U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Mark One
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 28, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission File No. 333-1557893
Deer Bay Resources Inc.
(Name of small business issuer in its charter)
Nevada n/a
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
133 W. Broadway Street, Suite 678
Vancouver, British Columbia
Canada V6H 4C1
(Address of principal executive offices)
(604) 721-2001
(Issuer's telephone number)
Securities registered pursuant to Name of each exchange
Section 12(b) of the Act: on which registered:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001
(Title of Class)
Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]
Check whether the issuer (i) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (ii) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State issuers revenues for its most recent fiscal year $ -0-.
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. May 28, 2009: n/a. .
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS
N/A
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after
the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding as of June 12, 2009
----- -------------------------------
Common Stock, $0.0001 130,110,000
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-K (e.g., Part I, Part II, etc.) into which
the document is incorporated: (i) any annual report to security holders; (ii)
any proxy or information statement; and (iii) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 (the "Securities Act"). The
listed documents should be clearly described for identification purposes (e.g.
annual reports to security holders for fiscal year ended December 24, 1990).
N/A
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
DEER BAY RESOURCES INC.
Form 10-K
INDEX
Item 1. Business 4
Item 1A. Risk Factors 8
Item 1B. Unresolved Staff Comments 18
Item 2. Properties 18
Item 3. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 18
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation 21
Item 8. Financial Statements and Supplemental Data 26
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 35
Item 9A. Controls and Procedures 35
Item 9B Other Information 36
Item 10. Directors, Executive Officers and Corporate Governance 36
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 39
Item 13. Certain Relationships and Related Transactions and Director
Independence 40
Item 14. Principal Accountant Fees and Services 40
Item 15. Exhibits and Financial Statement Schedules 41
2
Statements made in this Form 10-K that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use of terms such as "may," "will," "expect," "believe," "anticipate,"
"estimate," "approximate" or "continue," or the negative thereof. We intend that
such forward-looking statements be subject to the safe harbors for such
statements. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could cause actual
results and events to differ materially from historical results of operations
and events and those presently anticipated or projected. We disclaim any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events.
AVAILABLE INFORMATION
Deer Bay Resources Inc. files annual, quarterly, current reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "Commission"). You may read and copy documents referred to in this Annual
Report on Form 10-K that have been filed with the Commission at the Commission's
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. You can also obtain copies of our Commission
filings by going to the Commission's website at http://www.sec.gov
GLOSSARY
ADIT - A horizontal excavation made into a hill that is usually driven for the
purpose of intersecting or mining an ore body.
ARKOSE - a feldspar-rich sandstone.
BRECCIA - A rock in which angular fragments are surrounded by a mass of
fine-grained minerals.
CHLORITIZATION - The conversion of or replacement by chlorite.
DIAMOND DRILLING - a type of rotary drilling in which diamond bits are used as
the rock-cutting tool to produce a recoverable drill core sample of rock for
observation and analysis.
ELECTRO-MAGNETIC ("EM") SURVEY - A geophysical survey method which measures the
electromagnetic properties of rocks.
FAULT - a fracture or break in rock along which there has been movement.
FLUVIAL: Of or pertaining to a river or rivers
GAMMA LOG - A type of survey that records the amount of radiation in the
surrounding rock.
GEOPHYSICAL SURVEY - A scientific method of prospecting that measures the
physical properties of rock formations. Common properties investigated include
magnetism, specific gravity, electrical conductivity and radioactivity.
3
GRANITE - any holocrystalline, quartz-bearing plutonic rock.
HEMATITE - An oxide of iron, and one of iron's most common ore minerals.
IGNIMBRITE - The rock formed by the widespread deposition and consolidation of
ash flows.
LENSE - A body of ore that is thick in the middle and tapers towards the ends.
NATIONAL INSTRUMENT 43-101 (NI 43-101) - A rule developed by the Canadian
Securities Administrators (CSA) and administered by the provincial securities
commissions in Canada that governs how issuers disclose scientific and technical
information about their mineral projects to the public. It covers oral
statements as well as written documents and websites. It requires that all
disclosure be based on advice by a "qualified person" and in some circumstances
that the person be independent of the issuer and the property. A qualified
person (QP) as defined in NI 43-101 as an individual who: (i) is an engineer or
geoscientist with at least five years of experience in mineral exploration, mine
development or operation or mineral project assessment, or any combination of
these; (ii) has experience relevant to the subject matter of the mineral project
and the technical report; and (iii) is a member in good standing of a
professional association.
PYROCLASTIC - Produced by explosive or aerial ejection of ash, fragments, and
glassy material from a volcanic vent. Applied to the rocks and rock layers as
well as to the textures so formed.
SANDSTONE - A medium-grained sedimentary rock composed of abundant rounded or
angular fragments of sand size set in a fine-grained matrix and more or less
firmly united by a cementing material
SYNCLINE - A down-arching fold in bedded rocks
TUFF - A general term for all consolidated pyroclastic rocks.
PART I
ITEM 1. BUSINESS
BUSINESS DEVELOPMENT
Deer Bay Resources Inc. was incorporated under the laws of the State of Nevada
on August 25, 2004 under the name "Deer Bay Resources Inc.". Since inception, we
have been engaged in the business of acquisition and exploration of mineral
properties in North American. As of the date of this Annual Report, our main
focus is the identification, acquisition and exploration of mineral properties,
which has resulted in the acquisition of our interest in the properties
discussed below. We are an exploration stage company and there is no assurance
that a commercially viable mineral deposit exists on any of our properties, and
that further exploration will be required before a final evaluation as to the
economic and legal feasibility is determined.
On November 28, 2008, we filed a registration statement on Form S-1 (the
"Registration Statement") with the Securities and Exchange Commission. The
Registration Statement went effective on December 11, 2008. As of the date of
this Annual Report, we intend to file the appropriate documentation to commence
trading our shares of common stock on the Over-the-Counter Bulletin Board.
4
Please note that throughout this Annual Report, and unless otherwise noted, the
words "we," "our," "us," the "Company," or "Deer Bay Resources." refers to Deer
Bay Resources Inc.
TRANSFER AGENT
Our transfer agent is Island Stock Transfer, 100 Second Avenue S, Suite 104N St.
Petersburg, Fl 33701.
CURRENT BUSINESS OPERATIONS
Since inception, we were an exploration stage company engaged in the acquisition
and exploration of mineral properties. We are considered an exploration or
exploratory stage company because we are involved in the examination and
investigation of land that we believe may contain minerals for the purpose of
discovering the presence of such minerals, if any, and its extent. There is no
assurance that commercially viable minerals exist on the property underlying our
British Columbia Claim, and a great deal of further exploration will be required
before a final evaluation as to the economic and legal feasibility for our
future exploration is determined. To date, we have not discovered an
economically viable reserve on the property underlying our interests, and there
is no assurance that we will discover one.
On April 26, 2005, we entered into a mineral property purchase agreement to
acquire a 100% interest in a mineral claim located in the Scadding Township,
Sudbury Mining Division, Ontario, Canada for total consideration of $7,500. This
claim has expired.
MINERAL PROPERTIES
BRITISH COLUMBIA CLAIM
On March 18, 2008, we entered into a mineral property purchase agreement with
Laurence Stephenson (the "Stephenson Agreement") to acquire a 100% interest in a
mineral claim known as the Emmy Claim located in the Emory Creek area of the New
Westminster Mining Division, British Columbia, Canada (the "British Columbia
Claim"). As of the date of this Annual Report, the British Columbia Claim is in
good standing.
During fiscal year ended February 28, 2009, we paid $5,000 to a geologist for
analysis of the property underlying our British Columbia Claim. We obtained a
geological report on the property underlying our British Columbia Claim. The
geology report dated June 5, 2008 recommended that a Phase I program of
geological mapping, sampling and prospecting be undertaken to further define
areas of potential interest. The first priority should be a comprehensive review
of reports and maps pertaining to all past exploration work, including surface
surveys, drilling, trenching and underground exploration followed by a field
examination of the subject area. The review should include preparation of
compilations of all available maps and sections pertaining to the property
adjusted to common scales to permit accurate comparisons of data from different
projects. The geophysical data, in particular the chargeability surveys
previously carried out, should be professionally re-evaluated and an effort
should be made to re-locate the survey grids. Their positions along with those
of all known mineral occurrences, trenches, drill holes, adits and geographical
features should be established with the aid of GPS instruments. Completion of
this phase is expected to identify gaps in data and areas where additional
effort is needed and to permit design of an appropriate program of additional
work.
5
The nature and extent of any follow-up work will be contingent on the results of
the review but it is recommended that provision be made for a preliminary
program of geological mapping, fill-in soil sampling and possibly trenching
particularly in the areas of the chargeability anomalies. Consideration should
be given to the application of mobile metal ion geochemistry as an approach to
overcoming apparent difficulties with heavy overburden in parts of the property.
An estimate of the cost of the proposed initial review and field examination is
$10,000 along with an additional $25,000 of further geological investigation in
order to complete Phase II. Provision of an additional budget of $50,000 is
recommended for the contingent exploration work that would be required to
complete the follow-up surveys.
PROPERTY DESCRIPTION
The property consists of one mineral claim representing 320 units listed in the
table below:
Claim Number and Name Area (in hectares) Expiry Date
--------------------- ----------------- -----------
#574831 Emmy 418 January 25, 2009
The British Columbia Claim consists of one mineral claim representing 320 units
listed in the table below: The Pacific Nickel Mine located in Southwestern BC
near Hope was a very significant producer of copper and nickel from an
ultramafic intrusive geologic environment. As one of the largest Canadian
sources of these metals outside of Sudbury, Ontario and Thompson, Manitoba, the
lack of exploration in this area makes it a unique underdeveloped mineral belt
that requires a concerted exploration program that should include geological
mapping; silt, soil and rock sampling, thin section analysis, and airborne
geophysics followed by diamond drilling.
The Emory Creek Claim is located five kilometers north of the mine area and
approximately eleven kilometers north of Hope B.C. on Map Sheet M092H053. There
is tremendous similarity and coincident features in the rock types and
geophysical imprint between the geology of the Pacific Nickel Mine area and the
ultramafic belt extending to the northwest and south west from it. It is evident
from the public and private record that this belt has not been subjected to
detailed recent exploration until now with numerous exploration companies
initiating large scale programs. Research into the mine area has provided some
excellent exploration features that should be looked for on the unexplored area.
EXPLORATION PROGRAM
We will engage a geologist to provide a further analysis of the British Columbia
Claim and potential for minerals. Our initial program should subsequently be to
prospect the property locating all signs of unreported previous work and record
the results by global positioning system (GPS) coordinates. After all previous
work areas have been accurately located, a geologist can rapidly produce a
detailed geological map of the British Columbia Claim delineating the favorable
areas. Samples should be carefully collected from all exposure of the formation
and analyses performed.
