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, 2009
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 (Commission File No.) (IRS Employer
of incorporation) Identification No.)
39 New Brighton Manor S.E.
Calgary, Alberta, Canada T2Z 4G8
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (888) 387-1403
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N/A
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(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 __X__
-
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_
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Class of Stock No. Shares Outstanding Date
-------------- ---------------------- ----
Common 14,400,000 February 25, 2009
DAULTON CAPITAL CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
January 31, April 30,
2009 2008
------------------ -------------
(Unaudited) (Restated)
Current Assets
Cash and Cash Equivalents $ 269 $ 46,323
Accounts Receivable - 5,387
Prepaid Rent 750 750
1,019 52,460
-------------- -------------
Other Assets
Oil and Gas Working Interest:
Mayberry No. 1 100,000 100,000
Oil and Gas Working Interest:
Glencoe Wells 90,000 -
190,000 100,000
-------------- -------------
TOTAL ASSETS $ 191,019 $ 152,460
============== =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities $ - $ -
-------------- -------------
Commitments and contingencies (Note 5)
Stockholders' Equity
Common Stock, $0.001 par value,
200,000,000 shares authorized,
13,200,000 shares issued and
outstanding as at April 30, 2008,
14,400,000 shares issued and
outstanding as at January 31, 2008 14,400 13,200
Additional paid-in capital 239,654 150,854
Deficit accumulated in the development stage (63,035) (11,594)
Total Stockholders' Equity 191,019 152,460
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 191,019 $ 152,460
============== =============
The accompanying notes are an integral part of these financial statements
2
DAULTON CAPITAL CORPORATION
(A Development Stage Company)
Statement of Operations
- --------------------------------------------------------------------------------
(Unaudited)
For the period
of Inception,
For the three For the nine from Jan. 8,
months ended months ended 2008 through
January 31, January 31, January 31,
2009 2009 2009
------------- ------------ --------------
Revenues
Crude Oil Production $ 7,994 $ 11,352 $ 16,739
------------ ------------ ------------
Costs and Expenses
Consulting 9,128 9,128 9,128
Professional Fees 11,205 31,469 43,469
Occupancy Expense 3,000 7,500 9,750
Stock Transfer Fees 2,810 5,678 5,679
Other General & Administrative 11,620 18,146 20,876
------------ ------------ ------------
Total Expenses 28,635 62,793 79,774
------------ ------------ ------------
Operating Loss (20,641) (51,441) (63,035)
------------ ------------ ------------
Net Income (Loss) $ (20,641) (51,441) $ (63,035)
============ ============ ============
Net Income (Loss) per share,
basic and dilutive $ (0.001) $ (0.004)
Weighted average number of shares
outstanding, basic and diluted 14,400,000 13,665,217
============ ============
The accompanying notes are an integral part of these financial statements
3
DAULTON CAPITAL CORPORATION
(A Development Stage Company)
Statement of Cash Flows
- --------------------------------------------------------------------------------
(Unaudited)
For the period
of Inception,
For the three For the nine from Jan. 8,
months ended months ended 2008 through
January 31, January 31, January 31,
2009 2009 2009
------------- ------------ --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (20,641) $ (51,441) $ (63,035)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Change in operating assets and
liabilities:
Increase (Decrease) in accounts
receivable - 5,387 -
Increase (Decrease) in prepaids (750)
------------- ------------- -------------
Net Cash provided by (used by)
operating activities (20,641) (46,054) (63,785)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of oil and gas working interests (90,000) (190,000)
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Net Cash (used by) Investing Activities - (90,000) (190,000)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of Common Stock - 90,000 254,054
------------- ------------- -------------
Net Cash provided by Financing
Activities - 90,000 254,054
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (20,641) (46,054) 269
CASH AT BEGINNING OF PERIOD 20,910 46,323 -
------------- ------------- -------------
CASH AT END OF PERIOD $ 269 $ 269 $ 269
============= ============= =============
CASH PAID FOR:
Interest $ - $ - $ -
Income Taxes $ - $ - $ -
The accompanying notes are an integral part of these financial statements
4
