UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2015

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 000-26669

 

CAN-CAL RESOURCES LTD.

(Exact name of registrant as specified in its charter)

 

Nevada	88-0336988
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

#802, 228 – 26 Avenue S.W.

Calgary, Alberta, Canada T2S 3C6

(Address of principal executive offices)

 

(403) 561-9490

(Registrant’s telephone number, including area code)

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

 

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data Filed required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period the registrant was requires to submit and post such files)

x Yes ¨ No

 

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

 

The number of shares of Common Stock, $0.001 par value, outstanding on December 31, 2014 was 42,027,060.

 

CAN-CAL RESOURCES LTD.

FORM 10-Q

TABLE OF CONTENTS

 

				Page
PART I – FINANCIAL INFORMATION
	Item 1. Financial Statements
		Balance Sheets as of March 31, 2015 and December 31, 2014 (Unaudited)		3
		Statements of Operations for the three months ended March 31, 2015 and 2014 (Unaudited)		4
		Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (Unaudited)		5
		Notes to Financial Statements (Unaudited)		6
	Item 2. Management’s Discussion and Analysis			10
	Item 3. Quantitative and Qualitative Disclosures about Market Risk			12
	Item 4. Controls and Procedures			12
PART II – OTHER INFORMATION
	Item 1. Legal Proceedings			13
	Item 1A. Risk Factors			13
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			13
	Item 3. Defaults Upon Senior Securities			13
	Item 4. Mine Safety Disclosures			13
	Item 5. Other Information			13
	Item 6. Exhibits			13

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

BALANCE SHEETS (Unaudited)

 

		March 31,				December 31,
		2015				2014
ASSETS
Current assets:
Cash		$	5,558			$	585
Other current assets			–				–
Total current assets			5,558				585
Property and equipment, net of accumulated depreciation of $33,907 and $33,877, respectively			252				282
Total assets		$	5,810			$	867
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable		$	59,096			$	56,932
Accounts payable, related parties			180,506				180,506
Accrued expenses			7,588				7,588
Accrued expenses, related parties			713,819				680,663
Unearned rental revenues			2,292				9,167
Unearned revenues, related party			118,427				115,650
Notes payable, related parties, net of $82 and $448 of unamortized common stock warrants at March 31, 2015 and December 31, 2014, respectively			120,562				113,334
Total current liabilities			1,202,290				1,163,842
Total liabilities			1,202,290				1,163,842
Commitments and contingencies (See Note 8)
Stockholders' (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding			–				–
Common stock, $0.001 par value, 100,000,000 shares authorized, 42,027,060 and 42,027,060 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively			42,027				42,027
Additional paid-in capital			9,710,504				9,710,504
Accumulated (deficit) during exploration stage			(10,949,011	)			(10,915,506	)
Total stockholders' (deficit)			(1,196,480	)			(1,162,975	)
Total liabilities and stockholders' (deficit)		$	5,810			$	867

 

See accompanying unaudited notes to financial statements.

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended
		March 31,
		2015				2014
Rental revenue			6,875				6,875
Operating expenses:
Exploration costs		$	1,288			$	3,568
General and administrative			5,907				35,778
Depreciation			30				94
Officer salary			30,000				30,000
Total operating expenses			37,225				69,440
Net operating loss			(30,350	)			(62,565	)
Other income (expense):
Interest expense			(3,154	)			(1,985	)
Total other income (expense)			(3,154	)			(1,985	)
Loss before provision for income taxes			(33,504	)			(64,550	)
Provision for income taxes			–				–
Net loss		$	(33,504	)		$	(64,550	)
Weighted average number of common shares outstanding - basic and fully diluted			42,027,060				42,027,060
Net (loss) per share - basic and fully diluted		$	(0.00	)		$	(0.00	)

 

See accompanying unaudited notes to financial statements.

