10-Q 1 ccre_10q-033113.htm FORM 10-Q

 

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, 2013

 

¨         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.)

 

8205 Aqua Spray Avenue
Las Vegas, Nevada

(Address of principal executive offices)

 

(702) 243-1849

(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 May 14, 2013 was 42,027,060.

 

 

 

 
 

 

CAN-CAL RESOURCES LTD.

FORM 10-Q

TABLE OF CONTENTS

 

    Page
     
PART I – FINANCIAL INFORMATION    
  Item 1. Financial Statements   3
    Condensed Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012   3
    Condensed Statements of Operations for the three months ended March 31, 2013 and 2012 (Unaudited)   4
    Condensed Statements of Cash Flows for the three months ended March 31, 2013 and 2012 (Unaudited)   5
    Notes to Condensed Financial Statements (Unaudited)   6
  Item 2. Management’s Discussion and Analysis   14
  Item 3. Quantitative and Qualitative Disclosures about Market Risk   18
  Item 4. Controls and Procedures   18
       
PART II – OTHER INFORMATION    
  Item 1. Legal Proceedings   18
  Item 1A. Risk Factors   18
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   18
  Item 3. Defaults Upon Senior Securities   19
  Item 4. Mine Safety Disclosures   19
  Item 5. Other Information   19
  Item 6. Exhibits   19

 

 

 

2
 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

CONDENSED BALANCE SHEETS

 

   March 31,   December 31, 
   2013   2012 
ASSETS  (Unaudited)     
         
Current assets:          
Cash  $164   $1,316 
Prepaid expenses   29,289    35,970 
Total current assets   29,453    37,286 
           
Property and equipment, net of accumulated depreciation of $33,226 and $33,133, respectively   933    1,026 
           
Total assets  $30,386   $38,312 
           
           
LIABILITIES AND STOCKHOLDERS' (DEFICIT)          
           
Current liabilities:          
Accounts payable  $62,606   $44,988 
Accounts payable, related parties   180,506    180,506 
Accrued expenses   10,834    5,211 
Accrued expenses, related parties   408,500    377,857 
Unearned rental revenues   29,792    9,167 
Notes payable, related parties, net of $326 and $448 of unamortized common stock warrants at March 31, 2013 and December 31, 2012, respectively   44,266    30,843 
Total current liabilities   736,504    648,572 
           
Total liabilities   736,504    648,572 
           
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, 2013 and December 31, 2012, respectively   42,027    42,027 
Additional paid-in capital   9,710,504    9,710,504 
(Deficit) accumulated during exploration stage   (10,458,649)   (10,362,791)
Total stockholders' (deficit)   (706,118)   (610,260)
           
Total liabilities and stockholders' (deficit)  $30,386   $38,312 

 

See accompanying notes to financial statements.

 

 

3
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

           March 22, 1995 
   For the Three Months Ended   (inception) to 
   March 31,   March 31, 
   2013   2012   2013 
             
Material sales  $   $   $245,500 
Cost of sales           263,400 
Gross loss           (17,900)
                
Operating expenses:               
Exploration costs   11,570    8,378    659,256 
General and administrative   59,322    80,369    7,364,864 
Depreciation   93    1,652    265,039 
Officer salary   30,000    30,000    1,231,176 
Impairment of operating assets           443,772 
Total operating expenses   100,985    120,399    9,964,107 
                
Net operating loss   (100,985)   (120,399)   (9,982,007)
                
Other income (expense):               
Other income       2,350    69,798 
Interest income           52,945 
Interest expense   (1,748)   (2,690)   (1,710,235)
Rental revenue   6,875    6,875    429,283 
Gain (loss) on disposal of fixed assets           3,128 
Gain on extinguishment of debts           1,152,039 
Total other income (expense)   5,127    6,535    (3,042)
                
Loss before provision for income taxes   (95,858)   (113,864)   (9,985,049)
Provision for income taxes            
Net income (loss) from continuing operations   (95,858)   (113,864)   (9,985,049)
                
Income from discontinued operations:               
Income from discontinued operations           116,400 
Loss on disposal of operations (net of taxes)           (590,000)
Net income (loss)  $(95,858)  $(113,864)  $(10,458,649)
                
Weighted average number of common shares outstanding - basic and fully diluted   42,095,949    39,083,663      
                
Net (loss) per share - basic and fully diluted  $(0.00)  $(0.00)     

 

See accompanying notes to financial statements.

