ ( 51,440 )
                 
Denominator:
               
                 
Basic and diluted weighted average number of shares outstanding
    57,600,000       54,660,868  
                 
Basic and Diluted Net Loss Per Share
  $ (0.001 )     (0.001 )

Accounting for Oil and Gas Producing Activities

The company uses the successful efforts method of accounting for oil and gas producing activities.  Under this method, acquisition costs for proved and unproved properties are capitalized when incurred.

Acquisition costs are capitalized when incurred pending the determination of whether a well has found proved reserves.  A determination of whether a well has found proved reserves is made within a year of acquisition.

If after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired, and its costs are charged to expense.  It’s costs can however, continue to be capitalized if a sufficient quantity of reserves are discovered in the well to justify its completion as a producing well and sufficient progress is made assessing the reserves and the well’s economic and operating feasibility.  The impairment of unamortized capital costs is measured at a lease level and is reduced to fair value if it is determined that the sum of expected future net cash flows is less than the net book value.

The company determines if impairment has occurred through either adverse changes or as a result of the annual review of all fields.  The company  has not recorded any impairment to January 31, 2010.  Development costs of proved oil and gas properties, including estimated dismantlement, restoration and abandonment costs and acquisition costs, are depreciated and depleted on a field basis by the units-of-production method using proved reserves, respectively.

The Costs of unproved oil and gas properties are generally combined and impaired over a period that is based on the average holding period for such properties and the company’s experience of successful operations.

Oil and Gas Revenue Recognition

The company applies the sales method of accounting for crude oil and natural gas revenue.  Under thus method, revenues are recognized based on the actual volume of crude oil and natural gas sold to purchasers.  Revenue from the sale of oil and gas is reported by the oil/gas gathering company monthly and paid two months in arrears.
 
8

 
Accounts Receivable

The Company’s crude oil revenue is normally paid two months in arrears by the oil purchasing company.  The purchasing company, Semcrude Inc., petitioned for Chapter 11 bankruptcy in the fiscal year ended April 30, 2008.  Revenue payments were  suspended and the wells were shut in.  The final payment was received in May, 2008. There have been no payments since.   No receivables are recorded at January 31, 2010.

4.           Capital Structure

On October 17, 2008 the Company effected a four-to-one forward stock split of common stock. There was no effect on stockholders’ equity.  Par value of $001 per share remained unchanged.

On August 6, 2009 the stockholders by a majority vote approved a 4-for-1 forward split of the Company’s common stock.   There was no effect on stockholders’ equity and par value of $0.001 per share remained unchanged.

As at January 31, 2010, the Company was authorized to issue 200,000,000 shares of $0.001 par value common stock, of which 57,600,000 shares were issued and outstanding.

The Company was also authorized to issue 5,000,000 shares of preferred stock, of which none was issued and outstanding.

5.
Change in Management

On September 11, 2009, Ryan Beamin resigned as President, Secretary and Treasurer of the Company.  He was succeeded by Terry R. Fields, who assumed the offices of  President, Chief Executive Officer, Secretary and Treasurer.   Michael R. Mulberry was appointed Vice President and General Manager of Operations. On August 6, 2009 Mr. Fields and Mr. Mulberry were appointed directors.

6.           Commitments and Contingencies

There were no commitments or contingencies in the nine months ended January 31, 2010.

7.
Restatements

The issued and outstanding shares and weighted average shares outstanding in the financial statements of April 30, 2009 and January 31, 2009 were restated to reflect retroactively the four-for-one forward stock split of August 6, 2009.
 
 
9

 
 
8.           Legal Proceedings

A complaint was filed for attorney’s fees in Superior Court, and judgment obtained on February 2, 2010 for $12,737.43, including costs of $292.   The judgment was pledged by certain stockholders, subsequently paid, and the judgment satisfied.

There were no other legal proceedings against the Company with respect to matters arising in the ordinary course of business. Neither the Company nor any of its officers or directors is involved in any other litigation other than as creditors in the Syncrude bankruptcy proceeding, or is involved either as plaintiffs or defendants, and have no knowledge of any threatened or pending litigation against them or any of the officers or directors.

9.           Subsequent Events

In February, 2010, the Company entered into option agreements with an individual, Shawn Ryan, for the purchase of two groups of mining claims in the Yukon Territory, Canada, known as the Ballarat Property and the Hunker Project.  The option on the Ballarat Property requires making staged cash payments and issuing common shares of the company on or before August 20, 2013, with the first payment of $30,000 due Aug 20, 2014.  The option on the Hunker Project requires an advance royalty payment of  $30,000 starting Aug 20, 2014.  Shawn Ryan retains a small net smelter interest in both properties.
 

 
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements
 
This following information specifies certain forward-looking statements of our management.  Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact.  Forward-looking statements may be identified by the use of forward-looking terminology, such as “may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms.  The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable.  Our future operating results, however, are impossible to predict, and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

Forward-looking statements include, but are not limited to, statements relating to our future business and financial performance, our competitive position and other material future developments that you may take into consideration.