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Three Months Ended
		March 31,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(33,504	)		$	(64,550	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			30				94
Decrease (increase) in assets:
Other current assets			–				4,295
Increase (decrease) in liabilities:
Accounts payable			2,164				1,182
Accrued expenses			–				5,117
Accrued expenses, related parties			33,155				32,400
Unearned rental revenues			(6,875	)			20,625
Unearned revenues, related party			2,777				3,480
Net cash (used in) provided by operating activities			(2,254	)			2,643
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable, related parties			7,227				8,624
Net cash provided by financing activities			7,227				8,624
Net increase in cash			4,973				11,267
Cash, beginning of period			585				1,388
Cash, end of period		$	5,558			$	12,655
Supplemental disclosures:
Interest paid		$	3,154			$	1,874
Income taxes paid		$	–			$	–

 

See accompanying unaudited notes to financial statements.

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 1 – Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and regulation S-X as promulgated by the Securities and Exchange Commissions (“SEC”). Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the Form 10-K for the year ended December 31, 2014 of Can-Cal Resources Ltd. (“Can-Cal” or the “Company”).

 

The interim financial statements present the balance sheets, statements of operations and cash flows of Can-Cal Resources Ltd. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

 

The interim financial information is unaudited. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2015 and the results of operations and cash flows presented herein have been included in the financial statements. Interim results are not necessarily indicative of results of operations for the full year.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 reporting period. Actual results could differ from those estimates.

 

Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation.

 

Nature of Business

 

Can-Cal Resources, Ltd. Is a Nevada corporation incorporated on March 22, 1995.

 

The Company is an exploration company engaged in the exploration for precious metals, specifically focused on mineral exploration projects. We have examined various prospective mineral properties for precious metals and acquired those deemed promising. We currently own, lease or have mining interest in two mineral properties in the southwestern United States – one being the Cerbat, Arizona property and the other the Pisgah, California property. The Company has abandoned the Owl Canyon – S & S Joint Venture entered into in 1996 with the Schwarz family choosing to use its resources on the Pisgah property (“Pisgah”). It has also abandoned the Wikieup, Arizona, project due to lack of funding.

 

As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage. An entity remains in the exploration stage until such time as proven or probable reserves have been established for its deposits. Upon the location of commercially mineable reserves, the Company plans to prepare for mineral extraction and enter the development stage. To date, the exploration stage of the Company’s operations consists of contracting with geologists who sample and assess the mining viability of the Company’s claims.

 

Note 2 – Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company incurred a net loss of $33,504 for the three months ended March 31, 2015. Also, the Company’s current liabilities exceed its current assets by $1,196,732 as of March 31, 2015. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities. Management has plans to seek additional capital through private placements and public offerings of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

The ability of the Company to continue as a going concern is dependent on securing additional sources of capital and the success of the Company’s plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 3 – Related Party Transactions

 

Material Supply Agreement

 

On April 9, 2013, the Company entered into a material supply agreement (the “the Original MSA”) with Candeo Lava Products Inc. (“Candeo”), which was amended on March 3, 2014 (the “Amended MSA”). Pursuant to the Amended MSA, Candeo is entitled to purchase material (“Material”) from the Pisgah Property at a price equal to the greater of $15 per ton and the net sales margin per ton removed from the Pisgah Property realized as follows: (i) 35% of the net sales margins during the first year of mining; and (ii) 50% of the net sales margins for the subsequent years during the term of the Amended MSA. Under the Amended MSA, Candeo has the right to remove an Initial Amount of up to 1,000,000 tons of Material from the Pisgah Property and Additional Amounts of 1,000,000 tons each, upon the successful removal of the Initial Amount from the Pisgah Property. Candeo’s right to remove the Additional Amounts from the Pisgah Property is on the basis that once Candeo has removed the first Additional Amount of the Material from the Pisgah Property, it shall have the right to remove subsequent Additional Amounts of Material from the Property, so long as it removes its then current Additional Amount. As such, Candeo’s right to extend the term of the Amended MSA is entirely based on Candeo’s successful performance of its Material removal commitments under the terms of the Amended MSA

 

Under the Amended MSA, Candeo is required to purchase a minimum of ten thousand (10,000) tons of Material during each of the first three years of the term of the agreement, all at a purchase price of $15.00 per ton, for a total payment of $150,000 per year in each of the first three years of the Term, with credit being given by the Company to Candeo for all pre-paid tons of Material that have already been purchased and paid for under the Original MSA. The Pre-Purchased Material will remain on the Pisgah Property until Candeo commences its production operations or engages the Company to mine and remove Material on Candeo’s behalf. In the event that Candeo engages the Company to mine and remove any of the Material, Candeo shall pay all of the Company’s reasonable costs and expenses in conducting such mining and removal operations plus a fee of 15%. All mining and removal operations on the Pisgah Property will be subject to all necessary regulatory and other third party approvals being obtained. The Pre-Purchased Payments will not be refundable to Candeo but shall be credited against the first Production Payments.