 

4
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

           March 22, 1995 
   For the Three Months Ended   (inception) to 
   March 31,   March 31, 
   2013   2012   2013 
CASH FLOWS FROM OPERATING ACTIVITIES               
Net loss  $(95,858)  $(113,864)  $(10,458,649)
Adjustments to reconcile net loss to net cash used in operating activities:               
Depreciation and amortization   93    1,652    265,039 
Bad debts           207,100 
(Gain) loss on sale of fixed assets           (3,128)
Gain on extinguishment of debts           (1,152,039)
Stock based compensation granted for services       1,050    563,952 
Stock based compensation granted for financing and interest   122        972,772 
Beneficial conversion feature on convertible debenture           25,200 
Loss on disposal of investment property           764,300 
Undistributed earnings of affiliate           (174,300)
Gain on discontinued operations           (116,400)
Loss on foreign currency translation           8,500 
Impairment of operating assets           443,772 
Decrease (increase) in assets:               
Prepaid expenses   6,681    1,214    91,611 
Increase (decrease) in liabilities:               
Accounts payable   17,618    7,500    (5,306)
Accounts payable, related parties       14,368    180,506 
Accrued expenses   5,623    2,752    549,412 
Accrued expenses, related parties   30,643    29,391    690,504 
Unearned revenues   20,625    20,625    29,792 
Net cash used in operating activities   (14,453)   (35,312)   (7,117,362)
                
CASH FLOWS FROM INVESTING ACTIVITIES              
Purchase of investment property           (1,083,600)
Proceeds from sale of investment property           319,300 
Purchase of property and equipment           (770,016)
Proceeds from sale of property and equipment           26,100 
Net cash used in investing activities           (1,508,216)
                
CASH FLOWS FROM FINANCING ACTIVITIES               
Proceeds from convertible debentures           128,800 
Proceeds from notes payable           948,400 
Principal payments on notes payable           (689,900)
Proceeds from notes payable, related parties   13,301        978,617 
Principal payments on notes payable, related parties           (462,475)
Proceeds from the issuance of common stock       46,000    7,722,300 
Net cash provided by financing activities   13,301    46,000    8,625,742 
                
Net increase in cash   (1,152)   10,688    164 
Cash, beginning of period   1,316    37,846     
Cash, end of period  $164   $48,534   $164 
                
Supplemental disclosures:               
Interest paid  $178   $      
Income taxes paid  $   $      

 

See accompanying notes to financial statements.

 

 

5
 

Note 1 – Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with Securities and Exchange Commission requirements for interim financial statements. 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, 2012 of Can-Cal Resources Ltd. (the “Company”).

 

The interim condensed 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, 2013 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.

 

Exploration Stage Company

 

The Company is currently an exploration stage company. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date. The Company has incurred net losses of $10,458,649 and used net cash in operations of $7,117,362 for the period from inception (March 22, 1995) through March 31, 2013. 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 Company incurred a net loss of $95,858 for the three months ended March 31, 2013. Also, the Company’s current liabilities exceed its current assets by $707,051 as of March 31, 2013. These factors create substantial doubt about the Company’s ability to continue as a going concern. The Company’s management plans to continue to fund its operations in the short term with a combination of debt and equity financing and with revenue from operations in the long term.

 

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
 

Note 3 – Related Party

 

Management Changes

 

On March 1, 2013, Dr. Michael Giuffre resigned from the Board of Directors.

 

On February 27, 2013, Mr. William J. Hogan resigned from the Board of Directors.

 

On August 12, 2012, Dr. Michael Giuffre was appointed to the Company’s Board of Directors. Compensation has not yet been determined.

