10-K 1 cancal_10k-123113.htm ANNUAL REPORT

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2013

or

 

¨ TRANSITION REPORT PURSUANT TO 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   86-0865852
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

8205 Aqua Spray Ave.    
Las Vegas, Nevada   89128
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code (702) 243-1849

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None
   
Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value
  Preferred Stock, $0.001 par value, 5% cumulative

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes x No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

o Yes x No

 

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.

o Yes x No

 

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

o Yes x No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File 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 that the registrant was required to submit and post such files).

o Yes x No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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).

o Yes x No

 

The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $1,362,566 as of June 28, 2013 (computed by reference to the last sale price of a share of the registrant’s Common Stock on that date as reported by OTC Bulletin Board). The voting stock held by non-affiliates on that date consisted of 34,064,150 shares of common stock.

 

The number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 42,027,060 shares of common stock, $0.001 par value, outstanding as of May 16, 2014.

 

Documents Incorporated by Reference

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.

 

 
 

 

CAN-CAL RESOURCES LTD.

FORM 10-K

TABLE OF CONTENTS

 

  Page
   
PART I 2
  Item 1. Business (and Information for Item 2 on Properties) 2
  Item 1A. Risk Factors 3
  Item 1B. Unresolved Staff Comments 8
  Item 2. Properties 8
  Item 3. Legal Proceedings 23
  Item 4. Mine Safety Disclosures 23
     
PART II 23
  Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23
  Item 6. Selected Financial Data 24
  Item 7. Management’s Discussion and Analysis 25
  Item 7A. Quantitative and Qualitative Disclosures about Market Risk 28
  Item 8. Financial Statements and Supplementary Data 29
  Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure 30
  Item 9A Controls and Procedures 30
  Item 9B. Other Information 31
     
Part III 32
  Item 10. Directors, Executive Officers and Corporate Governance 32
  Item 11. Executive Compensation 34
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 35
  Item 13. Certain Relationships and Related Transactions, and Director Independence 36
  Item 14. Principal Accountant Fees and Services 37
     
Part IV 38
  Item 15. Exhibits, Financial Statement Schedules 38

 

 
 

 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

 

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

 

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

 

·the unavailability of funds for capital expenditures;
·inability to efficiently manage our operations;
·inability to achieve future operating results;
·inability to raise additional financing for working capital;
·the inability of management to effectively implement our strategies and business plans;
·our ability to recruit and hire key employees;
·our ability to diversify our operations;
·actions and initiatives taken by both current and potential competitors;
·deterioration in general or regional economic, market and political conditions;
·the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain;
·adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
·changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; and
·the other risks and uncertainties detailed in this report.

 

In this form 10-K references to “Can-Cal”, “the Company”, “we,” “us,” “our” and similar terms refer to Can-Cal Resources Ltd.

 

AVAILABLE INFORMATION

 

Can-Cal files annual, quarterly, current and special reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC’s website at www.sec.gov or on our website at www.can-cal.com. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at Can-Cal Resources Ltd., 8205 Aqua Spray Ave., Las Vegas, Nevada 89128.

 

1
 

 

PART I

 

Item 1. Business (and Information for Item 2 on Properties).

 

Business Development

 

Can-Cal Resources Ltd. (“Can-Cal” or the “Company” ) is a Nevada corporation incorporated on March 22, 1995 under the name of British Pubs USA, Inc. as a wholly owned subsidiary of 305856 B.C., Ltd. d/b/a N.W. Electric Carriage Company (“NWE”), a British Columbia, Canada company (“NWE”). On April 12, 1995, NWE exchanged shares of British Pubs USA, Inc. for shares of NWE held by its existing shareholders, on a share for share basis. NWE changed its name to Can-Cal Resources Ltd. on July 2, 1996.

 

In January 1999, the Company sold its wholly-owned Canadian subsidiary, Scotmar Industries, Inc., which was engaged in the business of buying and salvaging damaged trucks from insurance companies for resale of guaranteed truck part components. The subsidiary was sold for a profit and the proceeds used to acquire and explore mineral properties, as the Company determined that the subsidiary would lose money in the vehicle salvage business unless more capital was obtained at that time specifically for that business.

 

Business of Issuer

 

The Company is an exploration company. Since 1996, we have examined various mineral properties prospective for precious metals and minerals and acquired those deemed promising. We own, lease or have mining interest in four mineral properties in the southwestern United States (California and Arizona, as follows: Wikieup, Arizona; Cerbat, Arizona; Owl Canyon, California; and Pisgah, California).

 

Prior to 2003, we performed more than 1,000 “in-house” assays on mineral samples from our properties in the United States. An assay is a test performed on a sample of minerals to determine the quantity of one or more elements contained in the sample. The in-house work was conducted with our equipment by persons under Can-Cal contract who are experienced in performing assays, but who were not independent of us. We also sent samples of materials from which we obtained the most promising results to outside independent assayers to confirm in-house results.

 

In 2003, the Company incorporated a wholly owned subsidiary in Mexico, Sierra Madre Resources S.A. de C.V. (“SMR”), to be an operating entity for mining-related acquisitions and activities in Mexico. In February 2004, SMR acquired a 100% interest in a gold-silver mineral concession, in Durango State, Mexico. In July 2004, SMR applied to the Mexican Government for a gold-silver concession, also in Durango State, Mexico. These were exploration stage properties, referred to in previous Company reports as “Arco Project” and “Arco 2 Project”. In November 2004, SMR applied to Mexico’s Director of Mines for three grass roots, gold-silver exploration concessions located in the State of Chihuahua, Mexico. These applications were subsequently cancelled in February 2005 due to incomplete application filings. SMR may reapply for one or more of these concessions in the future, but has currently ceased operations in Mexico.

 

The Company’s current focus has changed from Mexico to the United States with present emphasis on the Pisgah Mountain material and Wikieup material.

 

All the United States properties are considered “grass roots” because they are not known to contain reserves of precious metals or other minerals (a reserve is that portion of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination). None of these properties is in production.

 

Can-Cal is currently an exploration stage company. 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, in the event that we are successful in locating 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.

 

To the extent that financing is available, we intend to explore, develop, and, if producible and warranted, bring into production precious metals properties for either on our own account or in conjunction with joint venture partners (in those instances where we acquire less than a 100% interest in a property). However, either due to a combination of a lack of available financing, the number of properties which merit development, and/or the scope of the exploration and development work of a particular property being beyond the Company’s financial and administrative capabilities, the Company may contract out one or more of its properties to other mining companies.

 

Executive offices are located at 8205 Aqua Spray Ave, Las Vegas, Nevada 89128 (tel. 702.243.1849; fax 702.243.1869).

 

2
 

 

Item 1A. Risk Factors.

 

In the course of conducting our business operations, we are exposed to a variety of risks that are inherent to our industry specifically, and to early stage companies and for investments in securities, generally. The following discusses some of the key inherent risk factors that could affect our business and operations, as well as other risk factors which are particularly relevant to us in the current period of significant economic and market disruption. Other factors besides those discussed below or elsewhere in this report also could adversely affect our business and operations, and these risk factors should not be considered a complete list of potential risks that may affect us.

 

Risk Factors Related to Our Business

 

Losses to Date and General Risks Faced by the Company.

 

We are an exploration stage company engaged in the acquisition and exploration of precious metals mineral properties. To date, we have no producing properties. As a result, we have had minimal sources of operating revenue and we have historically operated and continue to operate at a loss. For the year ended December 31, 2013, the Company recorded a net loss of $329,994 and had an accumulated deficit of $10,692,541at that date. Our ultimate success will depend on our ability to generate profits from our properties.

 

We lack material operating cash flow and rely on external funding sources. If we are unable to continue to obtain needed capital from outside sources, we will be forced to reduce, curtail or cease our operations. Furthermore the, planned exploration and development of the mineral properties in which we hold interests depends upon our ability to obtain financing through:

 

  - Bank or other debt financing,
  - Equity financing, or
  - Other means.

 

As a mineral exploration company, our ability to commence production and generate profits is dependent on our ability to discover viable and economic mineral reserves. Our ability to discover such reserves are subject to numerous factors, many of which are beyond our control and are not predictable.

 

Exploration for gold is speculative in nature, involves many risks and is frequently unsuccessful. Any gold exploration program entails risks relating to:

 

  - The location of economic ore bodies,
  - Development of appropriate metallurgical processes,
  - Receipt of necessary governmental approvals, and
  - Construction of mining and processing facilities at any site chosen for mining.

 

The commercial viability of a mineral deposit is dependent on a number of factors including:

 

  - The price of gold,
  - Exchange rates,
  - The particular attributes of the deposit, such as its size, grade and proximity to infrastructure, financing costs, taxation, royalties, land tenure, land use, water use, power use, and foreign government regulations restricting importing and exporting gold and environmental protection requirements.

 

All of the mineral properties in which we have an interest or right are in the exploration stages only and are without reserves of gold or other precious metals minerals. We cannot assure that current or proposed exploration or development programs on properties in which we have an interest will result in the discovery of gold or other mineral reserves or will result in a profitable commercial mining operation.

 

The audit report on the financial statements at December 31, 2013 has a “going concern” qualification, which means we may not be able to continue operations unless we obtain additional funding and are successful with our strategic plan.

 

We have experienced losses since inception. The extended period over which losses have been experienced is principally attributable to the fact that a lot of money has been spent on exploring grass roots mineral properties to determine if precious metals might be present in economic quantities. In order to fund future activities the Company must identify and verify the presence of precious metals in economic quantities, which is currently ongoing “In House” in addition to independent third party testing. If economic results are identified, the Company then would either seek to raise capital itself, to put the Pisgah property and the Wikieup into production, or sell the properties to another company, or place the properties into a joint venture with another company.

 

3
 

 

Attaining these objectives will require capital, which the Company will have to obtain principally by selling stock or other equity in the company. However, we have currently have no definitive arrangements in place to raise the necessary capital to continue operations for any extended period of time, and have generally relied upon relatively small, and intermittent infusions to sustain operations.

 

If we do not obtain additional financing, our business will fail.

 

Our current operating funds are less than necessary to complete all intended objectives and therefore we will need to obtain additional financing in order to continue our business. We currently do not have any operations and we have no income.

 

We do not currently have any arrangements for financing and we can provide no assurance to investors that we will be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our business model and general market conditions. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.

 

The most likely source of future funds presently available to us is through the sale of equity capital in one or more negotiated private sale transactions. Any sale of share capital will result in dilution to existing shareholders.

 

As an exploration company, we are subject to the risks of the minerals business.

 

The exploration for minerals is highly speculative and involves risks different from and in some instances greater than risks encountered by companies in other industries. Without extensive technical and economic feasibility studies, no one can know if any property can be mined at a profit. Most exploration programs do not result in the discovery of mineralization that leads to commercially viable mining activities and most exploration programs never recover the funds invested in them. Furthermore, even with promising reserve reports and feasibility studies, profits cannot be assured. We have not systematically drilled and sampled any of our properties to confirm the presence of any concentrations of precious metals, and drilling and sampling results to date have been inconclusive.

 

The British Columbia Securities Commission has required us to obtain a report by an independent consultant qualified under the standards of the BCSC.

 

The British Columbia Securities Commission (“BCSC”) previously required the Company to obtain a report by an independent consultant qualified under the standards of the BCSC. Under British Columbia securities laws, all disclosure of scientific or technical information, including disclosure of a mineral resource or mineral reserve must be based on information prepared by or under the supervision of an independent third party who is “qualified” under the terms of that law. The Company was therefore required under order to supply such verification by a “qualified” third party consultant, and its stock was prohibited from trading in British Columbia until the BCSC accepted such verification. The BCSC also requested documentation regarding all subscribers to the Company stock who were at such time residing in British Columbia. The Company subsequently retained a “qualified” third party consultant who prepared and filed the necessary reports with the BCSC. If the BCSC continues with additional investigatory proceedings, it will require the Company to expend additional funds on legal and accounting fees, which will have a negative impact on our resources available for exploration and general operating activities.

 

There is substantial risk that such testing on the United States properties would show limited concentrations of precious metals, and such testing may show a lack of precious metals in the properties. Any positive test results will only confirm the presence of precious metals in the samples, and it cannot be assumed that precious metals-bearing materials exist outside of the samples tested.

 

Policy changes.

 

Changes in regulatory or political policy could adversely affect our exploration and future production activities. Any changes in government policy, in the United States or other countries where properties are or may be held, could result in changes to laws affecting ownership of assets, land tenure, mining policies, taxation, environmental regulations, and labor relations.

 

4
 

 

Environmental costs.

 

Compliance with environmental regulations could adversely affect our exploration and future production activities. There can be no assurance that future changes to environmental legislation and related regulations, if any, will not adversely affect our operations.

 

Future reserve estimates.

 

All of the mineral properties in which we have an interest or right are in the exploration stages only and are without reserves of gold or other minerals. Even if and when we can prove such reserves, reserve estimates may not be accurate. There is a degree of uncertainty attributable to any calculation of reserves or resources. Until reserves or resources are actually mined and processed, the quantity of reserves or resources must be considered as estimates only. In addition, the quantity of reserves or resources may vary depending on metal prices. Any material change in the quantity of reserves, resource grade or stripping ratio may affect the economic viability of our properties. In addition, there can be no assurance that mineral recoveries in small-scale laboratory tests will be duplicated in large tests under on-site conditions or during production.

 

The possibility of a global financial crisis may significantly impact our business and financial condition for the foreseeable future.

 

The credit crisis and related turmoil in the global financial system may adversely impact our business and our financial condition, and we may face challenges if conditions in the financial markets do not improve. Our ability to access the capital markets may be restricted at a time when we would like, or need, to raise financing, which could have a material negative impact on our flexibility to react to changing economic and business conditions. The economic situation could have a material negative impact on our lenders or customers, causing them to fail to meet their obligations to us. We will need additional capital and financing to fund our fiscal 2014 operating forecast. There is no assurance that additional capital or financing will be available to us on terms that are acceptable to us or at all.

 

Risks Related to Our Securities

 

Because our common stock is deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

 

Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:

 

·Deliver to the customer, and obtain a written receipt for, a disclosure document;
·Disclose certain price information about the stock;
·Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
·Send monthly statements to customers with market and price information about the penny stock; and
·In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.

 

Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

 

The market price of our Common Stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations.

 

The market price of our Common Stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to a number of factors, some of which are beyond our control, including but not limited to:

 

·dilution caused by our issuance of additional shares of Common Stock and other forms of equity securities;
·announcements of new acquisitions, expansions or other business initiatives by us or our potential competitors;
·our ability to take advantage of new acquisitions, expansions or other business initiatives;
·quarterly variations in our revenues and operating expenses;
·changes in the valuation of similarly situated companies, both in our industry and in other industries;
·challenges associated with timely SEC filings;
·illiquidity and lack of marketability by being an OTC quoted stock;
·changes in analysts’ estimates affecting our company, our competitors and/or our industry;
·changes in the accounting methods used in or otherwise affecting our industry;
·additions and departures of key personnel;
·announcements of technological innovations or new products;
·fluctuations in interest rates and the availability of capital in the capital markets; and
·significant sales of our Common Stock, including sales by selling shareholders following the registration of shares under a prospectus.

 

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our Common Stock and our results of operations and financial condition.

 

5
 

 

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

 

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

Shareholders will experience dilution upon the exercise of options and issuance of common stock under our incentive plans.