The requirement to raise further funding for exploration beyond that obtained
for the next six month period continues to depend on the outcome of geological
and engineering testing occurring over this interval. If results provide the
basis to continue development and geological studies indicate high probabilities
of sufficient production quantities, we will attempt to raise capital to further
6
our mining program, build production infrastructure, and raise additional
capital for further land acquisitions. This includes the following activity:
* Review all available information and studies.
* Digitize all available factual information.
* Complete an NI 43-101 Compliant Report with a qualified geologist
familiar with mineralization.
* Determine feasibility and amenability of extracting the minerals via
an ISL operation.
* Create investor communications materials, corporate identity.
* Raise funding for mineral development.
* Target further leases for exploration potential and obtain further
funding to acquire new development targets.
COMPETITION
We operate in a highly competitive industry, competing with other mining and
exploration companies, and institutional and individual investors, which are
actively seeking mineral based exploration properties throughout the world
together with the equipment, labour and materials required to exploit such
properties. Many of our competitors have financial resources, staff and
facilities substantially greater than ours. The principal area of competition is
encountered in the financial ability to cost effectively acquire prime mineral
exploration prospects and then exploit such prospects. Competition for the
acquisition of mineral exploration properties is intense, with many properties
available in a competitive bidding process in which we may lack technological
information or expertise available to other bidders. Therefore, we may not be
successful in acquiring and developing profitable properties in the face of this
competition. No assurance can be given that a sufficient number of suitable
mineral exploration properties will be available for acquisition and
development.
MINERALS EXPLORATION REGULATION
Our minerals exploration activities are, or will be, subject to extensive
foreign laws and regulations governing prospecting, development, production,
exports, taxes, labor standards, occupational health, waste disposal, protection
and remediation of the environment, protection of endangered and protected
species, mine safety, toxic substances and other matters. Minerals exploration
is also subject to risks and liabilities associated with pollution of the
environment and disposal of waste products occurring as a result of mineral
exploration and production. Compliance with these laws and regulations may
impose substantial costs on us and will subject us to significant potential
liabilities. Changes in these regulations could require us to expend significant
resources to comply with new laws or regulations or changes to current
requirements and could have a material adverse effect on our business
operations.
Exploration and production activities are subject to certain environmental
regulations which may prevent or delay the commencement or continuance of our
operations. In general, our exploration and production activities are subject to
certain foreign regulations, and may be subject to Canadian or federal, state
and local laws and regulations, relating to environmental quality and pollution
control. Such laws and regulations increase the costs of these activities and
may prevent or delay the commencement or continuance of a given operation.
Compliance with these laws and regulations does not appear to have a future
material effect on our operations or financial condition to date. Specifically,
we may be subject to legislation regarding emissions into the environment, water
discharges and storage and disposition of hazardous wastes. However, such laws
7
and regulations, whether foreign or local, are frequently changed and we are
unable to predict the ultimate cost of compliance. Generally, environmental
requirements do not appear to affect us any differently or to any greater or
lesser extent than other companies in the industry and our current operations
have not expanded to a point where either compliance or cost of compliance with
environmental regulation is a significant issue for us. Costs have not been
incurred to date with respect to compliance with environmental laws but such
costs may be expected to increase with an increase in scale and scope of
exploration.
Minerals exploration operations are subject to comprehensive regulation which
may cause substantial delays or require capital outlays in excess of those
anticipated causing an adverse effect on our business operations. Minerals
exploration operations are subject to foreign, federal, state, and local laws
relating to the protection of the environment, including laws regulating removal
of natural resources from the ground and the discharge of materials into the
environment. Minerals exploration operations are also subject to federal, state,
and local laws and regulations which seek to maintain health and safety
standards by regulating the design and use of drilling methods and equipment.
Various permits from government bodies are required for drilling operations to
be conducted; no assurance can be given that such permits will be received.
Environmental standards imposed by federal, state, or local authorities may be
changed and any such changes may have material adverse effects on our
activities. Moreover, compliance with such laws may cause substantial delays or
require capital outlays in excess of those anticipated, thus causing an adverse
effect on us. Additionally, we may be subject to liability for pollution or
other environmental damages which we may elect not to insure against due to
prohibitive premium costs and other reasons. As of the date of this Annual
Report, we have not been required to spend any material amount on compliance
with environmental regulations. However, we may be required to do so in future
and this may affect our ability to expand or maintain our operations.
RESEARCH AND DEVELOPMENT ACTIVITIES
No research and development expenditures have been incurred, either on our
account or sponsored by customers, during the past three years.
EMPLOYEES
We do not employ any persons on a full-time or on a part-time basis. Garry Wong
is our President and Chief Executive Officer and Chief Financial Officer. These
individuals are primarily responsible for all our day-to-day operations. Other
services are provided by outsourcing, consultant, and special purpose contracts.
ITEM 1A. RISK FACTORS
An investment in our common stock involves a number of very significant risks.
You should carefully consider the following risks and uncertainties in addition
to other information in evaluating our company and its business before
purchasing shares of our common stock. Our business, operating results and
financial condition could be seriously harmed due to any of the following risks.
The risks described below are all of the material risks that we are currently
aware of that are facing our company. Additional risks not presently known to us
may also impair our business operations. You could lose all or part of your
investment due to any of these risks.
8
RISKS RELATED TO OUR BUSINESS
WE WILL NEED TO RAISE ADDITIONAL FINANCING TO COMPLETE FURTHER EXPLORATION.
We will require significant additional financing in order to continue our
exploration activities and our assessment of the commercial viability of our
mineral property. Furthermore, if the costs of our planned exploration programs
are greater than anticipated, we may have to seek additional funds through
public or private share offerings or arrangements with corporate partners. There
can be no assurance that we will be successful in our efforts to raise these
require funds, or on terms satisfactory to us. The continued exploration of
current and future mineral properties and the development of our business will
depend upon our ability to establish the commercial viability of our mineral
properties and to ultimately develop cash flow from operations and reach
profitable operations. We currently are in the exploration stage and we have no
revenue from operations and we are experiencing significant negative cash flow.
Accordingly, the only other sources of funds presently available to us are
through the sale of equity and advances from related parties. We presently
believe that debt financing will not be an alternative to us as our property is
in the exploration stage. Alternatively, we may finance our business by offering
an interest in any of our future mineral properties to be earned by another
party or parties carrying out further exploration and development thereof or to
obtain project or operating financing from financial institutions, neither of
which is presently intended. If we are unable to obtain this additional
financing, we will not be able to continue our exploration activities and our
assessment of the commercial viability of our mineral properties. Further, if we
are able to establish that development of our mineral properties is commercially
viable, our inability to raise additional financing at this stage would result
in our inability to place our mineral properties into production and recover our
investment. We may not discover commercially exploitable quantities of minerals
on our properties that would enable us to enter into commercial production, and
achieve revenues and recover the money we spend on exploration.
Our properties do not contain reserves in accordance with the definitions
adopted by the Securities and Exchange Commission, and there is no assurance
that any exploration programs that we out will establish reserves. Our mineral
properties are in the exploration stage as opposed to the development stage and
have no known body of economic mineralization. The known mineralization at these
projects has not yet been determined, and may never be determined to be
economic. We plan to conduct further exploration activities on our mineral
property, which future exploration may include the completion of feasibility
studies necessary to evaluate whether commercial mineable minerals exist on our
property. There is a substantial risk that these exploration activities will not
result in discoveries of commercially recoverable quantities of minerals. Any
determination that our property contains commercially recoverable quantities of
minerals may not be reached until such time that final comprehensive feasibility
studies have been concluded that establish that a potential mine is likely to be
economical. There is a substantial risk that any preliminary or final
feasibility studies carried out by us will not result in a positive
determination that our mineral property can be commercially developed.
OUR EXPLORATION ACTIVITIES ON OUR MINERAL PROPERTY MAY NOT BE COMMERCIALLY
SUCCESSFUL, WHICH COULD LEAD US TO ABANDON OUR PLANS TO DEVELOP THE
PROPERTY AND OUR INVESTMENTS IN EXPLORATION.
Our long-term success depends on our ability to establish commercially
recoverable quantities of minerals on our properties that can then be developed
into commercially viable mining operations. Mineral exploration is highly
speculative in nature, involves many risks and is frequently non-productive.
These risks include unusual or unexpected geologic formations, and the inability
9
to obtain suitable or adequate machinery, equipment or labor. The success of
mineral exploration is determined in part by the following factors:
* identification of potential mineralization based on superficial
analysis;
* availability of government-granted exploration permits;
* the quality of management and geological and technical expertise; and
* the capital available for exploration.
Substantial expenditures are required to establish proven and probable reserves
through drilling and analysis, to develop processes to extract the mineral, and
to develop the mining and processing facilities and infrastructure at any chosen
site. Whether a mineral deposit will be commercially viable depends on a number
of factors, which include, without limitation, the particular attributes of the
deposit, such as size, grade and proximity to infrastructure; mineral prices,
which fluctuate widely; and government regulations, including, without
limitation, regulations relating to prices, taxes, royalties, land tenure, land
use, importing and exporting of minerals and environmental protection. We may
invest significant capital and resources in exploration activities and abandon
such investments if it is unable to identify commercially exploitable mineral
reserves. The decision to abandon a project may reduce the trading price of our
common stock and impair our ability to raise future financing. We cannot provide
any assurance to investors that we will discover or acquire any mineralized
minerals in sufficient quantities on our property to justify commercial
operations. Further, we will not be able to recover the funds that we spend on
exploration if we are not able to establish commercially recoverable quantities
of minerals on our property.
CERTAIN MINERAL PRICES MAY NOT SUPPORT CORPORATE PROFIT.
Certain mineral prices have been highly volatile, and are affected by numerous
international economic and political factors which we have no control. The price
of certain minerals is affected by numerous factors beyond our control,
including the demand, increased supplies from both existing and new mines, sales
of the mineral from existing government stockpiles, and political and economic
conditions. Our long-term success is highly dependent upon the price of certain
minerals, as the economic feasibility of any ore body discovered on our property
would in large part be determined by the prevailing market price of such
mineral. If a profitable market does not exist, we could have to cease
operations.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.
In considering whether to invest in our common stock, you should consider that
our inception was August 25, 2004 and, as a result, there is only limited
historical financial and operating information available on which to base your
evaluation of our performance. In addition, we have only recently acquired or
will acquire our primary mineral exploration prospect located in British
Columbia, Canada and elsewhere with limited experience in early stage
exploration efforts.
WE HAVE A HISTORY OF OPERATING LOSSES AND THERE CAN BE NO ASSURANCES WE
WILL BE PROFITABLE IN THE FUTURE.