 

On April 17, 2012 the Company appointed Ron Schinnour to the Board of Directors. Mr. Schinnour currently serves on the Board of Directors of FoodChek Systems Inc., a Company owned by another former member of the Company’s Board of Directors, William Hogan. Compensation has not yet been determined.

 

On January 30, 2012, the Company appointed Mr. Thompson MacDonald to the Board of Directors. Compensation has not yet been determined.

 

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.

 

We owed accrued salaries to our CEO of $390,000 and $360,000 at March 31, 2013 and December 31, 2012, 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. 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.

 

7
 

Share Based Compensation

 

On September 30, 2012, the Company extended 2,439,920 previously granted and extended common stock warrants issued to the Company’s CEO, with an exercise price of $0.15 for an additional 21 months from their expiration on September 30, 2012. These warrants are fully vested and expire on June 30, 2014. The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 216% and a call option value of $0.0374, was $91,215 and was recognized as interest expense during the year ended December 31, 2012.

 

On September 30, 2012, the Company extended a total of 1,301,312 previously granted and extended common stock warrants issued to the one of the Company’s directors, with an exercise price of $0.15 for an additional 21 months from their expiration on September 30, 2012. These warrants are fully vested and expire on June 30, 2014. The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 216% and a call option value of $0.0374, was $48,649 and was recognized as interest expense during the year ended December 31, 2012.

 

On April 4, 2012, the Company sold 416,667 shares of its common stock and an equal number of warrants pursuant to unit offerings to a member of the Company’s Board of Directors in exchange for proceeds of $25,000. The warrants are exercisable over two years at an exercise price of $0.08 per share. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On June 30, 2011, the Company extended 2,439,920 previously granted common stock warrants issued to the Company’s CEO, with an exercise price of $0.15 for an additional 15 months from their expiration on June 30, 2011. These warrants are fully vested and expire on September 30, 2012. The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 180% and a call option value of $0.0090, was $22,047 and was recognized as interest expense during the year ended December 31, 2011. These warrants were again extended for an additional 21 months with all other terms remaining consistent with these previously amended terms.

 

On June 30, 2011, the Company extended a total of 1,301,312 previously granted common stock warrants issued to the one of the Company’s directors, with an exercise price of $0.15 for an additional 15 months from their expiration on June 30, 2011. These warrants are fully vested and expire on September 30, 2012. The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 180% and a call option value of $0.0090, was $11,758 and was recognized as interest expense during the year ended December 31, 2011. These warrants were again extended for an additional 21 months with all other terms remaining consistent with these previously amended terms.

 

 

Note 4 – Prepaid Expenses

 

As of March 31, 2013 and December 31, 2012 prepaid expenses consisted of the following:

 

   March 31,   December 31, 
   2013   2012 
Prepaid portion of UNLV research project as disclosed below  $18,353   $18,530 
Annual Bureau of Land Management fees   10,936    14,581 
Directors and officers insurance       2,859 
   $29,289   $35,970 

 

8
 

On April 23, 2012, May 10, 2012 and March 31, 2013, the Company paid $30,000, $5,000 and $6,000, respectively to the University of Nevada Las Vegas (UNLV) as part of a research project on our Wikieup property to be conducted from May 1, 2012 through September 30, 2013. These fees were paid pursuant to a donation to the UNLV’s Economic Geology Research Program Fund, and will be amortized over the duration of the project on a straight line basis. The project will use both field and laboratory analyses to investigate the surface geology of the property in order to address the following questions:

1. Is there geologic evidence consistent with the presence of a porphyry copper system within the area of Can-Cal's claim block?

2. Is there evidence to support the hypothesis that the property represents the root zone of a porphyry system that has been decapitated and transported into the valley to the east?