 

As of December 31, 2013, we had no options outstanding under our 2003 Non-Qualified Option Plan. Our 2003 Non-Qualified Option Plan permits us to issue up to 1,500,000 shares of our common stock either upon exercise of stock options granted under such plan or through restricted stock awards under such plan. If the holders of outstanding options exercise those options or our full board of directors determines to grant additional stock awards under our incentive plan, shareholders may experience dilution in the net tangible book value of our common stock. In addition, 9,455,810 shares of our common stock may be issued upon the exercise of warrants held by certain of our stockholders. If the stockholders exercise their warrants, shareholders may experience dilution in the net tangible book value of our common stock. Further, the sale or availability for sale of the underlying shares in the marketplace as a result of the exercise of existing options, the grant of additional options, and the exercise of the warrants could depress our stock price.

 

We do not expect to pay dividends in the foreseeable future.

 

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business. In addition, debt arrangements we may enter into in the future may preclude us from paying dividends. Therefore, investors will not receive any funds unless they sell their common stock, and shareholders may be unable to sell their shares on favorable terms or at all. Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in our common stock.

 

We may issue additional stock without shareholder consent.

 

Our board of directors has authority, without action or vote of the shareholders, to issue all or part of our authorized but unissued shares. Additional shares may be issued in connection with future financing, acquisitions, employee stock plans, or otherwise. Any such issuance will dilute the percentage ownership of existing shareholders. We are also currently authorized to issue up to 10,000,000 shares of preferred stock. The board of directors can issue preferred stock in one or more series and fix the terms of such stock without shareholder approval. Preferred stock may include the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions. The issuance of preferred stock could adversely affect the rights of the holders of common stock and reduce the value of the common stock. In addition, specific rights granted to holders of preferred stock could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our shareholders. Such issuance could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

 

There is currently a limited trading market for our common stock and we cannot ensure that one will ever develop or be sustained.

 

To date there has not been a significant liquid trading market for our common stock. We cannot predict how liquid the market for our common stock might become. We currently do not satisfy the initial listing standards for any major securities exchange. Currently our common stock is traded on the OTCQB. Should we fail to remain traded on the OTCQB or not be able to be traded on the OTCQB, the trading price of our common stock could suffer, the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility. Furthermore, for companies whose securities are quoted on the OTCQB, it may be more difficult (i) to obtain accurate quotations, (ii) to obtain coverage for significant news events because major wire services generally do not publish press releases about such companies and (iii) to obtain needed capital.

 

6
 

 

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

 

If our stockholders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding period under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could hinder our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

 

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

We have a limited number of personnel that are required to perform various roles and duties as well as be responsible for monitoring and ensuring compliance with our internal control procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.

 

7
 

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

 

Item 2. Properties.

 

GENERAL

 

We own or have interests in four United States properties. They are:

 

·Pisgah, San Bernadino County, California
·Owl Canyon, California
·Cerbat, Arizona
·Wikieup, Arizona

 

A summary of important features about each of these properties is set forth in Exhibit 99.1 to our Form 10-KSB/A filed on March 11, 2009, and investors should take care to review this summary.

 

On September 26, 2006, the Company signed a letter of intent with E.R.S. Ltd., an Israeli owned Cyprus corporation with offices located in Tel Aviv. The letter of intent was to expand testing by E.R.S. on material from Can-Cal’s Pisgah property. The Company and E.R.S. did not enter into a definitive agreement in 2007.

 

In May and June 2006, Can-Cal acquired an additional 66 20-acre lode claims for the filing cost of $1,200. This increased the Company’s property holding to 1,900 acres or 2.97 square miles of 95 lode claims.

 

In April, June, July and September 2006, the Company conducted further surface sampling and rock wall sampling on its Wikieup, Arizona property. These samples were shipped to ALS Chemex, an internationally recognized assayer for fire assays (process of testing the original head ore material at high temperatures to determine the recoverability of precious metals) and I.C.P. tests. The preliminary assay results were encouraging and the Company will continue with further surface sampling from various areas of the approximate six square miles of claimed land.

 

On August 28, 2006, Can-Cal acquired an additional 1,800 acres from the Rose Trust in exchange for 1,000,000 restricted shares of its common stock. This increased the Company’s property holding on its Wikieup, Arizona property to 3,700 acres or approximately six square miles of 185 lode claims. The area is accessed by gravel road just off highway 93 approximately eight miles from the town of Wikieup, Arizona.

 

Adits (A type of entranche to underground mine shafts), tunnels and open pit locations following what may be a trend (direction that an ore body may follow) or vein structure (faults and cracks caused by shifts in the earth that had filled in with silica fluids and other magma volcanics which solidified leaving minerals behind) over a large region have been found on the property. The legacy of previous mining activity including; abandoned equipment, stone built homes, a cement water reservoir and numerous tailings piles, or piles of dirt left over from previous mining operations, can be seen from various locations.

 

The geology of the Wikieup area claims is comprised of Precambrian ganoids and gneiss. Outcrop is extensive on the property and rock units include diorite, gabbro and granitic dikes. The Company is continuing the surface sampling program and has hired an independent geologist, working together with students from the University of Nevada Las Vegas (UNLV) for continued exploration.

 

In the United States, one property is owned (patented mining claims on a volcanic cinders property at Pisgah, California), one is leased with an option to purchase (the Cerbat property in Mohave County, Arizona), and two properties are groups of unpatented mining claims located on federal public land and managed by the United States Bureau of Land Management (the “BLM”): the Owl Canyon property (23 miles northeast of Baker, California); and the Wikieup property (in Mohave County, Arizona).

 

In the United States, unpatented claims are “located” or “staked” by individuals or companies on federal public land. Each placer claim covers 160 acres and each lode claim covers 20 acres. The Company is obligated to pay a maintenance fee of $140 per claim per year to the BLM and file an Affidavit of Assessment Work with the County showing labor and improvements of at least $100 for each claim yearly.

 

If the statutes and regulations for the location and maintenance of a mining claim in the United States are complied with, the locator obtains a valid possessory right, or claim, to the contained minerals. Failure to pay such fees or make the required filings may render the mining claim void or voidable. We believe we have valid claims, but, because mining claims are self-initiated and self-maintained, it is impossible to ascertain their validity solely from public real estate records. If the government challenges the validity of an unpatented mining claim, we would have the burden of proving the present economic feasibility of mining minerals located on the claims.

 

8
 

 

The evaluation and acquisition of precious metals, mining properties and mineral properties is competitive; as there are numerous companies involved in the mining and minerals business.

 

Exploration for and production of minerals is highly speculative and involves greater risks than exist in many other industries. Many exploration programs do not result in the discovery of mineralization and any mineralization discovered may not be of a sufficient quantity or quality to be profitably mined. Also, because of the uncertainties in determining metallurgical amenability of any minerals discovered, the mere discovery of mineralization may not warrant the mining of the minerals on the basis of available technology.

 

The Company’s decision as to whether any of the mineral properties it now holds, or which it may acquire in the future, contain commercially mineable deposits, and whether such properties should be brought into production, will depend upon the results of the exploration programs and independent feasibility analysis and the recommendation of engineers and geologists. The decision will involve the consideration and evaluation of a number of significant factors, including, but not limited to: 1. The ability to obtain all required permits; 2. Costs of bringing the property into production, including exploration and development or preparation of feasibility studies and construction of production facilities; 3. Availability and costs of financing; 4. Ongoing costs of production; 5. Market prices for the metals to be produced; and 6. The existence of reserves or mineralization with economic grades of metals or minerals. No assurance can be given that any of the properties the Company owns, leases or acquires contain (or will contain) commercially mineable mineral deposits, and no assurance can be given that the Company will ever generate a positive cash flow from production operations on such properties.

 

The Company has processed and tested mineralized materials and produced very small amounts of precious metals on a testing basis. These have come primarily from testing material from the Pisgah Mountain, Wikieup, Cerbat and the Owl Canyon properties.

 

Exploration and mining operations in the United States are subject to statutory and agency requirements which address various issues, including: (i) environmental permitting and ongoing compliance, including plans of operations which are supervised by the Bureau of Land Management (“BLM”), the Environmental Protection Agency (“EPA”) and state and county regulatory authorities and agencies (e.g., state departments of environmental quality) for water and air quality, hazardous waste, etc.; (ii) mine safety and OSHA generally; and (iii) wildlife (Department of Interior for migratory fowl, if attractive standing water is involved in operations). See (b)(11) below. The Company has been added by San Bernardino County as a party to the Approved Mining/ Reclamation Plan and related permits, which have been issued for the Pisgah property. See Item 2, Description of Properties - Pisgah, California - Pisgah Property Mining Lease.

 

Because any exploration (and future mining) operations of the Company would be subject to the permitting requirements of one or more agencies, the commencement of any such operations could be delayed, pending agency approval (or a determination that approval is not required because of size, etc.), or the project might even be abandoned due to prohibitive costs.

 

The Company has historically expended a significant amount of funds on consulting, geochemical analytical testing, metallurgical processing and extracting, and precious metal assaying of material, however, the Company does not consider those activities as research and development activities. All those expenses are borne by the Company.

 

Federal, state and local provisions regulating the discharge of material into the environment, or otherwise relating to the protection of the environment, such as the Clean Air Act, Clean Water Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response Liability Act (“Superfund”) affect mineral operations. For exploration and mining operations, applicable environmental regulation includes a permitting process for mining operations, an abandoned mine reclamation program and a permitting program for industrial development. Other non- environmental regulations can impact exploration and mining operations and indirectly affect compliance with environmental regulations. For example, a state highway department may have to approve a new access road to make a project accessible at lower costs, but the new road itself may raise environmental issues. Compliance with these laws, and any regulations adopted there under, can make the development of mining claims prohibitively expensive, thereby frustrating the sale or lease of properties, or curtailing profits or royalties which might have been received there from. In 1997, the S & S Joint Venture spent approximately $32,000 to clean up areas of the Owl Canyon properties as requested by the BLM. The Company cannot anticipate what the further costs and/or effects of compliance with any environmental laws might be. The BLM approved the S&S Joint Venture trenching program at Owl Canyon without a requirement for bonding. The BLM approved the reclamation of this trenching program in 2000. BLM demanded further clean-up of the mill site and surrounding area, and the Joint Venture complied with their request in 2000.

 

The Company presently has one full-time employee and relies on outside subcontractors, consultants and agents, to perform various administrative, legal and technical functions, as required.

 

9
 

 

PISGAH, CALIFORNIA PROPERTY

 

GENERAL TESTING. In 1997 we acquired fee title to a “volcanic cinders” property at Pisgah, San Bernardino County, California, for $567,000. The cinders material resulted from a geologically recent volcanic eruption.

 

The property is privately owned and is comprised of approximately 120 acres located 10 miles southwest of Ludlow, California, with a very large hill of volcanic cinders, accessible by paved road from Interstate 40. An independent survey service hired by the Company reported that there are approximately 13,500,000 tons of volcanic cinders above the surface. Approximately 3,500,000 tons of the cinders have been screened and stockpiled, the result of prior operations by Burlington Northern Railroad Co. It processed the cinders from the hill for railroad track ballast, taking all cinders above about one inch diameter and leaving the rest on the ground surface within one-quarter mile of the hill. The remaining material in the hill and the material left over from Burlington’s operations can easily be removed by front end loaders and loaded into dump trucks for hauling. The Cinder and Cinder #2 patented mining claims contain morphologically young alkali basalt and hawaiite lava flows and cinder (rock types created by volcanic activity). The cinder and spatter cone is about 100 meters high and has a basal diameter (circumference area at the base of the volcanic material) of about 500 meters, and was formed by the splattering of lava into a cone shape during volcanic activity. The volcanic cone and crater consists of unsorted basalis tephra (volcanic material), ranging from finest ash, through scoriascious cinders and blocks, or slag like structures born from igneous rock, to dense and broken bombs up to two meters in dimension.

 

The Company owns equipment which was acquired with the property, and is located on the property: a ball mill used for crushing cinders, truck loading pads, two buildings, large storage tanks, conveyors to load trucks, material silos and screening equipment.

 

The Pisgah property consists of patented claims we own; no fees have to be paid to the BLM or work performed on the claims to retain title to the property.

 

From the year 2000 through 2002, the Company ran numerous tests on the volcanic cinders property to determine if the material contains precious metals. Although the program indicated precious metals might exist in material taken from the Pisgah property, overall the program results were inconclusive.

 

Pisgah Property - Mining Lease

 

To generate working capital, as of May 1, 1998, we signed a Mining Lease Agreement for the Pisgah property with Twin Mountain Rock Venture, a California general partnership (“Twin Mountain,”). The Agreement is for an initial term of 10 years, with an option to renew for an additional ten-year term. Twin Mountain has the right to take 600,000 tons of volcanic cinders during the initial term, and 600,000 more tons during the additional term, for processing and sale as decorative rock. The material would be removed from the original cinder deposit, not the stockpiled material. Twin Mountain has not removed any material to date.

 

The agreement provides that Twin Mountain will pay minimum annual rental payments of $22,500 for the initial term and $27,500 per year for the additional term. Twin Mountain is also obligated to pay us a monthly production royalty for all material removed from the premises: The greater of 5% of gross sales f.o.b. Pisgah, or $0.80 per ton for material used for block material; plus 10% of gross sales f.o.b. Pisgah for all other material. Twin Mountain will be credited against these payments for minimum royalty payments previously made.

 

Twin Mountain is current in payments, which are pledged to service company debt. Twin Mountain has not yet removed any material from the property and has not indicated when it would do so. Twin Mountain does not have the right to remove or extract any precious metals from the property; it does have the right to remove cinder material, which could contain precious metals (and Twin Mountain would have title to the removed cinder material), but it cannot process the materials for precious metals either on or off site.

 

Mining and reclamation permits, and an air quality permit have been issued by the California regulatory agencies in the names of both Twin Mountain and the Company. We 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.

 

10
 

 

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.

 

Pisgah Property - Debt Transactions

 

We owed a second private lender (First Colony Merchant) a total of $852,767 including accrued interest, on three notes payable secured by a deed of trust and assignment of rents (payments under the Twin Mountain lease) on the Pisgah property, which were cancelled during 2011 in accordance with the statute of limitations. The resulting gain on extinguishment of debt of $852,767 was recognized within the statement of operations during the year ended December 31, 2011. For additional consideration for part of the amounts loaned, the Company granted the lender a five-year option to purchase 300,000 restricted shares of common stock, at the lower of $0.65 per share or 50% of the lowest trading price during the month before exercise, payable in cash. The option was exercised in 2000 at $0.52 per share. In addition, in fiscal year 2000, as further consideration, we issued 45,000 restricted shares of common stock to a corporate affiliate of the lender as a loan placement fee.

 

Location and Access

 

The Pisgah Project is located in San Bernardino County, 72 kilometers (45 miles) east of the city of Barstow, California, and 307 kilometers (192 miles) south-southeast of Las Vegas, Nevada, United States. Barstow lies near the southwest border of California, east of the junction of Interstate 15, Interstate 40 and U.S. Route 66. The Project is centered at Latitude 34o 44’ 47” North, Longitude 116o 22’ 29” West (See Figures 1, 2 and 3), or UTM (metric) co-ordinates 55700 E/384500 N in Zone 11, datum point NAD 27. It lies within the NW ¼ of Section 32, Township 8 North, Range 6 East from San Bernardino Meridian and has an area of 48.4 hectares (120.2 acres).