We have a history of operating losses, expect to continue to incur losses, and
may never be profitable, and we must be considered to be in the exploration
stage. Further, we have been dependent on sales of our equity securities and
10
debt financing to meet our cash requirements. We have incurred losses totaling
approximately $76,763 from August 25, 2004 (inception) to February 28, 2009. As
of February 29, 2009, we had an accumulated deficit of $76,763 and had incurred
losses of $46,687 during fiscal year ended February 29, 2009. Further, we do not
expect positive cash flow from operations in the near term. There is no
assurance that actual cash requirements will not exceed our estimates. In
particular, additional capital may be required in the event that: (i) the costs
to acquire additional mineral exploration claims are more than we currently
anticipate; (ii) exploration and or future potential mining costs for additional
claims increase beyond our expectations; or (iii) we encounter greater costs
associated with general and administrative expenses or offering costs.
FUTURE PARTICIPATION IN AN INCREASED NUMBER OF MINERAL EXPLORATION
PROSPECTS WILL REQUIRE SUBSTANTIAL CAPITAL EXPENDITURES.
The uncertainty and factors described throughout this section may impede our
ability to economically discover, acquire, develop and/or exploit mineral
prospects. As a result, we may not be able to achieve or sustain profitability
or positive cash flows from operating activities in the future.
The financial statements for the fiscal years ended February 28, 2009 and
February 29, 2008 have been prepared "assuming that the Company will continue as
a going concern," which contemplates that we will realize our assets and satisfy
our liabilities and commitments in the ordinary course of business. Our ability
to continue as a going concern is dependent on raising additional capital to
fund our operations and ultimately on generating future profitable operations.
There can be no assurance that we will be able to raise sufficient additional
capital or eventually have positive cash flow from operations to address all of
our cash flow needs. If we are not able to find alternative sources of cash or
generate positive cash flow from operations, our business and shareholders will
be materially and adversely affected. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation - Going Concern."
WE WILL REQUIRE ADDITIONAL FUNDING IN THE FUTURE.
Based upon our historical losses from operations, we will require additional
funding in the future. If we cannot obtain capital through financings or
otherwise, our ability to execute our exploration programs will be greatly
limited. The terms and provisions of any prospective agreements and our current
plans require us to make substantial capital expenditures for the exploration of
our mineral exploration property. Historically, we have funded our operations
through the issuance of equity and short-term debt financing arrangements. We
may not be able to obtain additional financing on favorable terms, if at all.
Our future cash flows and the availability of financing will be subject to a
number of variables, including potential production and the market prices of
certain minerals. Further, debt financing could lead to a diversion of cash flow
to satisfy debt-servicing obligations and create restrictions on business
operations. If we are unable to raise additional funds, it would have a material
adverse effect upon our operations.
AS PART OF OUR GROWTH STRATEGY, WE INTEND TO ACQUIRE ADDITIONAL MINERAL
EXPLORATION PROPERTIES.
Such acquisitions may pose substantial risks to our business, financial
condition, and results of operations. In pursuing acquisitions, we will compete
with other companies, many of which have greater financial and other resources
to acquire attractive properties. Even if we are successful in acquiring
11
additional properties, some of the properties may not produce positive results
of exploration, or we may not complete exploration of such prospects within
specified time periods may cause the forfeiture of the lease in that prospect.
There can be no assurance that we will be able to successfully integrate
acquired properties, which could result in substantial costs and delays or other
operational, technical, or financial problems. Further, acquisitions could
disrupt ongoing business operations. If any of these events occur, it would have
a material adverse effect upon our operations and results from operations.
WE ARE RELATIVELY A NEW ENTRANT INTO THE MINERAL EXPLORATION INDUSTRY
WITHOUT PROFITABLE OPERATING HISTORY.
Since inception, our activities have been limited to organizational efforts and
obtaining working capital. It has only been since 2007 that our business
operations and focus is on acquiring and developing a very limited number of
properties. As a result, there is limited information regarding production or
revenue generation. As a result, our future revenues may be limited. The
business of mineral acquisition and exploration is subject to many risks and if
minerals are found in economic production quantities, the potential
profitability of future possible mining ventures depends upon factors beyond our
control. The potential profitability of mining mineral properties if economic
quantities of minerals are found is dependent upon many factors and risks beyond
our control, including, but not limited to: (i) unanticipated ground and water
conditions and adverse claims to water rights; (ii) geological problems; (iii)
metallurgical and other processing problems; (iv) the occurrence of unusual
weather or operating conditions and other force majeure events; (v) lower than
expected grades of the mineral; (vi) accidents; (vii) delays in the receipt of
or failure to receive necessary government permits; (viii) delays in
transportation; (ix) labor disputes; (x) government permit restrictions and
regulation restrictions; (xi) unavailability of materials and equipment; and
(xii) the failure of equipment or processes to operate in accordance with
specifications or expectations.
THE RISKS ASSOCIATED WITH EXPLORATION AND, IF APPLICABLE, MINING COULD
CAUSE PERSONAL INJURY OR DEATH, ENVIRONMENTAL DAMAGE, DELAYS IN MINING,
MONETARY LOSSES AND POSSIBLE LEGAL LIABILITY.
We are not currently engaged in mining operations because we are in the
exploration phase and have not yet any proved mineral reserves. We do not
presently carry property and liability insurance. Cost effective insurance
contains exclusions and limitations on coverage and may be unavailable in some
circumstances.
THE MINERAL EXPLORATION AND MINING INDUSTRY IS HIGHLY COMPETITIVE AND THERE
IS NO ASSURANCE THAT WE WILL BE SUCCESSFUL.
The mineral exploration and mining industry is intensely competitive, and we
compete with other companies that have greater resources. Many of these
companies not only explore for and produce certain minerals, but also market
certain minerals and other products on a regional, national or worldwide basis.
These companies may be able to pay more for productive mineral properties and
exploratory prospects or define, evaluate, bid for and purchase a greater number
of properties and prospects than our financial or human resources permit. In
addition, these companies may have a greater ability to continue exploration
activities during periods of low mineral market prices. Our larger competitors
may be able to absorb the burden of present and future foreign, federal, state,
local and other laws and regulations more easily than we can, which would
adversely affect our competitive position. Our ability to acquire additional
12
properties and to discover productive prospects in the future will be dependent
upon our ability to evaluate and select suitable properties and to consummate
transactions in a highly competitive environment. In addition, because we have
fewer financial and human resources than many companies in our industry, we may
be at a disadvantage in bidding for exploratory prospects and producing mineral
properties.
THE MARKETABILITY OF CERTAIN MINERALS WILL BE AFFECTED BY NUMEROUS FACTORS
BEYOND OUR CONTROL WHICH MAY RESULT IN US NOT RECEIVING AN ADEQUATE RETURN
ON INVESTED CAPITAL TO BE PROFITABLE OR VIABLE.
The marketability of certain minerals which may be acquired or discovered by us
will be affected by numerous factors beyond our control. These factors include
macroeconomic factors, market fluctuations in commodity pricing and demand, the
proximity and capacity of natural resource markets and processing equipment,
governmental regulations, land tenure, land use, regulation concerning the
importing and exporting of certain minerals and environmental protection
regulations. The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may result in us not receiving an adequate
return on invested capital to be profitable or viable.
MINERAL MINING OPERATIONS ARE SUBJECT TO COMPREHENSIVE REGULATION, WHICH
MAY CAUSE SUBSTANTIAL DELAYS OR REQUIRE CAPITAL OUTLAYS IN EXCESS OF THOSE
ANTICIPATED, CAUSING AN ADVERSE EFFECT ON OUR BUSINESS OPERATIONS.
If economic quantities of certain minerals are found by us in sufficient
quantities to warrant mining operations, such mining operations are subject to
foreign, federal, state, and local laws relating to the protection of the
environment, including laws regulating removal of natural resources from the
ground and the discharge of materials into the environment. Mineral mining
operations are also subject to foreign, federal, state, and local laws and
regulations which seek to maintain health and safety standards by regulating the
design and use of mining methods and equipment. Various permits from government
bodies are required for mining operations to be conducted; no assurance can be
given that such permits will be received. Environmental standards imposed by
federal, provincial, or local authorities may be changed and any such changes
may have material adverse effects on our activities. Moreover, compliance with
such laws may cause substantial delays or require capital outlays in excess of
those anticipated, thus resulting in an adverse effect on us. Additionally, we
may be subject to liability for pollution or other environmental damages which
we may elect not to insure against due to prohibitive premium costs and other
reasons. To date we have not been required to spend material amounts on
compliance with environmental regulations. However, we may be required to do so
in future and this may affect our ability to expand or maintain our operations.
MINERAL EXPLORATION AND MINING ACTIVITIES ARE SUBJECT TO CERTAIN
ENVIRONMENTAL REGULATIONS, WHICH MAY PREVENT OR DELAY THE COMMENCEMENT OR
CONTINUANCE OF OUR OPERATIONS.
Mineral exploration and future potential mining operations are or will be
subject to stringent federal, state, provincial, and local laws and regulations
relating to improving or maintaining environmental quality. Our global
operations are also subject to many environmental protection laws. Environmental
laws often require parties to pay for remedial action or to pay damages
regardless of fault. Environmental laws also often impose liability with respect
to divested or terminated operations, even if the operations were terminated or
divested of many years ago.
13
Future potential mineral mining operations and current exploration activities
are or will be subject to extensive laws and regulations governing prospecting,
development, production, exports, taxes, labor standards, occupational health,
waste disposal, protection and remediation of the environment, protection of
endangered and protected species, mine safety, toxic substances and other
matters. Mineral mining is also subject to risks and liabilities associated with
pollution of the environment and disposal of waste products occurring as a
result of mineral exploration and production. Compliance with these laws and
regulations will impose substantial costs on us and will subject us to
significant potential liabilities.
IF THERE IS A DEFECT WITH RESPECT TO TITLE OF OUR MINERAL CLAIM, OUR
BUSINESS MAY FAIL.
We own certain mineral claims in British Columbia, Canada. The mining claim
located in Ontario, Canada expired. Although we believe that we have taken all
appropriate steps to determine that we have title to these claims, there is no
guarantee that there are no defects with respect to title of the mineral claims.
The property may be subject to prior unregistered agreements or transfers or
native land claims, and title may be affected by undetected defects. If we do
not have clear title to our mineral claims, our business may fail and you may
lose your entire investment in our common stock.
IF WE ARE UNABLE TO MAINTAIN OUR MINERAL CLAIMS, THEN OUR BUSINESS WILL
FAIL.
We own mineral claims in British Columbia, Canada. British Columbia's Mineral
Tenure Act requires that a holder of title to mineral claims must spend at least
CDN$0.40 per hectare per year (in the form of expenditures or payment of a fee
in lieu thereof) in order to keep claims in good standing. Our mineral claims
cover a total area of approximately 418 hectares. Thus, the annual cost of
compliance with the Mineral Tenure Act with respect to our mineral claims is
currently approximately CDN $167 per year. The claims are in good standing with
the Province of British Columbia. As such, exploration work with a minimum value
of approximately CDN $167 (or payment of a fee in lieu thereof) is required
before October 31 of each year in order to maintain the claims in good standing
for an additional year. If we fail to meet these requirements on a timely basis,
our mineral claims will lapse. Accordingly, you could lose all or part of your
investment in our common stock.
