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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended January 31, 2012

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   333-152002   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   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

(Do not check if a smaller reporting company)

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

  

Class of Stock No. Shares Outstanding Date
     
Common 60,240,003 March 1, 2012

 

 

 
 

 

Daulton Capital Corporation

(An Exploration Stage Company)

Notes to Financial Statements

January 31, 2012

(Unaudited)

 

    PAGE
PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
 
  Consolidated Balance Sheet as of January 31, 2012 (unaudited) 1
 
  Consolidated Statement of Operations for the period ending January 31, 2012 (unaudited) 3
     
  Consolidated Statement of Cash Flows for the period ending January 31, 2012 (unaudited) 5
     
  Consolidated Statement of  Shareholders’ Deficit for the period ending January 31, 2012 (unaudited) 7
     
  Notes to Consolidated Financial Statements (unaudited) 10
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
     
Item 4. Controls and Procedures 20
     
PART II. OTHER INFORMATION 23
     
Item 1. Legal Proceedings 23
     
Item 1A. Risk Factors 23
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
     
Item 3. Defaults Upon Senior Securities 23
     
Item 4. (Removed and Reserved). 23
     
Item 5. Other Information 23
     
Item 6. Exhibits 24
     
  Signatures 24

   

 
 

 

 


PART I – FINANCIAL INFORMATION

 

ITEM 1.  Financial Statements

 

DAULTON CAPITAL CORPORATION
(An Exploration Stage Company)
Balance Sheet
       
ASSETS  
       
  January 31,   April 30,
  2012   2011
  (Unaudited)    
Current Assets      
  Cash and Cash Equivalents  $          1,341    $          4,199
  Accounts Receivable                      -                       -
  Prepaid Rent  -                       -
               1,341                4,199
Other Assets      
  Mining Property Interest            25,000                       -
             25,000                       -
       
    TOTAL ASSETS  $        26,341    $          4,199
       
LIABILITIES & STOCKHOLDERS' EQUITY
       
Current Liabilities      
  Accounts Payable 39,125    
  Stockholder Loan 37,500    
  Loans from Officers           120,492              90,492
       
           197,117              90,492
       
Commitments and contingencies (Note 5)      
       
Stockholders' Equity      
Preferred Stock, $0.001 par value, 5,000,000 shares authorized;      
none outstanding as at January 31, 2012 and April 30, 2011.      
  Common Stock, $0.001 par value, 200,000,000 shares authorized,      
60,240,003 shares issued and outstanding as at January 31, 2012      
     60,240,003 shares issued and outstanding as at April 30, 2011            60,240              60,240
  Additional paid-in capital          896,761            896,761
  Subscriptions Received            23,000                3,000
  Deficit accumulated in the development stage     (1,150,777)       (1,046,294)
       
    Total Stockholders' Equity (Deficit)          (170,776)             (86,293)
       
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $        26,341    $          4,199
 
 

 

 
 

 

DAULTON CAPITAL CORPORATION
 (An Exploration 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,
  2012   2011   2012   2011   2012
                   
 Revenues                  
      Crude Oil Production  $              -    $              -    $              -    $              -    $          17,189
                   
 Costs and Expenses                  
                   
 Mining Exploration                   40,203             40,203
 Salary & Wages                           -               5,000
 Consulting               35,000       178,500            282,664
 Professional Fees       23,823           1,040         58,963         14,890            145,069
 Occupancy Expense            49               2,225           1,737             15,970
 Stock Transfer Fees           853           1,565           1,469           3,727             13,149
  Abandment Loss                          385,000
 Impairment of oil and Gas Lease                          190,000
 Other General Administrative         3,067           5,843           6,826         13,655             50,911
                                     -
    Total Expenses       28,492           8,448       104,483       252,712         1,167,966
                                     -
    Operating Loss    (28,492)        (8,448)     (104,483)     (252,712)       (1,150,777)
                   
                   
 Net Income (Loss)  $ (28,492)    $  (8,448)   $(104,483)   $(252,712)    $ (1,150,777)
                   
 Net Income (Loss) per share,                  
       basic and diluted  $    (0.00)    $    (0.00)    $     0.00)    $     0.00)    
                   
 Weighted average number of shares                
 outstanding, basic and diluted     60,240,003     582,450,000       60,240,003       57,820,540  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DAULTON CAPITAL CORPORATION
 (An Exploration 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,
          2012   2011   2012   2011   2012
                           