 

Access to the Pisgah Project is by the paved 2-lane paved road. From the junction of Interstate 15 and Interstate 40 just east of Barstow, California travel east along Interstate 40 for 52 kilometers (32.5 miles). Take the Hector Rd. Exit and turn right onto Hector Rd. From here turn left onto Historic Route 66 for 7.4 kilometers (4.6 miles), and then turn right (south) onto the Pisgah Crater road. Follow this road for 3.2 kilometers (2.0 miles) to the Pisgah Crater workings.

 

 

 

 

 

 

 

 

 

11
 

 

Pisgah Project

General Location Map

 

 

 

12
 

 

Pisgah Project

Regional Location Map

 

 

 

13
 

 

Pisgah Project

Township Location Map

 

 

14
 

 

Pisgah Project

Topography Map

 

 

 

15
 

 

OWL CANYON - S & S JOINT VENTURE

 

In 1996, the Company entered into a Joint Venture Agreement with the Schwarz family covering approximately 425 acres of unpatented placer and lode mining claims in the Silurian Hills of California, known as Owl Canyon (the “S&S Joint Venture”). The S & S Joint Venture has since reduced its holdings to 160 acres of lode claims and a five-acre mill site claim. These claims are prospective for precious metals and some base metals. The property is located approximately 23 miles northeast of Baker, California, accessible by 23 miles of paved and dirt road. The Company and the Schwarz family each have a 50% interest in the venture which is operated by a management committee, comprised of G. Michael Hogan, a director of the company, and Ms. Robin Schwarz.

 

Holding costs are approximately $160 per year for county and BLM filing fees for each of the eight lode claims, in accordance with filings under provisions of the “Small Miner Waiver”. Work must be performed on the property each year to keep title to the claims. Due to the lack of operating funds in 2013, Can-Cal has discontinued paying the California BLM fees for the period October 1, 3013 through September 30, 2014.

 

Pursuant to the Joint Venture Agreement, we are funding the venture’s operations. Any income from the venture will first be paid to the Company to repay funds advanced to the venture or spent on its account, with any additional income divided 50% to the Company and 50% to the Schwarz family.

 

As the acquisition price of its 50% interest in the S & S Joint Venture, in 1996 the Company issued 500,000 restricted shares of common stock to the Schwarz family.

 

Prior to 2003, the Company conducted extensive preliminary testing and assaying on the Owl Canyon property. Results indicate precious metals are present in material located on the Owl Canyon property, and further exploration is warranted. Upon conclusion of the trenching program conducted by Geochemist, Bruce Ballantyne, the assay results confirmed that the “Papa Hill” section of Owl Canyon should be a designated drill target in the future.

 

Geology of Owl Canyon

 

Mineralization on the property migrates along north/south oriented faulting and at the contact point between metamorphic and dolomite rocks. Metalliferous deposits, or deposits filled with fine metal particles, along these fractures are prevalent near the central area of Owl Canyon. Along the southern side of the property, fault contact areas exhibit localized zone alteration from migrating hydrothermal fluids, or areas altered from hot lava and hydrothermal fluids due to volcanic activity, producing a mineralized vein ranging in width from approximately 18 to 36 inches.

 

We have performed external and in-house fire assays on material from the Owl Canyon property, sending both trench and rock samples to independent laboratories. Approximately 15 tons of material was removed to a depth of 3 to 4 feet to expose a continuation of one of the veins. An independent laboratory analyzed samples from this material.

 

A detailed structural and geologic mapping survey has been completed on the property, indicating some zones in certain areas are suitable exploration targets. Currently, work on this property has been suspended. This property is without known reserves and future work would be exploratory in nature. There was no significant activity on this property as of the date of this annual report. in 201.

 

Location

 

The Silurian Hills are located in the Silurian Hills 15-minute quadrangle. The property is located in the northeastern corner of the 7.5 minute series topographic map entitled North of Bank Quadrangle California - San Bernardino County in Section 9, Township 16N, Range 9E. It is centered along the topographic feature known as Owl Canyon.

 

The area lies within the California Desert Conservation Area administered by the Bureau of Land Management. This agency identified the Silurian Hills as having high mineral potential for silver (1980) which led the County of San Bernardino to zone the area for mining and mineral exploration.

 

Access

 

From Interstate 15 at Baker, California, access is via California State Highway 127 for a distance of nine miles north of the service center town of Baker. At the Powerline Road junction turn right and travel on a USGS class 3 road generally under the Power Transmission Line for a further 9 miles. At this point turn to the left and head north to the Silurian Hills until metal gates are reached after 5 miles of slow, track-road, travel. This is the eastern boundary of the Owl Canyon Mineral Property.

  

Topography

 

Relief at the Owl Canyon Mineral Property area ranges from 650 meters to about 775 meters (elevation 2,000 to 3,000 feet above sea level). Locally, topographic relief is on the order of 1,000 feet in less than one half a mile along the Owl Canyon topographic feature.

 

16
 

 

Owl Canyon Project

Township Location Map

 

 

17
 

 

CERBAT PROPERTY

 

On March 12, 1998, we signed a Lease and Purchase Option Agreement covering six patented mining claims in the Cerbat Mountains, Hualapai Mining District, and Mohave County, Arizona. The patented claims cover approximately 120 acres. We paid $10,000 as the initial lease payment and are obligated to pay $1,500 per quarter as minimum advance royalties. The Company has the option to purchase the property for $250,000, less payments already made. In the event of production before purchase, we will pay the lessor a production royalty of 5% of the gross returns received from the sale or other disposition of metals produced. Except for limited testing and evaluation work performed in mid- 2002, no work has been performed on this property since 1999. Access is north 15 miles from Kingman, Arizona on Highway 93, east from the historical market to Mill Ranch, then left three miles to a locked gate.

 

The country rock is pre-Cambrian granite, gneiss and schist complex. It is intruded by dikes of minette, granite porphyry, diabase, rhyolite, basalt and other rocks, some of which are associated with workable veins and are too greatly serieitized (altered small particles within the material) for determination. The complex is also flanked on the west by masses of the tertiary volcanic rocks, principally rhyolite. The mineralized body contains principally gold, silver and lead. They occur in fissure veins, which generally have a north-easterly trend and a steep north-easterly or south-westerly dip. Those situated north of Cerbat wash are chiefly gold bearing while those to the south principally contain silver and lead. The gangue (material that is considered to have base metals that are not precious or worth recovering for market value) is mainly quartz and the values usually favor the hanging wall. The Company has been informed by the owner that the property contains several mine shafts of up to several hundred feet in depth and tailings piles containing thousands of tons of tailings. The property has not produced since the late 1800’s.

 

The buildings on the property are practically valueless, owing to being in disuse for so many years.

 

We conducted (in late June and July 2002) a limited number of preliminary tests and assays on material taken from mine dumps (material left on the property from mining by others many years ago). It was anticipated that this material could be economically processed. However, the dump material tonnage will not support a small-scale operation without being supplemented with additional underground ore. We are considering selling or farming out the property, as there have been expressions of interest in the property from time to time. We have had no significant activity on Cerbat as of the date of this annual report.

 

Location and Access

 

The Cerbat Group of claims is located in the Hualapai Mining District about 15 miles north from Kingman which is the nearest railroad and supply point. The state highway from Kingman to Boulder Dam and Las Vegas passes within 4 miles of the property and a good County road connects the highway with the mining site. The County road passes through the Rolling Wave and Red Dog claims making transportation available to the lower workings. An old road connects the New Discovery shaft with the Cerbat workings near the crest of the hill. This group of claims is favorably situated for trucking and transportation purposes.

 

WIKIEUP PROPERTY

 

During 2012 and 2013, we began the process of conducting a comprehensive research and development program to ascertain the potential for any rare earth elements on the Wikieup property with the assistance of an independent geologist working together with students from the University of Nevada Las Vegas’ geology department (UNLV). The study has been completed and the results have been presented to the Company.

 

Can-Cal now consists of 56 Lode claims based on the UNLV study project conducted during 2012 and 2013. Can-Cal reduced its number of claims from the previous year as recommended by the UNLV study project. Holding costs are approximately $155 per year for county and BLM fees, and work must be performed on the property each year to keep title to the claim.

 

The geology of the area is comprised of Precambrian ganoids and gneiss. Outcrop is extensive on the property and rock units include diorite, gabbro and granitic dikes. The Company has kept the claims in good standing by submission of the required rental fees. During the past nine months, the Company has conducted surface sampling of the rock units on the property for “In House” and independent third party companies’ analytical evaluation and assay tests. We are currently holding the property for further exploration. At the present time the property is without known reserves.

 

Location and Access

 

The Wikieup Project is located in southern Mohave County, 88 kilometers (55 miles) south of the city of Kingman, Arizona, and 253 kilometers (158 miles) southeast of Las Vegas, Nevada, United States. Wikieup lies on Interstate 93. It occurs at Latitude 34o 44’ 47” North, Longitude 116o 22’ 29” West, the site of Wikieup, and west from there for approximately 19 kilometres (12 miles; Figures 1, 2 and 3). The Project is located 37 kilometers (23 miles) northwest of the mining camp of Bagdad, Arizona and 25 kilometers (16 miles) northwest of the mining camp of Bagdad, Arizona.

 

Access to the Wikieup Project is by the paved 2-lane Interstate 93 from the village of Wikieup. A few claims straddle the highway at Wikieup, but the main body of mining claims is accessed by heading west from the junction of Interstate 93 at Wikieup onto Chicken Springs Road and following various secondary and tertiary gravel and sand roads. Many of the tertiary roads require a 4-wheeldrive vehicle for access.

 

18
 

 

Wikieup Project

General Location Map

 

 

19
 

 

Wikieup Project

Regional Location Map

 

 

20
 

 

Wikieup Project

District Location Map

 

 

 

21
 

 

Wikieup Project

Geology Map

 

 

22
 

 

Item 3. Legal Proceedings.

 

The Company is not currently a party to, or otherwise involved in any legal proceedings.

 

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 management, 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 4. Mine Safety Disclosures.

 

The Company does not currently operate any mines related to its claims. As a result, mine safety disclosures are not applicable.

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

(a) Market Information

 

Our Common Stock trades sporadically on the over-the-counter bulletin board market (OTC:QB) under the symbol CCRE. Our common stock has traded infrequently on the OTC:QB, which limits our ability to locate accurate high and low bid prices for each quarter within the last two fiscal years. Therefore, the following table lists the quotations for the high and low bid prices as reported by a Quarterly Trade and Quote Summary Report of the OTC Bulletin Board for the calendar years 2012 and 2011. The quotations from the OTC Bulletin Board reflect inter-dealer prices without retail mark-up, markdown, or commissions and may not represent actual transactions.

 

  2013 2012
  High Low High Low
1st Quarter $0.10 $0.03 $0.10 $0.03
2nd Quarter $0.10 $0.04 $0.10 $0.04
3rd Quarter $0.05 $0.04 $0.05 $0.04
4th Quarter $0.10 $0.03 $0.10 $0.03

 

(b) Holders of Common Stock

 

As of December 31, 2013, there were approximately 596 holders of record of our Common Stock and 42,027,060 shares outstanding.

 

(c) Dividends

 

In the future we intend to follow a policy of retaining earnings, if any, to finance the growth of the business and do not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of future dividends on the Common Stock will be the sole discretion of board of directors and will depend on our profitability and financial condition, capital requirements, statutory and contractual restrictions, future prospects and other factors deemed relevant.

 

23
 

 

(d) Securities Authorized for Issuance under Equity Compensation Plans

 

STOCK OPTION PLANS

 

THE CAN-CAL 2003 QUALIFIED INCENTIVE STOCK OPTION PLAN: The 2003 Qualified Incentive Stock 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, which will be used to compensate senior executives and mid-level employees in the future. An option on 500,000 shares had been granted to Mr. Ciali under this plan. These options expired unexercised in 2006. An option on 300,000 shares had been granted to Anthony F. Ciali when he was appointed an officer of the company in March 2003. These options expired unexercised in 2006.

 

An option on 500,000 shares has been granted to Mr. Ronald Sloan with an exercise price of $0.20 in June 2006 under this plan. These options expired unexercised in 2011. An option on 125,000 shares has been granted to Mr. James Dacyszyn with an exercise price of $0.20 in June 2006 under this plan. This option was exercisable upon issuance and expired in June 2008. An option on 125,000 shares has been granted to Mr. John Brian Wolfe with an exercise price of $0.20 in June 2006 under this plan. This option was exercisable upon issuance and expired in June 2008.

 

THE CAN-CAL 2003 NON-QUALIFIED STOCK OPTION PLAN FOR SENIOR EXECUTIVES, OUTSIDE DIRECTORS, AND CONSULTANTS: 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. An option on 300,000 shares had been granted to Anthony F. Ciali, a former officer of the Company, when he was appointed an officer of the company in March 2003. These options expired unexercised in 2006. An option on 100,000 shares had been granted to Luis Vega when he signed a consulting agreement with the company in April 2003. Mr. Vega’s options expired unexercised in 2006.

 

The total number of options issued and outstanding at any time, under both the Qualified and Non-Qualified Stock Option Plans will not exceed 10% of the company’s issued and outstanding common stock, calculated on a pro forma basis.

 

WARRANTS

 

For the fiscal years ended December 31, 2013 and 2012, no new warrants were issued.

 

Can-Cal has a total of 9,455,810 warrants outstanding as of the fiscal year ending 2013. and as of the fiscal year 2012, 15,280,394 warrants outstanding. The difference of 5,824,584 represents warrants that have expired during the year 2013.

 

Recent Sales of Unregistered Securities

 

There were no sales of equity securities by the Company during the fiscal year ended December 31, 2013.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the year ended December 31, 2013.

 

 

Item 6. Selected Financial Data.

 

Not applicable.

 

24
 

 

Item 7. Management’s Discussion and Analysis.

 

The following discussion of the business, financial condition and results of operation of the Company should be read in conjunction with the financial statements of the Company for the years ended December 31, 2013 and 2012 and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K. 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 statements as a result of a number of factors, including those set forth under the section titled “Risk Factors.”

 

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 December 31, 2013, we had cash on hand of approximately $1,388 available to sustain operations. Accordingly, we are uncertain as to whether the Company may continue as a going concern. While we may 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 2012 for (i) completion of work-up of two potential extraction processes to determine which process we will employ to potentially prove up any precious metals, platinum groups elements and/or other base metals on the Pisgah, California property and the Wikieup, Arizona property, if any; (ii) the development of a drill program to potentially prove up any tonnages and precious metals and/or other base metals on the Wikieup, Arizona property, if any; (iii) the continued development a comprehensive research and development program to ascertain the potential for any rare earth elements on the Owl Canyon, California property; (iv) strategic working capital reserve and (v) 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 expect to 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 report, we have not yet sold any minerals under this agreement.

 

On April 9, 2013, the Company entered into a Material Supply Agreement (“MSA”) with Candeo Lava Products, Inc., (“Candeo”) an Alberta, Canadian company controlled by a former Director and the brother of our current CEO. The agreement entitles Candeo to purchase certain volcanic lava or cinders from our Pisgah Mine Project that has been previously crushed and stockpiled (the “Finished Material”) at a price equal to the greater of 33 1/3% of the Net Sales Margin and fifteen US dollars ($15 USD) per ton. Under the agreement, Candeo is granted the exclusive right and privilege to remove up to 1 million tons (“Initial Amount”) of the Finished Material, and another million tons (“Additional Amount”) upon the successful of the initial million tons.