 

The term of the Amended MSA has been extended from an initial term of ten (10) years to twenty (20) years (the “Primary Term”) and Candeo has the option to extend the term for an additional thirty (30) years exercisable at any time with no less than three (3) months written notice prior to the expiration of the Primary Term, provided that Candeo is not in default under any of the provisions of the Amended MSA and that the whole of the Initial Amount has been removed from the Property.

 

All revenue is treated unearned until such time as the product is shipped.

 

Notes Payable, Related Parties

 

From time to time we have received and repaid loans from Officers and Directors to fund operations. These related party debts are fully disclosed in Note 5 below.

 

Compensation

 

On July 1, 2010, the Company entered into a twelve month employment agreement, subject to automatic monthly renewals, with the Company’s CEO, G. Michael Hogan. The terms of the agreement include a fixed annual salary of $120,000. The Company may elect to satisfy payment in shares of common stock in lieu of cash at a market value equal to $0.10 above the average closing trading price of the common stock for the preceding five (5) days from the date of such election. No payments have been made in cash or stock to date.

 

The Company owed accrued salaries to our CEO of $630,000 and $600,000 at March 31, 2015 and December 31, 2014, respectively.

 

On June 30, 2010, the Company entered into a consulting agreement, with a Board of Director’s consulting firm, Futureworth Capital Corp. The terms of the agreement include annual compensation of $60,000, payable monthly. The Company may elect to satisfy payment in shares of common stock in lieu of cash at a market value equal to $0.10 above the average closing trading price of the common stock for the preceding five (5) days from the date of such election. No payments have been made in cash or stock to date. As of March 31, 2015, we owe Futureworth Capital Corp. $180,000, as included in accounts payable, related parties, for service prior to, and during the service period under the consulting agreement. Mr. William Hogan resigned from the Board of Directors on February 27, 2013, and his compensation via his consulting agreement terminated as of December 31, 2012.

 

Share Based Compensation

 

All warrants previously issued by the Company have expired as of the fiscal year ending December 31, 2014. No new warrants have been issued as of March 31, 2015.

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 4 – Notes Payable, Related Parties

 

Notes payable, related parties consisted of the following as of March 31, 2015 and December 31, 2014, respectively:

 

		March 31,				December 31,
		2015				2014
Notes payable to the CEO, unsecured, bearing interest at 10%, due on demand.		$	110,562			$	103,334
Promissory note payable originated on November 30, 2012 with Futureworth Capital Corp., a consulting firm owned by our former Chairman of the Board of Directors, unsecured, bearing interest at 10%, matures on November 29, 2013. In connection with the promissory note, the Company granted warrants to purchase 20,000 shares of the Company’s common stock at an exercise price of $0.10. The warrants expire on November 29, 2014.			10,000				10,000
Total notes payable, related parties			120,562				113,334
Less: current portion			120,562				113,334
Notes payable, related parties, less current portion		$	–			$	–

 

Accrued interest on Notes Payable to Related Parties is $19,494 and $16,340 for the periods ending March 31, 2015 and December 31, 2014, respectively.

 

Note 5 – Changes in Securities

 

There have been no changes in securities since August of 2012.

 

Note 6 – Options

 

The 2003 Non-Qualified Option Plan was established by the Board of Directors in June 2003 and approved by shareholders in October 2003. A total of 1,500,000 shares of common stock are reserved for issuance under this plan. During the three months ended March 31, 2015 and during the year ended December 31, 2014, no Options were issued, exercised or cancelled.

 

Note 7 – Warrants

 

All Warrants previously granted and extended have expired, thus there are no outstanding Warrants as of March 31, 2015 and December 31, 2014.

