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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark One)
 
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2014
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
For the transition period from __________ to __________
 
Commission file number 000-52848
 
CALIFORNIA MINES CORP.
(Exact name of small business issuer as specified in its charter)

Nevada
 
26-1125521
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

111 Bank Street, Suite 326, Grass Valley, CA, 95959
(Address of principal executive offices)

09 574 2687327
(Issuer's telephone number)
___________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
 
Check whether the issuer (1) 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 (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
(Do not check if a smaller reporting company)    
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date 142,440,000 common shares issued and outstanding as of May 15, 2014
 
Check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
 


 
 

 
 
CALIFORNIA MINES CORP.
(formerly Palmdale Executive Homes, Corp.)
(An Exploration Stage Company)
BALANCE SHEETS
(Unaudited)
 
   
March 31,
   
December 31,
 
   
2014
   
2013
 
ASSETS
Current Assets
           
Cash
  $ 54,204     $ 60,990  
Total Current Assets
    54,204       60,990  
                 
Mineral property
    160,000       160,000  
                 
TOTAL ASSETS
  $ 214,204     $ 220,990  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
                 
LIABILITIES
               
Current Liabilities
               
Accounts payable and accrued expenses
  $ 42,010     $ 33,873  
Accounts payable and accrued expenses - related parties
    279,043       246,327  
Advances - related party
    1,860       1,860  
Promissory note
    125,000       125,000  
Promissory note - related parties
    82,569       82,569  
Convertible debt, net of discount
    76,747       50,488  
Derivative liability
    174,938       157,101  
Total Current Liabilities
    782,167       697,218  
                 
Total Liabilities
    782,167       697,218  
                 
Commitments and Contingencies
               
                 
STOCKHOLDERS' DEFICIT
               
Common stock, par value $0.001, 1,000,000,000 shares authorized and
               
142,440,000 shares issued and outstanding
    142,440       142,440  
Additional paid-in capital
    (31,570 )     (31,570 )
Deficit accumulated during the exploration stage
    (678,833 )     (587,098 )
Total Stockholders' Deficit
    (567,963 )     (476,228 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 214,204     $ 220,990  
 
The accompanying notes are an integral part of the financial statements.
 
 
2

 
 
CALIFORNIA MINES CORP.
(formerly Palmdale Executive Homes, Corp.)
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
 
   
Three Months
March 31,
   
January 14, 2000
(Inception)
to March 31,
 
   
2014
   
2013
   
2014
 
                   
Operating expenses
                 
General and administrative
  $ 7,923     $ 8,255     $ 196,429  
Consulting fees
    30,000       30,000       306,666  
Mining Exploration
    -       -       23,129  
Loss from operations
    (37,923 )     (38,255 )     (526,224 )
                         
Other expenses
                       
Interest expense
    (35,975 )     (5,216 )     (127,671 )
Derivative expense
    (17,837 )     -       (24,938 )
Total other expense
    (53,812 )     (5,216 )     (152,609 )
                         
Net Loss
  $ (91,735 )   $ (43,471 )   $ (678,833 )
                         
Net loss per share, basic and diluted
  $ (0.00 )   $ (0.00 )        
                         
Weighted average number of shares of
                       
common stock outstanding
    142,440,000       142,440,000          
 
The accompanying notes are an integral part of the financial statements.
 
 
3

 
 
CALIFORNIA MINES CORP.
(formerly Palmdale Executive Homes, Corp.)
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)

               
January 14, 2000
 
   
Three Months Ended
   
(Inception) to
 
   
March 31,
   
March 31,
 
   
2014
   
2013
   
2014
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net loss
  $ (91,735 )   $ (43,471 )   $ (678,833 )
Adjustments to reconcile net loss to net cash
                       
used in operating activities
                       
Issuance of common stock for services
    -       -       1,870  
Amortization of debt discount
    26,259       -       76,747  
Derivative expense
    17,837       -       24,938  
Changes in assets and liabilities
                       
Accounts payable
    8,137       (854 )     42,010  
Accounts payable and accrued interest - related party
    32,716       32,716       279,043  
Net cash used in operating activities
    (6,786 )     (11,609 )     (254,225 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Purchase of mineral properties
    -       -       (160,000 )
Net cash used in investing activites
    -       -       (160,000 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Issuance of common stock for cash
    -       -       109,000  
Proceeds from advances - related party
    -       -       33,471  
Proceeds from convertible debt
    -       -       150,000  
Proceeds from promissory notes
    -       -       125,000  
Proceeds from promissory note - related party
    -       -       50,958  
Net cash provided by financing activities
    -       -       468,429  
                         