 

The Term of this agreement is for an initial period of ten (10) years from April 9, 2013, unless extended pursuant to the terms hereof. Candeo shall have the option to extend the Term of this Material Supply Agreement for [up to three (3)] additional five (5) year periods exercisable at any time with no less than three (3) months written notice prior to the expiration of the then current term, provided that the Candeo is not in default under any of the provisions of the MSA and that the whole of the Initial Amount and the Additional Amount of Finished Material have been completely removed from the Property.

 

Candeo will purchase thirteen thousand, three hundred and thirty-five (13,335) tons (the “Pre-Purchased Finished Material”) of the Finished Material during the first year of the Term at a purchase price of fifteen US dollars ($15 USD) per ton, for a total payment of two hundred and twenty-five thousand US dollars ($225,000 USD) (the “Pre-Purchased Payment”). The Pre-Purchased Finished Material will remain on the Property until Candeo commences its production operations, which will be subject to all necessary regulatory and other approvals required to remove the Finished Material from the Property, such as permits, certified weigh scale, productions plan, environmental reclamation plan (if applicable) and insurance all of which shall be the responsibility and at the sole cost of Candeo. The Pre-Purchased Payment will not be refundable to Candeo but shall be credited against the first Production Payment.

 

25
 

 

Results of Operations for the Years Ended December 31, 2013 and 2012:

 

   Year Ended     
   December 31,   Increase / 
   2013   2012   (Decrease) 
Expenses:               
Exploration costs  $53,754   $51,837   $1,917 
General and administrative   174,028    291,571    (117,543)
Depreciation   374    6,162    (5,788)
Officer salary   120,000    120,000     
Total operating expenses   348,156    469,570    (121,414)
                
Net operating loss   (348,156)   (469,570)   (121,414)
                
Other income (expense):               
Other income   1,260    3,100    (1,840)
Interest expense   (10,354)   (243,042)   232,688 
Rental revenue   27,500    27,500     
Total other income (expense)   18,406    (212,442)   (230,848)
                
Net income (loss)  $(329,750)  $(682,012)  $(352,262)

 

Revenues:

 

We are an exploration stage company and had no revenue to recognize in the years ended December 31, 2013 and 2012. As such, there were no comparative revenues or cost of revenues.

 

Exploration Costs:

 

For the year ended December 31, 201, exploration costs were $53,754 compared to $51,837 for the year ended December 31, 2012, an increase of $1,917, or 4%. The increase in exploration costs for the year ended December 31, 2013 compared to the year ended December 31, 2012 is due to increased exploration activities at our Owl Canyon and Wikieup locations.

 

General and Administrative:

 

General and administrative expenses were $174,028 for the year ended December 31, 2013 compared to $291,971 for the year ended December 31, 2012, a decrease of $117,543 or approximately 68%. The decrease in general and administrative expense for the year ended December 31, 2013 compared to the year ended December 31, 2012 was primarily due to cancellation of Directors and Officers Insurance, elimination of Directors Fees & Costs, and a decrease of professional fees.

 

Depreciation:

 

For the year ended December 31, 2013, depreciation expense was $374 compared to $6,162 for the year ended December 31, 2012, a decrease of $5,788, or 1,548%. The decrease in depreciation expense is due to diminishing depreciation expense as assets have become fully depreciated and have not been replaced.

 

Officer Salary:

 

Officer Salaries was $120,000 for the years ended December 31, 2013 and 2012, respectively. The CEO’s compensation is fixed at $10,000 per month. All salaries payable in 2013 and 2012 were accrued, but not paid, and remain an outstanding obligation of the Company.

 

Net Operating Loss:

 

Net operating loss for the year ended December 31, 2013 was $329,750, or ($0.01) per share, compared to a net operating loss of $682,012 for the year ended December 31, 2012, or ($0.02) per share, a decrease of $352,262 or 107%. This operating loss decrease is primarily due to decrease in General and Administrative expense as explained above.

 

26
 

 

Other Income:

 

Other income was $1,260 for the year ended December 31, 2013 compared to $3,100 for the year ended December 31, 2012, a decrease of $1,840, or 59%. Other income decreased due to the diminished collection of restitution proceeds received in settlement of misappropriated funds by our former bookkeeper as the balance due was collected in full during the year.

 

Interest Expense:

 

Interest expense for the year ended months December 31, 2013 was $10,354 as compared to $243,042 for the year ended decreased by $232,688 (or 96%). The decrease in interest expense was primarily due to decreased finance costs of $238,419 on the extension of warrants that were recognized during the fiscal year 2012 that were not incurred in 2013.

 

Rental Revenue:

 

Rental revenue was $27,500 for the year ended December 31, 2013 compared to $27,500 for the year ended December 31, 2013. 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.

 

Net Loss:

 

The net loss for the year ended December 31, 2013 was $329,750 as compared to a net loss of $682,412 for the year ended December 31, 2012, or a decrease of $352,262 of 107%. This reduction of net loss is primarily due to the reduction of general and administrative expenses as discussed above and the elimination of interest expense related to the fair value of warrants extended based on estimated valuations using a Black-Scholes valuation model during the year ended December 31, 2013 as compared to 2012.

 

Liquidity and Capital Resources

 

The following table summarizes total assets, accumulated deficit, stockholders’ equity (deficit) and working capital at December 31, 2013 compared to December 31, 2012.

 

   December 31, 
   2013   2012 
Total Assets  $10,162   $38,312 
           
Accumulated (Deficit)  $(10,692,541)  $(10,365,791)
           
Stockholders’ Equity (Deficit)  $(940,010)  $(610,260)
           
Working Capital (Deficit)  $(940,662)  $(611,286)

 

At December 31, 2013, we had total assets of $10,162, consisting principally of cash, and prepaid expenses. We have implemented financial controls in the business to ensure each expense is warranted and needed. Our cash on hand at December 31, 2013 was $1,388.

 

Off Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements of any kind

 

Contractual Obligations

 

We have certain fixed contractual obligations and commitments. The table below summarizes our contractual obligations as of December 31, 2013 and for the future periods identified. The exploration of our properties, changes in our business needs and other factors may result in our incurring significant future obligations which would impact our cash and liquidity position and requirements. We cannot provide certainty regarding the timing and amounts of payments.

 

Payments Due By Period

Contractual

Cash Obligations

 

Total

Less than

One Year

1-3

Years

3-5

Years

After 5

Years

Repayment of debt(1) $32,368 $32,368 $-0- $-0- $-0-
           
Total Contractual Cash Obligations $32,368 $32,368 $-0- $-0- $-0-
             

(1) Includes total principal amounts of $31,291 and interest of $1,077.

 

27
 

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, 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. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for sales returns and doubtful accounts, inventory valuation, business combination purchase price allocations, our review for impairment of long-lived assets, intangible assets and goodwill, income taxes and stock-based compensation expense. Actual results may differ from these judgments and estimates, and they may be adjusted as more information becomes available. Any adjustment may be significant.

 

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably may have been used, or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements. We refer readers to Note 1 to our audited financial statements for the year ended December 31, 2012 filed with this Annual Report.

 

Recent Accounting Pronouncements

 

See Note 1 contained in the “Notes to the Financial Statements” for a discussion of new and recently adopted accounting pronouncements.

 

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

28
 

 

Item 8. Financial Statements and Supplementary Data.

 

Index to Financial Statements

 

Report of Independent Registered Public Accounting Firm   F-1
     
Balance Sheets as of December 31, 2013 and 2012   F-2
     
Statements of Operations for the years ended December 31, 2013 and 2012, and the period from March 22, 1995 (inception) to December 31, 2013   F-3
     
Statement of Stockholders' (Deficit) for the period from March 22, 1995 (inception) to December 31, 2013   F-4
     
Statements of Cash Flows for the years ended December 31, 2013 and 2012, and the period from March 22, 1995 (inception) to December 31, 2013   F-5
     
Notes to Financial Statements   F-6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29
 

 

Item 9. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure.

 

None

 

 

Item 9A. Controls and Procedures.

 

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our Chief Executive Officer has concluded that the Company’s disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below in Management’s Annual Report on Internal Control over Financial Reporting, which we view as an integral part of our disclosure controls and procedures.

 

Changes in Internal Control

 

We have also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls as of December 31, 2012.

 

Limitations on the Effectiveness of Controls

 

Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

 

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

CEO and CFO Certifications

 

Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) under the Exchange Act.

 

The management of the Company assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on this assessment, management determined that, during the year ended December 31, 2012, our internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules, as more fully described below. This was due to deficiencies in the design or operation of the Company’s internal control that adversely affected the Company’s internal controls and that may be considered to be material weaknesses.

 

30
 

 

Management identified the following material weaknesses in internal control over financial reporting:

 

1.    The Company has limited segregation of duties, which is not consistent with good internal control procedures.

 

2.    The Company does not have a written internal control procedurals manual which outlines the duties and reporting requirements of the Directors and any staff to be hired in the future. This lack of a written internal control procedurals manual does not meet the requirements of the SEC or good internal controls.

 

Management believes that the material weaknesses set forth in items 1 and 2 above did not have an effect on the Company’s financial results.

 

The Company and its management will endeavor to correct the above noted weaknesses in internal control once it has adequate funds to do so.

 

Management will continue to monitor and evaluate the effectiveness of the Company’s internal controls and procedures and its internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only the management’s report in this annual report.

 

 

Item 9B. Other Information.

 

On February 27, 2013, following the Company’s fiscal year ended December 31, 2012, 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. Dr. Giuffre MD, MBA is currently “Clinical Professor” of Cardiac Sciences and Pediatrics in the Faculty of Medicine at the University of Calgary and a recipient of the “Distinguished Fellow of the American Academy of Cardiology.” Dr Giuffre is also the current President of the Alberta Medical Association. He currently sits on the board of FoodChek Systems, a private Life Sciences company in Calgary, Canada owned by another former member of the Company’s Board of Directors, William Hogan; DiaMedica, a biotechnology company currently traded on the TSX; and UNICEF Canada. Dr. Giuffre is a past Board member of MedMira, a public biotechnology company in rapid HIV and hepatitis diagnostics, and is a past consultant for Redsky Inc. that was sold to Research In Motion (“RIM”). Dr. Giuffre subsequently resigned on March 1, 2013.

 

On April 17, 2012 the Company appointed Ron Schinnour to the Board of Directors. Mr. Schinnour has held countless executive, leadership and management roles in the agricultural industry, both domestically and globally. This has included positions with Monsanto, United Agri Products and Agrium (Cominco). He recently moved back to Calgary and joined the UFA, holding the position of Executive VP of Agri Business. Mr. Schinnour’s expertise in Strategic Planning, Financial Management, International Business and M&A Leadership has been instrumental for the business success and growth of his current and previous companies. Mr. Schinnour holds an MBA from Washington University with special recognition for Excellence in Team Process, Strategic Planning and Finance. He also holds a CMA Designation from the University of Calgary/Society of Management Accountants. Mr. Schinnour currently serves on the Board of Directors of FoodChek Systems Inc., a private Life Sciences company in Calgary, Canada owned by another former member of the Company’s Board of Directors, William Hogan, and Universal Co-op Ltd. (Minneapolis). He has previously served as the Chairman and Director for RAPID & AEC, and on the Board of Directors for the Latin America Agricultural Development Bank, AgroBio & the Agricultural Future of America. He has been President, Treasurer and Director of numerous corporate entities at Monsanto and UAP.

 

31
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

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

 

Name   Age   Position and Tenure
         
G. Michael Hogan   75   President and Chief Executive Officer since November 17, 2009, and a Director.
         
William J. Hogan   64   Secretary and Chairman of the Board of Directors from July 31, 2009 until his resignation on February 27, 2013.
         
Thompson MacDonald   67   Director from June 4, 2009 to November 13, 2009, reappointed on January 31, 2012. Mr. MacDonald was appointed Chairman of the Board of Directors upon Mr. Hogan’s resignation on February 27, 2013.
         
Dr. Michael Giuffre   58   Director from August 12, 2012 until his resignation on March 1, 2013.
         
Ron Schinnour   57   Director since April 17, 2012.

 

G. MICHAEL HOGAN. Mr. G. Michael Hogan spent the majority of his career in various senior management positions at Texaco Canada Ltd and Imperial Oil Ltd. He began his career as an Industrial/Lubrication Engineer for Texaco Canada. Shortly thereafter, he was promoted to District Supervisor making him the youngest supervisor in the company. After graduating with a degree in Mechanical Engineering from the University of Toronto, Ontario and an MBA in Finance from the University of Western Ontario in 1971, he returned to Texaco as the Assistant Manager in Strategic Planning at the corporate office of Texaco Canada. After several promotions, he was appointed Manager of Budgets and Long Range Strategic Planning, where he managed the team that computerized the budget and planning process. Prior to the merger with Imperial Oil, he served on the Corporate M&A team for two years. After the merger with Imperial Oil, he served as the Manager of Retail Pricing.

 

Mr. Hogan joined Equion Securities in 1991, as a Financial Advisor (FA) serving high net worth individual investors. After joining Equion, the company merged with Loring Ward and the combined company changed its name to Assante Corp. Assante then grew by purchasing fifteen (15) Independent Financial Advisory firms. Subsequently, Assante was purchased by CI Financial, during the second half of 2003, for approximately $900 million.

 

Mr. Hogan sold his prosperous FA practice in 2004, and went into semi-retirement and ultimately into full retirement in 2007. Mr. G. Michael Hogan has a degree in Mechanical Engineering from the University of Toronto, Ontario and an MBA in Finance from the University of Western Ontario.

 

WILLIAM J. HOGAN. Mr. Hogan specializes in business development and has a track record of adding shareholder value to his endeavors in both the public and private sectors, with over 33 years of experience in the areas of development, operations, fund raising and strategic planning for startup and growth level companies. Mr. Hogan currently holds the position of Vice Chairman, Founder of Vacci-Test Corporation, a Calgary, Alberta developing food safety pathogen testing company. Mr. Hogan resigned from the Board of Directors on February 27, 2013, following the Company’s fiscal year ended December 31, 2012.

 

DR. MICHAEL GIUFFRE. Dr. Giuffre MD, MBA is currently “Clinical Professor” of Cardiac Sciences and Pediatrics in the Faculty of Medicine at the University of Calgary and a recipient of the “Distinguished Fellow of the American Academy of Cardiology.” Dr Giuffre is also the current President of the Alberta Medical Association. He currently sits on the board of FoodChek Systems, a private Life Sciences company in Calgary, Canada owned by another former member of the Company’s Board of Directors, William Hogan; DiaMedica, a biotechnology company currently traded on the TSX; and UNICEF Canada. Dr. Giuffre is a past Board member of MedMira, a public biotechnology company in rapid HIV and hepatitis diagnostics, and is a past consultant for Redsky Inc. that was sold to Research In Motion (“RIM”).