 

Note 8 – Commitments

 

Mining claims - The Company has a lease and purchase option agreement covering six patented claims in the Cerbat Mountains, Hualapai Mining District and Mohave County Arizona. The Company pays $1,500 per quarter as minimum advance royalties. The Company has the option to purchase the property for $250,000 plus interest at a rate of 8% compounded annually from and after the date of its exercise of the option to purchase the property. If the Lessee exercises its option to purchase, all funds paid to Lessors shall be credited toward the purchase price as of the date the payments were made.

 

Note 9 – Subsequent Events

 

The Company has evaluated subsequent events from March 31, 2015 through the date whereupon the financial statements were issued.

 

a) Resignations

 

Subsequent of December 31, 2014, all previous officers and directors of the Company resigned.

 

On August 19, 2015 G. Michael Hogan resigned as an officer and director of the Company.

 

On September 10, 2015, Thompson MacDonald (Chairman of the Board of Directors) and Ronald Schinnour resigned from the Board of Directors to pursue other interests.

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

b) New Appointments

 

The new Officers and directors of the Company are listed below. Directors are elected to hold offices until the next annual meeting of shareholders and until their successors are elected or appointed and qualified. Officers are appointed by the board of directors until a successor is elected and qualified or until resignation, removal or death.

 

Name			Position and Tenure
Jonathan Legg			Director and Chairman of the Board.
Tim J. Nakaska			Director and Chairman of the Audit Committee.
Richard R. Singleton			Director and Chairman of the Compensation Committee.

 

Mr. Jonathan Legg, of Kelowna, British Columbia, was elected as a Director as of August 19, 2015, and as Chairman of the Board of Directors as of September 10, 2015. Mr. Legg is a Senior Advisor to PricewaterhouseCoopers Advisory Services Practice in Canada. He was a Senior Executive for both RBC Bank and Canadian Pacific Railway. He is experienced in strategy, risk management, business model innovation, operating effectiveness, restructuring, and corporate governance.

 

Mr. Tim J. Nakaska, ICD.D of Calgary, Alberta, was elected as a Director as of August 19, 2015, and as Chairman of the Audit Committee as of September 10, 2015, Mr. Nakaska was a Partner and Senior Vice President of PricewaterhouseCoopers, a major international accounting and consulting firm where he led the firm’s Corporate Advisory and Restructuring practice in Calgary. He is a Chartered Accountant and member of the Institute of Corporate Directors. Mr. Nakaska has extensive experience in providing advice and carrying out formal and informal financial restructuring and sales mandates for corporations, financial institutions, and governments. In addition, he has conducted numerous strategy and risk assessment, business and financial reviews, and due diligence assignments.

 

Mr. Richard R. Singleton, B.Arch., LEED, ICD.D of Calgary, Alberta was elected as a Director and Chairman of the Compensation Committee on September 10, 2015. Mr. Singleton has a Bachelor of Architecture degree from the University of Manitoba and went on to professional architecture career for 35 years. His work includes leading teams in creating Bankers Hall, the Hyatt Hotel, Trimac Building, Husky Oil Building complex, several Famous Players theatre complexes, the CSIS Headquarters, the Royal Canadian Mounted Police regional offices in Edmonton, Calgary, Toronto, and Halifax. He has been a member of numerous Boards of Directors.

 

c) Debt Settlements

 

1) Upon the resignation of G. Michael Hogan as an officer and director of the Company on August 19, 2015, all accrued and unpaid salaries to that date of $676,333 ($600,000 as at December 31, 2014) were settled in exchange for 600,000 common shares (worth approximately $18,000 based on August 19, 2015 share prices). This transaction has been recorded during the quarter ended September 30, 2015.

 

2) Mr. William Hogan resigned from the Board of Directors on February 27, 2013, and his compensation via his FutureWorth Capital Corp. consulting agreement terminated as of December 31, 2012. On August 19, 2015, FutureWorth Capital Corp. settled all accrued and unpaid compensation of $180,000 to that date ($180,000 as at December 31,2015) for 240,000 common shares (worth approximately $7,200 based on August 19, 2015 share prices). This transaction has been recorded during the quarter ended September 30, 2015.

