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EX-31.2 - CERTIFICATION - CAN CAL RESOURCES LTDcancal_10q-ex3102.htm
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EX-32 - CERTIFICATION - CAN CAL RESOURCES LTDcancal_10q-ex3201.htm

 

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 September 30, 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 Ave. 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 September 30, 2015 and December 31, 2014 (Unaudited)   3
    Statements of Operations for the three and nine months ended September 30, 2015 and 2014 (Unaudited)   4
    Statements of Cash Flows for the nine months ended September 30, 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   13
  Item 4. Controls and Procedures   13
       
PART II – OTHER INFORMATION    
  Item 1. Legal Proceedings   14
  Item 1A. Risk Factors   14
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   14
  Item 3. Defaults Upon Senior Securities   14
  Item 4. Mine Safety Disclosures   14
  Item 5. Other Information   14
  Item 6. Exhibits   14

 

 2 
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

BALANCE SHEETS (Unaudited)

 

   September 30,   December 31, 
   2015   2014 
ASSETS          
           
Current assets:          
Cash  $3,072   $585 
Other current assets   1,290     
Total current assets   4,362    585 
           
Property and equipment, net of accumulated depreciation of $33,967 and $33,507, respectively   191    282 
           
Total assets  $4,553   $867 
           
LIABILITIES AND STOCKHOLDERS' (DEFICIT)          
           
Current liabilities:          
Accounts payable  $39,539   $56,933 
Accounts payable, related parties   506    180,506 
Accrued expenses       7,588 
Accrued expenses, related parties   90,268    680,664 
Unearned rental revenues   16,042    9,167 
Unearned revenues, related party   198,653    115,650 
Notes payable, related parties   118,694    113,334 
Total current liabilities   463,702    1,163,842 
           
Total liabilities   463,702    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, 42,867,060 and 42,027,060 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively   42,867    42,027 
Additional paid-in capital   10,565,997    9,710,504 
Accumulated (deficit)   (11,068,013)   (10,915,506)
Total stockholders' (deficit)   (459,149)   (1,162,975)
           
Total liabilities and stockholders' (deficit)  $4,553   $867 

 

See accompanying notes to unaudited financial statements.

 

 3 
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF OPERATIONS

(Unaudited)

 

   For the Nine Months Ended 
   September 30, 
   2015   2014 
Rental revenue  $26,225   $20,625 
Operating expenses:          
Exploration costs  $7,274   $10,774 
General and administrative   84,934    96,137 
Depreciation   91    281 
Officer salary   76,333    90,000 
Total operating expenses   168,632    197,192 
           
Net operating loss   (142,407)   (176,567)
           
Other income (expense):          
Interest expense   (10,100)   (6,938)
           
Total other income (expense)   (10,100)   (6,938)
           
Profit (Loss) before provision for income taxes   (152,507)   (183,505)
Provision for income taxes        
Net Profit (Loss)  $(152,507)  $(183,505)
           
Weighted average number of common shares outstanding - basic and fully diluted   42,867,060    42,027,060 
           
Net (loss) per share - basic and fully diluted  $(0.00)  $(0.00)

 

See accompanying notes to unaudited financial statements.

 

 4 
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the Nine Months Ended 
   September 30, 
   2015   2014 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net profit (loss)  $(152,507)  $(183,505)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   91    281 
Decrease (increase) in assets:          
Other current assets   (1,290)   8,122 
Increase (decrease) in liabilities:          
Accounts payable   (17,394)   4,047 
Accounts payable, related parties        
Accrued expenses   (7,588)   3,973 
Accrued expenses, related parties   85,937    106,197 
Unearned rental revenues   6,875    6,875 
Unearned revenues, related party   83,003    26,370 
Net cash used in operating activities   (2,873)   (27,640)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from notes payable, related parties   5,360    27,187 
Net cash provided by financing activities   5,360    27,187 
           
Net increase (decrease) in cash   2,487    (453)
Cash, beginning of period   585    1,388 
Cash, end of period  $3,072   $935 
           
Supplemental disclosures:          
Interest paid  $   $ 
Income taxes paid  $   $ 
           
SIGNIFICANT NON-CASH FINANCING ACTIVITIES          
Accounts payable  $(180,000)  $ 
Reduction of notes payable to related party  $(676,333)  $ 
Stock issuance in relationship forgiveness of debt  $856,333   $ 

 

See accompanying unaudited notes to financial statements.