 

RON SCHINNOUR. Mr. Schinnour has held countless executive, leadership and management roles in the agricultural industry, both domestically and globally. This has included positions with Monsanto, United Agri Products and Agrium (Cominco). He recently moved back to Calgary and joined the UFA, holding the position of Executive VP of Agri Business. Mr. Schinnour’s expertise in Strategic Planning, Financial Management, International Business and M&A Leadership has been instrumental for the business success and growth of his current and previous companies. Mr. Schinnour holds an MBA from Washington University with special recognition for Excellence in Team Process, Strategic Planning and Finance. He also holds a CMA Designation from the University of Calgary/Society of Management Accountants. Mr. Schinnour currently serves on the Board of Directors of FoodChek Systems Inc., a private Life Sciences company in Calgary, Canada owned by another former member of the Company’s Board of Directors, William Hogan, and Universal Co-op Ltd. (Minneapolis). He has previously served as the Chairman and Director for RAPID & AEC, and on the Board of Directors for the Latin America Agricultural Development Bank, AgroBio & the Agricultural Future of America. He has been President, Treasurer and Director of numerous corporate entities at Monsanto and UAP.

 

32
 

 

DIRECTOR COMPENSATION

 

During the fiscal year ended December 31, 2012, we had five directors. Our chairman of the board of directors, William J. Hogan, received annual compensation in the amount of $60,000 to be paid in a combination of cash and restricted shares of the Company’s common stock, as funds are available. The board can approve to award the compensation in a combination of cash or common stock as agreed upon to be computed utilizing the trading price of the Company’s common stock as quoted on the Over the Counter Bulletin Board (OTCBB) on the last trading day of each month. In the past, the Company has not compensated outside (non-employee) directors for service but has reimbursed them for travel costs to attend Board meetings. In the future, the Board of Directors may issue non-qualified options to non-executive directors. The terms of such options to be granted have not yet been established.

 

Our other director, Mr. G. Michael Hogan, who also serves as CEO and President, receives compensation for his services as CEO and President in the amount of $120,000 annually. The board can approve to award the compensation in a combination of cash or common stock as agreed upon to be computed utilizing the trading price of the Company’s common stock as quoted on the Over the Counter Bulletin Board (OTCBB) on the last trading day of each month.

 

William J. Hogan’s and G. Michael Hogan’s salaries for 2012 and 2011 were accrued, but not paid.

 

Compensation has not yet been determined for our other three Directors.

 

(b) Identification of Certain Significant Employees and Consultants

 

None.

 

(c) Family Relationships.

 

Not applicable.

 

(d) Involvement in Certain Legal Proceedings.

 

During the past five years, no director, person nominated to become a director, or executive officer of the Company:

 

(1) has filed or had filed against him, a petition under the federal bankruptcy law or any state insolvency law, nor has any court appointed a receiver, fiscal agent or similar officer by or against any business of which such person was a general partner, or any corporation or business association of which he was an executive officer within two years before the time of such filing;

 

(2) was convicted in a criminal proceeding or is the named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

(3) was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring or suspending him from, or otherwise limiting his involvement in, any type of business, securities or banking activities, or

 

(4) was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated any federal or state securities or commodities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended or vacated.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Based upon a review of Forms 3 and 4 furnished to the company pursuant to Rule 16a-3(a) and written representations referred to in Item 405(b) (2)(i) of Regulation S-K, no directors, officers, beneficial owners of more than 10% of the company’s common stock, or any other person subject to Section 16 of the Exchange Act failed for the period from January 1, 2012 through December 31, 2012 to file on a timely basis the reports required by Section 16(a) of the Exchange Act.

 

CODE OF ETHICS

 

The Company has adopted a Code of Ethics. A copy of the Code of Ethics will be provided to any person, without charge, upon written request addressed to G. Michael Hogan, President/Chief Executive Officer, 8205 Aqua Spray Avenue, Las Vegas, Nevada 89128.

 

33
 

  

Item 11. Executive Compensation.

 

The following table sets forth summary compensation information for the years ended December 31, 2013, 2012 and 2011 for our chief executive officers and directors.

 

Summary Compensation Table
        Option All Other  
Name and Fiscal Salary Bonus Awards Compensation Total
Principal Position Year ($) ($) ($) ($) ($)
G Michael Hogan 2013 $120,000(1) $-0- $-0- $-0- $120,000
President, CEO, Director 2012 $120,000(1) $-0- $-0- $-0- $120,000
  2011 $120,000(1) $-0- $-0- $-0- $120,000
             
William J. Hogan 2013 $60,000(1) $-0- $-0- $-0- $  60,000
Secretary, Former Chairman 2012 $60,000(1) $-0- $-0- $-0- $  60,000
  2011 $60,000(1) $-0- $-0- $-0- $  60,000
             
Thompson MacDonald(2) 2013 $-0- $-0- $-0- $-0- $-0-
Current Chairman, Former Director            
             
Dr. Michael Giuffre(2) 2013 $-0- $-0- $-0- $-0- $-0-
Former Director            
             
Ron Schinnour(2) 2013 $-0- $-0- $-0- $-0- $-0-
Director            
             
Officers as a Group 2013 $180,000 $-0- $-0- $-0- $180,000
  2012 $180,000 $-0- $-0- $-0- $180,000
  2011 $180,000 $-0- $-0- $-0- $180,000

(1) Accrued, but not paid.

(2) Compensation has not yet been determined.

 

Grants of Plan-Based Awards in Fiscal 2013

 

We did not grant any plan-based awards to our named executive officer during the fiscal year ended December 31, 2013.

 

Outstanding Equity Awards at 2013 Fiscal Year-End

 

There were no unexercised stock options, stock that has not vested, and equity incentive plan awards held by our executive officers at December 31, 2013.

 

Option Exercises for 2013

 

There were no options issued or exercised by our executive officers during fiscal 2013.

 

34
 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table presents information, to the best of Can-Cal’s knowledge, about the ownership of Can-Cal’s common stock on December 31, 2013 relating to those persons known to beneficially own more than 5% of Can-Cal’s capital stock and by Can-Cal’s directors and executive officers. The percentage of beneficial ownership for the following table is based on 42,027,060 shares of common stock outstanding as of December 31, 2013.

 

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the shareholder has sole or shared voting or investment power. It also includes shares of common stock that the shareholder has a right to acquire within 60 days after December 31, 2013 pursuant to options, warrants, conversion privileges or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of Can-Cal’s common stock.

 

        Percent of
        Outstanding Shares of
Name and Address of Beneficial Owner, Officer or Director(1)(3)   Number of Shares   Common Stock(2)
Officers and Directors:        
G. Michael Hogan, Chief Executive Officer, President and Director   4,943,779(4)   11.1%
William J. Hogan, Former Chairman   2,266,968(5)   5.2%
Thompson MacDonald, Chairman   2,135,070(6)   4.9%
Dr. Michael Giuffre, Former Director, resigned March 1, 2013   833,332(7)   2.0%
Ron Schinnour, Director   833,300(8)   2.0%
All Current Directors and Executive as a Group (5 persons)   11,012,449   23.2%
5% Holders:        
Randy Obniawka   2,812,000(9)   6.5%

 

(1)As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).
(2)Figures are rounded to the nearest tenth of a percent.
(3)The address of each person is care of Can-Cal: 8205 Aqua Spray Avenue, Las Vegas, Nevada 89128.
(4)Includes warrants to purchase an additional 2,439,920 shares.
(5)Includes warrants to purchase an additional 1,321,312 shares.
(6)Includes warrants to purchase an additional 1,284,491 shares.
(7)Includes warrants to purchase an additional 416,666 shares.
(8)Includes warrants to purchase an additional 416,650 shares.
(9)Includes warrants to purchase an additional 1,000,000 shares.

 

35
 

 

Equity Compensation Plan Information

 

The following table sets forth information as of December 31, 2013 regarding outstanding options granted under the plan, warrants issued to consultants and options reserved for future grant under the plan.

 

  Number of shares to be issued upon exercise of outstanding options, warrants and rights   Weighted-average exercise price of outstanding options, warrants and rights   Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column 
Plan Category  (a)   (b)   (a)(c) 
2003 Qualified ISOP (1,500,000 shares)      $    1,500,000 
                
Equity compensation plans not approved by stockholders   15,280,394    0.14     
                
Total   15,280,394   $0.14    1,500,000 

 

Total shares underlying unexercised options cannot exceed 10% of the Company’s total issued and outstanding shares of common stock, calculated on a pro forma basis.

 

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

On November 30, 2012, the Company sold a promissory note to FutureWorth Capital Corp., a consulting firm owned by our former Chairman of the Board of Directors. The note is unsecured, bears interest at 10% and 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.

 

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 during the year ended December 31, 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 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 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 during the year ended December 31, 2012.

 

36
 

 

Item 14. Principal Accountant Fees and Services.

 

(5)(i) The Board of Directors has not established an audit committee. However, the Board of Directors, as a group, carries out the responsibilities, which an audit committee would have. In this respect the Board of Directors has the responsibility of reviewing our financial statements, exercising general oversight of the integrity and reliability of our accounting and financial reporting practices, and monitoring the effectiveness of our internal control systems. The Board of Directors also recommends selection of the auditing firm and exercises general oversight of the activities of our independent auditors, principal financial and accounting officers and employees and related matters.

 

The Board of Directors delegates to management of Mr. G. Michael Hogan and the Board of Directors, the terms of engagement, before we engage independent auditor for audit and non-audit services, except as to engagements for services outside the scope of the original terms, in which instances the services have been provided pursuant to pre-approval policies and procedures, established by management. These pre-approval policies and procedures are detailed as to the category of service and the Board of Directors is kept informed of each service provided.

 

(7) L.L. Bradford & Company was retained as our auditing firm by the Board of Directors for the fiscal years ended December 31, 2013 and 2012. L.L. Bradford & Company billed us as follows for the years ended December 31, 2013 and 2012, respectively:

 

   For the Fiscal Years 
   Ended December 31, 
   2013   2012 
         
Audit Fees(a)  $24,000   $25,000 
Audit-Related Fees(b)        
Tax Fees(c)        
All Other Fees(d)        
Total fees paid or accrued to our principal accountants  $24,000   $25,000 

 

(a) Includes fees for audit of the annual financial statements and review of quarterly financial information filed with the Securities and Exchange Commission.
(b) For assurance and related services that were reasonably related to the performance of the audit or review of the financial statements, which are not included in the Audit Fees category. The Company had no Audit-Related Fees for the periods ended December 31, 2012, and 2011, respectively.
(c) For tax compliance, tax advice, and tax planning services, relating to any and all federal and state tax returns as necessary for the periods ended December 31, 2012 and 2011, respectively.
(d) For services in respect of any and all other reports as required by the SEC and other governing agencies.

 

37
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

The following information required under this item is filed as part of this report:

 

(a) 1. Financial Statements

 

    Page
Management’s Report on Internal Control Over Financial Reporting   34
Report of Independent Registered Public Accounting Firm   F-1
Balance Sheets   F-2
Statements of Operations   F-3
Statements of Stockholders’ (Deficit)   F-4
Statements of Cash Flows   F-7
Notes to Financial Statements   F-8

 

(b) 2. Financial Statement Schedules

 

None.

 

(c) 3. Exhibit Index

 

      Incorporated by reference
Exhibit Exhibit Description Filed herewith Form Period ending Exhibit Filing date
             
10.1 Form of Mineral Lease Agreement X        
10.2 Form of Promissory Note with FutureWorth Capital X        
10.3 Form of Subscription Agreement for Promissory Note with FutureWorth Capital X        
10.4 Form of Warrant Certificate with FutureWorth Capital X        
24.1 Power of Attorney (including on signature page) X        
31.1 Certification of G. Michael Hogan pursuant to Section 302 of the Sarbanes-Oxley Act X        
32.1 Certification of G. Michael Hogan pursuant to Section 906 of the Sarbanes-Oxley Act X        
99.1 Summary of Significant Details Regarding Pigsah, Wikeiup, Cerbat and the Owl Canyon Properties   10-KSB/A 12/31/07 99.1 03/11/09
99.2 Press Release stated February 19, 2010   8-K   99.7 02/25/10
99.3 Press Release stated January 4, 2011   8-K   99.8 01/04/11
99.4 Press Release stated February 23, 2011   8-K   99.9 03/03/11
99.5 Press Release stated January 31, 2012   8-K   99.10 01/31/12
99.6 Press Release stated April 18, 2012   8-K   99.11 04/18/12
99.7 Press Release stated October 24, 2012   8-K   99.12 10/25/12
101.INS XBRL Instance Document X        
101.SCH XBRL Schema Document X        
101.CAL XBRL Calculation Linkbase Document X        
101.DEF XBRL Definition Linkbase Document X        
101.LAB XBRL Labels Linkbase Document X        
101.PRE XBRL Presentation Linkbase Document X        

 

38
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CAN-CAL RESOURCES LTD.

 

By: /s/ G. Michael Hogan

G. Michael Hogan, President and Chief Executive Officer

 

Date: May 20, 2014

 

 

POWER OF ATTORNEY

 

 

Each of the undersigned members of the Board of Directors of PLAYERS NETWORK, whose signature appears below hereby constitutes and appoints Mark Bradley, such person’s true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such person and in such name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 2012 (the “Annual Report”) of PLAYERS NETWORK and any or all amendments to such Annual Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, as amended, and Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed by the following persons in the capacities indicated on the dates indicated.

 

Name   Title   Date
         
/s/ G. Michael Hogan   Director & Chief Executive Officer (Principal   May 23, 2014 
G. Michael Hogan   Executive Officer & Principal Accounting Officer)    
         
/s/ Thompson MacDonald   Chairman of the Board of Directors   May 23, 2014 
Thompson MacDonald        
         
/s/ William J Hogan   Director   May 23, 2014 
William J Hogan        
         
/s/ Ron Schinnour   Director   May 23, 2014 
Ron Schinnour        

 

39
 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of

Can Cal Resources Ltd.

 

We have audited the accompanying balance sheet of Can Cal Resources Ltd. as of December 31, 2013, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2013, and the period from inception (March 22, 1995) to December 31, 2013. These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Can Cal Resources Ltd as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2013, and the period from inception (March 22, 1995) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statement, the Company suffered net losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ L. L. Bradford & Company, LLC

Las Vegas, Nevada

May 23, 2014

 

 

 

 

 

F-1
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

BALANCE SHEETS

 

   December 31,   December 31, 
   2013   2012 
ASSETS          
           
Current assets:          
Cash  $1,388   $1,316 
Prepaid expenses   8,122    35,970 
Total current assets   9,510    37,286 
           
Property and equipment, net of accumulated depreciation of $33,507 and $33,133, respectively   652    1,026 
           
Total assets  $10,162   $38,312 
           
           
LIABILITIES AND STOCKHOLDERS' (DEFICIT)          
           
Current liabilities:          
Accounts payable  $62,007   $44,988 
Accounts payable, related parties   180,506    180,506 
Accrued expenses   17,603    5,211 
Accrued expenses, related parties   541,700    377,857 
Unearned rental revenues   9,167    9,167 
Unearned rental revenues, related party   63,460     
Notes payable, related parties, net of $-0- and $488 of unamortized common stock warrants at December 31, 2013 and 2012 respectively   75,729    30,843 
Total current liabilities   950,172    648,572 
           
Total liabilities   950,172    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 December 31, 2013 and 2012, respectively   42,027    42,027 
Subscriptions payable, -0-, and -0- share at December 31, 2013 and 2012 respectively        
Additional paid-in capital   9,710,504    9,710,504 
(Deficit) accumulated during exploration stage   (10,692,541)   (10,362,791)
Total stockholders' (deficit)   (940,010)   (610,260)
           
Total liabilities and stockholders' (deficit)  $10,162   $38,312 

 

The accompanying notes are an integral part of these financial statements.