 Cash Flows From Operating Activities                
   Net Income (Loss) $ (28,491)   $ (8,448)   $(104,483)   $(252,712)    $ (1,150,777)
   Adjustments to reconcile net loss to                  
     net cash used by operating activities:                
      Non cash issue of stock for services              178,500           178,500
    Change in operating assets and liabilities:                 
     Accounts payable      23,223            39,125                 39,125
       Net Cash provided by (used by)                  
         operating activities     (5,268)      (8,448)     (65,358)     (74,212)         (933,152)
                           
 Cash Flows From Investing activities                
     Purchase mineral property interest           (25,000)               (25,000)
     Purchase of mining leases                       (240,000)
      Abandonment of oil and gas leases                         665,000
       Net Cash (used by) Investing                  
           Activities               -                 -       (25,000)                 -           400,000
                           
 Cash Flows From Financing Activities                
   Proceeds of the sale of Stock                         164,054
   Subscriptions Received         10,000        20,000        76,000           185,000
   Proceeds of loans from officer              30,000               120,492
   Proceeds of loans from stockholders              37,500                 37,500
   Contribution of capital                           27,447
       Net Cash provided by Financing                  
       Activities              -       10,000        87,500        76,000           534,493
                           
 Net Increase (Decrease) in Cash     (5,268)        1,552             1,788              1,341
                           
   Cash at beginning of period        6,609       11,000          4,199        10,764                     -
                           
 Cash at end of period  $    1,341    $ 12,552    $    1,341    $  12,552    $         1,341
                           
                           
 Cash Paid For:                  
         Interest  $          -    $         -    $          -    $          -    $               -
         Income Taxes  $          -    $         -    $          -    $          -    $               -

 

 
 

 

DAULTON CAPITAL CORPORATION    
 (A Development Stage Company)    
 Statement of Stockholders' Equity (Deficit)    
 For the period from Inception, January 8, 2008, to January 31, 2012    
 (Unaudited)    
 
                     Accumulated    
             Sub-    Additional    Deficit During    
     Common Stock    scriptions    Paid-in    Exploration    
     Shares    Amount    Received    Capital    Stage    Total
                         
 Balances at Inception,                       
   January 8, 2008                    -    $      -    $          -    $           -    $              -    $          -
 Common stock issued for cash                    
   on Jan. 14, 2008 at $0.098      28,800,000    28,800          (11,223)           17,577
 Common stock issued for cash                    
   on Feb. 21, 2008 at $0.0977      24,000,000     24,000            22,477          146,477
 Net loss for the period                         (11,594)      (11,594)
                         
   Balances at April 30, 2008        52,800,000    $52,800    $          -    $111,254    $  (11,594)   $152,460
 Common stock issued for purchase                    
   of a working interest in wells at                    
   $0.30 per share Oct.16, 2008    4,800,000     4 ,800             85,200           90,000
                         
 Net loss for the year                        (51,710)     (51,710)
                         
   Balances at April 30, 2009    57,600,000    $57,600    $          -    $196,454    $  (63,304)    $190,750
 Capital contributed Dec. 31, 2010                 12,447           12,447
 Subscriptions Received for                       
   common stock Nov. 2009                      
   to March, 2010              89,000               89,000
 Net loss for the year                          (276,925)       (276,925)
                         
   Balances at April 30, 2010 57,600,000   $57,600    $89,000    $208,901    $(340,229)    $15,272
 Common stock issued for services                     
   September 14, 2010 at $0.21       850,000        850           177,650          178,500
   Shares issued at $0.32 as partial                    
      consideration in acquisition of                    
      mineral lease Nov. 15, 2010       750,000        750           239,250          240,000
   Common stock issued for                      
   subscriptions December 3,2010                    
     at $0.30 per sh.         33,334          33     (10,000)          9,967                    -
    Director contributed his loan to                    
     the Company, Dec.15, 2010                 15,000           15,000
   Subscriptions received for                      
    common stock Dec.22, 2010            76,000               76,000
   Shares issued at $0.19 as partial                    
      consideration in acquisition of                    
      mineral lease Jan. 13, 2011       500,000        500             94,500           95,000
   Common stock issued for                      
   subscriptions March 11, 2011                    
   at $0.30 per sh.       506,669        507   (152,000)       151,493        
                         