COSTS ASSOCIATED WITH ENVIRONMENTAL LIABILITIES AND COMPLIANCE MAY INCREASE
WITH AN INCREASE IN FUTURE SCALE AND SCOPE OF OPERATIONS.
We believe that our operations currently comply, in all material respects, with
all applicable environmental regulations. However, we are not fully insured at
the current date against possible environmental risks.
ANY CHANGE IN GOVERNMENT REGULATION/ADMINISTRATIVE PRACTICES MAY HAVE A
NEGATIVE IMPACT ON OUR ABILITY TO OPERATE AND OUR PROFITABILITY.
The laws, regulations, policies or current administrative practices of any
government body, organization or regulatory agency in any applicable
jurisdiction, may be changed, applied or interpreted in a manner which will
fundamentally alter our ability to carry on business. The actions, policies or
regulations, or changes thereto, of any government body or regulatory agency, or
other special interest groups, may have a detrimental effect on us. Any or all
of these situations may have a negative impact on our ability to operate and/or
our profitably.
14
IF WE DO NOT FIND A JOINT VENTURE PARTICIPANT FOR THE CONTINUED EXPLORATION
OF THE PROPERTY UNDERLYING OUR MINERAL CLAIMS, WE MAY NOT BE ABLE TO
ADVANCE THE EXPLORATION WORK.
If the initial results of our mineral exploration program are successful, we may
try to enter into a joint venture agreement with a third party for the further
exploration and possible production of the property underlying our mineral
claims. We would face competition from other junior mineral resource exploration
companies if we attempt to enter into a joint venture agreement with a third
party. A prospective joint venture participant could have a limited ability to
enter into joint venture agreements with junior exploration companies, and will
seek the junior exploration companies who have the properties that it deems to
be the most attractive in terms of potential return and investment cost. In
addition, if we entered into a joint venture agreement, we would likely assign a
percentage of our interest in our mineral claims to the joint venture
participant. If we are unable to enter into a joint venture agreement with a
third party, we may fail and you will lose your entire investment in our common
stock
WE MAY BE UNABLE TO RETAIN KEY EMPLOYEES OR CONSULTANTS OR RECRUIT
ADDITIONAL QUALIFIED PERSONNEL.
Our extremely limited personnel means that we would be required to spend
significant sums of money to locate and train new employees in the event any of
our employees resign or terminate their employment with us for any reason. Due
to our limited operating history and financial resources, we are entirely
dependent on the continued service of Garry Wong, our President/Chief Executive
Officer/Chief Financial Officer and a director. Further, we do not have key man
life insurance on this individual. We may not have the financial resources to
hire a replacement if any of our officers were to die. The loss of service of
any of these employees could therefore significantly and adversely affect our
operations.
OUR OFFICER AND DIRECTOR MAY BE SUBJECT TO CONFLICTS OF INTEREST.
Our officer/director serves only part time and is subject to conflicts of
interest. Our executive officer/director serves only on a part time basis. He
devotes part of his working time to other business endeavors, including
consulting relationships with other corporate entities, and has responsibilities
to these other entities. Such conflicts include deciding how much time to devote
to our affairs, as well as what business opportunities should be presented to
us. Because of these relationships, our officer and director may be subject to
conflicts of interest.
NEVADA LAW AND OUR ARTICLES OF INCORPORATION MAY PROTECT OUR DIRECTORS FROM
CERTAIN TYPES OF LAWSUITS.
Nevada law provides that our officers and directors will not be liable to us or
our stockholders for monetary damages for all but certain types of conduct as
officers and directors. Our Bylaws permit us broad indemnification powers to all
persons against all damages incurred in connection with our business to the
fullest extent provided or allowed by law. The exculpation provisions may have
the effect of preventing stockholders from recovering damages against our
officers and directors caused by their negligence, poor judgment or other
circumstances. The indemnification provisions may require us to use our limited
assets to defend our officers and directors against claims, including claims
arising out of their negligence, poor judgment, or other circumstances.
15
RISKS RELATED TO OUR COMMON STOCK
SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK INTO THE PUBLIC
MARKET BY CERTAIN STOCKHOLDERS MAY RESULT IN SIGNIFICANT DOWNWARD PRESSURE
ON THE PRICE OF OUR COMMON STOCK AND COULD AFFECT YOUR ABILITY TO REALIZE
THE CURRENT TRADING PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock in the public market
by certain stockholders could cause a reduction in the market price of our
common stock. As of the date of this Annual Report, we have 130,110,000 shares
of common stock issued and outstanding. Of the total number of issued and
outstanding shares of common stock, certain stockholders are able to resell up
to 41,610,000 shares of our common stock pursuant to the Registration Statement
declared effective on December 11, 2008 and are available for immediate resale
which could have an adverse effect on the price of our common stock.
As of the date of this Annual Report, there are 88,500,000 outstanding shares of
our common stock that are restricted securities as that term is defined in Rule
144 under the Securities Act of 1933, as amended (the "Securities Act").
Although the Securities Act and Rule 144 place certain prohibitions on the sale
of restricted securities, restricted securities may be sold into the public
market under certain conditions. See "Item 5.
Market for Common Equity and Related Stockholder Matters."
Any significant downward pressure on the price of our common stock as the
selling stockholders sell their shares of our common stock could encourage short
sales by the selling stockholders or others. Any such short sales could place
further downward pressure on the price of our common stock.
WHEN OUR SHARES OF COMMON STOCK COMMENCE TRADING ON THE OTC BULLETIN BOARD,
THE TRADING PRICE WILL FLUCTUATE SIGNIFICANTLY AND STOCKHOLDERS MAY HAVE
DIFFICULTY RESELLING THEIR SHARES.
As of the date of this Annual Report, our common stock has not commenced trading
on the Over-the-Counter Bulletin Board. We anticipate that our shares of common
stock will commence trading in approximately three months. There will be a
volatility associated with Bulletin Board securities in general and the value of
your investment could decline due to the impact of any of the following factors
upon the market price of our common stock: (i) disappointing results from our
discovery or development efforts; (ii) failure to meet our revenue or profit
goals or operating budget; (iii) decline in demand for our common stock; (iv)
downward revisions in securities analysts' estimates or changes in general
market conditions; (v) technological innovations by competitors or in competing
technologies; (vi) lack of funding generated for operations; (vii) investor
perception of our industry or our prospects; and (viii) general economic trends.
In addition, stock markets have experienced price and volume fluctuations and
the market prices of securities have been highly volatile. These fluctuations
are often unrelated to operating performance and may adversely affect the market
price of our common stock. As a result, investors may be unable to sell their
shares at a fair price and you may lose all or part of your investment.
RESALE RESTRICTIONS FOR BRITISH COLUMBIA RESIDENTS MAY LIMIT THE ABILITY OF
SUCH RESIDENTS TO RESELL THEIR SHARES IN THE UNITED STATES, WHICH WILL
AFFECT THE PRICE AT WHICH THEIR SHARES MAY BE SOLD.
16
Selling stockholders that are residents of British Columbia have to rely on an
exemption from prospectus and registration requirements of British Columbia
securities laws to sell their shares that are being registered for resale by
this prospectus. Such selling stockholders have to comply with the British
Columbia Securities Commission's B.C. Instrument 72-502 "Trade in Securities of
U.S. Registered Issuers" to resell their shares. B.C. Instrument 72-502
requires, among other conditions, that British Columbia residents hold the
shares for a period of twelve months and, consequent thereon, limits the volume
of shares sold in a twelve-month period to five percent of the issued and
outstanding shares of the issuer. However, if we become a reporting issuer in
British Columbia, then our British Columbia stockholders will only have to hold
their shares for a period of four months and a day from becoming a reporting
issuer in order to resell their shares. These restrictions will limit the
ability of the British Columbia residents to resell the securities in the United
States and, therefore, may materially affect the market value of your shares. If
we decide to become a reporting issuer in British Columbia, then it is estimated
that becoming such will take approximately three months from our decision to do
so subject, at all times, to the prior approval of the British Columbia
Securities Commission. At present we do not intend to become a reporting issuer
in British Columbia.
ADDITIONAL ISSUANCE OF EQUITY SECURITIES MAY RESULT IN DILUTION TO OUR
EXISTING STOCKHOLDERS.
Our Articles of Incorporation authorize the issuance of 200,000,000 shares of
common stock. Common stock is our only authorized class of stock. The board of
directors has the authority to issue additional shares of our capital stock to
provide additional financing in the future and the issuance of any such shares
may result in a reduction of the book value or market price of the outstanding
shares of our common stock. If we do issue any such additional shares, such
issuance also will cause a reduction in the proportionate ownership and voting
power of all other stockholders. As a result of such dilution, your
proportionate ownership interest and voting power will be decreased accordingly.
Further, any such issuance could result in a change of control.
OUR COMMON STOCK IS CLASSIFIED AS A "PENNY STOCK" UNDER SEC RULES WHICH
LIMITS THE MARKET FOR OUR COMMON STOCK.
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the NASDAQ system, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer must also
provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer, and sales person in the transaction, and
monthly account statements indicating the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that,
prior to a transaction in a penny stock not otherwise exempt from those rules,
the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the trading activity in the secondary market for stock that becomes
subject to those penny stock rules. If a trading market for our common stock
develops, our common stock will probably become subject to the penny stock
rules, and shareholders may have difficulty in selling their shares.
17
OUR SOLE DIRECTOR AND OFFICER IS OUTSIDE THE UNITED STATES, WITH THE RESULT
THAT IT MAY BE DIFFICULT FOR INVESTORS TO ENFORCE WITHIN THE UNITED STATES
ANY JUDGMENTS OBTAINED AGAINST US OR ANY OF OUR DIRECTORS OR OFFICERS.
Our sole director and officer is a national and resident of Canada, and all or a
substantial portion of such person's assets are located outside the United
States. As a result, it may be difficult for investors to effect service of
process on our director or officer, or enforce within the United States or
Canada any judgments obtained against us or our officer or director, including
judgments predicated upon the civil liability provisions of the securities laws
of the United States or any state thereof. Consequently, you may be effectively
prevented from pursuing remedies under U.S. federal securities laws against
them. In addition, investors may not be able to commence an action in a Canadian
court predicated upon the civil liability provisions of the securities laws of
the United States.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our principal office space, located at 1333 W. Broadway Street, Suite 678,
Vancouver, British Columbia, Canada V6H 4C1 is provided to the Company at no
charge by our President.
