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 July 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
-------------------------------------
(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_
Class of Stock No. Shares Outstanding Date
-------------- ---------------------- ----
Common 14,400,000 September 10, 2009
DAULTON CAPITAL CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
July 31 April 30,
2009 2009
---------- ----------
(Unaudited)
Current Assets
Cash and Cash Equivalents $ - $ -
Accounts Receivable - -
Prepaid Rent 750 750
------------ ------------
750 750
------------ ------------
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 $ 190,750 $ 190,750
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities $ - $ -
------------ ------------
Commitments and contingencies (Note 5)
Stockholders' Equity
Preferred Stock, $0.001 par value, 5,000,000
shares authorized; none outstanding as at
July 31, 2009 and April 30,2008.
Common Stock, $0.001 par value, 200,000,000
shares authorized,
14,400,000 shares issued and outstanding as
at July 31, 2009
14,400,000 shares issued and outstanding as
at April 30, 2009 14,400 14,400
Additional paid-in capital 239,654 239,654
Deficit accumulated in the development stage (63,304) (63,304)
------------ ------------
Total Stockholders' Equity 190,750 190,750
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 190,750 $ 190,750
============ ============
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
For the 3 months of Inception,
ended from Jan. 8,
July 31, 2008 through
------------------------ July 31,
2009 2008 2009
------------------------ ------------
Revenues
Crude Oil Production $ - $ 3,358 $ 17,189
----------- ----------- -----------
Costs and Expenses
Consulting - - 9,128
Professional Fees - 18,164 43,469
Occupancy Expense - 2,250 9,750
Stock Transfer Fees - - 5,954
Other General & Administrative - 5,059 21,320
----------- ----------- -----------
Total Expenses - 25,473 80,493
----------- ----------- -----------
Operating Loss - (22,115) (63,304)
----------- ----------- -----------
Net Income (Loss) $ - $ (22,115) $ (63,304)
=========== =========== ===========
Net Income (Loss) per share,
basic and diluted $ - $ (0.002)
Weighted average number of
shares outstanding, basic
and diluted 14,400,000 13,200,000
=========== ===========
The accompanying notes are an integral part of these financial statements
3
DAULTON CAPITAL CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the period
For the 3 months of Inception,
ended from Jan. 8,
July 31, 2008 through
------------------------- July 31,
2009 2008 2009
---------- ---------- -------------
Cash Flows From Operating Activities
Net Income (Loss) $ - $ (22,115) $ (63,304)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Change in operating assets and
liabilities:
Accounts receivable - 5,387 -
Prepaids (750)
----------- ----------- -----------
Net Cash provided by (used by)
operating activities - (16,728) (64,054)
----------- ----------- -----------
Cash Flows From Investing activities
Purchase working interest in wells - (190,000)
Net Cash (used by) Investing
Activities - - (190,000)
----------- ----------- -----------
Cash Flows From Financing Activities
Proceeds from the sale of Stock - 254,054
Common stock paid for oil and gas
working interest
Net Cash provided by Financing
Activities - - 254,054
----------- ----------- -----------
Net Increase (Decrease) in Cash - (16,728) -
Cash at beginning of period - 46,323 -
----------- ----------- -----------
Cash at end of period $ - $ 29,595 $ -
=========== =========== ===========
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
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 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 per share October 16, 2008 300,000 300 89,700 90,000
----------- ----------- ----------- ----------- -----------
Balances before stock split
Oct. 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) -
Net loss, year ended April 30, 2009 (51,710) (51,710)
----------- ----------- ----------- ----------- -----------
Balances at April 30, 2009 14,400,000 $ 14,400 $ 239,654 $ (63,304) $ 190,750
Net income (loss), three months
ended April 30, 2009 - -
----------- ----------- ----------- ----------- -----------
Balances at July 31, 2009 14,400,000 $ 14,400 $ 239,654 $ (63,304) $ 190,750
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements
5
Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
July 31, 2009
(Unaudited)
1. Basis of Presentation and Nature of Operations
The interim financial statements as of and for the three months ended July
31, 2009 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 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 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 three month
period ended July 31, 2009 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.
6
Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
July 31, 2009
(Unaudited)
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.
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 July 31, 2009 approximate their respective fair values, because of the
short-term nature of these instruments. Such instruments consist of cash,
accounts payable and prepaid expenses.
7
Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
July 31, 2009
(Unaudited)
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.
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 no activity in the first quarter of the current fiscal year. The
Company experienced a loss of $51,710 in the recent year ended April 30,
2009 and $63,304 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 and generate oil and
gas revenue. 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
8
Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
July 31, 2009
(Unaudited)
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 $63,304. 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 July
31, 2009.
The following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share computations for the three months
ended July 31, 2009 and 2008, respectively. The weighted average number of
shares outstanding as at July 31, 2008 has been restated to reflected the
4-to-1 forward stock split of October 17, 2008.
Numerator:
----------
Basic and diluted net loss per share: 2009 2008
---- ----
Net Loss $ ( 0) $ (11,594)
Denominator
-----------
Basic and diluted weighted average
number of shares outstanding 14,400,000 13,200,000
Basic and Diluted Net Loss Per Share $ (0.000) $ (0.002)
-------------------------------------
9
Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
July 31, 2009
(Unaudited)
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
years ending April 30, 2009 and 2008 and in the first quarter of 2009 the
company did nor 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.
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 prior fiscal year ended April
30, 2008. Revenue payments were suspended and the wells were shut in. The
10
Daulton Capital Corporation
(A Developmental Stage Company)
Notes to Financial Statements
July 31, 2009
(Unaudited)
final payment was received in May, 2008. There have been no payments
since. No receivables are recorded at July 31, 2009.
4. Capital Structure
On October 17, 2008 the Company effected a four-to-one forward stock
split. There was no effect on stockholders' equity. Par value of $001 per
share was unchanged.
As at July 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 or contingencies as of July 31, 2009.
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
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.
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 September 10, 2009 the well
was shut in and not producing.
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 September 10, 2009, the six wells were shut in
and not producing.
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 September 10, 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 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 Daulton Capital's internal controls over
financial reporting that occurred during the fiscal quarter ended July 31, 2009
that have materially affected, or are reasonably likely to materially affect,
Daulton Capital's internal control over financial reporting.
Terry Fields, 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 6. (a) 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: September 14, 2009 /s/ Terry Fields
------------------------------------
Terry Fields, President and Principal
Financial and Accounting Officer