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.

 

OVERVIEW AND OUTLOOK

 

The following discussion of the business, financial condition and results of operation of the Company should be read in conjunction with the financial statements of the Company for the years ended December 31, 2013 and 2012 and the and the notes to those statements that are included their respective Annual Reports on Form 10-K, as well as the financial statements and notes the financial statements included in this Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statement, including, but not limited to, the risk factors described in this Form 10-Q and in Item 1A of our Form 10-K for the year ended December 31, 2013 to which reference is made herein.

 

Overview

 

Can-Cal Resources Ltd. is a publicly traded exploration stage company engaged in seeking the acquisition and exploration of metals mineral properties. As part of its growth strategy, the Company will focus its future activities in the USA, with an emphasis on the Pisgah Property.

 

At March 31, 2015, we had cash on hand of $5,558 available to sustain operations. Accordingly, we are uncertain as to whether the Company may continue as a going concern. While we plan to seek additional investment capital, or possible funding or joint venture arrangements with other mining companies, we have no assurance that such investment capital or additional funding and joint venture arrangements will be available to the Company.

 

We expect in the near term to continue to rely on outside financing activities to finance our operations. We used officer loan proceeds and advance payments received on material sales to a related party realized during the first three months of 2015 to finance our operations.

 

In addition to our historic exploration activities, we are currently undertaking alternative revenue producing opportunities at our Pisgah Property. On January 23, 2012, the Company entered into a mineral lease agreement with a GoodCorp Inc. to purchase material from the property. This mineral lease agreement is for an initial period of ten (10) years, with an additional five (5) year extension at the option of the lessee. Sale prices of minerals are set at diminishing prices in $0.50 increments between $12 per ton and $10 per ton for each 20,000 tons of material removed. As of the date hereof, no material has been sold under this agreement and no revenue has been received by the Company.

 

On April 9, 2013, the Company entered into the Original MSA with Candeo, which was amended on March 3, 2014 by the Amended MSA. Pursuant to the Amended MSA, Candeo is entitled to purchase Material from the Pisgah Property at a price equal to the greater of $15 per ton and the net sales margin per ton removed from the Pisgah Property realized as follows: (i) 35% of the net sales margins during the first year of mining; and (ii) 50% of the net sales margins for the subsequent years during the term of the Amended MSA. Under the Amended MSA, Candeo has the right to remove an Initial Amount of up to 1,000,000 tons of Material from the Pisgah Property and Additional Amounts of 1,000,000 tons each, upon the successful removal of the Initial Amount from the Pisgah Property. Candeo’s right to remove the Additional Amounts from the Pisgah Property is on the basis that once Candeo has removed the first Additional Amount of the Material from the Pisgah Property, it shall have the right to remove subsequent Additional Amounts of Material from the Property, so long as it removes its then current Additional Amount. As such, Candeo’s right to extend the term of the Amended MSA is entirely based on Candeo’s successful performance of its Material removal commitments under the terms of the Amended MSA.

 

Under the Amended MSA, Candeo is required to purchase a minimum of ten thousand (10,000) tons of Material during each of the first three years of the term of the agreement, all at a purchase price of $15.00 per ton, for a total payment of $150,000 per year in each of the first three years of the Term, with credit being given by the Company to Candeo for all pre-paid tons of Material that have already been purchased and paid for under the Original MSA. The Pre-Purchased Material will remain on the Pisgah Property until Candeo commences its production operations or engages the Company to mine and remove Material on Candeo’s behalf. In the event that Candeo engages the Company to mine and remove any of the Material, Candeo shall pay all of the Company’s reasonable costs and expenses in conducting such mining and removal operations plus a fee of 15%. All mining and removal operations on the Pisgah Property will be subject to all necessary regulatory and other third party approvals being obtained. The Pre-Purchased Payments will not be refundable to Candeo but shall be credited against the first Production Payments.