ITEM 3. LEGAL PROCEEDINGS
Our management is not aware of any legal proceedings contemplated by any
governmental authority or any other party involving us or our properties. As of
the date of this Annual Report, no director, officer or affiliate is (i) a party
adverse to us in any legal proceeding, or (ii) has an adverse interest to us in
any legal proceedings. Management is not aware of any other legal proceedings
pending or that have been threatened against us or our properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During fiscal year ended February 28, 2009, no matters were submitted to our
stockholders for approval.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR COMMON EQUITY
Our shares of our common stock have not commenced trading on the OTC Bulletin
Board.
As of May 28, 2009, we had 34 shareholders of record, which does not include
shareholders whose shares are held in street or nominee names.
18
DIVIDEND POLICY
No dividends have ever been declared by the Board of Directors on our common
stock. Our losses do not currently indicate the ability to pay any cash
dividends, and we do not indicate the intention of paying cash dividends either
on our common stock in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS
As of the date of this Annual Report, we do not have any equity compensation
plans.
Number of Securities
Number of Securities to Weighted-Average Remaining Available for
be Issued Upon Exercise Exercise Price of Future Issuance Under
of Outstanding Options, Outstanding Options, Equity Compensation
Warrants and Rights Warrants and Rights Plans (excluding column
Plan Category (a) (b) (a))
------------- ------------------- ------------------- -----------------------
Equity Compensation Plans
Approved by Security
Holders -0- -0- -0-
Equity Compensation Plans
Not Approved by Security
Holders -0- -0- -0-
RECENT SALES OF UNREGISTERED SECURITIES
As of the date of this Annual Report and during fiscal year ended February 28,
2009, to provide capital, we sold stock in private placement offerings, issued
stock in exchange for our debts or pursuant to contractual agreements as set
forth below.
MAY 2008 PRIVATE PLACEMENT OFFERING
Effective as of May 1, 2008, we completed a private placement of 32,500,000
shares at a price of $0.001 per share to a total of five purchasers (the "May
2008 Private Offering"). The total proceeds from the May 2008 Private Offering
were $32,500. We completed the May 2008 Private Offering pursuant to Rule 903 of
Regulation S under the Securities Act. Each sale of shares was completed as an
"offshore transaction", as defined in Rule 902(h) of Regulation S, on the basis
that: (i) each investor was outside of the United States at the time the offer
to purchase the shares was made; and (ii) at the time the subscription agreement
for the shares was executed, the investor was outside of the United States or we
had a reasonable belief that the investor was outside of the United States. We
did not engage in any directed selling efforts, as defined in Regulation S, in
the United States. Each investor represented to us that the investor was not a
U.S. person, as defined in Regulation S, and was not acquiring the shares for
the account or benefit of a U.S. Person. Each investor represented their
intention to acquire the securities for investment only and not with a view
toward distribution. Appropriate legends have been affixed to the stock
certificate issued to each purchaser in accordance with Regulation S. None of
the securities were sold through an underwriter and accordingly, there were no
underwriting discounts or commissions involved. No registration rights were
granted to any of the investors.
19
JUNE 2008 PRIVATE PLACEMENT OFFERING
Effective as of June 24, 2008, we completed a private placement of 85,000,000
shares at a price of $0.0001 per share to a total of one purchaser (the "June
2008 Private Offering"). The total proceeds from the June 2008 Private Offering
were $8,500. We completed the June 2008 Private Offering pursuant to Rule 903 of
Regulation S under the Securities Act. Each sale of shares was completed as an
"offshore transaction", as defined in Rule 902(h) of Regulation S, on the basis
that: (i) each investor was outside of the United States at the time the offer
to purchase the shares was made; and (ii) at the time the subscription agreement
for the shares was executed, the investor was outside of the United States or we
had a reasonable belief that the investor was outside of the United States. We
did not engage in any directed selling efforts, as defined in Regulation S, in
the United States. Each investor represented to us that the investor was not a
U.S. person, as defined in Regulation S, and was not acquiring the shares for
the account or benefit of a U.S. Person. Each investor represented their
intention to acquire the securities for investment only and not with a view
toward distribution. Appropriate legends have been affixed to the stock
certificate issued to each purchaser in accordance with Regulation S. None of
the securities were sold through an underwriter and accordingly, there were no
underwriting discounts or commissions involved. No registration rights were
granted to any of the investors.
OCTOBER 2008 PRIVATE PLACEMENT OFFERING
Effective as of October 24, 2008, we completed a private placement of 5,000,000
shares at a price of $0.001 per share to a total of one purchaser (the "October
2008 Private Offering"). The total proceeds from the October 2008 Private
Offering were $5,000. We completed the October 2008 Private Offering pursuant to
Rule 903 of Regulation S under the Securities Act. The sale of shares was
completed as an "offshore transaction", as defined in Rule 902(h) of Regulation
S, on the basis that: (i) the investor was outside of the United States at the
time the offer to purchase the shares was made; and (ii) at the time the
subscription agreement for the shares was executed, the investor was outside of
the United States or we had a reasonable belief that the investor was outside of
the United States. We did not engage in any directed selling efforts, as defined
in Regulation S, in the United States. The investor represented to us that the
investor was not a U.S. person, as defined in Regulation S, and was not
acquiring the shares for the account or benefit of a U.S. Person. The investor
represented his intention to acquire the securities for investment only and not
with a view toward distribution. Appropriate legends have been affixed to the
stock certificate issued to the purchaser in accordance with Regulation S. None
of the securities were sold through an underwriter and accordingly, there were
no underwriting discounts or commissions involved. No registration rights were
granted to the investor.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information is qualified by reference to, and
should be read in conjunction with our financial statements and the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operation" contained elsewhere herein. The selected income statement
data for fiscal years ended February 28, 2009 and February 29, 2008 and the
selected balance sheet data as of February 28, 2009 and February 29, 2008 are
derived from our audited financial statements which are included elsewhere
herein.
20
STATEMENT OF OPERATIONS DATA
For the Period from
Fiscal Years Ended August 25, 2004
February 28, 2009 and (inception) to
February 29, 2008 February 28,
2009 2008 2009
-------- -------- --------
REVENUE $ 0 $ 0 $ 0
EXPENSES
Bank charges 158 152 553
Mineral property costs 8,000 0 15,500
Office expenses 534 319 1,645
Professional fees 25,889 10,500 45,080
Transfer agent and filing fees 12,106 954 13,985
NET LOSS $(46,687) $(11,925) $(76,763)
BALANCE SHEET DATA
2009 2008
-------- --------
TOTAL ASSETS $ 37 $ 4,724
TOTAL LIABILITIES 1,000 5,000
STOCKHOLDERS EQUITY (DEFICIT) $ (963) $ (276)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The summarized financial data set forth in the table below is derived from and
should be read in conjunction with our audited financial statements for the
period from inception (August 25, 2004) to fiscal year ended February 28, 2009,
including the notes to those financial statements which are included in this
Annual Report. The following discussion should be read in conjunction with our
audited financial statements and the related notes that appear elsewhere in this
Annual Report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to
those discussed below and elsewhere in this Annual Report, particularly in the
section entitled "Risk Factors". Our audited financial statements are stated in
United States Dollars and are prepared in accordance with United States
Generally Accepted Accounting Principles.
We are an exploration stage company and have not generated any revenue to date.
The above table sets forth selected financial information for the periods
indicated. We have incurred recurring losses to date. Our financial statements
21
have been prepared assuming that we will continue as a going concern and,
accordingly, do not include adjustments relating to the recoverability and
realization of assets and classification of liabilities that might be necessary
should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating
requirements. We expect to raise additional capital through, among other things,
the sale of equity or debt securities.
RESULTS OF OPERATION
FISCAL YEAR ENDED FEBRUARY 28, 2009 COMPARED TO FISCAL YEAR ENDED FEBRUARY 29,
2008.
Our net loss for fiscal year ended February 28, 2009 was ($46,687) compared to a
net loss of ($11,925) during fiscal year ended February 29, 2008 (an increase of
$34,762). During fiscal years ended February 28, 2009 and February 29, 2008, we
did not generate any revenue.
During fiscal year ended February 28, 2009, we incurred expenses of $46,687
compared to $11,925 incurred during fiscal year ended February 29, 2008 (an
increase of $34,762). These expenses incurred during fiscal year ended February
28, 2009 consisted of: (i) bank charges of $158 (2008: $152); (ii) mineral
property costs of $8,000 (2008: $-0-); (iii) office expenses of $534 (2008:
$319); (iv) professional fees of $25,889 (2008: $10,500); and (v) transfer agent
and filing fees of $12,106 (2008: $954).
Of the $46,687 incurred as expenses during fiscal year ended February 28, 2009,
we did not incur any management fees payable to our officers and directors. See
"Item 11. Executive Compensation."
Expenses incurred during fiscal year ended February 28, 2009 compared to fiscal
year ended February 29, 2008 increased primarily due to the increase in mineral
property costs and professional fees relating to the increased scale and scope
of our business operations relating to our British Columbia Claim. Expenses
generally include corporate overhead, financial and administrative contracted
services, marketing, and consulting costs.
Our net loss during fiscal year ended February 28, 2009 was ($46,687) compared
to a net less of ($11,.925) during fiscal year ended February 29, 2008. The
weighted average number of shares outstanding was 89,507,000 for fiscal year
ended February 28, 2009 compared to 7,610,000 for fiscal year ended February 29,
2008.
LIQUIDITY AND CAPITAL RESOURCES
FISCAL YEAR ENDED FEBRUARY 28, 2009
As at fiscal year ended February 28, 2009, our current assets were $37 and our
current liabilities were $1,000, which resulted in a working capital deficiency
of ($963). As at fiscal year ended February 28, 2009, current assets were
comprised of $37 in cash. As at fiscal year ended February 28, 2009, current
liabilities were comprised of $1,000 in accounts payable and accrued liabilities
- - officer's loan.
As at fiscal year ended February 28, 2009, our total assets were $37 comprised
entirely of current assets. The decrease in total assets during fiscal year
ended February 28, 2009 from fiscal year ended February 29, 2008 was primarily
due to the decrease in cash.
22
As at fiscal year ended February 28, 2009, our total liabilities were $1,000
comprised entirely of current liabilities. The decrease in liabilities during
fiscal year ended February 28, 2008 from fiscal year ended February 29, 2008 was
primarily due to the decrease in accounts payable and accrued liabilities -
officer's loan.
Stockholders' equity (deficit) increased from ($276) for fiscal year ended
February 29, 2008 to ($963) for fiscal year ended February 28, 2009.
CASH FLOWS FROM OPERATING ACTIVITIES
We have not generated positive cash flows from operating activities. For fiscal
year ended February 28, 2009, net cash flows used in operating activities was
($43,687) consisting primarily of a net loss of ($46,687). Net cash flows used
in operating activities was adjusted by $8,000 in write-off of mineral
properties and ($5,000) in accounts payable and accrued liabilities.