   Net loss for the year                     (706,065)   (706,065)
                         
   Balances at April 30, 2011    60,240,003    $60,240    $  3,000    $896,761    $(1,046,294)    $(86,293)
   Subscriptions received  for                       
     common stock May 11, 2011        $  20,000            $  20,000
   Net loss for the nine months                       (104,483)    (104,483)
                         
    Balances at July 31, 2011    60,240,003      60,240          23,000         896,761      (1,150,777)    (170,776)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Daulton Capital Corporation

(An Exploration Stage Company)

Notes to Financial Statements

January 31, 2012

(Unaudited)

 

1.                Basis of Presentation and Nature of Operations

 

These unaudited interim financial statements as of and for the nine months ended January 31, 2012 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, 2011 report on Form 10-K. 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, 2012 are not necessarily indicative of results for the entire year ending April 30, 2012.

 

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

 

Mayberry No. 1. 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, filed bankruptcy under Chapter 11 of the Bankruptcy Code. Payments to the Company for oil sold have been suspended.

 

Glencoe Wells. 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 were not performed.

 

Property Acquisition Costs:

  Unproved
Mayberry No. 1 well $100,000
Glencoe Wells 90,000
  $190,000

 

Impairment of the Mayberry and Glencoe interests was considered under FASB ASC Topic 360. Future cash flows from and beyond probable reserves was considered to be zero. The wells were considered 100% impaired in April, 2010 and written down accordingly.

 

Ballarat and Hunker Mineral Claims. 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 Ballarat Property consisted of 38 mineral claims covering 1900 acres and the Hunker Project consists of 121 mineral claims covering 6,000 acres in known gold producing areas. The option on the Ballarat Property required making staged cash payments and issuing common shares of the Company. The Company incurred $40,203 exploration expenses during the prior year, consisting of soil sampling. The first payments of $25,000 due for each option were paid. The Company defaulted on the second annual combined payment of $125,000, which was due February 15, 2011. On April 29, 2011 the Company signed a letter of termination, releasing its interest in the mineral options.

 

Papua New Guinea Mining Claim. On April 18, 2011 the Company entered into an agreement with South Pacific Connection, a Papua, New Guinea corporation, to purchase an 80% working interest in a mining claim in Papua, New Guinea for $35,000, later reduced to $25,000, and 2,500,000 restricted common shares of the Company. The $25,000 was paid. Stock is to be issued in stages over five years. The agreement requires the Company to make $3,400,000 capital expenditures over five years.

 

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, reliability 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, 2012 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 FASB ACS 740, “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. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

The Company generated a deferred tax credit through net operating loss carry-forward. However, a valuation allowance of 100% has been established. The Company has a Net Operating Loss of approximately $1,150,000 as at January 31, 2012, which can be utilized to offset taxable income for the following 20 years, unless utilized first.

Interest and penalties on tax deficiencies recognized in accordance with ASC accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.

 

Recent Accounting Pronouncements

 

Comprehensive Income — In June 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance on the presentation of comprehensive income. Specifically, the new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. We do not believe our adoption of the new guidance will have an impact on our consolidated financial position, results of operations or cash flows.

 

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, the Company’s management has not determined whether implementation of such standards would be material to its financial statements.

 

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. The Company experienced a loss of $104,483 in the nine months ended January 31, 2012 and $1,150,777 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 mining claims. 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.

 

Exploration Stage Company

 

The Company is considered an exploration-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 $1,150,777. 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 FASB ASC 260, Earnings Per Share, for the period presented. ASC 260 requires presentation of basic earnings per share and diluted earnings per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) is similarly calculated. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be 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. As at January 31, 2012, there were no potentially dilutive securities.

 

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, 2012 and 2011,

 

        2012 2011
Numerator:        
Basic and Diluted net loss per share:  $    (104,483)  $    (252,712)
Net Loss:          
           
Denominator:        
Basic and diluted weight average    
number of shares outstanding:    $60,240,003  $57,820,540
           
Basic and Diluted Net Loss Per share:  $                -  $                -

 

 

 

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. The well 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. 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.

 

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, 2012.

 

4. Income Taxes

 

No provision was made for federal income tax for the nine months ended January 31, 2012, since the Company had net operating loss.

 

Net operating loss carry-forwards may be used to reduce taxable income through the year 2031. The availability of the Company’s net operating loss carry-forwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company’s stock.