NET CHANGE IN CASH
    (6,786 )     (11,609 )     54,204  
                         
CASH - BEGINNING OF PERIOD
    60,990       42,920       -  
                         
CASH - END OF PERIOD
  $ 54,204     $ 31,311     $ 54,204  
                         
SUPPLEMENTAL CASH FLOW INFORMATION:
                       
Cash paid for interest
  $ -     $ -     $ -  
Cash paid for taxes
  $ -     $ -     $ -  
                         
NON-CASH TRANSACTIONS:
                       
Conversion of advances to promissory note - related party
  $ -     $ -     $ 31,611  
 
The accompanying notes are an integral part of the financial statements.
 
 
4

 
 
CALIFORNIA MINES CORP.
(FORMERLY PALMDALE EXECTIVE HOMES, CORP.).
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 – Basis of Presentation

The accompanying unaudited interim consolidated financial statements of California Mines Corp. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2013 as reported in Form 10-K, have been omitted.

Going Concern

The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have sufficient cash to meet its current commitments nor does it have assets or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan, or merge with an operating company. There can be no assurance that the Company will be successful in either situation which raises substantial doubt about the Company’s ability to continue as a going concern.

Newly Adopted Accounting Pronouncements
 
Management does not expect the future adoption of any recently issued accounting pronouncement to have a significant impact on its financial position, results of operations, or cash flows.
 
Note 2 – Mining Lease and Option to Purchase Agreement
 
Effective August 11, 2011, the Company entered into a Mining Lease and Option to Purchase Agreement (the “Property Agreement”) with the Ellers Family Revocable Trust of March 24, 2000 (the “Owner”). Under the terms of the Agreement, the Company leased a mining property consisting of 65 acres of real property interests and 13 unpatented mining claims situated in Tuolumne County, California for a term of three years.
 
In accordance with the Agreement the Company is obligated to expend $150,000 per year of the lease developing the property, and pay annual advance royalty amounts of $50,000 for the first year (paid by an officer of the Company on behalf of the Company as of December 31, 2011), $50,000 in the second year (paid) and $60,000 in the final year (paid).
 
In addition, the Company must pay a net smelter return royalty of 10% during the term of the lease until expiration of the Agreement or the exercise of the option to purchase. The option to purchase may be exercised by the Company, in its sole discretion, at any time during the three year term of the Agreement. The option to purchase is exercisable for a 75% interest in the property with the Owner retaining a 25% interest as tenants in common. The purchase price of the 75% interest is $2,000,000 in cash plus the ongoing payment of a net smelter return royalty of 2.5% to the Owner.
 
In connection with the Property Agreement, the Company entered into a Finder’s Fee Agreement with Tosca Capital Corp. (“Tosca”), a private British Columbia company, to formalize Tosca’s role in identifying a suitable mining property for the Company to lease or purchase, whereby the Company issued 11,000 shares of the Company’s common stock to Tosca on August 11, 2011. The grant date fair value of the common stock was $1,870 and was expensed during the period.
 
 
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Effective August 9, 2012 the Company and the Owner amended the Property Agreement whereby the Company’s obligation for the annual exploration expenditures of $150,000 are to be met by December 31, 2012, December 31, 2013 and August 11, 2014.

Effective December 31, 2012, the Company and the Owner further amended the Property Agreement whereby the Company’s obligation for the annual exploration expenditures were met with its actual expenditures of $21,194 by December 31, 2012, and $200,000 and $150,000 are to be met by December 31, 2013 and December 31, 2014 respectively.

As of the date of this report, the Company is in discussion with the Owner to amend the Property Agreement and the Owner does not consider the Property Agreement to be in default, therefore the Property Agreement is in good standing.

Note 3 – Promissory Notes

On August 25, 2012, the Company issued an unsecured promissory note for cash proceeds of $75,000 with a term of one year and simple annual interest rate of 8% repayable on August 25, 2013. As at March 31, 2014, total interest expense of $9,600 was accrued on the promissory note and is included in accounts payable. This promissory note is in default.

On November 26, 2012, the Company issued an unsecured promissory note for cash proceeds of $50,000 with a term of one year and simple annual interest rate of 8% repayable on November 26, 2013. As at March 31, 2014, total interest expense of $5,383 was accrued on the promissory note and is included in accounts payable. This promissory note is in default.