For fiscal year ended February 29, 2008, net cash flows used in operating
activities was ($11,925). Net cash flows used in operating activities was
adjusted by $5,000 for accounts payable and accrued liabilities.
CASH FLOWS FROM INVESTING ACTIVITIES
For fiscal year ended February 28, 2009, net cash flows used in investing
activities was ($8,000) compared to net cash flows used in investing activities
during fiscal year ended February 29, 2008 of $-0- consisting of acquisition of
mineral property interest.
CASH FLOWS FROM FINANCING ACTIVITIES
We have financed our operations primarily from either advancements or the
issuance of equity and debt instruments. For fiscal year ended February 28,
2009, net cash flows provided from financing activities was $47,000 compared to
$-0- for fiscal year ended February 29, 2008. Cash flows from financing
activities for fiscal year ended February 28, 2009 consisted primarily of
$46,000 in proceeds received from issuance of common shares and $1,000 in
proceeds from officer's loan. We expect that working capital requirements will
continue to be funded through a combination of our existing funds and further
issuances of securities. Our working capital requirements are expected to
increase in line with the growth of our business.
PLAN OF OPERATION AND FUNDING
Existing working capital, further advances and debt instruments, and anticipated
cash flow are expected to be adequate to fund our operations over the next six
months. We have no lines of credit or other bank financing arrangements.
Generally, we have financed operations to date through the proceeds of the
private placement of equity and debt instruments. In connection with our
business plan, management anticipates additional increases in exploration
expenses and capital expenditures relating to: (i) mineral exploration
properties; and (ii) future mineral exploration property acquisitions. We intend
to finance these expenses with further issuances of securities, and debt
issuances. Thereafter, we expect we will need to raise additional capital and
generate revenues to meet long-term operating requirements. Additional issuances
of equity or convertible debt securities will result in dilution to our current
shareholders. Further, such securities might have rights, preferences or
privileges senior to our common stock. Additional financing may not be available
upon acceptable terms, or at all. If adequate funds are not available or are not
available on acceptable terms, we may not be able to take advantage of
23
prospective new business endeavors or opportunities, which could significantly
and materially restrict our business operations.
We may consider entering into a joint venture arrangement to provide the
required funding to develop the property underlying our interests. We have not
undertaken any efforts to locate a joint venture participant. Even if we
determined to pursue a joint venture participant, there is no assurance that any
third party would enter into a joint venture agreement with us in order to fund
exploration of the property underlying our interests. If we enter into a joint
venture arrangement, we would likely have to assign a percentage in our interest
to the joint venture participant.
During fiscal year ended February 29, 2008, we engaged in the May 2008 Private
Offering, the June 2008 Private Offering and the October 2008 Private Offering
pursuant to which we raised $46,000.
Our plan of operations for the next twelve months is to complete the following
objectives within the time periods specified:
1. Obtain a trading symbol to facilitate quotation of our shares over the
OTC Bulletin Board. As of the date of this Annual Report, we intend to
apply to FINRA for a trading symbol to begin trading our shares on the
OTC Bulletin Board.
2. We plan to complete phase one of our recommended exploration program
on the property underlying our interest at an estimated cost of
$70,000. We expect to commence our exploration program in the fall of
2009, depending on weather conditions and the availability of
personnel and equipment.
3. We anticipate spending approximately $1,000 per month in ongoing
general and administrative expenses per month for the next twelve
months, for a total anticipated expenditure of $12,000 over the next
twelve months. The general and administrative expenses for the year
will consist primarily of professional fees for the audit and legal
work relating to our regulatory filings throughout the year, as well
as transfer agent fees and general office expenses.
MATERIAL COMMITMENTS
As of the date of this Annual Report, we do not have any material commitments.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve
months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report, we do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
GOING CONCERN
The independent auditors' report accompanying our February 28, 2009 and February
29, 2008 financial statements contains an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern. The
financial statements have been prepared "assuming that we will continue as a
24
going concern," which contemplates that we will realize our assets and satisfy
our liabilities and commitments in the ordinary course of business.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, ACCOUNTING FOR FINANCIAL GUARANTEE INSURANCE CONTRACTS - AN INTERPRETATION
OF FASB STATEMENT NO. 60. SFAS 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial obligation. It
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities, and requires expanded disclosures about
financial guarantee insurance contracts. It is effective for financial
statements issued for fiscal years beginning after December 15, 2008, except for
some disclosures about the insurance enterprise's risk-management activities.
SFAS 163 requires that disclosures about the risk-management activities of the
insurance enterprise be effective for the first period beginning after issuance.
Except for those disclosures, earlier application is not permitted. We do not
expect the adoption of this standard to have a significant impact on our
financial position, cash flows or results of operations
In March 2008, the FASB issued SFAS No. 161, "DISCLOSURES ABOUT DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES". SFAS 161 is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
an entity's financial position, financial performance, and cash flows. SFAS 161
achieves these improvements by requiring disclosure of the fair values of
derivative instruments and their gains and losses in a tabular format. It also
provides more information about an entity's liquidity by requiring disclosure of
derivative features that are credit risk-related. Finally, it requires
cross-referencing within footnotes to enable financial statement users to locate
important information about derivative instruments. SFAS 161 will be effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, will be adopted by us beginning in the first quarter of
fiscal 2010. We do not expect there to be any significant impact of adopting
SFAS 161 on our financial position, cash flows and results of operations.
In December 2007, the FASB issued SFAS No. 160, "NONCONTROLLING INTEREST IN
CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB NO. 51" which will change
the accounting and reporting for minority interests, which will be
recharacterized as noncontrolling interests and classified as a component of
equity within the consolidated balance sheets. SFAS No. 160 is effective as of
the beginning of an entity's first fiscal year beginning on or after December
15, 2008. Earlier adoption is prohibited. We do not expect there to be any
significant impact of adopting SFAS 160 on its financial position, cash flows or
results of operations.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "BUSINESS
COMBINATIONS". SFAS No. 141(R) will change the accounting for business
combinations. Under SFAS No. 141(R), an acquiring entity will be required to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will
change the accounting treatment and disclosure for certain specific items in a
business combination. SFAS No. 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
entity's first annual reporting period beginning on or after December 15, 2008.
Accordingly, any business combinations completed by us prior to June 1, 2009
will be recorded and disclosed following existing GAAP. We do not expect there
to be any significant impact of adopting SFAS 141 on our financial position,
cash flows or results of operations
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DATED JUNE 1, 2009.
Report of Independent Registered Public Accounting Firm
Stockholders and Directors
Deer Bay Resources, Inc. (An Exploration Stage Company)
We have audited the accompanying balance sheet of Deer Bay Resources, Inc. (an
exploration stage company) as of February 28, 2009 and the related statements of
operations, stockholders' equity (deficit), and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatements. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Deer Bay Resources, Inc. (An
Exploration Stage Company) as of February 28, 2009 and the results of its
operations, stockholders' equity (deficit), and cash flows for the year then
ended in conformity with U.S. generally accepted accounting principles
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations.
This factor raises substantial doubt about the Company's ability to continue as
a going concern. Management's plans with regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Weaver & Martin, LLC
- ------------------------------------
Weaver & Martin, LLC
Kansas City Missouri
June 1, 2009
26
DEER BAY RESOURCES INC.
(An Exploration Stage Company)
Balance Sheets
February 28, February 29,
2009 2008
-------- --------
$ $
Assets
Current Assets
Cash 37 4,724
-------- --------
Total Assets 37 4,724
======== ========
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable and accrued liabilities -- 5,000
Officer's Loan 1,000 --
-------- --------
Total Current Liabilities 1,000 5,000
-------- --------
Stockholders' Equity (Deficit)
Capital stock
Authorized:
200,000,000 common shares with a par value of $0.0001
Issued and outstanding:
130,110,000 and 7,610,000 common shares issued and
outstanding, respectively 13,011 761
Additional paid-in-capital 62,789 29,039
Deficit accumulated during the exploration stage (76,763) (30,076)
-------- --------
Total stockholders' equity (deficit) (963) (276)
-------- --------
Total liabilities and stockholders' equity (deficit) 37 4,724
======== ========
Nature of operations and continuance of business (Note 1)
See Accompanying Notes
27
DEER BAY RESOURCES INC.
(An Exploration Stage Company)
Statements of Operations
Cumulative from
August 25, 2004
Year Ended Year Ended (Inception) to
February 28, February 29, February 28,
2009 2008 2009
---------- ---------- ----------
$ $ $
Revenue -- -- --
---------- ---------- ----------
Expenses
Bank charges 158 152 553
Mineral property costs 8,000 -- 15,500
Office expenses 534 319 1,645
Professional fees 25,889 10,500 45,080
Transfer agent and filing fees 12,106 954 13,985
---------- ---------- ----------
Net Loss (46,687) (11,925) (76,763)
========== ========== ==========
Loss per share - Basic and diluted -- --
========== ==========
Weighted Average Number of Common Shares
Outstanding 89,507,000 7,610,000
========== ==========
See Accompanying Notes
28
DEER BAY RESOURCES INC.
(An Exploration Stage Company)
Statement of Stockholders' Equity (Deficit)
From August 25, 2004 (Inception) to February 28, 2009
Deficit
Accumulated
Number of Additional During the
Common Par Paid-in Exploration
Shares Value Capital Stage Total
------ ----- ------- ----- -----
August 25, 2004 -- $ -- $ -- $ -- $ --
October 11, 2004 - Issued for
cash at $0.001 6,300,000 630 5,670 -- 6,300
October 25, 2004 - Issued for
cash at $0.01 1,050,000 105 10,395 -- 10,500
January 5, 2005 - Issued for 260,000 26 12,974 -- 13,000
cash at $0.05
Net loss -- -- -- (3,729) (3,729)
----------- -------- -------- --------- --------
Balance, February 28, 2005 7,610,000 761 29,039 (3,729) 26,071
Net loss -- -- -- (11,824) (11,824)
----------- -------- -------- --------- --------
Balance, February 28, 2006 7,610,000 761 29,039 (15,553) 14,247
Net loss -- -- -- (2,598) (2,598)
----------- -------- -------- --------- --------
Balance, February 28, 2007 7,610,000 761 29,039 (18,151) 11,649
Net loss -- -- -- (11,925) (11,925)
----------- -------- -------- --------- --------
Balance, February 29, 2008 7,610,000 761 29,039 (30,076) (276)
June 24, 2008 - Issued for
cash at $0.001 32,500,000 3,250 29,250 -- 32,500
June 24, 2008 - Issued for
cash at $0.0001 85,000,000 8,500 -- -- 8,500
October 24, 2008 - Issued for
cash at $0.001 5,000,000 500 4,500 -- 5,000
Net loss -- -- -- (46,687) (46,687)
----------- -------- -------- --------- --------
Balance, February 28, 2009 130,110,000 $ 13,011 $ 62,789 $ (76,763) $ (963)
=========== ======== ======== ========= ========
See Accompanying Notes
29
DEER BAY RESOURCES INC.