 

The net operating loss carry-forward for federal and state income tax purposes is approximately $1,150,000, generating a Federal deferred tax credit of $460,000 as of January 31, 2012. An allowance of $460,000 has been established.

   
 
 

5. Related Party Transactions

 

The Company has a payable to the Company’s chairman of 120,492. The loan carries no interest, is unsecured, due on demand and has no maturity.

 

6. Stockholder Loan

 

The Company received a loan from a stockholder of $37,500 to effect the agreement signed April 18, 2011 for purchase of an interest in a mining claim. The initial terms of the loan pending further negotiations are that it carries no interest, is unsecured, due on demand and has no maturity.

 

7. Capital Structure

On May 11, 2011, $20,000 cash was received for subscriptions of common stock.

 

No stock was issued during the quarter ended January 31, 2012.

 

As at January 31, 2012, the Company was authorized to issue 200,000,000 shares of $0.001 par value common stock, of which 60,240,003 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.

 

8. Commitments and Contingencies

 

There were no commitments or contingencies in the nine months ended January 31, 2012.

 

9. Legal Proceedings

 

There were no 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 Semcrude 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.

 

10. Subsequent Events

 

Events subsequent to January 31, 2012 have been evaluated through March 14, 2012, the date these statements were available to be issued, to determine whether they should be disclosed to keep the financial statements from being misleading. Management found no subsequent events to be disclosed.

 

 
 

 

ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

References in this Quarterly Report on Form 10-Q (this "Quarterly Report") to "we", "us", "our", "Registrant", "Issuer", "Company", "Daulton", mean Daulton Capital Corp., a Nevada Corporation, unless the context otherwise requires.

 

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.  

 

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.

 

 
 

Organizational History

 

We were incorporated in Nevada on January 8, 2008 with the intention of pursuing oil and gas exploration and development opportunities.

 

On February 15, 2008, we filed a Certificate of Amendment to increase our authorized stock into 50,000,000 shares of common stock, $0.001 par value and 5,000,000 shares of preferred stock, $0.001 par value. 

   

On October 17, 2008, we filed a Certificate of Change with the Nevada Secretary of State effecting a four-for-one forward stock split of our common stock and increasing the our authorized capitalization to 200,000,000 shares of common stock.

 

On August 7, 2009, we filed a Certificate of Amendment to affect a four-for-one forward split of our common stock.

 

Operational History

 

We have a 20% working interest (16% net revenue interest) in an oil well located in Creek County, Oklahoma. As of April 30, 2010, the well was shut in and not producing.

 

On July 30, 2008, we 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, we issued 300,000 shares of its restricted common stock to the former owner of the working interest. As of April 30, 2010, the wells were shut in and not producing.

 

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

 

On  April  25,  2009  we signed  an  agreement  to  acquire approximately  90% of the outstanding  shares of Energy Solutions People Inc. in exchange for 7,234,034  shares of our  common stock. Energy Solutions was incorporated in Nevada in September 2007. Shortly after its formation, Energy Solutions acquired the rights to various renewable energy products, the most significant of which are wind turbines and solar powered electrical generators. This agreement was subsequently terminated.

 

On February 22, 2010, we 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, we entered into an option agreement with Shawn Ryan to purchase an undivided interest of mining claims of a property described as “Hunker Project.” Our exploration activities on the Ballarat Property and the Hunker Project were limited only to soil sampling. The Ballarat Property and Hunker Project option agreements, and all amendments thereto, were terminated as of April 29, 2011 through a mutual agreement with Mr. Ryan.

 

On April 18, 2011, we entered into a Purchase Agreement with South Pacific Connection Limited (James Das), to purchase an 80% working interest of a mining claim in Papua New Guinea. In exchange for the Mining Claim, the Company paid $25,000.00 to South Pacific at the execution of the Purchase Agreement. Pursuant to the Purchase Agreement, the Company shall issue a total of 2,500,000 shares restricted common stock in staged payments over the next 5 years. The payments shall be made in increments of 500,000 shares, delivered on September 11 of each year. In addition, the Company shall incur a total of $3,400,000 in total capital expenditures over the next 5 years to retain the working interest of the mining claim. As of the date of this report there has been no exploration activities associated with this mining claim. On September 10, 2011, the Company was issued an extension for the payment of 500,000 shares of common stock and $150,000.00, which was due September 11, 2011. The payment date for the stock and funds has been extended to March 30, 2012.