DAULTON CAPITAL CORPORATION
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
(Unaudited)
Accumulated
Common Stock Additional Deficit During
--------------------- Paid-in Development
Shares Amount Capital Stage Total
------ ------ ---------- -------------- -----
Balances at January 8, 2008, Inception - $ - $ - $ - $ -
Common stock issued for cash on
January 14, 2008 at $0.098 per
share 1,800,000 1,800 15,777 17,577
Common stock issued for cash on
February 21, 2008 at $0.0977 per share 1,500,000 1,500 144,977 146,477
Net loss, period ended April 30, 2008 (11,594) (11,594)
------------ ------------ ------------ ------------ ------------
Balances at April 30, 2008 3,300,000 $ 3,300 $ 160,754 $ (11,594) $ 152,460
Common stock issued for purchase
of a working interest in wells
at $0.30/sh. 300,000 300 89,700 90,000
------------ ------------ ------------ ------------ ------------
Balances before stock split
October 17, 2008 3,600,000 $ 3,600 $ 250,454 $ (11,594) $ 242,460
Forward stock split, four-for-one 10,800,000 10,800 (10,800) 0
Net loss, nine months ended \
January 31, 2009 (51,441) (51,441)
------------ ------------ ------------ ------------ ------------
Balances at January 31, 2009 14,400,000 $ 14,400 $ 239,654 $ (63,035) $ 191,019
============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements
5
Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
January 31, 2009
1. 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 purchaser 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
2. Summary of Significant Accounting Policies
Basis of Presentation
---------------------
The financial statements of the Company have been prepared using the accrual
basis of accounting in accordance with generally accepted accounting
principles in the United States.
6
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.
The financial statements presented include all adjustments which are, in the
opinion of management, 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.
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, 2009 approximate their respective fair values because of the
short-term nature of these instruments. Such instruments consist of cash,
accounts payable and accrued expenses. The fair value of related party
payables is not determinable.
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 carry-forward. 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.
7
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 $51,441 in the nine months ended January 31, 2009 and $63,035 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 $63,035. 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 we 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, 2009.
8
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, 2009. There is no comparable period in 2008.
Numerator:
----------
Basic and diluted net loss per share:
Net Loss $ (51,441)
Denominator
Basic and diluted weighted average
number of shares outstanding 13,665,217
Basic and Diluted Net Loss Per Share $ (0.004)
-------------------------------------
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. During fiscal year
2008- 2009 the company did not record any impairment. 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.
9
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 purchaser, Semcrude Inc., petitioned for Chapter
11 bankruptcy in the prior fiscal year ended April 30, 2008. Revenue payments
were interrupted, however the receivable at the fiscal year end was received
in May, 2008. There have been no payments since. No receivables are recorded
at January 31, 2009 because of the uncertainty as to collection
4. Capital Structure
During the period from inception through October 31, 2008 the Company entered
into the following equity transactions:
January 14, 2008: sold 1,800,000 shares of common stock at $.01 per
share realizing $17,577.
February 21, 2008: sold 1,500,000 shares of common stock at $.098
per share realizing $146,477.
July 30, 2008: issued 300,000 restricted common shares at a price of
$0.30 per share in payment for the working interest in
six oil wells known as the Glencoe wells.
October 16, 2008: pursuant to the provisions of the Nevada Revised
Statutes, the Company's director adopted a resolution
approving a four-for-one forward split of the
Company's common stock and increasing the Company's
authorized capitalization to 200,000,000 shares of
common stock.
As of January 31, 2009 the Company was authorized to issue 200,000,000 shares
of $0.001 par value common stock, of which 14,400,000 shares were issued and
outstanding.
The Company was also authorized to issue 5,000,000 shares of preferred stock,
of which none were issued and outstanding.