 

F-2
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF OPERATIONS

 

           March 22, 1995 
   For the Years Ended   (inception) to 
   December 31,   December 31, 
   2013   2012   2013 
             
Material sales  $   $   $245,500 
Cost of sales           263,400 
Gross loss           (17,900)
                
Operating expenses:               
Exploration costs   53,754    51,837    701,440 
General and administrative   174,028    291,571    7,479,570 
Depreciation   374    6,162    265,320 
Officer salary   120,000    120,000    1,321,176 
Impairment of operating assets           443,772 
Total operating expenses   348,156    469,570    10,211,278 
                
Net operating loss   (348,156)   (469,570)   (10,229,178)
                
Other income (expense):               
Other income   1,260    3,100    71,058 
Interest income           52,945 
Interest expense   (10,354)   (243,042)   (1,718,841)
Rental revenue   27,500    27,500    449,908 
Gain (loss) on disposal of fixed assets           3,128 
Gain on extinguishment of debts           1,152,039 
Total other income (expense)   18,406    (212,442)   10,237 
                
Loss before provision for income taxes   (329,750)   (682,012)   (10,218,941)
Provision for income taxes            
Net loss from continuing operations   (329,750)   (682,012)   (10,218,941)
                
Income from discontinued operations:               
Income from discontinued operations           116,400 
Loss on disposal of operations (net of taxes)           (590,000)
Net loss  $(329,750)  $(682,012)  $(10,692,541)
                
Weighted average number of common shares outstanding - basic and fully diluted   42,027,060    40,941,949      
                
Net loss per share - basic and fully diluted  $(0.01)  $(0.02)     

 

The accompanying notes are an integral part of these financial statements.

 

F-3
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

 

                                   (Deficit)     
   Common stock                   Foreign       Accumulated   Total 
   Number               Rescission   Unamortized   Currency   Additional   during   Stockholders' 
   of       Subscriptions    Subscriptions    Liability    Equity   Translation   Paid-in   Exploration   Equity 
   Shares   Amount   Receivable   Payable   Receivable   Grants   Adjustment   Capital   Stage   (Deficit) 
Balance, March 22, 1995  $   $   $   $   $   $   $   $   $   $ 
                                                   
Common shares issued for services                                       
Net loss                                           (1,000)   (1,000)
Balance, December 31, 1995                                   (1,000)   (1,000)
                                                   
Common shares issued for services   3,441,217    3,400                        625,000        628,400 
Prior period adjustment, investment in joint venture                                   497,900    497,900 
Net loss                                           (497,000)   (497,000)
Balance, December 31, 1996   3,441,217    3,400                        625,000    (100)   628,300 
                                                   
Common shares issued for services   3,006,435    3,000                        1,051,400        1,054,400 
Net loss                                           (1,044,700)   (1,044,700)
Balance, December 31, 1997   6,447,652    6,400                        1,676,400    (1,044,800)   638,000 
                                                   
Common shares issued for cash   557,509    600                        211,200        211,800 
Foreign currency translation adjustment                           8,500            8,500 
Net loss                                           (353,000)   (353,000)
Balance, December 31, 1998   7,005,161    7,000                    8,500    1,887,600    (1,397,800)   505,300 
                                                   
Common shares issued for cash   1,248,621    1,200                        572,600        573,800 
Foreign currency translation adjustment                           (11,800)           (11,800)
Realized foreign currency translation loss                           3,300            3,300 
Prior period Adjustment                                   15,000    15,000 
Elimination of subsidiary upon disposal                                   116,400    116,400 
Net loss                                           (1,038,500)   (1,038,500)
Balance, December 31, 1999   8,253,782    8,200                        2,460,200    (2,304,900)   163,500 
                                                   
Common shares issued for cash   1,119,009    1,200                        948,400        949,600 
Net loss                                           (962,500)   (962,500)
Balance, December 31, 2000   9,372,791    9,400                        3,408,600    (3,267,400)   150,600 
                                                   
Common shares issued for cash   785,947    800                        81,500        82,300 
Net loss                                           (704,500)   (704,500)
Balance, December 31, 2001   10,158,738    10,200                        3,490,100    (3,971,900)   (471,600)
                                                   
Common shares issued for cash   1,093,280    1,100                        269,900        271,000 
Common shares issued for services   92,292    100                        23,800        23,900 
Options granted for services                               7,100        7,100 
Common shares issued for repayment of note  payable, related party in the amount of $119,800, including accrued interest of $71,800   309,677    300                        119,500        119,800 
Warrants granted for loan fees on  convertible notes payable, related party           (16,700)       (16,700)   (16,700)       16,700        (33,400)
Common shares issued for loan fees on  convertible notes payable, related party   30,000        (13,500)       (13,500)   (13,500)       13,500        (27,000)
Deemed interest on beneficial conversion feature of notes payable, related party                               20,500        20,500 
Amortization of loan fees           8,200        8,200    8,200                24,600 
Net loss                                           (709,300)   (709,300)
Balance, December 31, 2002   11,683,987    11,700    (22,000)       (22,000)   (22,000)       3,961,100    (4,681,200)   (774,400)
                                                   
Common shares issued for cash   823,410    800                        163,900        164,700 
Common shares issued for services   381,260    400                        63,800        64,200 
Options granted for services                               61,300        61,300 
Common shares issued for repayment of note payable, note payable, related party in the amount of related party common shares issued for repayment of  $78,300, including accrued interest of $43,300   364,305    400                        77,900        78,300 
Deemed interest on beneficial conversion  feature of notes payable, related party                               38,300        38,300 
Amortization of loan fees           15,000        15,000    15,000                45,000 
Net loss                                           (711,100)   (711,100)
Balance, December 31, 2003   13,252,962    13,300    (7,000)       (7,000)   (7,000)       4,366,300    (5,392,300)   (1,033,700)
                                                   
Common shares issued for cash   1,564,311    1,600                        306,400        308,000 
Common shares issued for exercise of warrants   701,275    700                        124,900        125,600 
Common shares issued for services   390,224    400                        73,800        74,200 
Warrants granted for services                               12,200        12,200 
Interest expense for warrants granted                               280,200        280,200 
Common shares issued in satisfaction of accounts payable  and accrued liabilities in the amount of $229,400   917,747    900                        228,500        229,400 
Common shares issued for repayment of note payable in the  amount of $99,700, including accrued interest of $14,700   702,760    700                        99,000        99,700 
Common shares issued for repayment of note payable, related party in the amount of $82,700   330,747    300                        82,400        82,700 
Deemed interest on beneficial conversion  feature of notes payable, related party                               17,600        17,600 
Amortization of loan fees           7,000        7,000    7,000                21,000 
Net loss                                           (1,030,500)   (1,030,500)
Balance, December 31, 2004   17,860,026    17,900                        5,591,300    (6,422,800)   (813,600)
                                                   
Common shares issued for cash   762,500    800                        152,700        153,500 
Common shares issued for exercise of warrants   349,545    300                        69,500        69,800 
Net loss                                           (421,800)   (421,800)
Balance, December 31, 2005   18,972,071    19,000                        5,813,500    (6,844,600)   (1,012,100)
                                                   
Common shares issued for cash   2,448,213    2,400                        642,100        644,500 
Common warrants exercised for cash   174,000    200                        43,300        43,500 
Common shares issued for services   19,500                            5,000        5,000 
Common shares issued in satisfaction of accounts  payable and accrued liabilities   385,714    400                        80,600        81,000 
Common shares issued in satisfaction of notes payable-related parties   56,821    100                        11,800        11,900 
Common shares issued in satisfaction of convertible  debenture, (including accrued interest of $1,895)   206,767    200                        41,700        41,900 
Common shares issued for asset acquisition   1,000,000    1,000                        399,000        400,000 
Option granted to officers and directors                               123,500        123,500 
Warrants granted for services                               2,200        2,200 
Warrants granted in satisfaction of accounts payable and accrued liabilities                               65,400        65,400 
\Warrants granted in satisfaction of notes payable-related parties                               9,600        9,600 
Warrants granted in satisfaction of convertible debenture                               40,000        40,000 
Net loss                                           (621,000)   (621,000)
Balance, December 31, 2006 (Restated)   23,263,086    23,264                        7,277,736    (7,465,600)   (164,600)
                                                   
Common shares issued for cash   492,795    492                        188,698        189,190 
Common warrants exercised for cash   745,372    745                        185,598        186,343 
Common shares issued for services   4,000    4                        2,010        2,014 
Common shares issued in satisfaction of accrued wages of $22,000, related party   50,000    50                        21,950        22,000 
Debt forgiveness, related party                               147,419        147,419 
Net loss                                           (604,913)   (604,913)
Balance, December 31, 2007 (Restated)   24,555,253    24,555                        7,823,411    (8,070,513)   (222,547)
                                                   
Common shares issued for cash   32,500    33                        8,091        8,124 
Net loss                                           (1,016,661)   (1,016,661)
Balance, December 31, 2008   24,587,753    24,588                        7,831,502    (9,087,174)   (1,231,084)
                                                   
Common shares issued for cash   2,926,600    2,926    (25,000)                   362,899        340,825 
Common shares issued for debt conversion to related partiesof $398,593, including accrued interest of $29,093   3,188,741    3,189                        395,404        398,593 
Warrants granted in connection with debt conversion                               78,961        78,961 
Common shares issued for services   122,000    122                        15,338        15,460 
Common shares cancelled per rescission order   (126,898)   (127)                       (55,660)       (55,787)
Rescission liability receivable                   (12,125)                   (12,125)
Net loss                                          (595,554)   (595,554)
Balance, December 31, 2009   30,698,196    30,698    (25,000)       (12,125)           8,628,444    (9,682,728)   (1,060,711)
                                                   
Common shares issued for cash   40,000    40    25,000                    4,960        30,000 
Receipt of payment on rescission liability receivable                   12,125                    12,125 
Common shares awarded for debt conversion, 2,146,666 shares               128,800                        128,800 
Finance costs on inducement of conversion, 2,146,666 warrants                               74,403        74,403 
Common shares awarded for commissions, 46,500 shares               2,790                        2,790 
Common shares cancelled   (26,993)   (27)                       27         
Net loss                                           (572,855)   (572,855)
Balance, December 31, 2010   30,711,203    30,711        131,590                8,707,834    (10,255,583)   (1,385,448)
                                                   
Common shares issued for cash   5,824,584    5,825                        343,650        349,475 
Common shares granted for commissions, 50,000 shares               1,500                        1,500 
Common shares issued for debt conversion   2,146,666    2,146        (128,800)               126,654         
Common shares awarded for commissions   218,793    219        (2,790)               12,909        10,338 
Extension of previously granted warrants, 6,377,496 warrants                               57,626        57,626 
Net income                                           574,804    574,804 
Balance, December 31, 2011   38,901,246    38,901        1,500                9,248,673    (9,680,779)   (391,705)
                                                   
Common shares issued for cash   3,058,314    3,059                        220,440        223,499 
Common shares issued for services   50,000    50        (1,500)               1,450         
Common shares granted for commissions, 17,000 shares   17,500    17                        1,033        1,050 
Extension of previously granted warrants, 6,377,496 warrants                               238,419        238,419 
Warrants granted as debt offering costs, 20,000 warrants                               489        489 
Net loss                                           (682,012)   (682,012)
Balance, December 31, 2012   42,027,060    42,027                        9,710,504    (10,362,791)   (610,260)
                                                   
Net Loss                                   (329,750)   (329,750)
Balance, December 31, 2013   42,027,060   $42,027   $   $   $   $   $   $9,710,504   $(10,692,541)  $(940,010)

 

The accompanying notes are an integral part of these financial statements.

 

F-4
 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CASH FLOWS

 

           March 22, 1995 
   For the Years Ended   (inception) to 
   December 31,   December 31, 
   2013   2012   2013 
CASH FLOWS FROM OPERATING ACTIVITIES               
Net loss  $(329,750)  $(682,012)  $(10,692,541)
Adjustments to reconcile net loss to net cash used in operating activities:              
Depreciation and amortization   374    6,162    265,320 
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       238,460    972,650 
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   27,848    (14,471)   112,778 
Increase (decrease) in liabilities:              
Accounts payable   17,019    19,052    (5,905)
Accounts payable, related parties       59,874    180,506 
Accrued expenses   12,392    244    556,181 
Accrued expenses, related parties   163,843    133,988    823,704 
Unearned revenues           9,167 
Unearned revenues, related party   63,460        63,460 
Net cash used in operating activities   (44,814)   (237,653)   (7,147,723)
                
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       (605)   (770,016)
Proceeds from sale of property and equipment           26,100 
Net cash used in investing activities       (605)   (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   44,886    57,525    1,010,202 
Principal payments on notes payable, related parties       (79,296)   (462,475)
Proceeds from the issuance of common stock       223,499    7,722,300 
Net cash provided by financing activities   44,886    201,728    8,657,327 
               
Net increase in cash   72    (36,530)   1,388 
Cash, beginning of period   1,316    37,846     
Cash, end of period  $1,388   $1,316   $1,388 
                
Supplemental disclosures:               
Interest paid  $   $      
Income taxes paid  $   $      

 

The accompanying notes are an integral part of these financial statements.

 

F-5
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

Note 1 – Nature of Business and Summary of Significant Accounting Policies

 

Nature of Business

 

Can-Cal Resources Ltd. (“Can-Cal” or the “Company”) 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 gold 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 four mineral properties in the southwestern United States (California and Arizona, as follows: Wikieup, Arizona; Cerbat, Arizona; Owl Canyon, California; and Pisgah, California).

 

Summary of Significant Accounting Policies

 

Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. The Company’s fiscal year-end is December 31.

 

The Company’s functional and reporting currency is the United States dollar (USD). Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 820, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in the Canadian dollar (CDN). The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

 

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 $10,692,541 and used net cash in operations of $7,147,723 for the period from inception (March 22, 1995) through December 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.

 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

Cash equivalents include money market accounts which have maturities of three months or less. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value.

 

Long-Lived Assets

Fixed assets are recorded at the lower of cost or estimated net recoverable amount, and is depreciated using the straight-line method over the estimated useful life of the related asset as follows:

 

Machinery and equipment 10 years
Transportation equipment 5 years
Furniture and fixtures 7 years

 

Maintenance and repairs will be charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

 

F-6
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

The Company will assess the recoverability of equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.

 

Fair Value of Financial Instruments

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no items that required fair value measurement on a recurring basis.

 

Basic and Diluted Loss Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For 2013 and 2012, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

 

Stock-Based Compensation

The Company has adopted FASB guidance on stock based compensation. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. Stock and stock options issued for services and compensation totaled $0 and $239,469 for the years ended December 31, 2013 and 2012, respectively, based on the fair value of the common stock at the grant date.

 

Modification of Warrants

The Company extended a total of 6,417,496 warrants on September 30, 2012, which were originally granted on June 30, 2009 as part of debt financing arrangements. A modification of the terms or conditions of an equity award is treated as an exchange of the original award for a new award. The incremental (additional) cost is computed as any excess of the fair value of the modified award over the fair value of the original award immediately before modification. As a result, a total of $10,354 and $238,419 has been expensed as finance charges during the years ended December 31, 2013 and 2012.

 

Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

 

Uncertain Tax Positions

In accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

 

Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.

 

The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.