We believe it is important to communicate our expectations to our shareholders.  however, there may be events in the future that we are not able to accurately predict or over which we have no control.  the risk factors and cautionary language discussed in this report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations we described in our forward-looking statements, including among other things, competition in the industry in which we do business, legislation or regulatory environments, requirements or changes adversely affecting the businesses in which we are engaged, and general economic conditions.
 
You are cautioned not to place undue reliance on these forward-looking statements.  The assumptions used for purposes of the forward-looking statements represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances.  As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment.  To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results; accordingly, no opinion is expressed on the achievability of those forward-looking statements.  We cannot guaranty that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

The following discussion of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements, which are included elsewhere in this report.

Company Overview

Daulton Capital Corp. (the “Company”) was incorporated on January 8, 2008. In February 2008 the Company sold 1,500,000 shares of its common stock at a price of $0.10 CDN per share to a group of private investors.

The Company has a 20% working interest (16% net revenue interest) in an oil well located in Creek County, Oklahoma.  As of September 10, 2009 the well was shut in and not producing.
 
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On July 30, 2008 the Company acquired a 5% working interest (4% net revenue interest) in six wells located in Pawnee County, Oklahoma. In consideration for assignment of the working interest in these wells, the Company issued 300,000 shares of its restricted common stock to the former owner of the working interests.  As of September 10, 2009, the six wells were shut in and not producing.

In June 2008 Semcrude, Inc., the purchaser of the oil produced by the Company's wells, filed for bankruptcy under Chapter 11 of the Federal Bankruptcy Code. As a result, payments to the Company for oil sold have been temporarily suspended.

On February 23, 2010, the Company entered into an option agreement with Shawn Ryan to purchase an undivided interest of mining claims of a property described as “Ballarat Property”.  In addition, on February 25, 2010, the Company entered into an option agreement with Shawn Ryan to purchase an undivided interest of mining claims of a property described as “Hunker Project”.

The Company plans to generate profits by drilling productive oil or gas wells and developing mining claims. However, the Company will need to raise funds from third parties to drill new wells and to excavate mining claims. The Company may also attempt to raise needed capital through the private sale of its securities or by borrowing from third parties. The Company may not be successful in raising the capital needed to drill oil or gas wells or excavate the claims. In addition, any future wells which may be drilled by the Company may not be productive of oil or gas. The inability of the Company to generate profits may force the Company to curtail or cease operations.

The Company's future plans will be dependent upon the amount of capital the Company is able to raise. The Company does not have any commitments or arrangements from any person to provide the Company with any additional capital.

Results of Operations for the Three Months Ended January 31, 2010
 
During the three month period ended January 31, 2010, the Company incurred an operating loss of $66,960.  
 
Our activities have been financed from proceeds of shareholders, related or third party subscriptions and/or loans.  We do not anticipate earning revenues until such time as we have entered into commercial production of any mineral claims or potential oil wells.  We are presently in the pre-exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on any properties, or if such resources are discovered, that we will enter into commercial production of any claims.

Net Loss for the Nine Month Period Ended January 31, 2010

For the nine month period ended January 31, 2010, we recorded an operating loss of $67,710 compared to a loss of $62,793 for the comparative nine month period of the prior year.  The loss consists of: salary & wages $45,000 (2009 - $nil); consulting fees $nil (2009 - $9,128); professional fees $17, 147 (2009 - $31,469) ; occupancy expenses $996 (2009 - $7,500); stock transfer fees $nil (2009 - $5,678); and other general and administrative fees $4,567 (2009 - $9,018).

Cumulative Loss to January 31, 2010

We have not generated any revenues from operations since our incorporation through January 31, 2010.  We have incurred a cumulative loss of $131,014 since inception, January 8, 2008.  Thus, there can be no assurance that we will ever achieve profitability or that revenues will be generated and sustained in the future.  We are dependent upon obtaining additional and future financing to pursue our exploration and excavation activities.

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Liquidity and Further Capital Resources

At January 31, 2010, we had assets of $942, consisting of cash and cash equivalents.  Total stockholders’ equity was $135,486 at January 31, 2010.  We are a pre-exploration stage company and, since inception, have experienced significant changes in liquidity, capital resources and shareholders’ equity.

To finance the Company’s operations the Company has relied upon cash on hand, sources internally generated from management, advances from shareholders and financing via loans and debt financing.

The Company has not raised any equity from stock issuances during the three month period ended January 31, 2010.