5. Commitments and Contingencies
There were no commitments and contingencies in the nine months ended January
31, 2009.
10
6. 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 either as
plaintiffs or defendants, and have no knowledge of any threatened or pending
litigation against them or any of the officers or directors.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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.
Daulton Capital was incorporated on January 8, 2008. In February 2008
Daulton Capital sold 1,500,000 shares of its common stock at a price of $0.10
CDN per share to a group of private investors.
Daulton Capital has a 20% working interest (16% net revenue interest) in a
oil well located in Creek County, Oklahoma. As of January 31, 2009 the well was
producing, net to Daulton Capital's net revenue interest, two barrels of oil per
day.
On July 30, 2008 Daulton Capital 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, Daulton
Capital issued 300,000 shares of its restricted common stock to the former owner
of the working interests. As of January 31, 2009, five of the six wells were
producing approximately 40 barrels (gross) of oil per day and 60 MCF (gross) of
gas per day. The sixth well is being used as a saltwater disposal well.
In June 2008 Semcrude, Inc., the purchaser of the oil produced by Daulton
Capital's wells, filed for bankruptcy under Chapter 11 of the Federal Bankruptcy
Code. As a result, payments to Daulton Capital for oil sold have been
temporarily suspended.
Daulton Capital plans to generate profits by drilling productive oil or
gas wells. However, Daulton Capital will need to raise the funds required to
drill new wells from third parties willing to pay Daulton Capital's share of
drilling and completing the wells. Daulton Capital may also attempt to raise
needed capital through the private sale of its securities or by borrowing from
third parties. Daulton Capital may not be successful in raising the capital
needed to drill oil or gas wells. In addition, any future wells which may be
drilled by Daulton Capital may not be productive of oil or gas. The inability of
Daulton Capital to generate profits may force Daulton Capital to curtail or
cease operations.
Daulton Capital's future plans will be dependent upon the amount of
capital Daulton Capital is able to raise. Daulton Capital does not have any
commitments or arrangements from any person to provide Daulton Capital with any
additional capital.
Contractual Obligations
- -----------------------
As of January 31, 2009 Daulton Capital did not have any material capital
commitments, other than funding its operating losses. It is anticipated that any
capital commitments that may occur will be financed principally through the sale
of shares of Daulton Capital's common stock or other equity securities. However,
there can be no assurance that additional capital resources and financings will
be available to Daulton Capital on a timely basis, or if available, on
acceptable terms.
12
Item 4.T. CONTROLS AND PROCEDURES
Daulton Capital's management is responsible for establishing and
maintaining adequate internal control over financial reporting as required by
Sarbanes-Oxley (SOX) Section 404.A. Daulton Capital'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.
There were no changes in Daulton Capital's internal controls over financial
reporting that occurred during the quarter ended January 31, 2009 that have
affected, or are reasonably likely to materially affect, Daulton Capital's
internal control over financial reporting.
Ryan Beamin, Daulton Capital's President and Principal Financial Officer,
evaluated the effectiveness of Daulton Capital's disclosure controls and
procedures as of the end of the period covered by this report; and in his
opinion Daulton Capital's disclosure controls and procedures were effective.
PART II
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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.
The Company relied upon the exemption provided by Section 4(2) of the
Securities Act of 1933 in connection with the issuance of these shares.
Item 5. Other Information
On October 16, 2008, and pursuant to the provisions the Nevada Revised
Statutes, the Company's director adopted a resolution approving a four-for-one
forward split of the Company's common stock and increasing the Company's
authorized capitalization to 200,000,000 shares of common stock.
Item 6. Exhibits
Number Exhibit
- ------ -------
31 Rule 13a-14(a) Certifications
32 Section 1350 Certifications
13
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: February 21, 2009 /s/ Ryan Beamin
------------------------------------
Ryan Beamin, President and Principal
Financial and Accounting Officer