 

F-7
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

Mineral Claim Payments and Exploration Expenditures

The Company is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. We assess the carrying cost for impairment under the FASB ASC topic 360 at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs subsequently incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the established life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

 

Capitalized Mineral Costs

Mineral rights are recorded at cost of acquisition. When there is little likelihood of a mineral right being exploited; the value of mineral rights have diminished below cost, or the economic feasibility of extraction is limited, a write-down is affected against income in the period that such determination is made. The Company did not record any write downs during the years ended December 31, 2013 and 2012. Non-mining assets are recorded at cost of acquisition. These assets include the assets of the mining operation not included in the previous categories and all the assets of the non-mining operations. Mining assets, including mine development and infrastructure costs and mine plant facilities, are recorded at cost of acquisition. Expenditure incurred to evaluate and develop new ore bodies, to define mineralization in existing ore bodies, to establish or expand productive capacity, is capitalized until commercial levels of production are achieved, at which time the costs will be amortized.

 

Recent Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have a material effect on the Company’s financial statements.

 

 

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 had a net loss of $329,750 for the year ended December 31, 2013, has used net cash in operating activities of $7,147,723 from inception and had a working capital deficit of $940,010 at December 31, 2013. 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.

 

 

Note 3 – Related Party

 

Material Supply Agreement

 

On April 9, 2013, the Company entered into a Material Supply Agreement (“MSA”) with Candeo Lava Products, Inc., (“Candeo”) an Alberta, Canadian company controlled by a former Director and the brother of our current CEO. The agreement entitles Candeo to purchase certain volcanic lava or cinders from our Pisgah Mine Project that has been previously crushed and stockpiled (the “Finished Material”) at a price equal to the greater of 33 1/3% of the Net Sales Margin and fifteen US dollars ($15 USD) per ton. Under the agreement, Candeo is granted the exclusive right and privilege to remove up to 1 million tons (“Initial Amount”) of the Finished Material, and another million tons (“Additional Amount”) upon the successful of the initial million tons.

 

The Term of this agreement is for an initial period of ten (10) years from April 9, 2013, unless extended pursuant to the terms hereof. Candeo shall have the option to extend the Term of this Material Supply Agreement for [up to three (3)] additional five (5) year periods exercisable at any time with no less than three (3) months written notice prior to the expiration of the then current term, provided that the Candeo is not in default under any of the provisions of the MSA and that the whole of the Initial Amount and the Additional Amount of Finished Material have been completely removed from the Property.

 

F-8
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

Candeo will purchase thirteen thousand, three hundred and thirty-five (13,335) tons (the “Pre-Purchased Finished Material”) of the Finished Material during the first year of the Term at a purchase price of fifteen US dollars ($15 USD) per ton, for a total payment of two hundred and twenty-five thousand US dollars ($225,000 USD) (the “Pre-Purchased Payment”). The Pre-Purchased Finished Material will remain on the Property until Candeo commences its production operations, which will be subject to all necessary regulatory and other approvals required to remove the Finished Material from the Property, such as permits, certified weigh scale, productions plan, environmental reclamation plan (if applicable) and insurance all of which shall be the responsibility and at the sole cost of Candeo. The Pre-Purchased Payment will not be refundable to Candeo but shall be credited against the first Production Payment.

 

On various dates from May 10, 2013 to December 31, 2013, the Company received total proceeds of $63,460 from the prepaid sale of 4,138 tons of minerals at a price of $15 per ton. The materials have not been shipped as of the date of this filing.

 

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 debts are fully disclosed in Note 6 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 $480,000 and $360,000 at December 31, 2013 and 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. As of December 31, 2013 we owed 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. The consulting agreement was terminated on February 27, 2013 with Mr. William Hogan’s resignation from the Board of Directors.

 

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.

 

F-9
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

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

 

Prepaid expenses consisted of the following as of December 31, 2013 and December 31, 2012, respectively:

 

   December 31,   December 31, 
   2013   2012 
Prepaid portion of UNLV research project as disclosed below  $   $18,530 
Annual Bureau of Land Management fees   6,147    14,581 
Rental fees   1,975     
Directors and officers insurance       2,859 
   $8,122   $35,970 

 

On April 23, 2012 and May 10, 2012, the Company paid $30,000 and $5,000, 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?

 

F-10
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

Note 5 – Property and Equipment

 

Property and Equipment consists of the following:

 

   December 31,   December 31, 
   2013   2012 
           
Machinery and equipment  $1,000   $1,000 
Transportation equipment   31,787    31,787 
Furniture and fixtures   1,372    1,372 
    34,159    34,159 
Less accumulated depreciation   (33,507)   (33,133)
   $652   $1,026 

 

Depreciation expense totaled $374 and $6,162 for the years ended December 31, 2013 and 2012, respectively.

 

 

Note 6 – Notes Payable, Related Parties

 

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

 

  December 31,   December 31, 
   2013   2012 
Note payable to the CEO, unsecured, bearing interest at 10%, due on demand.  $70,729   $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   75,729    31,291 
Less: unamortized discount on common stock warrants       448 
Less: current portion   75,729    30,843 
           
Notes payable, related parties, less current portion  $   $ 

 

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

 

   December 31,   December 31, 
   2013   2012 
Interest on notes payable, related parties  $5,893   $1,593 
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   448    41 
Fair value of warrant extensions       238,419 
Accounts payable related vendor finance charges   4,013    889 
   $10,354   $243,042 

 

F-11
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

Note 7 – Unearned Rental Revenues

 

On May 1, 1998, we entered into an agreement with Twin Mountain Rock Venture (“Twin Mountain”) to lease our property located in San Bernardino County, California for a period of ten years. Further, we will make available to Twin Mountain a minimum of 600,000 tons of finished material during the term of the agreement in exchange for a minimum annual royalty payment in the amount of $22,500. The initial agreement expired on April 30, 2008. Twin Mountain elected to utilize the renewal option for an additional ten-year period with an increased minimum annual royalty of $27,500. As of December 31, 2013 and 2012, we had unearned revenue from this agreement totaling $9,167 and $9,167, respectively.

 

 

Note 8 – 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 9 – Changes in Securities

 

2013

 

No shares of common stock were issued by the Company during 2013.

 

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.

 

F-12
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

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.

 

2011

 

On December 29, 2011 the Company granted 50,000 shares of common stock to an employee for services rendered. The fair value of the common stock was $1,500 based on the closing price of the Company’s common stock on the date of grant. The shares were authorized, but unissued and recognized as a subscription payable as of December 31, 2011.

 

On October 24, 2011, the Company issued a total of 218,793 shares of its common stock as commissions on the sale of securities amongst three different sales persons. The total fair value of the common stock was $12,078 based on the closing price 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 $12,078 of finance costs as interest expense within the statement of operations.

 

On October 18, 2011, 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 from two investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On October 14, 2011, the Company sold a total of 150,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $9,000 from two investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On September 26, 2011, the Company sold a total of 700,000 shares of common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $42,000 from three investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On July 12, 2011, the Company sold 84,000 shares of common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds $5,040. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On June 29, 2011, the Company sold a total of 1,067,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $64,020 from five investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On June 22, 2011, the Company sold a total of 595,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $35,700 from three investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On June 10, 2011, the Company sold a total of 565,250 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $33,915 from six investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On May 31, 2011, the Company sold a total of 255,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $15,300 from two investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On April 1, 2011, the Company sold a total of 320,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $19,200 from three investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

F-13
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

On March 16, 2011, the Company sold a total of 698,334 shares of common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $41,900 from four investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On February 25, 2011, the Company sold 170,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $10,200. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On January 26, 2011, the Company sold 85,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $5,100. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On January 26, 2011, the Company sold 85,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $5,100. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On January 5, 2011, the Company issued a total of 2,146,666 shares of its par value common stock to satisfy subscriptions payable outstanding as of December 31, 2010 related to debts converted by a total of nine investors in the amount of $128,800.

 

On January 4, 2011, the Company sold 680,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $40,800. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On January 4, 2011, the Company sold 170,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $10,200. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

2010

 

On December 31, 2010, the Company converted $128,800 of previously issued convertible debentures to a total of nine investors in exchange for a total of 2,146,666 shares, at $0.06 per share, and a total of 2,146,666 warrants exercisable at $0.08 per share over a two year term, that were not issued until January 5, 2011. The shares were presented as a subscription payable of $128,800 at December 31, 2010. A total of $3,598 of accrued interest was forgiven by the note holders, as presented in other income. The total estimated value of the warrants granted as an inducement for conversion using the Black-Scholes Pricing Model, based on a volatility rate of 179% and a call option value of $0.0347, was $74,403, as presented in the income statement as interest expense.

 

Finders acting in connection with the conversion are entitled to receive aggregate fees of $2,790 and 46,500 shares of common stock. The fair market value of the common stock payable based on the closing stock price at the grant date was $2,790.

 

On December 31, 2010, the Company cancelled 26,993 previously granted shares to related parties.

 

On March 17, 2010, the Company received $12,125 in payment on a rescission receivable outstanding at December 31, 2009.

 

On January 20, 2010, the Company issued 40,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $5,000. The warrants are exercisable over fifteen months at an exercise price of $0.15 per share.

 

On January 20, 2010, the Company received $25,000 in payment on a subscription receivable outstanding at December 31, 2009.

 

2009

 

During the year ended December 31, 2009, the Company issued 2,926,600 shares of its common stock and an equal number of warrants pursuant to a unit offering whereby each recipient received one share of common stock and one warrant certificate for a unit price of $0.125. The Company recorded proceeds from the offering of $340,825 and a subscription receivable in the amount of $25,000, subsequently paid in January 2010.

 

During the year ended December 31, 2009, the Company issued a total of 107,000 shares of its restricted common stock to individuals for services rendered to the Company. As of December 31, 2009, the Company recorded an expense of $14,260 representing the fair value of the grant.

 

F-14
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

On December 31, 2009, the Company authorized the issuance of 9,000 and 6,000 shares of its restricted common stock to a director and officer of the Company, respectively for services performed for the Company. As of December 31, 2009, we recorded an expense of $1,200, representing the fair value of the issuance on the date of grant.

 

On June 30, 2009, certain note holders elected to convert the principal balance of their notes together with accrued interest into shares of the Company’s common stock at a rate of $0.125 per share. In addition, the Company agreed to issue a warrant to purchase two shares of the Company’s common stock for each share converted. The total principal balance converted was $369,500 and was converted into 2,956,000 common shares. Total accrued interest converted was $29,093 or 232,741 common shares.

 

2008

 

During the year ended December 31, 2008, the Company issued 32,500 shares of common stock and warrants to purchase 32,500 shares common stock for cash totaling $8,124. The warrants are fully vested upon grant, expire in two years and have an exercise price of $0.35 per share.

 

2007

 

During the twelve months ended December 31, 2007, we sold 1,238,167 restricted common shares to 72 Canadian residents and 4 US residents for a total of $375,534 and issued warrants to purchase 492,795 restricted common shares, exercisable between $0.35 and $0.65 per share. These securities were issued in private transactions, with respect to the Canadian residents, in reliance on the exemption from registration with the SEC provided by Regulation S, and with respect to the U.S. citizen, in reliance on the exemption available under Section 4(2) of the 1933 Act.

 

On June 29, 2007, the Company also issued 4,000 shares of restricted common stock for services rendered to a U.S. citizen, in reliance on the exemption available under Section 4(2) of the 1933 Act. The shares were valued at a total of $2,000.

 

On April 30, 2007, the Company also issued 50,000 shares of restricted common stock as part of a settlement agreement with a former officer of the Company for compensation of accrued salaries. The common stock was rendered to a U.S. citizen, in reliance on the exemption available under Section 4(2) of the 1933 Act. The shares were valued at a total of $22,000. In addition to monthly cash payments of $3,500 per month the Company has recorded debt forgiveness of $147,419 in accordance with the terms of the settlement agreement. Due to the related party nature of the transaction the gain has been recorded to additional paid in capital, therefore there has been no impact on the Company’s net loss.

 

2006

 

During the twelve months ended December 31, 2006, we sold 2,622,213 restricted common shares to 76 Canadian residents, 8 US residents, 5 Israeli Nationals and 1 Swiss National for a total of $688,000, and issued warrants to purchase 2,348,213 restricted common shares, exercisable between $0.25 to $.45 per share. These securities were issued in private transactions, with respect to the Canadian residents, in reliance on the exemption from registration with the SEC provided by Regulation S, and with respect to the U.S. citizen, in reliance on the exemption available under Section 4(2) of the 1933 Act.

 

We also issued, for services, 8,500 restricted common shares for a total value of $2,325 and these securities were issued to one U.S. resident in reliance on the exemption provided by Section 4(2) of the 1933 Act.

 

On August 22, 2006, the Company entered into an agreement to purchase mining claims located in Mohave County, Arizona in exchange for 1,000,000 shares of the Company’s par value common stock. The Company recorded an asset totaling $400,000, the fair value of the underlying shares.

 

On July 11, 2006, the Company issued 206,767 shares of its par value common stock pursuant to the convertible debenture agreement entered into on January 24, 2006 whereby the Company received a $40,000 convertible at a rate of $0.20 per share bearing interest of 10% per annum. The note holder elected to convert all accrued interest totaling $1,895 into 6,767 shares of the Company’s par value common stock.

 

On July 3, 2006, the Company issued 2,200 shares of its par value common stock for services received by an individual. As of September 30, 2006, the Company recorded consulting expense in the amount of $462, the fair value of the shares issued on the date of grant. Additionally, the Company granted a warrant to purchase 2,200 shares of the Company’s common stock at an exercise price of $0.25 for a period of 2 years. The Company recorded an expense in the amount of $373, the fair value of the warrant on the date of grant. Fair value was determined using the Black Scholes option pricing model based on the following assumptions: expected dividends: $-0-; volatility: 187%; risk free interest rate: 5.12%.

 

F-15
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

On July 3, 2006, the Company issued 8,800 shares of its par value common stock for services received from an individual. As of September 30, 2006, the Company recorded consulting expense in the amount of $2,200, the fair value of the shares issued on the date of grant. Additionally, the Company granted a warrant to purchase up to 8,800 shares of the Company’s common stock at an exercise price of $0.25 for a period of 2 years. The Company recorded an expense in the amount of $1,812, the fair value of the warrant on the date of grant. Fair value was determined using the Black Scholes option pricing model based on the following assumptions: expected dividends: $-0-; volatility: 187%; risk free interest rate: 5.12%.

 

On July 3, 2006, an officer of the Company elected to convert half of his accrued salary in exchange for 385,714 shares of common stock valued at $81,000, the fair value of the shares issued on the date of grant. Additionally, the Company granted a warrant to purchase up to 385,714 shares of the Company’s common stock at an exercise price of $0.25 for a period of two years. The Company recorded an expense in the amount of $65,418, the fair value of the warrant on the date of grant. Fair value was determined using the Black Scholes option pricing model based on the following assumptions: expected dividends: $-0-; volatility: 187%; risk free interest rate: 5.12%.

 

On July 3, 2006, the Company issued 56,821 shares of its common stock for conversion of a note in the amount of $11,932 from a shareholder of the Company. Additionally, the Company granted a warrant to purchase up to 56,821 shares of the Company’s common stock at an exercise price of $0.25 for a period of two years. The Company recorded an expense in the amount of $9,637, the fair value of the warrant on the date of grant. Fair value was determined using the Black Scholes option pricing model based on the following assumptions: expected dividends: $-0-; volatility: 187%; risk free interest rate: 5.12%.

