10-K 1 cancal_10k-123116.htm FORM 10-K

 

Table of Contents

 

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, 2016

or

 

o 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.)

 

42 Springfield Avenue    
Red Deer, Alberta, Canada   T4N 0C7
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code (403) 342 6221

 

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

 

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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x
Emerging Growth Company o  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

 

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 $957,340 as of computed by reference to the sale price of a share of the registrant’s Common Stock on June 30, 2017 reported by OTC Bulletin Board (Ref: Bloomberg). The voting stock held by non-affiliates on that date consisted of 39,443,641 shares of common stock.

 

The number of shares outstanding of each of the registrant’s classes of common stock, as of March 8, 2018, was 43,667,060 shares of common stock, $0.001 par value held by approximately 180 shareholders.

 

Documents Incorporated by Reference

None.

 

 

 

   

 

 

EXPLANATORY NOTE

 

This Annual Report on Form 10-K is a comprehensive annual report which includes audited financial statements as of December 31, 2016, 2015 and 2014, and for the years then ended and unaudited financial statements as of March 31, 2016, June 30, 2016, September 30, 2016, March 31, 2017, June 30, 2017 and September 30, 2017, and for the three months ended March 31, 2016 and 2017, the three and six months ended June 30, 2016 and 2017 and the three and nine months ended September 30, 2016 and 2017. The Registrant is filing this comprehensive annual report in lieu of separately filing its Annual Report on Form 10-K for the years ended December 31, 2016 and 2015, and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016, September 30, 2016, March 31, 2017, June 30, 2017 and September 30, 2017, which reports are delinquent as of the date of this filing (collectively, the “Delinquent Reports”). Also included in this Annual Report on Form 10-K is all material information that would have been included in the Delinquent Reports.

 

The Registrant was unable to timely file the Delinquent Reports when originally due, as a result of finances. Moving forward, through payments received via the Amended MSA with Candeo, the Registrant believes that it will be able to resume the timely filing of future periodic and other reports due pursuant to the rules of Securities and Exchange Commission (SEC) and intends to timely file such filings.

 

The Registrant believes that all material information which would have been included in the Delinquent Reports, had they been separately filed with the SEC, is included in this comprehensive annual report. Notwithstanding the above, the focus of this Annual Report is the current state of the Registrant, rather than on the state of the Registrant as of the dates the Delinquent Reports were due.

 

 

   

 

 

 

CAN-CAL RESOURCES LTD.

COMPREHENSIVE 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 16
ITEM 4. MINE SAFETY DISCLOSURES 17
PART II 18
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 18
ITEM 6. SELECTED FINANCIAL DATA 20
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS 20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

24
ITEM 9A CONTROLS AND PROCEDURES 25
ITEM 9B. OTHER INFORMATION 26
PART III 27
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 27
ITEM 11. EXECUTIVE COMPENSATION 29

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 30
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 31
PART IV 32
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 32

 

 

 

 

   

 

 

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.cancal.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., 42 Springfield Avenue, Red Deer, Alberta, Canada T4N 0C7.

 

 

 

   

 

 

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 two mineral properties in the southwestern United States (California and Arizona, as follows: Cerbat, Arizona; and Pisgah, California. The Company formerly had an interest in a property in Owl Canyon, California, and Wikieup, Arizona but these were abandoned.

 

Prior to 2003, the Company performed numerous “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 property (“Pisgah Property”).

 

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.

 

 

 

 2 

 

 

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 42 Springfield Avenue, Red Deer, Alberta, Canada T4N 0C7 (tel. (403) 342 6221).

 

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, 2016, the Company recorded a net loss of $168,105 and had an accumulated deficit of $11,263,792 at 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 minerals is speculative in nature, involves many risks and is frequently unsuccessful. Any mineral 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 various minerals,
·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 minerals and environmental protection requirements.

 

 

 

 

 3 

 

 

All of the mineral properties in which we have an interest or right are in the exploration stages only and are without mineral reserves. 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 any minerals or mineral reserves or will result in a profitable commercial mining operation.

 

The audit report on the financial statements at December 31, 2016 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 Cerbat properties into production, or sell the properties to another company, or place the properties into a joint venture with another company.