(An Exploration Stage Company)
Statements of Cash Flows
Cumulative from
August 25, 2004
Year Ended Year Ended (Inception) to
February 28, February 29, February 28,
2009 2008 2009
-------- -------- --------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (46,687) (11,925) (76,763)
Adjustments to reconcile net loss to net cash
Write-off of mineral properties 8,000 -- 15,500
Accounts payable and accrued liabilities (5,000) 5,000 --
-------- -------- --------
Net cash used in operations (43,687) (6,925) (61,263)
-------- -------- --------
CASH FLOWS TO INVESTING ACTIVITIES
Mineral properties acquisition (8,000) -- (15,500)
-------- -------- --------
Net cash provided to investing activities (8,000) -- (15,500)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from officer's loan 1,000 -- 1,000
Common shares issued for cash 46,000 -- 75,800
-------- -------- --------
Net cash provided by financing activities 47,000 -- 76,800
-------- -------- --------
Net increase (decrease) in cash (4,687) (6,925) 37
Cash - beginning of period 4,724 11,649 --
-------- -------- --------
Cash - end of period 37 4,724 37
======== ======== ========
Supplemental cash flow information:
Cash paid for:
Interest -- --
Taxes -- --
======== ========
See Accompanying Notes
30
1. NATURE AND CONTINUANCE OF OPERATIONS
Deer Bay Resources Inc. ("the Company") was incorporated under the laws of State
of Nevada, U.S. on August 25, 2004. The Company is in the exploration stage of
its resource business. The Company complies with the Financial Accounting
Standards Board Statement No. 7, its characterization of the Company as an
exploration stage enterprise. During the year ended February 28, 2006 the
Company commenced operations by issuing shares and acquiring a mineral property
located in the Province of Ontario, Canada. The Company has not yet determined
whether this property contains reserves that are economically recoverable. The
recoverability of costs incurred for acquisition and exploration of the property
will be dependent upon the discovery of economically recoverable reserves,
confirmation of the Company's interest in the underlying property, the ability
of the Company to obtain necessary financing to satisfy the expenditure
requirements under the property agreement and to complete the development of the
property and upon future profitable production or proceeds for the sale thereof.
On April 29, 2008 the Company's articles of incorporation were amended to
increase the authorized share capital to 200,000,000 common shares and reduce
par value to $0.0001. This amendment has been applied retroactively to all
share, and per share, amounts.
These financial statements have been prepared on a going concern basis which
assumes the Company will be able to realize its assets and discharge its
liabilities in the normal course of business for the foreseeable future. The
Company has incurred losses since inception resulting in an accumulated deficit
of $76,763 as at February 28, 2009 and further losses are anticipated in the
development of its business raising substantial doubt about the Company's
ability to continue as a going concern. The ability to continue as a going
concern is dependent upon the Company generating profitable operations in the
future and/or to obtain the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations when they come
due. Management intends to finance operating costs over the next twelve months
with existing cash on hand and loans from directors and or private placement of
common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America and are
presented in US dollars. The Company's fiscal year end is February 28.
MINERAL INTERESTS
The Company is primarily engaged in the acquisition, exploration and development
of mineral properties. Mineral property acquisition costs are capitalized in
accordance with EITF 04-2 "WHETHER MINERAL RIGHTS ARE TANGIBLE OR INTANGIBLE
ASSETS" when management has determined that probable future benefits consisting
of a contribution to future cash inflows have been identified and adequate
financial resources are available or are expected to be available as required to
meet the terms of property acquisition and budgeted exploration and development
expenditures. Mineral property acquisition costs are expensed as incurred if the
criteria for capitalization are not met. In the event that a mineral property is
acquired through the issuance of the Company's shares, the mineral property will
be recorded at the fair value of the respective property or the fair value of
common shares, whichever is more readily determinable.
When mineral properties are acquired under option agreements with future
acquisition payments to be made at the sole discretion of the Company, those
future payments, whether in cash or shares, are recorded only when the Company
has made or is obliged to make the payment or issue the shares. When it has been
31
determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves and pre feasibility, the costs
incurred to develop such property are capitalized.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
STOCK-BASED COMPENSATION
a. In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment", which
replaced SFAS No. 123, "Accounting for Stock-Based Compensation" and superseded
APB Opinion No. 25, "Accounting for Stock Issued to Employees". In January 2005,
the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
("SAB") No. 107, "Share-Based Payment", which provides supplemental
implementation guidance for SFAS No. 123R. SFAS No. 123R requires all
share-based payments to employees, including grants of employee stock options,
to be recognized in the financial statements based on the grant date fair value
of the award. SFAS No. 123R was to be effective for interim or annual reporting
periods beginning on or after June 15, 2005, but in April 2005 the SEC issued a
rule that will permit most registrants to implement SFAS No. 123R at the
beginning of their next fiscal year, instead of the next reporting period as
required by SFAS No. 123R. The pro-forma disclosures previously permitted under
SFAS No. 123 no longer will be an alternative to financial statement
recognition. Under SFAS No. 123R, the Company must determine the appropriate
fair value model to be used for valuing share-based payments, the amortization
method for compensation cost and the transition method to be used at date of
adoption.
The transition methods include prospective and retroactive adoption options.
Under the retroactive options, prior periods may be restated either as of the
beginning of the year of adoption or for all periods presented. The prospective
method requires that compensation expense be recorded for all unvested stock
options and restricted stock at the beginning of the first quarter of adoption
of SFAS No. 123R, while the retroactive methods would record compensation
expense for all unvested stock options and restricted stock beginning with the
first period restated. The Company adopted the modified prospective approach of
SFAS No. 123R for the quarter beginning December 1, 2005. The Company did not
record any compensation expense in the fourth quarter of 2007 because there were
no stock options outstanding prior to the adoption or at November 30, 2008.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "ACCOUNTING FOR FINANCIAL GUARANTEE INSURANCE CONTRACTS - AN INTERPRETATION
OF FASB STATEMENT NO. 60". SFAS No. 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial obligation. It
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities, and requires expanded disclosures about
financial guarantee insurance contracts. It is effective for financial
statements issued for fiscal years beginning after December 15, 2008, except for
some disclosures about the insurance enterprise's risk-management activities.
SFAS No. 163 requires that disclosures about the risk-management activities of
the insurance enterprise be effective for the first period beginning after
issuance. Except for those disclosures, earlier application is not permitted.
The adoption of this statement is not expected to have a material effect on the
Company's financial statements.
32
In May 2008, the FASB issued SFAS No. 162, "THE HIERARCHY OF GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES". SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. It is effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, "THE
MEANING OF PRESENT FAIRLY IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES". The adoption of this statement is not expected to have a material
effect on the Company's financial statements.
In March 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
161, "DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - AN
AMENDMENT TO FASB STATEMENT NO. 133". SFAS No. 161 is intended to improve
financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Entities are required to provide enhanced disclosures about: (a) how and
why an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations; and (c) how derivative instruments and related hedged items
affect an entity's financial position, financial performance, and cash flows. It
is effective for financial statements issued for fiscal years beginning after
November 15, 2008, with early adoption encouraged. The Company is currently
evaluating the impact of SFAS No. 161 on its financial statements, and the
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141 (revised 2007), "Business Combinations". This statement replaces SFAS
No. 141 and defines the acquirer in a business combination as the entity that
obtains control of one or more businesses in a business combination and
establishes the acquisition date as the date that the acquirer achieves control.
SFAS 141 (revised 2007) requires an acquirer to recognize the assets acquired,
the liabilities assumed, and any non-controlling interest in the acquired at the
acquisition date, measured at their fair values as of that date. SFAS 141
(revised 2007) also requires the acquirer to recognize contingent consideration
at the acquisition date, measured at its fair value at that date. This statement
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Earlier adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
Consolidated Financial Statements Liabilities -an Amendment of ARB No. 51". This
statement amends ARB 51 to establish accounting and reporting standards for the
Non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. This statement is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. The adoption of this statement is not expected to have a
material effect on the Company's financial statements.
3. MINERAL INTERESTS
On April 26, 2005, the Company entered into a mineral property purchase
agreement to acquire a 100% interest in one mineral claim located in the
Scadding Township, Sudbury Mining Division, Ontario for total consideration of
$7,500.
The mineral interest is held in trust for the Company by the vendor of the
property. Upon request from the Company the title will be recorded in the name
of the Company with the appropriate mining recorder.
33
On March 18, 2008, the Company entered into a mineral property purchase
agreement with Laurence Stephenson to acquire a 100% interest in one mineral
claim located in the New Westminster Mining Division, BC for total consideration
of $8,000.
4. COMMON STOCK
During the year ended February 28, 2005 the Company issued 7,610,000 shares of
common stock for total cash proceeds of $29,800.
On April 29, 2008 the Company's articles of incorporation were amended to
increase the authorized share capital to 200,000,000 common shares and reduce
par value to $0.0001. This amendment has been applied retroactively to all share
and per share amounts.
On June 24, 2008 the Company issued 32,500,000 common shares at $.001 per share
to six individuals pursuant to a private placement under Regulation S of the
Securities and Exchange Commission for total cash proceeds of $32,500.
On June 24, 2008, the Company issued 85,000,000 common shares at $.0001 to the
Company's President for total cash proceeds of $8,500.
On October 24, 2008 the Company received $5,000 pursuant to a subscription for
5,000,000 common shares at $0.001 per share.
At February 28, 2009, there were no outstanding stock options or warrants.
5. INCOME TAXES
Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has net operating losses of
$77,000 which commence expiring in 2025. Pursuant to SFAS No. 109, the Company
is required to compute tax asset benefits for net operating losses carried
forward. Potential benefit of net operating losses have not been recognized in
these financial statements because the Company cannot be assured it is more
likely than not it will utilize the net operating losses carried forward in
future years.
The components of the net deferred tax asset at February 28, 2009 and February
29, 2008 and the statutory tax rate, the effective tax rate and the elected
amount of the valuation allowance are scheduled below:
February 28, February 29,
2009 2008
-------- --------
$ $
Cumulative Net Operating Losses 77,000 30,000
Statutory Tax Rate 34% 35%
Effective Tax Rate -- --
Deferred Tax Asset 26,180 10,500
Valuation Allowance (26,180) (10,500)
-------- --------
Net Deferred Tax Asset -- --
======== ========
34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have engaged Weaver & Martin LLC, as our principal independent registered
public accounting firm effective April 13, 2009. Concurrent with this
appointment, Dale Matheson Carr-Hilton Labonte LLP, Chartered Accountants
("DMCL"), have been dismissed as our principal independent registered public
accounting firm effective April 13, 2009. The decision to change our principal
independent registered public accounting firm was approved by our Board of
Directors.