 

 

Note 5 – Notes Payable, Related Parties

 

Notes payable, related parties consisted of the following as of March 31, 2013 and December 31, 2012, respectively:

 

   March 31,   December 31, 
   2013   2012 
         
Notes payable to the CEO, unsecured, bearing interest at 10%, due on demand.  $39,592   $26,291 
           
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.   5,000    5,000 
           
Total notes payable, related parties   44,592    31,291 
Less: unamortized discount on common stock warrants   326    448 
Less: current portion   44,266    30,843 
           
Notes payable, related parties, less current portion  $   $ 

 

The following presents components of interest expense by instrument type for the three months ended March 31, 2013 and 2012, respectively:

 

   March 31,   March 31, 
   2013   2012 
Interest on notes payable, related parties  $1,448   $516 
Commissions on finance offerings       1,050 
Fair value of common stock granted as commissions on finance offerings       1,050 
Amortization of warrants granted on notes payable, related parties   122     
Accounts payable related vendor finance charges   178    74 
   $1,748   $2,690 

 

9
 

Note 6 – Changes in Securities

 

2013

 

None.

 

2012

 

On August 1, 2012 the Company issued 17,500 shares of its common stock to satisfy the $1,050 of subscriptions payable realized pursuant to common stock granted on March 20, 2012 as commission on the sale of securities.

 

On July 31, 2012, the Company sold a total of 1,000,000 shares of its common stock and an equal number of warrants pursuant to unit offerings to an individual investor in exchange for proceeds of $100,000. The warrants are exercisable over two years at an exercise price of $0.15 per share. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On April 4, 2012, the Company sold 416,667 shares of its common stock and an equal number of warrants pursuant to unit offerings to a member of the Company’s Board of Directors in exchange for proceeds of $25,000. The warrants are exercisable over two years at an exercise price of $0.08 per share. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On April 4, 2012, the Company sold a total of 874,982 shares of its common stock and an equal number of warrants pursuant to unit offerings amongst three individual investors in exchange for total proceeds of $52,499. The warrants are exercisable over two years at an exercise price of $0.08 per share. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On March 20, 2012, the Company sold a total of 566,665 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $34,000 received amongst four investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On March 20, 2012, the Company granted a total of 17,500 shares of its common stock as commissions on the sale of securities. The total fair value of the common stock was $1,050 based on the fair market value of the Company’s common stock on the date of grant. The Company elected not to net these commissions against the proceeds received from the sales and recognized the $1,050 of finance costs as interest expense within the statement of operations. The shares were subsequently issued in April of, 2012.

 

On March 20, 2012 the Company issued 50,000 shares of its common stock to satisfy the $1,500 of subscriptions payable realized pursuant to common stock granted to an employee for services on December 29, 2011.

 

On February 15, 2012, the Company sold a total of 200,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $12,000 received amongst two investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

 

10
 

Note 7 – Options

 

Option Plan

 

Options granted for employee and consulting services - 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.

 

Options Granted

 

There were no options issued during the three months ended March 31, 2013 and 2012.

 

Options Exercised

 

There were no options exercised during the three months ended March 31, 2013 and 2012.

 

Options Cancelled

 

There were no options cancelled during the three months ended March 31, 2013 and 2012.

 

 

Note 8 – Warrants

 

Warrants Granted

 

On November 30, 2012, the Company granted 20,000 common stock warrants s to a former member of the Company’s Board of Directors with an exercise price of $0.10 per share for its common stock. These stock warrants were granted in connection with a $5,000 loan from the Director. These warrants are exercisable over two years from the date of grant at an exercise price of $0.10 per share.

 

On September 30, 2012, the Company extended 348,320 previously granted and extended common stock warrants issued to the Company’s former CEO, with an exercise price of $0.15 for an additional 21 months from their expiration on September 30, 2012. These warrants are fully vested and expire on June 30, 2014. The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 216% and a call option value of $0.0374, was $13,022 and was recognized as interest expense on September 30, 2012.

 

On September 30, 2012, the Company extended 2,439,920 previously granted and extended common stock warrants issued to the Company’s CEO, with an exercise price of $0.15 for an additional 21 months from their expiration on September 30, 2012. These warrants are fully vested and expire on June 30, 2014. The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 216% and a call option value of $0.0374, was $91,215 and was recognized as interest expense on September 30, 2012.