 

Attaining these objectives will require capital, which the Company will have to obtain principally by selling stock or income generation. 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 or commencement of income generation in order to continue in business. We currently do not have any operations. Our only source of income at present is from two third parties.

 

On May 1, 1998, the Company entered into a Mining Lease Agreement for the Pisgah Property with Twin Mountain Rock Venture, a California general partnership (“Twin Mountain,”). 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 a monthly production royalty for all material removed from the premises.

 

On March 3, 2014, the Company entered into an amended material supply agreement with Candeo Lava Products Inc. for the Pisgah Property, pursuant to which   Candeo will pay for and acquire 30,000 tons, and then it will pre-purchase a minimum of ten thousand (10,000) tons per year at a purchase price of fifteen dollars ($15.00 USD) per ton for a total payment of $150,000 USD per year in each of the first three years of the term.

 

We do not currently have any additional 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.

 

 

 

 4 

 

 

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.

 

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 any 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.

 

 

 

 5 

 

 

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 brokerdealers, 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 brokerdealer;
·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.

 

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.

 

 

 

 6 

 

 

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

 

Outside of the plan, by Board resolutions, the following Stock Options were issued in the fourth quarter of 2017 with an exercise price of $0.06 per share, to each to each of the following for director and/or consultant services rendered to Can-Cal Resources:

 

Recipient Name  Stock Options Granted 
Sandra Rogoza   100,000 
Red To Black Inc.   250,000 
Gary Oosterhoff, Director   100,000 
Revrok Farm, a company owned by Cornelus Korver   100,000 
For Life Financial Ltd., a company owned by Casey Douglass   100,000 
Total   650,000 

 

The following shares were issued in the fourth quarter of 2017 for director and/or consultant services rendered as follows:

 

Recipient Name  Shares Issued 
William J. Hogan   240,000 
Michael Hogan   600,000 
Thompson MacDonald   250,000 
Ronald Schinnour   250,000 
Gary Oosterhoff   100,000 
Revrok Farm Ltd., a corporation owned by Cornelus Korver   100,000 
For Life Financial Ltd., a corporation owned by Casey Douglass   100,000 
Total   1,640,000 

 

As at December 31, 2015, and December 31, 2016, we had no options outstanding under our 2003 Non-Qualified Option Plan. Our 2003 Non-Qualified Option Plan permitted 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.

 

In addition, the Company no longer has any outstanding warrants as all warrants have expired.

 

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 and 100,000,000 of common 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.

 

 

 

 7 

 

 

 

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.

 

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.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

Not applicable.

 

ITEM 2. PROPERTIES.

 

GENERAL

 

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

 

·Pisgah, San Bernadino County, California
·Cerbat, 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.

 

Adits (a type of entrance 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.

 

 

 

 

 8 

 

 

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).

 

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. 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 and Cerbat properties.

 

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.

 

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 nonenvironmental 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.

 

 

 

 9 

 

 

The Company presently has no full-time employees and relies on outside subcontractors, consultants and agents, to perform various administrative, legal and technical functions, as required.

 

PISGAH, CALIFORNIA PROPERTY

 

In 1997 we acquired fee title to the Pisgah Property, 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 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

 

In May, 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. 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 – Material Supply Agreements

 

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

 

On April 9, 2013, the Company entered into a Material Supply Agreement (the “Original MSA”) with Candeo Lava Products, Inc., (“Candeo”), an Alberta, Canada company controlled by a former director of the Company and brother of our then CEO. This Agreement was amended on March 3, 2014 (the “Amended MSA”). Pursuant to the Amended MSA, Candeo is entitled to purchase volcanic lava or cinders from Pisgah Property that is not currently stockpiled on the Pisgah Property (the “Material”) at a price equal to the greater of $15 per ton and the net sales margin per ton removed from the Pisgah Property realized as follows: (i) 35% of the net sales margins during the first year of mining; and (ii) 50% of the net sales margins for the subsequent years during the term of the Amended MSA (the “Production Payment”). Under the Amended MSA, Candeo has the right to remove an initial amount of up to 1,000,000 tons (the “Initial Amount”) of Material from the Property and additional incremental amounts (the “Additional Amounts”) of 1,000,000 tons each, upon the successful removal of the Initial Amount from the Property. Candeo’s right to remove the Additional Amounts from the Property is on the basis that once Candeo has removed the first Additional Amount of the Material from the Property, it shall have the right to remove subsequent Additional Amounts of Material from the Property, so long as it removes its then current Additional Amount. As such, Candeo’s right to extend the term of the Amended MSA is entirely based on Candeo’s successful performance of its Material removal commitments under the terms of the Amended MSA.