The report of DMCL on our financial statements for the past two fiscal years
ended February 29, 2008 and February 28, 2007 did not contain an adverse opinion
or disclaimer of opinion, nor was it modified as to uncertainty, audit scope, or
accounting principles, other than to state that there is substantial doubt as to
our ability to continue as a going concern.
During our two most recent fiscal years and the subsequent period through to the
date of DMCL's termination, there were no disagreements between us and DMCL,
whether or not resolved, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if not
resolved to the satisfaction of DMCL, would have caused them to make reference
thereto in their reports on our audited financial statements.
We provided DMCL with a copy of the Current Report on Form 8-K and requested
that DMCL furnish it with a letter addressed to the Securities and Exchange
Commission stating whether or not they agree with the statements made in the
Current Report on Form 8-K and, if not, stating the aspects with which they do
not agree. We received the requested letter from DMCL wherein they have
confirmed their agreement to our disclosures in the Current Report. A copy of
DMCL's letter was filed as an exhibit to the Current Report.
Weaver & Martin LLC have not been consulted on any matter relating to the
application of accounting principles to a specific transaction, either completed
or contemplated, or the type of audit opinion that might be rendered on our
financial statements.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Exchange Act) that is designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.
An evaluation was conducted under the supervision and with the participation of
our management, including Garry Wong, our President/Chief Executive
Officer/Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of February 28, 2009.
Based on that evaluation, Mr. Wong concluded that our disclosure controls and
procedures were not effective as of such date to ensure that information
required to be disclosed in the reports that we file or submit under the
Exchange Act, is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms. This evaluation included review of the
35
documentation of controls, evaluation of the design effectiveness of controls,
testing of the operating effectiveness of controls and a conclusion on this
evaluation. Based on this evaluation, management concluded that our internal
control over financial reporting was not effective as of February 28, 2009 due
to lack of audit committee. Such officer also confirmed that there was no change
in our internal control over financial reporting during fiscal year ended
February 28, 2009 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting. However,
management is in the process of creating a new audit committee to remediate such
material weakness; furthermore, we intend to hire a consulting firm to assess,
review and conduct appropriate operational testing effectiveness of our internal
control over financial reporting.
This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Security and Exchange
Commission that permits us to provide only management's report in this Annual
Report.
CHANGES IN INTERNAL CONTROLS
No change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal year
ended February 28, 2009; however, we do not currently have an audit committee
and management recognizes this as a material weakness which affects our internal
control over financial reporting. Management intends to remediate such material
weakness during fiscal year 2009.
AUDIT COMMITTEE REPORT
Our Board of Directors has not established an audit committee. The respective
role of an audit committee has been conducted by our Board of Directors. We are
contemplating establishment of an audit committee during fiscal year 2009/2010.
When established, the audit committee's primary function will be to provide
advice with respect to our financial matters and to assist our Board of
Directors in fulfilling its oversight responsibilities regarding finance,
accounting, and legal compliance. The audit committee's primary duties and
responsibilities will be to: (i) serve as an independent and objective party to
monitor our financial reporting process and internal control system; (ii) review
and appraise the audit efforts of our independent accountants; (iii) evaluate
our quarterly financial performance as well as its compliance with laws and
regulations; (iv) oversee management's establishment and enforcement of
financial policies and business practices; and (v) provide an open avenue of
communication among the independent accountants, management and our Board of
Directors.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
All of our directors hold office until the next annual general meeting of the
shareholders or until their successors are elected and qualified. Our officers
are appointed by our board of directors and hold office until their earlier
death, retirement, resignation or removal.
Our sole director and executive officer, his age and positions held are as
follows:
36
Name Age Position with the Company
---- --- -------------------------
Garry E. Wong 62 President/Chief Executive Officer/Chief Financial
Officer and a Director
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of our
director, executive officer and key employee during at least the past five
years, indicating his principal occupation during the period, and the name and
principal business of the organization by which he was employed, and including
other directorships held in reporting companies.
GARRY E. WONG. Mr. Wong has been our President, Chief Executive Officer, Chief
Financial Officer, Secretary, Treasurer and a director since inception. He has
been a Practicing Member of the Law Society of British Columbia, Canada
continuously from 1967 to date. During this time he practiced as a partner in
three different Vancouver law firms and for 1993 to 2002 practiced in a
partnership called Wong Hui & Associates. Since 2002 he has been practicing as a
sole proprietorship. Mr. Wong specialized in corporate and commercial law, real
estate and real estate financing. He has served as a director of various
companies and has also served as a director and president of a number of not for
profit organizations such as the Zajac Foundation and the Mount St Joseph
Hospital foundation. Mr. Wong received his Bachelor of Arts Degree from the
University of Washington in 1966 and received his Bachelor of law from Osgoode
Hall at York University, Toronto, Ontario, Canada.
FAMILY RELATIONSHIPS
There are no family relationships among our directors and officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, none of our directors, executive officers or persons
that may be deemed promoters is or have been involved in any legal proceeding
concerning: (i) any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time; (ii) any conviction in
a criminal proceeding or being subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses); (iii) being subject to
any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction permanently or temporarily enjoining,
barring, suspending or otherwise limiting involvement in any type of business,
securities or banking activity; or (iv) being found by a court, the Securities
and Exchange Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law (and the judgment has
not been reversed, suspended or vacated).
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our directors and officers, and the
persons who beneficially own more than ten percent of our common stock, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Copies of all filed reports are required to be furnished to us
pursuant to Rule 16a-3 promulgated under the Exchange Act. Based solely on the
reports received by us and on the representations of the reporting persons, we
believe that these persons have complied with all applicable filing requirements
during the fiscal year ended February 28, 2009.
37
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to our Chief Executive
Officer and those executive officers that earned in excess of $100,000 during
fiscal years ended February 28, 2009 and February 29, 2008 (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
Garry Wong, 2007 -0- -0- -0- -0- -- -- -0- 60,000
President 2008 -0- -0- -0- -0- -- -- -0- 170,000
CEO and CFO
STOCK OPTIONS/SAW GRANTS IN FISCAL YEAR ENDED FEBRUARY 28, 2009
The following table sets forth information as at February 28, 2009 relating to
Stock Options that have been granted to the Named Executive Officers.
OUTSTANDING EQUITY AWARDS AT YEAR END TABLE
Option Awards Stock Awards
----------------------------------------------------------------- -------------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Unearned Unearned
Plan Awards; of Market Shares, Shares,
Number of Number of Number of Shares Value of Units or Units or
Securities Securities Securities or Units Shares or Other Other
Underlying Underlying Underlying of Stock Units of Rights Rights
Unexercised Unexercised Unexercised Option Option That Stock That That That
Options Options Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Exercisable(#) Unexercisable(#) Options(#) Price($) Date Vested(#) Vested($) Vested(#) Vested(#)
- ---- -------------- ---------------- ---------- ----- ---- --------- --------- --------- ---------
Garry Wong, -0- -0- -0- -0- -0- -0- -0-
President,
CEO and CFO
38
The following table sets forth information relating to compensation paid to our
directors during fiscal years ended February 28, 2009:
DIRECTOR COMPENSATION TABLE
Fees Non-Equity Nonqualified
Earned Incentive Deferred
Paid in Stock Option Plan Compensation All Other
Name Cash($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
---- ------- --------- --------- --------------- ----------- --------------- --------
Garry Wong -0- -0- -0- -0- -0- -0- -0-
EMPLOYMENT AND CONSULTING AGREEMENTS
As of the date of this Annual Report, we are not a party to any employment or
consulting agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
As of the date of this Annual Report, the following table sets forth certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our current directors and executive officers. Each person
has sole voting and investment power with respect to the shares of common stock,
except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise indicated. As of the
date of this Annual Report, there are 130,110,000 shares of common stock issued
and outstanding.
Name and Address Amount and Nature of Percentage of
of Beneficial Owner(1) Beneficial Ownership(1) Beneficial Ownership
---------------------- ----------------------- --------------------
DIRECTORS AND OFFICERS:
Garry Wong 88,500,000 68.0%
1333 W. Broadway, Suite 678
Vancouver, British Columbia
Canada V6H 4C1
All executive officers and
directors as a group (1 persons) 88,500,000 68.0%
- ----------
(1) Under Rule 13d-3, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of
39
shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power
to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the date
as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually outstanding as of
the date of this Annual Report. As of the date of this Annual Report, there
are 130,110,000 shares issued and outstanding.
CHANGES IN CONTROL
We are unaware of any contract, or other arrangement or provision, the operation
of which may at a subsequent date result in a change of control of our company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
None of our directors, officers or principal stockholders, nor any associate or
affiliate of the foregoing, have any interest, direct or indirect, in any
transaction or in any proposed transactions, which has materially affected or
will materially affect us during fiscal year ended February 28, 2009.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
During fiscal year ended February 28, 2009, we incurred approximately $10,175 in
fees to our principal independent accountant for professional services rendered
in connection with the audit of our financial statements for fiscal year ended
February 28, 2009 and for the review of our financial statements for the
quarters ended May 31, 2008, August 31, 2008 and November 30, 2008.
During fiscal year ended February 29, 2008, we incurred approximately $7,350 in
fees to our principal independent accountants for professional services rendered
in connection with the audit of our financial statements for fiscal year ended
February 29, 2008 and for the review of our financial statements for the
quarters ended May 31, 2007, August 31, 2007 and November 30, 2007.
During fiscal year ended February 28, 2009, we did not incur any other fees for
professional services rendered by our principal independent accountant for all
other non-audit services which may include, but is not limited to, tax-related
services, actuarial services or valuation services.
40
ITEM 15. EXHIBITS AND FINANCIAL SCHEDULES
The following exhibits are filed as part of this Annual Report.
Exhibit No. Document
- ----------- --------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
10.1 Mineral Property Purchase Agreement dated March 18, 2008 between
Laurence Stephenson and Deer Bay Resources Inc. (1)
10.2 Geology Report on Emory Creek Claims by Glen Macdonald, P. Geo,
dated June 5, 2008. (1)
16.1 Letter of Dale Matheson Carry-Hilton Labonte LLP, Chartered
Accountants, dated April 13, 2009. (2) Chartered Accountants,
dated April 13, 2009. (2)
31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act.
31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act.
32.1 Certification of Chief Executive Officer and Chief Financial
Officer Under Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act.
- ----------
(1) Incorporated by reference from Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on November 28, 2008. .
(2) Incorporated by reference from Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 20, 2009.
41
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DEER BAY RESOURCES INC.
Dated: June 12, 2009 By: /s/ GARRY E. WONG
----------------------------------
Garry E. Wong,
President/Chief Executive Officer
Dated: June 12, 2009 By: /s/ GARRY E. WONG
----------------------------------
Garry E. Wong,
Treasurer/Chief Financial Officer
42