 

We will need to raise the funds required for excavation from third parties to continue with our exploration activities. We may also attempt to raise needed capital through the private sale of our securities or by borrowing from third parties. If we are able to raise such capital, we intend to spend such capital over the next 12 months with soil and stream sampling, geological mapping and possibly initiating a ground magnetic survey and excavator trenching followed by an evaluation of a possible drill program. However, we may not be successful in raising the capital needed for the aforementioned exploration activities.  

 

Our future plans will be dependent upon the amount of capital we are able to raise. We do not have any commitments or arrangements from any person to provide us with any additional capital.

 

 
 

General Overview of Business

 

As of April 30, 2010, we abandoned all of our oil and gas prospects. We plan to evaluate mining prospects and participate in mining activities on those prospects, which in the opinion of management are favorable. If, through our review, a geographical area indicates geological and economic potential, we may attempt to acquire leases or other interests in the area. We may then attempt to sell portions of its leasehold interests in a prospect to unrelated third parties, thus sharing the risks and rewards of the exploration and development of the prospect with the joint owners. 

  

We may also:

  

  Acquire a working interest in one or more prospects from others and participate with the other working interest owners in mining, or
     
  Purchase producing mining properties.

  

Our activities will primarily be dependent upon available equity and debt financing.

 

Oil and Gas Prospects

 

We have abandoned all of our oil and gas prospects, which included the 20% working interest (16% net revenue interest) in the Creek Well and the 5% working interest (4% net revenue interest) in Pawnee Wells. Impairment of these long-lived assets was considered under FASB ASC Topic 360. Future cash flows from and beyond probable reserves was considered to be zero. The Creek well and Pawnee Wells were considered 100% impaired in April of 2010 and written down accordingly.

 

We previously announced negotiations to possibly acquire oil and gas rights in Papua New Guinea. These negotiations were subsequently terminated and no oil and gas rights were acquired by us in Papua New Guinea.

 

Mining Interests

 

We are currently engaged in the business of exploration of precious metals with a focus on the exploration and development of quartz deposits Papua New Guinea. As of the date of this Quarterly Report, the Company’s mineral interests consist mainly of option agreements on exploration stage properties. We have not established any proven or probable reserves on our mineral property interests.

   

Papua New Guinea

 

On April 18, 2011, the Company and South Pacific Connection Ltd., a company formed under the laws of Papua New Guinea (“South Pacific”) entered into the Purchase Agreement for the Company to purchase an 80% working interest of a mining claim in Papua New Guinea. In exchange for the mining claim, the Company paid $25,000.00 to South Pacific at the execution of the Purchase Agreement. Pursuant to the Purchase Agreement, the Company shall issue a total of 2,500,000 shares restricted common stock in staged payments over the next 5 years. The payments shall be made in increments of 500,000 shares, delivered on September 11 of each year.  For the September 11, 2011 payment, the Company was given an extension to deliver the shares of common stock by December 31, 2011, which was further extended to March 30, 2012. In addition, the Company shall incur a total of $3,400,000 in total capital expenditures over the next 5 years to retain the working interest of the mining claim. The Company’s exploration plans are to conduct stream sediment sampling and geological mapping in conjunction with ridge and spur or grid soil sampling and bulk sampling of stream gravels.

 

The key task of our initial plan is to determine appropriate drill targets within any mineralized zones found and interpretation of findings. Thus far we have done no work on the property.

 

 
 

Ballarat

 

On February 22, 2010, the Company and Shawn Ryan, an individual (“Ryan”), entered into the “Ballarat Option Agreement” that granted the  Company the right to purchase from Ryan an undivided interest in the mining claims on a property described as the “Ballarat Property.” The Ballarat Option Agreement provided the Company with the option to acquire a 100% interest in the Ballarat Property from Ryan by making staged cash payments and issuing a total of 1,250,000 shares of common shares of stock of the Company on or before February 15, 2014.  

 

Pursuant to the Ballarat Option Agreement, Ryan retained a 2% net smelter return interest that requires an advance royalty payment for $30,000 starting August 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 Ryan. The Company’s exploration plans for the Ballarat Property is to establish a soil and ground magnetic survey. The soil-sampling program will be followed up with a portable excavator-trenching program that the Company believes will generate numerous quality drill targets.