 

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

 

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

 

 

 

 11 

 

 

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) coordinates 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.

 

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

 

The Company has abandoned the Owl Canyon – S & S Joint Venture entered into in 1996 with the Schwarz family choosing to use its resources on the Pisgah Project.

 

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, which payments have been made to date. 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 marker 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.

 

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 conducted 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. Based on those results, the Company has decided to abandon any development of the Wikieup Property.

 

ITEM 3. LEGAL PROCEEDINGS.

 

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

 

 

 

 16 

 

 

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

 

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

 

ITEM 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.

 

 

 

 

 

 

 

 

 

 17 

 

 

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.

 

    2014   2015 
    High   Low   High   Low 
 1st Quarter   $0.04   $0.02   $0.05   $0.05 
 2nd Quarter   $0.06   $0.03   $0.05   $0.05 
 3rd Quarter   $0.06   $0.04   $0.05   $0.03 
 4th Quarter   $0.06   $0.04   $0.03   $0.03 

 

      2016    2017 
      High    Low    High    Low 
 1st Quarter   $0.07   $0.03   $0.03   $0.03 
 2nd Quarter   $0.07   $0.05   $0.03   $0.03 
 3rd Quarter   $0.07   $0.05   $0.03   $0.03 
 4th Quarter   $0.05   $0.03   $0.03   $0.03 

 

(b) Holders of Common Stock

 

As of December 31, 2016, there were approximately 42,867,060 shares outstanding held by approximately 180 shareholders.

 

As at   Number of shareholders   Number of shares outstanding 
 December 31, 2015    180    42,867,060 
 March 31, 2016    180    42,867,060 
 June 30, 2016    180    42,867,060 
 September 30, 2016    180    42,867,060 
 December 31, 2016    180    42,867,060 
 March 31, 2017    180    42,867,060 
 June 30, 2017    180    42,867,060 
 September 30, 2017    180    42,867,060 

 

Upon the resignation of G. Michael Hogan as an officer and director of the Company on August 19, 2015, all accrued and unpaid salaries as of that date of $676,333 ($600,000 as at December 31, 2014) were settled with an agreement to issue 600,000 common shares (worth approximately $18,000 based on August 19, 2015 share prices). This transaction had been recorded during the quarter ended September 30, 2015, although the shares had yet to be issued. The shares were issued on December 31, 2017.

 

Mr. William Hogan resigned from the Board of Directors on February 27, 2013, and his compensation via his FutureWorth Capital Corp. consulting agreement terminated as of December 31, 2012. On August 19, 2015, FutureWorth Capital Corp. settled all accrued and unpaid compensation of $180,000 to that date ($180,000 as at December 31, 2015) with an agreement to issue 240,000 common shares (worth approximately $7,200 based on August 19, 2015 share prices). This transaction had been recorded during the quarter ended September 30, 2015 although the shares had yet to be issued. The shares were issued on December 31, 2017.

 

 

 

 18 

 

 

The above table includes the issuance owed to Michael Hogan and Bill Hogan in 2015. The shares were not officially issued until December 31, 2017.

 

(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.

 

(d) Securities Authorized for Issuance under Equity Compensation Plans

 

STOCK OPTION PLANS

 

There are no Stock Options open as of December 31, 2014, 2015, or 2016. On December 31, 2017, 650,000 Stock Options were granted to members of the Board of Directors and consultants of the Company in lieu of cash compensation.

 

WARRANTS

 

Can-Cal has no warrants outstanding as of the fiscal year ending 2014, 2015, 2016, or 2017.

 

Recent Sales of Unregistered Securities

 

There were no sales of equity securities by the Company during the fiscal year ended December 31, 2014, 2015, 2016, or the nine months ended September 30, 2017.