 

2005

 

During the twelve months ended December 31, 2005, we sold 712,500 restricted common shares to 21 Canadian residents for a total of $142,500, and issued warrants to purchase 712,500 restricted common shares, exercisable at $0.25 per share. These securities were issued in private transactions in reliance on the exemption from registration with the SEC provided by Regulation S.

 

A prior U.S. shareholder exercised other warrants, at exercise prices ranging from $0.22, for proceeds of $11,000, which resulted in the issuance of 50,000 restricted common shares. These securities were issued in private transactions in reliance on the exemption available under Section 4(2) of the 1933 Act.

 

We also issued, for services, 349,545 restricted common shares for a total value of $69,800 valued at fair market value at date of issuance and granted 13,575 warrants (exercisable for two years at $0.25 per share) valued at fair market value at date of issuance. These securities were issued to two Canadian residents, and one Mexican Corporation in reliance on the exemption from registration available under Regulation S, and one U.S. resident, in reliance on the exemption provided by Section 4(2) of the 1933 Act.

 

2004

 

During 2004, 2,255,586 restricted common shares were issued to one hundred and seven (107) Canadian residents or companies controlled and owned by Canadian resident investors for $431,425 and 10,000 restricted common shares were issued to one U.S. resident investor for $2,000 (245,000 shares were priced at $0.18 per share, 1,620,131 shares were priced at $0.20 per share, 261,200 shares were priced at $0.25 per share, and 139,255 shares were issued as a 25% premium on the conversion of warrants, representing premiums of up to 25% and discounts ranging from 0% to approximately 25% from market prices at the time of issuance). With respect to 1,319,308 of these restricted common shares, the investors were also issued warrants to purchase 1,259,308 additional restricted common shares at $0.25 per share and 60,000 additional restricted common shares at $0.20 per share. With respect to 245,000 restricted common shares, the investors were also issued warrants to purchase 245,000 additional restricted common shares at $0.25, and with respect to another 245,000 restricted common shares, the investors were also issued warrants to purchase 245,000 additional restricted common shares at $0.50 per share. Of these, we also sold 5,000 shares to a director of the Company for proceeds of $1,000 and issued warrants to purchase 5,000 restricted common shares, exercisable at $0.25 per share for a two year period. All warrants will expire two years from the date of issuance. The shares and warrants were sold to Canadian investors pursuant to the exemption provided by Regulation S of the 1933 Act, and the shares and warrants sold to U.S. investors were sold pursuant to the exemption provided by section 4(2) of the 1933 Act.

 

F-16
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

During 2004, 702,760 restricted common shares were issued in conversion of $99,657 principal and interest on a debenture held by Dutchess Fund. The conversion prices were $0.216 for 92,593 shares ($20,000 of the debenture); $0.160 for 31,250 shares ($5,000 of the debenture); $0.144 for 34,722 shares ($5,000 of the debenture); $0.128 for 544,195 shares ($69,657 of the debenture). All of the prices were determined by the conversion formula in the debenture (80% of the average bid prices for the three lowest (out of 15) trading days before conversion). These shares were sold pursuant to the exemption provided by section 4(2) of the 1933 Act.

 

During 2004, 215,336 restricted common shares were issued in payment of $40,932 of services by Luis Vega, consulting geologist. The price per share was determined by dividing the amount owed by the average closing price of the Company’s stock for each day’s service. These shares were sold pursuant to the exemption provided by section 4(2) of the 1933 Act.

 

During 2004, 15,367 restricted common shares were issued in payment of accounts payable amounting to $3,842. The price per share was based on the average closing share price for the period during which the services were rendered. These shares were sold pursuant to the exemption provided by Regulation S of the 1933 Act.

 

During 2004, 87,388 restricted common shares were issued to Terry Brown, a Mexican resident, for technical consulting services amounting to $15,247. The price per share was based on the average closing share price for the period during which the services were rendered. These shares were sold pursuant to the exemption provided by Regulation S of the 1933 Act.

 

On December 22, 2004, 2,500 restricted common shares were issued to Karen Barra, a U.S. resident, for services amounting to $500. The price per share was $0.20 based on private placement offering for the period during which the services were rendered. These shares were sold pursuant to the exemption provided by Regulation S of the 1933 Act.

 

On March 1, 2004, in connection with the conversion of $82,687 in notes payable and $225,595 in accrued officers’ salary payable, we issued 1,233,127 restricted common shares at $0.25 per share and 1,233,127 warrants, with an exercise price of $0.30 and expiring on March 1, 2006, to two officers, two directors, and a former director and his insurance agency. These persons and the insurance agency are accredited investors.

 

Between February 10 and March 31, 2004, 75,000 restricted common shares were issued to Jeff Whitford, a Canadian resident, for investor relation services, in the amount of $15,000. In addition, Mr. Whitford received 50,000 warrants at an exercise price of $0.20 per share; the warrants will expire between February 2006 and March 2006. The warrants were valued at $12,200 utilizing the Black Scholes model. These shares were issued pursuant to the exemption provided by Regulation S of the 1933 Act.

 

On February 4, 2004, 10,000 restricted common shares were issued to Yvonne St. Pierre, a Canadian resident, for computer-related services, in the amount of $2,500. These shares were issued pursuant to the exemption provided by Regulation S of the 1933 Act.

 

2003

 

During 2003, 673,410 restricted common shares were issued to nineteen (19) Canadian residents or companies controlled and owned by Canadian resident investors for $134,682 and 150,000 restricted common shares were issued to 12 U.S. resident investors for $30,000 (all shares were priced at $0.20 per share, representing premiums of up to 25% and discounts ranging from 0% to approximately 25% from market prices at the time of issuance). With respect to 237,410 restricted common shares, the investors were also issued warrants to purchase 474,820 additional restricted common shares and with respect to 473,500 restricted common shares, the investors were also issued warrants to purchase 473,500 additional restricted common shares; all warrants were priced at $0.20 per share and will expire two years from the date of issuance. With respect to 112,500 restricted common shares, the investors were also issued 112,500 warrants to purchase additional restricted common shares, at a price of $0.25 per share for a period of two years from the date of issuance. The shares and warrants were sold to Canadian investors pursuant to the exemption provided by Regulation S of the 1933 Act, and the shares and warrants sold to U.S. investors were sold pursuant to the exemption provided by section 4(2) of the 1933 Act.

 

During 2003, 364,305 restricted common shares were issued in conversion of $35,000 principal and interest on a debenture held by Dutchess Fund. The conversion prices were $0.099 for 50,710 shares ($5,000 of the debenture); $0.112 for 44,643 shares ($5,000 of the debenture); $0.061 for 81,433 shares ($5,000 of the debenture); $0.067 for 75,075 shares ($5,000 of the debenture); and $0.1334 for 112,444 shares ($15,000 of the debenture). All of the prices were determined by the conversion formula in the debenture (80% of the average bid prices for the three lowest (out of 15) trading days before conversion. These shares were sold pursuant to the exemption provided by section 4(2) of the 1933 Act.

 

During 2003, 205,166 restricted common shares in payment of $31,500 of services by Luis Vega, consulting geologist. The price per share was determined by dividing the amount owed by the average closing price of the Company’s stock for each day’s service. These shares were sold pursuant to the exemption provided by section 4(2) of the 1933 Act.

 

F-17
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

On March 14, 2003, 24,960 restricted common shares were issued to Catherine Nichols, a Canadian resident, for marketing services amounting to $5,000. The price per share was based on the average closing share price for the period during which the services were rendered. These shares were sold pursuant to the exemption provided by Regulation S of the 1933 Act.

 

During the period from July 15 to December 31, 2003, 112,326 restricted common shares in payment of $22,250 of investor relations services by Jeffrey Whitford, a Canadian resident who is a consultant to the Company. The price per share was based on the average monthly closing share prices for the period. These shares were sold pursuant to the exemption provided by Regulation S of the 1933 Act.

 

33,600 restricted common shares were issued to pay $4,200 of legal services provided by Stephen E. Rounds, outside company counsel. The price per share was based on the average closing share price for the period during which the services were rendered. These shares were sold pursuant to the exemption provided by section 4(2) of the 1933 Act.

 

On December 30, 2003, 5,208 restricted common shares were issued to Terry Brown, a Mexican resident, for technical consulting services amounting to $1,250. The price per share was based on the average closing share price for the period during which the services were rendered. These shares were sold pursuant to the exemption provided by Regulation S of the 1933 Act.

 

2002

 

In November 2002, the Company issued 52,292 restricted common shares to four individuals in exchange for various services, valued at approximately $9,900.

 

During October 2002, the Company issued 35,679 shares of the Company’s common stock for $4,600 in cash related to the Dutchess Private Equities Fund, net of offering costs of $700.

 

During September 2002, the Company issued 32,281 shares of the Company’s common stock for $5,500 in cash related to the Dutchess Private Equities Fund, net of offering costs of $200, and issued 30,000 shares to Joseph B. LaRocco, attorney for Dutchess Fund and DRH Investment Company, LLC for legal services to such entities.

 

From July 1, 2002 through December 24, 2002, 609,720 restricted common shares were issued to 20 investors (19 whom are Canadian residents or companies controlled and owned by Canadian residents, and one who is a resident of Great Britain) for $152,400 cash ($0.25 per share, representing prices that ranged from 22% over market to approximately 40% below market prices at the time of issuance). The investors also were issued warrants to purchase a total of 609,720 additional restricted shares, at a price of $0.25 per share; the warrants will expire two years from the date of issuance. No commissions were paid.

 

On June 21, 2002, 40,000 restricted common shares were issued to Financial Communications Corp. for public relations services, valued at approximately $14,000.

 

From March 1, 2002 through June 3, 2002, 369,600 restricted common shares were issued to 48 investors (all Canadian residents or companies controlled and owned by Canadian residents) for $92,400 cash ($0.25 per share, representing discounts ranging from 0% to approximately 50% from market prices at the time of issuance). These investors also were issued warrants to purchase 369,600 additional restricted shares, at a price of $0.25 per share; the warrants will expire two years from the date of issuance. No commissions were paid.

 

On February 11, 2002, 10,000 restricted common shares were sold to one investor (a Canadian resident) for $3,500 cash ($0.35 per share, representing a discount of approximately 50% from market price). This investor also was issued warrants to purchase 10,000 additional restricted shares, at a price of $0.35 per share; the warrants will expire February 11, 2004. Complete information about the Company was provided to these investors. These shares and warrants were sold pursuant to the exemption provided by Regulation S of the 1933 Act. No commissions were paid.

 

On January 31, 2002, we issued 309,677 restricted common shares to a lender (First Colony Merchant) for payment of past due and current interest on debt, $119,800. No commissions were paid.

 

On January 8, 2002, we sold 36,000 restricted common shares to three investors (one Canadian resident, and two private companies controlled and owned by Canadian residents) for $12,600 cash ($0.35 per share, representing a discount of approximately 50% from market price). These investors also were issued warrants to purchase 36,000 additional restricted shares, at a price of $0.35 per share; the warrants will expire January 8, 2004.

 

F-18
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

2001

 

On December 12, 2001 the Board of Directors approved the sale of 40,000 shares of restricted common stock.

 

On November 2, 2001 the Board of Directors approved the sale of 82,888 shares of restricted common stock.

 

During October, 2001 the Company signed an Investment Agreement with two funds (Dutchess Private Equities Fund LP and DRH Investment Company LLC) to sell to those funds up to $8,000,000 in common stock of the Company, for a period of three years. In connection with the Investment Agreement, the Company issued 606,059 shares of restricted common stock to Dutchess Fund and its advisor, and to a broker-dealer firm, for services valued at $400,000, to induce those entities to enter into the Investment Agreement and perform services contemplated under such agreement. The Company also issued 37,000 shares of restricted common stock to the attorney for Dutchess Fund.

 

In September, 2001, the Board of Directors authorized the sale of 20,000 shares of its common stock to an individual.

 

2000

 

On November 24, 2000, the Company borrowed $300,000 from a lender. As part of the transaction, the Company issued 45,000 shares of its common stock as a loan placement fee and granted the lender an option to purchase up to 300,000 shares of its common stock. On November 24, 2000, the lender exercised its option in full and purchased 300,000 shares of Can-Cal’s common stock.

 

In July 2000 the Board of Directors authorized the sale of 74,009 shares of its common stock to eight persons, all of whom reside outside the United States. During the third quarter 46,670 shares were sold and the remaining 27,339 shares were sold during the fourth quarter. All of those shares were issued on December 15, 2000.

 

On July 3, 2000, the Board of Directors exercised the option to acquire technology related to the extraction and processing of ore and, in accordance with the agreement with the two owners of that technology, issued 200,000 shares of Can-Cal’s common stock to them.

 

On February 27, 2000, the Board of Directors approved the sale of 500,000 shares of common stock to three of its directors (all of whom reside in Canada), an offshore trust and another person affiliated with the Company.

 

1999

 

On November 9, 1999 the board approved the issuance of 10,000 shares of common stock to an investor.

 

On September 7, 1999 the Board approved the sale of 20,000 shares of common stock to an investor.

 

On August 24, 1999 the Board approved the sale of 274,000 shares of common stock to various investors.

 

On July 21, 1999 the Board approved the sale of 357,500 shares of common stock to various investors.

 

On April 1, 1999 the Board approved the sale of 1,000 shares of restricted common stock in return for equipment.

 

On March 17, 1999 the Board approved the issuance of 40,000 shares of Can-Cal common stock in return for equipment.

 

On March 15, 1999 the Board approved the sale of 86,000 shares of Can-Cal common stock to various investors.

 

On March 10, 1999 the Board approved the sale of 295,500 shares of Can-Cal common stock to various investors.

 

On March 1, 1999 the Board approved the issuance of 32,121 shares of Can-Cal common stock in return for services rendered.

 

On February 8, 1999 the Board approved the sale of 70,000 shares of Can-Cal common stock to a Board member.

 

On February 1, 1999, the Board of Directors approved the Sale of 62,500 shares of Can-Cal common stock to a Board member.

 

F-19
 

 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

1998

 

During December, 1998 the Board approved the sale of 263,059 restricted common shares to various investors.

 

In October, 1998 the Board approved the sale of 172,450 restricted common shares to various investors.

 

In July, 1998 the Board approved the issuance 122,000 restricted common shares to various investors.

 

1997

 

During December, 1997 the Board approved the issuance of 42,000 restricted common shares in return for services rendered.

 

During November, 1997 the Board approved the sale of 124,683 restricted common shares to various investors.

 

On October 27, 1997 the Board approved the issuance of 2,181,752 restricted common shares to ARUM, LLC to repay an existing debt of $315,046 and to purchase a property located in San Bernadino County, California, known as the Pisgah property.

 

On February 13, 1997 the Board approved the acquisition of Scotmar Industries, Inc. 200,000 shares of Can-Cal common stock were issued in return for all of the issued and outstanding stock of the acquired company.

 

On January 15, 1997 the Company issued 500,000 shares of Can-Cal common stock along with a cash payment of $100,000 in exchange for a 50% interest in S&S Joint Venture. Additionally, the Company agreed to loan the joint venture up to $48,000.

 

1996

 

During 1996 the Company issued 3,441,217 shares of Can-Cal common stock to various investors resulting in cash proceeds of $628,400.

 

 

Note 10 – Options

 

Option Plan

 

Opti