 

On September 30, 2012, the Company extended a total of 1,301,312 previously granted and extended common stock warrants issued to the one of the Company’s directors, with an exercise price of $0.15 for an additional 21 months from their expiration on September 30, 2012. These warrants are fully vested and expire on June 30, 2014. The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 216% and a call option value of $0.0374, was $48,649 and was recognized as interest expense on September 30, 2012.

 

11
 

On September 30, 2012, the Company extended a total of 2,287,944 previously granted and extended common stock warrants issued amongst a total of five former investors, with an exercise price of $0.15 for an additional 21 months from their expiration on September 30, 2012. These warrants are fully vested and expire on June 30, 2014. The total estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 216% and a call option value of $0.0374, was $85,533 and was recognized as interest expense on September 30, 2012.

 

On July 31, 2012, the Company granted 1,000,000 common stock warrants with an exercise price of $0.15 per share for its common stock. These stock warrants were granted in connection with the sale of 1,000,000 shares of common stock in exchange for proceeds of $100,000. These warrants are exercisable over two years from the date of grant at an exercise price of $0.15 per share.

 

On April 4, 2012, the Company granted a total of 874,982 common stock warrants amongst three individual investors with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the sale of 874,982 shares of common stock in exchange for total proceeds of $52,499. These warrants are exercisable over two years from the date of grant at an exercise price of $0.08 per share.

 

On April 4, 2012, the Company granted 416,667 common stock warrants s to a member of the Company’s Board of Directors with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the sale of 874,982 shares of common stock in exchange for total proceeds of $25,000. These warrants are exercisable over two years from the date of grant at an exercise price of $0.08 per share.

 

On March 20, 2012, the Company granted 150,000 common stock warrants with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the sale of 150,000 shares of common stock in exchange for proceeds of $9,000. These warrants are exercisable over two years from the date of grant at an exercise price of $0.08 per share.

 

On March 20, 2012, the Company granted 83,333 common stock warrants with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the sale of 83,333 shares of common stock in exchange for proceeds of $5,000. These warrants are exercisable over two years from the date of grant at an exercise price of $0.08 per share.

 

On March 20, 2012, the Company granted 166,666 common stock warrants with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the sale of 166,666 shares of common stock in exchange for proceeds of $10,000. These warrants are exercisable over two years from the date of grant at an exercise price of $0.08 per share.

 

On March 20, 2012, the Company granted 166,666 common stock warrants with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the sale of 166,666 shares of common stock in exchange for proceeds of $10,000. These warrants are exercisable over two years from the date of grant at an exercise price of $0.08 per share.

 

On February 15, 2012, the Company granted 100,000 common stock warrants with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the sale of 100,000 shares of common stock in exchange for proceeds of $6,000. These warrants are exercisable over two years from the date of grant at an exercise price of $0.08 per share.

 

On February 15, 2012, the Company granted 100,000 common stock warrants with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the sale of 100,000 shares of common stock in exchange for proceeds of $6,000. These warrants are exercisable over two years from the date of grant at an exercise price of $0.08 per share.

 

12
 

Warrants Expired

 

A total of 1,888,334 and -0- warrants expired during the three months ended March 31, 2013 and 2012, respectively.

 

Warrants Cancelled

 

There were no warrants cancelled during the three months ended March 31, 2013 and 2012.

 

The following is a summary of the common stock warrant activity as of March 31, 2013.

 

       Weighted 
   Warrants   Average 
   Outstanding   Exercise Price 
           
Balance, January 1, 2012   14,348,746   $0.11 
Granted   9,455,810    0.13 
Cancelled        
Exercised        
Expired   (8,524,162)   (0.08)
Balance, December 31, 2012   15,280,394    0.14 
Granted        
Cancelled        
Exercised        
Expired   (1,888,334)   (0.08)
Balance, March 31, 2013   13,392,060   $0.12 

 

 

Note 9 – Commitments and Contingencies

 

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.