Note 4 – Related Party Advance and Promissory Note

On August 11, 2011, the Company issued an unsecured promissory note for the full balance of $82,569 owed to Mr. Medina. The promissory note of $82,569 has a term of one year and bears simple annual interest rate of 8%. On August 11, 2012, the Company defaulted on the promissory note with the interest rate increased to 13% under the term of the promissory note. Interest expense of $2,716 was incurred during the three months ended March 31, 2014. As at March 31, 2014, total interest of $24,377 was accrued on the promissory note and is included in accounts payable and accrued expenses – related party. No demand has been made on this note through the date of filing.

During the year ended December 31, 2011, Mr. Medina advanced an additional $1,860 to the Company, which was outstanding on March 31, 2014. The advance is non-interest bearing, unsecured and due on demand.
 
Note 5 – Convertible Debt

On August 9, 2013, the Company issued an unsecured convertible note for principal amount of $150,000 with a term of two years and simple annual interest rate of 12%. The principal amount and accrued interest is convertible into the Company’s common shares at the conversion price of 75% of the average closing prices for the five trading days immediately preceding the conversion date.

The convertible note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature and conversion price. At the date of issuance of the convertible note, derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount.
 
 
6

 

The fair value of the conversion feature was recorded as discount to the convertible debt and derivative liability. As of March 31, 2014, the derivative liability was estimated using Black-Scholes option pricing model at $174,938 with the following assumptions: exercise price of $0.15, risk-free interest rate of 0.33%, dividend rate of 0%, expected life of 1.3 year and expected volatility of 343%.

The Company recorded a net change in fair value of $17,837 during the three months ended March 31, 2014.

Note 6 – Related Party Transactions

On September 7, 2011 the Company entered into a consulting agreement with the Chief Operating Officer (“COO”) of the Company at consulting fee of $5,000 per month. During the three months ended March 31, 2014, consulting fees of $15,000 were recorded and $127,333 was owed to the COO at March 31, 2014.
 
On September 7, 2011 the Company entered into a consulting agreement with the Vice President of Geology (the “VP”) of the Company at consulting fee of $5,000 per month. During the three months ended March 31, 2014, consulting fees of $15,000 were recorded and $127,333 was owed to the COO at March 31, 2014.
 
 
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Item 2. Management's Discussion and Analysis or Plan of Operation.
 
FORWARD-LOOKING STATEMENTS
 
This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
 
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
 
Our financial statements are stated in United States Dollars (US$) and are prepared in conformity with generally accepted accounting principles in the United States of America for interim financial statements. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.
 
As used in this quarterly report, the terms "we", "us", "our company", “Company” and "California Mines" mean California Mines Corp., unless otherwise indicated. All dollar amounts refer to US dollars unless otherwise indicated.

General
 
Our Business – General

We were incorporated on January 14, 2000 under the laws of the state of Nevada. We are an exploration stage company with no revenues to date. As of the date hereof, we can be defined as a "shell" company, an entity which is generally described as having no or nominal operations and with no or nominal assets or assets consisting solely of cash and cash equivalents.

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.

Current Business
 
We are in the business of acquisition and exploration of mineral properties. We have not generated revenues since our inception.
 
Our ticker symbol is “CLMC”. Our CUSIP number is 130446107.
 
 
8

 
 
Employees
 
Currently our company does not have full-time or part-time employees. Our President Mr. Santiago Medina, our Chief Operating Officer Mr. Defensor and our Vice President-Geology Mr. Calpito are consultants of our company. If business is successful and we experience significant growth, we will hire new personnel to improve, implement and administer our operational, management, financial and accounting systems.
 
Results of Operations
 
Three months ended March 31, 2014 and 2013
 
For the three months ended March 31, 2014, we incurred expenditures of $91,735 and posted losses of $91,735. For the three months ended March 31, 2013, we incurred expenditures of $43,471 and posted losses of $43,471.
 
Operating expenses for the three months ending March 31, 2014 were $37,923 compared to operating expenses for the three months ended March 31, 2013 of $38,255. Of the operating expenses, general and administrative expense was consistent from $8,255 in 2013 to $7,923 in the same three month period in 2014. We incurred total consulting fees of $30,000 payable to our Chief Operating Officer and Vice President of Geology for the three months ended March 31, 2014 and 2013. For the three months ended March 31, 2014, we recorded interest expenses of $35,975 on three promissory notes and one convertible note compared to interest expense of $5,216 on three promissory note for the three months ended March 31, 2013.