 

 5 
 

 

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 ALtd. 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 September 30, 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 (the “Pisgah Property”). 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 $152,507 for the nine months ended September 30, 2015. Also, the Company’s current liabilities exceed its current assets by $459,340 as of September 30, 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.

 

 6 
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 3 – Related Party

 

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.

 

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 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. The Company has accrued salaries of $676,333 and $600,000 at September 30, 2015 and December 31, 2014, respectively.

 

On August 19, 2015, G. Michael Hogan resigned as an officer and director of the Company and settled all accrued and unpaid salaries in exchange for 600,000 common shares (worth approximately $18,000 at current share price $0.03). This transaction has been recorded during this quarter.

 

 7 
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

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. As of September 30, 2015, the Company owes 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. On August 19, 2015, FutureWorth Capital Corp. settled all accrued and unpaid compensation for 240,000 common shares (worth approximately $7,200 at current share price $0.03). This transaction has been recorded during this quarter.

 

On August 19, Jonathan Legg and Tim J. Nakaska were elected to the Board of Directors 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 and were each awarded a grant of 250,000 common shares of the Corporation as recognition for their past services to the Company. These transactions (worth approximately $15,000 at current share price $0.03) have not been recorded during this quarter and will be recorded in the 4th quarter.

 

On September 10, 2015, Richard Singleton was elected to the Board of Directors, such that the ongoing directors of the Company are Jonathan Legg, Tim J. Nakaska and Richard Singleton. On that date, Jonathan Legg was elected Chairman of the Board, Tim J. Nakaska was elected Chairman of the Audit Committee and Richard Singleton was elected Chairman of the Compensation Committee.

 

On September 10, 2015, the Board of Directors approved the following compensation to be paid/issued to each of Jonathan Legg, Tim J. Nakaska and Richard Singleton in their capacities as directors of the Company: a grant of 250,000 common shares, a grant of 2,500 deferred share units per month of service as a director; and a grant of 100,000 options that vest immediately and are exercisable at a price of $0.10 per share for a term of five years. These transactions (worth approximately $22,500 at current share price $0.03) have not been recorded during this quarter and will be recorded in the 4th quarter.

 

Note 4 – Other Current Assets

 

Other current assets are prepaid expenses. As of September 30, 2015, the Company had prepaid property taxes of $1,290.

 

Note 5 – Notes Payable, Related Parties

 

Notes payable, related parties consisted of the following as of September 30, 2015 and December 31, 2014, respectively:

 

   September 30,   December 31, 
   2015   2014 
Notes payable to the G. Michael Hogan, unsecured, bearing interest at 10%, due on demand.  $108,694   $103,334 
           
Promissory note payable with FutureWorth Capital Corp., a consulting firm owned by our former Chairman of the Board of Directors, unsecured, bearing interest at 10%, due on demand.  $10,000   $10,000 
           
Total notes payable, related parties  $118,694   $113,334 
           
Less: current portion  $118,694   $113,334 
           
Notes payable, related parties, less current portion  $   $ 

 

Accrued interest on Notes Payable to Related Parties is $10,100 and $6,939 for the periods ending September 30, 2015 and December 31, 2014, respectively.

 

 8 
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 6 – Equity

 

On August 19, 2015, G. Michael Hogan forgave his accrued salary of $676,333 for 600,000 shares of common stock. On this same date, FutureWorth Capital Corp. forgave $180,000 in accrued consulting fees for 240,000 shares of common stock. As a result of the stock issuance to settle the debts with G. Michael Hogan and FutureWorth above, the stockholders’ equity increased by $856,333 for the nine month ended September 30, 2015.

 

On September 10, 2015 the company awarded 1,250,000 shares (approximately worth $37,500 at price $0.03 per share) to the management for their services (Thompson MacDonald, Ronald Schinnour, Jonathan Legg, Tim J. Nakaska, and Richard Singleton). The transaction was not included in the 3rd quarter financial statements and will be recorded during the next period.

 

Stock Option Plans

In addition to the 300,000 stock options granted to the directors described in Note 3 above, 100,000 options with an exercise price of $0.10 per share with a term of five years were granted to the manager of corporate affairs as partial compensation pursuant to an Independent Contractor Agreement.