 

The term of the Amended MSA has been extended from an initial term of ten (10) years to twenty (20) years and Candeo has the option to extend the term for an additional thirty (30) years exercisable at any time with no less than three (3) months written notice prior to the expiration of the Primary Term, provided that Candeo is not in default under any of the provisions of the Amended MSA and that the whole of the Initial Amount has been removed from the Property.

 

With reference to the Wikieup Property, Can-Cal has commissioned a Geologist to perform a three-phased project to evaluate the property and its surrounding areas. The use of Satellite Imaging Interpretation software will provide regional, geological mapping. The next phase is to take surface samplings from various areas and have the samples analyzed. The results will determine the potential for any commercially viable mineral deposits as well as prospective drilling locations.

 

 

Results of Operations for the Three Months Ended March 31, 2015 and 2014:

 

		Three Months Ended
		March 31,
		2015				2014				Increase / (Decrease)
		Amount				Amount				$				$
Rental revenue			6,875				6,875				–				–
Expenses:
Exploration costs		$	1,288			$	3,568				(2,280	)			(64%	)
General and Administrative			5,907				35,778				(29,871	)			(83%	)
Depreciation			30				94				(64	)			–
Officer salary			30,000				30,000				–				–
Total operating expenses			37,225				69,440				(32,215	)			(46%	)
Loss from operations			(30,350	)			(62,565	)			(32,215	)			(51%	)
Other income (expense):
Interest expense			(3,154	)			(1,985	)			1,169				59%
Total other income (expense)			(3,154	)			(1,985	)			1,169				59%
Net loss		$	(33,504	)		$	(64,550	)			(31,046	)			(48%	)

 

Exploration costs

 

Exploration costs for the three months ended March 31, 2015 decreased by $2,280 (or 64%). The decrease is due primarily due to no geological activity and the decrease in BLM claim fees during the first quarter of 2015.

 

Unless the Company is able to establish the economic viability of its mining properties, the Company will continue writing off its expenses of exploration and testing of its properties. Therefore, losses will continue unless the Company sells one or more of its properties or locates and delineates reserves and initiates mining operations. If that occurs, the Company may capitalize certain of those expenses.

 

The Company has no material commitments for capital expenditures other than expenditures it chooses or may choose to make, if funds are available, with respect to testing and or exploration of its mineral properties.

 

General and administrative expenses

 

General and administrative expenses for the three months ended March 31, 2015 decreased by $29,871 (or 83%). The decrease is principally due to reduction in administrative salaries with the Controller leaving and the closing of the Las Vegas, Nevada office

 

Officer salary

 

Officer salary for the three months ended March 31, 2015 and 2014 was $30,000 in accordance with the annual compensation of $120,000 to our Chief Executive Officer. No bonuses or stock awards were granted, and all compensation was accrued. No payments have been made in either cash or shares of the Company’s stock in either period.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The following table summarizes total current assets, total current liabilities and working capital at March 31, 2015 and December 31, 2014:

 

		March 31,				December 31,				Increase / (Decrease)
		2015				2014				$				%
Current Assets		$	5,558			$	585				4,973				850%
Current Liabilities		$	1,202,290			$	1,163,842				38,448				3%
Working Capital (deficit)		$	(1,196,732	)		$	(1,163,257	)			33,475				3%

 

 

Internal and External Sources of Liquidity

 

During the three months ended March 31, 2015, our operating activities used cash of $2,253 while our financing activities provided cash of $7,227. The cash used by operating activities during the three months ended March 31, 2015 was principally the payment of regulatory compliance fees of $2,777 and rental expense on the Cerbat Property of $1,500.

 

Financing Activities. During the three months ended March 31, 2015, we raised $7,227 received from loan advances from our CEO, Mr. Michael Hogan. These proceeds have been used to maintain operations and comply with our reporting requirements.

 

Cash Flow. Since inception, we have primarily financed our cash flow requirements through the issuance of common stock and the issuance of notes. With the expected growth of our current business we may, during our normal course of business, experience net negative cash flows from operations until some of our mining activities begin to produce revenues. Further, we will therefore be required to obtain financing to fund operations, both during periods of growth and/or contraction, through additional common stock offerings and bank or other debt borrowings, to the extent available, or to obtain additional financing to the extent necessary to augment our available working capital.