We will require additional financing before we generate significant revenues. We intend to raise the capital required to meet any additional needs through sales of our securities in secondary offerings or private placements. We have no agreements in place to do this at this time.
 
There are no assurances that we will be able to obtain additional funds required for our continued operations. In such event that we do not raise sufficient additional funds by secondary offering or private placement, we will consider alternative financing options, if any, or be forced to scale down or perhaps even cease our operations.

We will require additional financing before we generate significant revenues. We intend to raise the capital required to meet any additional needs through sales of our securities in secondary offerings or private placements. We have no agreements in place to do this at this time.
 
There are no assurances that we will be able to obtain additional funds required for our continued operations. In such event that we do not raise sufficient additional funds by secondary offering or private placement, we will consider alternative financing options, if any, or be forced to scale down or perhaps even cease our operations.
 
Liquidity and Capital Resources
 
During the three months ended March 31, 2014 we used $6,786 in our operations.
 
At March 31, 2014, we had working capital deficit of $727,963 compared to working capital deficit of $636,228 on December 31, 2013.
 
 
9

 
 
At March 31, 2014, our total current assets were $54,204 compared to $60,990 on December 31, 2013.
 
At March 31, 2014, our total current liabilities were $782,167 compared to $697,218 on December 31, 2013.
 
At March 31, 2014, we had promissory notes payable to non-related parties of $125,000, promissory note payable to our President of $82,569, and convertible note payable of $150,000.
 
Plan of Operations
 
We intend to develop the mining property we have leased in Tuolumne County, California known as the Providence Mines property. We anticipate that we will expend approximately $240,000 on operations over the next twelve months, including $200,000 for exploration of the leased mineral property and $40,000 for working capital.
 
Over the next twelve months we intend to raise funds through sales of our common stock in private placements to qualified investors or debt financing.
 
Recently Issued Accounting Standards
 
Management does not anticipate that the recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial statements.

Off Balance Sheet Arrangements

As of the date of this Quarterly 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

As at March 31, 2014 we have not generated income from our operations, had a working capital deficit of $727,963 and accumulated loss of $678,833 since inception. Due to the uncertainty of our ability to generate sufficient revenues from our operating activities and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, in their report on our financial statements for the fiscal year ended December 31, 2013, our registered independent auditors included additional comments indicating concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our registered independent auditors. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Management plans to continue to seek financing on favorable terms; however, there is no assurance that such financing can be obtained on favorable terms. If we are unable to generate sufficient revenue or obtain additional funds for our working capital needs, we may need to cease or curtail operations.
 
 
10

 

Item 3. Quantitative and Qualitative Disclosures about Market Risks
 
As a “smaller reporting company”, we are not required to provide the information under this Item.
 
Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures
 
Under the supervision and with the participation of our management, including our principal executive officer who is also our principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer who is also our principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to the Company, particularly during the period when this report was being prepared. However, because we have limited transactions which are all approved and reviewed by our directors and sole officer, the impact of the limitations are not material.
 
Changes in internal control over financial reporting
 
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
 
 
11

 
 
PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
None.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None from January 1, 2014 to the date of this filing.
 
Item 3. Defaults Upon Senior Securities
 
None.
 
Item 4. Mine Safety Disclosures
 
None.
 
Item 5. Other Information
 
None.
 
 
12

 
 
Item 6. Exhibits.
 
Exhibits required by Item 601 of Regulation S-K
 
Exhibit Number and Exhibit Title

Exhibit No.
 
Document Description
     
31.1
 
Section 302 Certification of Chief Executive Officer and Chief Financial Officer
     
32.1
 
Section 906 Certification of Chief Executive Officer and Chief Financial Officer
 
101.INS **
 
XBRL Instance Document
     
101.SCH **
 
XBRL Taxonomy Extension Schema Document
     
101.CAL **
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **
 
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **
 
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **
 
XBRL Taxonomy Extension Presentation Linkbase Document
____________
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
13

 
 
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.
 
 
  CALIFORNIA MINES CORP.  
       
Date: May 16, 2014 By:
/s/ Santiago Medina
 
   
Santiago Medina
Chief Executive Officer, Chief Financial Officer, Treasurer and Director
(Principal Executive and Principal Financial and Accounting Officer)
 
 
 
 
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