 

Note 7 – Warrants

 

All Warrants previously granted and extended have expired, thus there are no outstanding Warrants as of September 30, 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

 

There are no subsequent events determined to be of merit for inclusion herein.

 

 9 
 

 

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, 2014 and 2013 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 September 30, 2015, we had cash on hand of $3,072 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 under taking 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.

 

 10 
 

 

Results of Operations for the Three Months Ended September 30, 2015 and 2014:

 

  Three Months Ended         
  September 30,         
   2015   2014   Increase / (Decrease) 
   Amount   Amount   $   % 
Rental revenue   12,475    6,875    5,600    81% 
Expenses:                    
Exploration costs  $5,106   $3,637    1,469    40% 
General & administrative   32,215    17,141    15,074    88% 
Depreciation   31    94    (63)    
Officer salary   16,333    30,000    (13,667)   (46%)
Total operating expenses   53,685    50,872    2,813    (6%)
                     
Loss from operations   (41,210)   (43,997)   (2,787)   (6%)
                     
Other income (expense):
                    
Interest expense   (3,929)   (2,429)   1,500    62% 
                     
Total other income (expense)   (3,929)   (2,429)   1,500    62% 
                     
Net profit (loss)  $(45,139)  $(46,426)   (1,287)   (3%)

 

Rental Revenue

 

Rental income for the three months ended September 30, 2015 increased by $5,600 due to rent for rental property received in August 2015.

 

Exploration costs

 

Exploration costs for the three months ended September 30, 2015 increased by $1,469 principally due to the payment of property taxes.

 

General and administrative expenses

 

General and administrative expenses for the three months ended September 30, 2015 increased by $15,074 due principally to the accrual and payment of legal and accounting fees.

 

Interest Expense

 

Interest expense for the three months ended September 30, 2015 decrease by $1,500 as G. Michael Hogan continued to finance company expenditures personally thus increasing his short-term payable balance.

 

 11 
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

The following table summarizes total current assets, total current liabilities and working capital at September 30, 2015 compared to December 31, 2014.

 

  September 30,   December 31,   Increase / (Decrease) 
   2015   2014   $   % 
Current Assets  $4,362   $585    3,777    646% 
                     
Current Liabilities  $463,702   $1,163,842    (700,140)   (60%)
                     
Working Capital (deficit)  $(459,340)  $(1,163,257)   (703,917)   (61%)

 

Internal and External Sources of Liquidity

 

During the nine months ended September 30, 2015 and 2014, our operating activities used cash of $2,873 and $27,640, respectively, while our financing activities provided cash of $5,360 and $27,187, respectively. The cash used in operating activities was principally a result of the net loss we incurred without taking into the consideration of the forgiveness of debt, and decreased in part due to the receipt of $27,500 from Cemex Materials as an annual royalty payment, $21,813 of proceeds related to the deposits received on related party sales of certain volcanic lava or cinders from our Pisgah Property to Candeo Lava Products Inc. and $5,600 in rental income from an advertising film shoot.

 

Financing Activities. During the nine months ended September 30, 2015 and 2014, we raised a total of $5,360 and $27,187, respectively from loan advances and direct pays of expenditures from, Mr. Michael Hogan, the company’s former CEO. These proceeds have been used to maintain operations and comply with our reporting requirements. The company may have to find another source of operating capital moving forward with Mr. Hogan’s resignation on August 19, 2015.

 

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 September 30, 2015, our cash balance was $3,072. Our plan for satisfying our cash requirements for the next twelve months is through additional debt and/or equity financing and prepayments on material sales to Candeo Lava Products, Inc. On various dates from January 1, 2015 to September 30, 2015, the Company received $27,500 from Cemex as their annual royalty payment on the Twin Mountain lease and $64,754 from Candeo on the prepaid sale of approximately 4,300 tons of minerals at a price of $15 per ton. We anticipate that prepaid purchases of materials by Candeo and royalties received by Cemex. We intend to make appropriate plans in order 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

 

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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 and Chief Financial Officer of the Company concluded that the Company’s disclosure controls and procedures were ineffective 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, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer of the Company concluded that the Company’s disclosure controls and procedures needed to 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 including the Company’s Chief Executive Officer and Chief Financial Officer to 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.

 

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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 nine month period ended September 30, 2015.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the three month period ended September 30, 2015.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

N/A

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

      Incorporated by reference
Exhibit Exhibit Description Filed herewith Form Period ending Exhibit Filing date
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        

 

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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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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