 

Satisfaction of our cash obligations for the next twelve months

 

As of March 31, 2015, our cash balance was $5,558. Our plan for satisfying our cash requirements for the next nine months of 2015 is through additional debt and/or equity financing and prepayments on material sales to Candeo Lava Products, Inc. We anticipate our current cash reserves and rental income will be sufficient to support operations through December 31, 2015. We are striving to obtain sources of additional capital in the future to fund growth and expansion through the issuance of additional equity or debt financing or credit facilities. We also are considering possible funding through joint venture arrangements with other mining companies or other natural resource companies. However, there can be no assurance that we will raise capital through any of these means.

 

As we maintain or expand our current operational activities, we may continue to experience net negative cash flows from operations, and unless we generate sufficient sales through our operations, will be required to obtain additional financing to fund operations through common stock offerings and debt borrowings to the extent necessary to provide working capital.

 

We anticipate incurring operating losses until we build our capital base. Our operating history makes predictions of future operating results difficult to ascertain and unreliable. In addition, since our net loss has increased we are finding it increasingly difficult to support and expand our operations. Thus, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of commercial viability. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, implement and successfully execute our business and marketing strategy, continuously develop and upgrade technology and products, respond to competitive developments, and continue to attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions in accordance with the required "disclosure controls and procedures" as defined in Rule 13a-15(e). The Company’s disclosure and control procedures are designed to provide reasonable assurance of achieving their objectives, and the Chief Executive Officer of the Company concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

 

At the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, management concluded that the Company’s disclosure controls and procedures must be reevaluated to ensure that the information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

On June 3, 2014, a group of Company shareholders under the direction of Ronald D. Sloan (a former Chief Executive Officer and director of the Company) (collectively the “Plaintiffs”) filed a shareholder derivative complaint in Nevada State Court against the Company, as well as its then current directors (Thompson MacDonald, G. Michael Hogan, and Ron Schinnour), William Hogan, FutureWorth Capital Corp. and Candeo (collectively the “Defendants”). The Plaintiffs are alleging, among other things, that the Defendants caused the Company to enter into a transaction with Candeo involving the Pisgah Property that was not in the best interests of the Company.  However, the transaction with Candeo is in the best interests of the Company (see above in "Note 3 – Related Party - Material Supply Agreement”).

 

There are many other allegations made by the Plaintiffs, all of which are considered by the Defendants to be frivolous with no basis in fact. In fact, due to the actions of the prior management of the Company, the Company would not have been able to continue operations and would have failed without the intervention of new management, including certain of the Defendants, and without entering into the transaction with Candeo.   Accordingly, no provision has been recorded in the financial statements of the Company for any payment to the Plaintiffs pursuant to the claim or otherwise.  Legal counsel for the Company is Justin Jones, Esq. of Wolf, Rifkin, Shapiro, Schulman, and Rabkin, LLP of Las Vegas, Nevada. 

 

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions.  The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations.  However, in the opinion of our Board of Directors, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

 

Item 1A. Risk Factors.

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

We did not sell any unregistered securities under private placement exemptions pursuant to Section 4(2) and Regulation S of the Securities Act of 1933 during the three month period ended March 31, 2015.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the three month period ended March 31, 2015.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine safety disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

			Incorporated by reference
Exhibit	Exhibit Description	Filed herewith	Form	Period ending	Exhibit	Filing date
10.1	Amended Material Supply Agreement, Candeo Lava Products, Inc. – January 25, 2014		10-Q	March 31, 2015	10.1	November 4, 2015
31.1	Certification of Jonathan Legg pursuant to Section 302 of the Sarbanes-Oxley Act	X
31.2	Certification of Jonathan Legg pursuant to Section 302 of the Sarbanes-Oxley Act	X
32.1	Certification of Jonathan Legg pursuant to Section 906 of the Sarbanes-Oxley Act	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X

 

 

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.

 

	CAN-CAL RESOURCES LTD.
	(Registrant)
Date: January 7, 2016	By:	/s/ Jonathan Legg
		Jonathan Legg, Board Chairman (On behalf of the Registrant and as Principal Financial Officer)