 

Pursuant to the Ballarat Option Agreement, the first payment of $25,000 was due to Ryan on or about March 15, 2010. However, the Company and Ryan entered into the “Ballarat Extension Agreement” to extend such payment by 10 days. 

 

On March 31, 2010, the Company entered into an “Amendment to Ballarat Option Agreement” which amended the Ballarat Option Agreement as follows: (a) the Ballarat Property shall consist of 94 Yukon Quartz Mining Claims located in the Dawson Mining District, Yukon Territory, Canada and (b) the claim block shall cover approximately 19 square kilometers and straddle Ballarat Creek.  

   

However, pursuant to a Termination Agreement, the aforementioned Ballarat Option Agreement and the Amendment to the Ballarat Option Agreement have been terminated and are therefore null and void as of April 29, 2011. Pursuant to the Termination Agreement Ryan shall keep the payment of $25,000 and the issuance of 250,000 shares of restricted common stock.

   

Hunker

 

On February 25, 2010, the Company and Ryan entered into the “Hunker Option Agreement” for the Company to acquire from Ryan an undivided interest in the mining claims of a property described as the “Hunker Project.” The Hunker Option Agreement granted the Company the option to earn 100% interest in the Hunker Project from Ryan by making staged cash payments and issuing a total of 1,000,000 shares of common stock of the Company to Ryan on or before February 15, 2014. Ryan shall retain a 2% net smelter return interest that requires an advance royalty payment for $30,000. At the option of the Company, the net smelter return interest of Ryan may be reduced to 1% upon making a $2 million dollar payment to Ryan. The Company has paid Ryan the first payment of $25,000.  

 

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 southeast of Dawson City and now stands at 6,000 acres or 24 square kilometers and straddles Hunker Creek.

 

However, pursuant to a Termination Agreement, the aforementioned Hunker Option Agreement has been terminated and thus is null and void as of April 29, 2011. Pursuant to the Termination Agreement Ryan shall keep the payment of $25,000 and the issuance of 1,000,000 shares of restricted common stock.

 

Results of Operations for the Three Months Ended January 31, 2012

 

During the three month period ended January 31, 2012, the Company incurred an operating loss of $28,492.

 

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. We are presently in the 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 mineral claims.

 

 
 

Net Loss for the Three Month Period Ended January 31, 2012

 

For the three month period ended January 31, 2012, we recorded an operating loss of $28,492, compared to a loss of $8,448 for the comparative three month period of the prior year. The loss consists of: mining and exploration $-0- (2011 - $nil); salary & wages $-0- (2011 - $nil); consulting fees $-0- (2011 - $nil); professional fees $23,823 (2011 - $1,040); occupancy expenses $749 (2011 - $nil); stock transfer fees $853 (2011 - $1,565); abandonment loss $-0- (2011 - $nil); impairment of oil and gas leases $-0- (2011 - $nil); and other general and administrative fees $3,067 (2011 - $5,843).

 

Cumulative Loss to January 31, 2012

 

We have generated $17,189 in revenues from our operations since our incorporation through January 31, 2012. We have incurred a cumulative loss of $1,150,777 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. 

  

Liquidity and Further Capital Resources

 

At January 31, 2012, we had assets of $26,341, consisting of cash and cash equivalents and mineral property interests. Total stockholders’ deficit was $170,776 at January 31, 2012. We are an 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.

 

Off-Balance Sheet Arrangements

 

As of January 31, 2012, the Company did not have any off-balance sheet arrangements.

 

 
 

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

ITEM 4.  Controls and Procedures.

 

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as required by Sarbanes-Oxley (SOX) Section 404.A. The Company's internal control over financial reporting is a process designed under the supervision of its Chief Executive and Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its financial statements for external purposes in accordance with Generally Accepted Accounting Principles.

The Company’s management have 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, the Company’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, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s Principal Executive Officer 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.

 

PART II – OTHER INFORMATION

 

ITEM 1.  Legal Proceedings.

 

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 Semcrude 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.

 

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.

 

None.

 

ITEM 3.  Defaults Upon Senior Securities.

   

None.

   

ITEM 4.  (Removed and Reserved).

 

ITEM 5.  Other Information.

 

None.

 

 

ITEM 6.  Exhibits.

 

Number   Exhibit
     
31.1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32   Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

   

   


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 __, 2012 By: /s/ Terry Fields  
    Terry Fields, President and Principal Financial and  
   

Accounting Officer