 

Mining reclamation costs - Mining and reclamation permits, and an air quality permit have been issued by the California regulatory agencies in the names of both Twin Mountain, our joint venture partner, and the Company. The Company posted a cash bond in the amount of $1,379 (1% of the total bond amount) and Twin Mountain has posted the remainder of the $137,886 bond. If Twin Mountain defaults, we would be responsible for reclamation of the property, but reclamation costs incurred in that event would be paid in whole or part by the bond posted by us and Twin Mountain. Reclamation costs are not presently determinable.

 

 

Note 10 – Subsequent Events

 

On April 11, 2013, the Company received an unsecured loan of $20,000 from the CEO, bearing interest at 10% and due on demand.

 

 

13
 

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, 2012 and 2011 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, 2012 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 Mountain, California property and the Wikieup, Arizona property.

 

At March 31, 2013, we had cash on hand of $164 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 investment proceeds realized during the first three months of 2013 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 we entered into a mineral lease agreement with a partner who will purchase up to 100,000 tons of resources derived from the property to produce commercial products for resale. The agreement is for an initial period of ten (10) years, with an additional five (5) year extension at the option of the lessee. We will receive fees for the removal of minerals 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 of this filing, we have not yet sold any minerals under this agreement. We continue to be hopeful that these sales will commence in the near term, however there can be no assurances.

 

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.

 

 

14
 

Results of Operations for the Three Months Ended March 31, 2013 and 2012:

 

   Three Months Ended     
   March 31,     
   2013   2012   Increase / (Decrease) 
   Amount   Amount   $   % 
Expenses:                    
Exploration costs  $11,570   $8,378   $3,192    38% 
General & administrative   59,322    80,369    (21,047)   (26%)
Depreciation   93    1,652    (1,559)   (94%)
Officer salary   30,000    30,000         
Total operating expenses   100,985    120,399    (19,414)   (16%)
                     
Loss from operations   (100,985)   (120,399)   (19,414)   (16%)
                     
Other income (expense):                    
Other income       2,350    (2,350)   (100%)
Rental revenue   6,875    6,875         
Interest expense   (1,748)   (2,690)   (942)   (35%)
Total other income (expense)   5,127    6,535    (1,408)   (22%)
                     
Net loss  $(95,858)  $(113,864)  $(18,006)   (16%)

 

Exploration costs

 

Exploration costs for the three months ended March 31, 2013 increased by $3,192 (or 38%) from $8,378 for the three months ended March 31, 2012 to $11,570 for the three months ended March 31, 2013. The increase is due primarily to increased exploration costs related to our UNLV research project at our Wikieup location that didn’t start until May of 2012.

 

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, 2013 decreased by $21,047 (or 26%) from $80,369 for the three months ended March 31, 2012 to $59,322 for the three months ended March 31, 2013. The decrease is principally due to $15,000 of decreased Directors fees pursuant to the termination of Mr. William Hogan’s consulting agreement during the three months ended March 31, 2013 compared to the three months ended March 31, 2012.

 

15
 

Depreciation

 

Depreciation for the three months ended March 31, 2013 decreased by $1,559 (or 94%) from $1,652 for the three months ended March 31, 2012 to $93 for the three months ended March 31, 2013. The decrease is principally due to certain assets reaching the end of their depreciable life cycle. We anticipate the replacement of these assets as resources become available.

 

Officer salary

 

Officer salary for the three months ended March 31, 2013 and 2012 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.

 

Total operating expenses

 

Total operating expenses for the three months ended March 31, 2013 decreased by $19,414 (or 16%) from $120,399 for the three months ended March 31, 2012 to $100,985 for the three months ended March 31, 2013. The decrease in total operating expenses was mainly a result of reductions in General and Administrative expenses related to decreased Directors fees commensurate with the termination of Mr. William Hogan’s consulting agreement during the three months ended March 31, 2013 compared to the three months ended March 31, 2012.