Contractual Obligations

On February 23, 2010, the Company and Shawn Ryan, entered into an option agreement for the Company to purchase from Ryan an undivided interest in the mining claims of a property described as the Ballarat Property.  The option agreement provides the Company with the option to earn 100% interest in the Ballarat Property from Shawn Ryan by making installment cash payments and issuing common shares of the Company on or before Aug 20, 2013.  Ryan will retain a 2% net smelter return interest that requires an advance royalty payment in the amount of $30,000 starting Aug 20, 2014.  At the option of the Company, the net smelter return interest may be reduced to 1% upon making a $2 million dollar payment to Shawn Ryan. 

The Company’s exploration plans for the Ballarat Property is to establish a soil and ground magnetic survey over the GSC anomalous silt drainage.  The soil sampling program will be followed up with a portable excavator trenching program that the Company believes will generate numerous quality drill targets.  The Ballarat Property consists of 38 Yukon Quartz Mining Claims located in the Dawson Mining District, Yukon Territory, Canada.  The claim block is situated 3 miles south east of the Underworld resources, Black Fox Property.  The claim block covers 1900 acres or 7.6 square kilometers and straddles Ballarat Creek.

On February 25, 2010, the Company and Shawn Ryan, an individual entered into an additional option agreement for the Company to purchase from Shawn Ryan an undivided interest in the mining claims of a property described as the Hunker Project.  The option agreement provides the Company with the option to acquire 100% interest in the Hunker Project from Shawn Ryan by making installment cash payments and issuing common shares of the Company on or before Aug 20, 2013.  Shawn Ryan will retain a 2% net smelter return interest that requires an advance royalty payment in the amount of $30,000 starting Aug 20, 2014.  At the option of the Company, the net smelter return interest may be reduced to 1% upon making a $2 million dollar payment to Shawn Ryan. 

The Hunker Project consists of 121 Yukon Quartz Mining Claims located in the Dawson Mining District, Yukon Territory Canada.  The claim block is situated 15 miles south east of Dawson City and now stands at 6,000 acres or 24 square kilometers and straddles Hunker Creek, one of the Klondike’s famous gold producing placer creeks.

It is anticipated that any capital commitments that may occur will be financed principally through the sale of shares of the Company's common stock or other equity securities. However, there can be no assurance that additional capital resources and financings will be available to the Company on a timely basis, or if available, on acceptable terms.
 
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ITEM 3.
QUANTITATIVE AND QUALIITATIVE DISCOLSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.T.
INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company’s management has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report, and in their opinion Daulton Capital’s disclosure controls and procedures are effective at the reasonable assurance level to ensure that information is adequately disclosed.

There were no changes in the Company’s internal controls over financial reporting that occurred during the fiscal quarter ended January 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s President and Principal Financial Officer, Terry Fields, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report; and in his opinion the Company’s disclosure controls and procedures were effective.

Limitations on effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error.  Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our management has concluded that our disclosure controls and procedures are effective at that reasonable assurance level.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.   Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control.  The design of any system controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, control may become inadequate because of changes in conditions, or the degree of compliance within the policies or procedures may determine.

PART II

ITEM 1.
LEGAL PROCEEDINGS

A complaint was filed for attorney’s fees in Superior Court, and judgment obtained on February 2, 2010 for $12,737.43, including costs of $292.   The judgment was pledged by certain stockholders, subsequently paid, and the judgment satisfied.

There were no other legal proceedings against the Company with respect to matters arising in the ordinary course of business. Neither the Company nor any of its officers or directors is involved in any other litigation other than as creditors in the Syncrude bankruptcy proceeding, or is involved either as plaintiffs or defendants, and have no knowledge of any threatened or pending litigation against them or any of the officers or directors.
 
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ITEM 1A.
RISK FACTORS

Smaller reporting companies are not required to provide the information required by this Item 1A.

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On October 17, 2008 the Company effected a four-to-one forward stock split of common stock. There was no effect on stockholders’ equity.  Par value of $001 per share remained unchanged.

On August 6, 2009 the stockholders by a majority vote approved a 4-for-1 forward split of the Company’s common stock.   There was no effect on stockholders’ equity and par value of $0.001 per share remained unchanged.

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.
SUMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the Company's shareholders during the three months ended January 31, 2010.

ITEM 5.
OTHER INFORMATION.

Reports were filed by the Issuer on February 2, 2010 and March 2, 2010 respectively.  In reference to the Form 8-K filed on February 26, 2010, the first payment was due on or about March 15, 2010 for $25,000.  However, the Company has received from Shawn Ryan, pursuant to a written extension agreement attached hereto and incorporated by reference herein, a ten (10) day extension for such payment.

ITEM 6.
EXHIBITS
 
Number
Exhibit
   
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbans-Oxley Act of 2002
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbans-Oxley Act of 2002
32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1
Ballarat Extension Agreement dated March 14, 2010

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.
 
 
DAULTON CAPITAL CORP.
 
       
Date: March 19, 2010     
By:
/s/ Terry Fields  
   
Terry Fields, President and Principal Financial and Accounting Officer
 
       
       


 
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