 

Other income (expense)

 

Other income for the three months ended March 31, 2013 decreased by $2,350 (or 100%) from $2,350 for the three months ended March 31, 2012 to $-0- for the three months ended March 31, 2013 due to discontinued collection of proceeds received in settlement of misappropriated funds by our former bookkeeper during the three months ended March 31, 2013 compared to the three months ended March 31, 2012.

 

Rental revenue was $6,875 for the three months ended March 31, 2013, as well as, the three months ended March 31, 2012. Rental revenue relates to income derived from the rental of the Company’s land for the purposes of mineral extraction, filming movies or conducting photo shoots.

 

Interest expense for the three months ended March 31, 2013 decreased by $942 (or 35%) from $2,690 for the three months ended March 31, 2012 compared to $1,748 for the three months ended March 31, 2013. The decrease in interest expense was primarily due to finance charges recognized as commissions on stock sales during the three months ended March 31, 2012 that were not incurred in the comparative three month period ending March 31, 2013.

 

Net loss

 

Our net loss for the three months ended March 31, 2013 decreased by $18,006 (or 16%) from $113,864 for the three months ended March 31, 2012 compared to $95,858 for the three months ended March 31, 2013. Our decreased net loss for the three months ended March 31, 2013 was primarily a result of $15,000 of Directors fees and $2,100 of finance costs on stock sales recognized during the three months ended March 31, 2012 that were not recognized during the comparative three months ended March 31, 2013.

 

 

16
 

LIQUIDITY AND CAPITAL RESOURCES

 

The following table summarizes total current assets, total current liabilities and working capital at March 31, 2013 compared to December 31, 2012.

 

   March 31,   December 31,   Increase / (Decrease) 
   2013   2012   $   % 
                 
Current Assets  $29,453   $37,286   $(7,833)   (21%)
                     
Current Liabilities  $736,504   $648,572   $87,932    14% 
                     
Working Capital (deficit)  $(707,051)  $(611,286)  $95,765    16% 

 

Internal and External Sources of Liquidity

 

During the three months ended March 31, 2013 and 2012, our operating activities used cash of $14,453 and $35,312, respectively, while our financing activities provided cash of $13,301 and $46,000, respectively. The cash used in operating activities was principally a result of the net loss we incurred.

 

Financing Activities. During the three months ended March 31, 2013 we raised a total of $13,301 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, 2013, our cash balance was $164. Our plan for satisfying our cash requirements for the next twelve months is through additional debt and/or equity financing. On April 11, 2013, we received a short term loan of $20,000 from our CEO, Mr. Michael Hogan. We anticipate our current cash reserves will be sufficient to support operations through May 31, 2013, but do not anticipate generating sufficient amounts of positive cash flow from operations to meet our working capital requirements. Consequently, 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.

 

17
 

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 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, 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 were effective 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.

 

 

PART II--OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The Company is not currently a party to litigation.

 

 

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, 2013.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the three month period ended March 31, 2013.

 

 

18
 

Item 3. Defaults Upon Senior Securities.

 

None.

 

 

Item 4. Mine safety disclosures.

 

N/A

 

 

Item 5. Other Information.

 

On March 1, 2013, Dr. Michael Giuffre resigned from the Board of Directors.

 

On February 27, 2013, Mr. William J. Hogan resigned from the Board of Directors.

 

 

Item 6. Exhibits.

 

      Incorporated by reference
Exhibit Exhibit Description Filed herewith Form Period ending Exhibit Filing date
             
31.1 Certification of Michael Hogan pursuant to Section 302 of the Sarbanes-Oxley Act X        
31.2 Certification of Michael Hogan pursuant to Section 302 of the Sarbanes-Oxley Act X        
32.1 Certification of Michael Hogan 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        

 

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

 

 

 

19
 

 

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)

 

 

     
By: /s/ Michael Hogan  
  Michael Hogan, President and Chief Executive Officer  
 

(On behalf of the Registrant and as
Principal Financial Officer)

 
     

 

 

Date: May 17, 2013

 

 

 

 

20