 

Outside of the plan, by Board resolutions, the following Stock Options were issued in the fourth quarter of 2017 with an exercise price of $0.06 per share, to each to each of the following for director and/or consultant services rendered to Can-Cal Resources:

 

Recipient Name  Stock Options Granted 
Sandra Rogoza   100,000 
Red To Black Inc.   250,000 
Gary Oosterhoff, Director   100,000 
Revrok Farm, a company owned by Cornelus Korver   100,000 
For Life Financial Ltd., a company owned by Casey Douglass   100,000 
Total   650,000 

 

The following shares were issued in the fourth quarter of 2017 for director and/or consultant services rendered as follows:

 

Recipient Name  Shares Issued 
William J. Hogan   240,000 
Michael Hogan   600,000 
Thompson MacDonald   250,000 
Ronald Schinnour   250,000 
Gary Oosterhoff   100,000 
Revrok Farm Ltd., a corporation owned by Cornelus Korver   100,000 
For Life Financial Ltd., a corporation owned by Casey Douglass   100,000 
Total   1,640,000 

 

Upon the resignation of G. Michael Hogan as an officer and director of the Company on August 19, 2015, all accrued and unpaid salaries as of that date of $676,333 ($600,000 as at December 31, 2014) were settled with an agreement to issue 600,000 common shares (worth approximately $18,000 based on August 19, 2015 share prices). This transaction had been recorded during the quarter ended September 30, 2015, although the shares had yet to be issued. The shares were issued on December 31, 2017.

 

 

 

 19 

 

 

Mr. William Hogan resigned from the Board of Directors on February 27, 2013, and his compensation via his FutureWorth Capital Corp. consulting agreement terminated as of December 31, 2012. On August 19, 2015, FutureWorth Capital Corp. settled all accrued and unpaid compensation of $180,000 to that date ($180,000 as at December 31, 2015) with an agreement to issue 240,000 common shares (worth approximately $7,200 based on August 19, 2015 share prices). This transaction had been recorded during the quarter ended September 30, 2015 although the shares had yet to be issued. The shares were issued on December 31, 2017.

 

We claim an exemption from registration for the issuances described above pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the foregoing issuances did not involve a public offering, the recipients were (a) “accredited investors”; and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act, the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuances and grant and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the year ended December 31, 2014, 2015, 2016, or 2017.

 

ITEM 6. SELECTED FINANCIAL DATA.

 

Not applicable.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

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, 2016, 2015 and 2014 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 Cerbat, Arizona property.

 

 

 

 20 

 

 

At December 31, 2016, we had cash on hand of approximately $Nil available to sustain operations. At December 31, 2015, cash on hand was $1,905. 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 Cerbat, 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 Cerbat, 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 (subsequently abandoned); (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, the Company entered into a mineral lease agreement with a GoodCorp Inc. to purchase material from the property. This mineral lease agreement is for an initial period of ten (10) years, with an additional five (5) year extension at the option of the lessee. Sale prices of minerals are set at diminishing prices in $0.50 increments between $12 per ton and $10 per ton for each 20,000 tons of material removed. As of the date hereof, no material has been sold under this agreement and no revenue has been received by the Company.

 

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

 

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

 

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

 

 

 

 21 

 

 

Results of Operations for the Years Ended December 31, 2016, 2015, and 2014:

 

($ dollars)  Year Ended December 31, 
   2016   2015   2014 
Rental Income   9,167    33,100    27,500 
                
Operating expenses:               
    Exploration costs   17,096    10,929    10,161 
    General and administrative   147,346    115,359    129,453 
    Depreciation       282    370 
    Officer salary       76,333    120,000 
        Total operating expenses   164,442    202,903    259,984 
                
Net operating loss   (155,275)   (169,803)   (232,484)
                
Other income (expense):               
    Interest expense   (13,243)   (13,399)   (9,706)
    Foreign exchange gain (loss)   145    396     
    Non-recurring income   268    2,626    19,224 
        Total other income (expense)   (12,830)   (10,377)   9,518 
                
Loss before provision for income taxes   (168,105)   (180,180)   (222,966)
    Provision for income taxes            
Net loss   (168,105)   (180,180)   (222,966)

 

Revenues:

 

Rental revenue was $9,167 for the year ended December 31, 2016, $33,100 for 2015, and $27,500 for 2014. 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. The decrease in rental revenue in 2016 was due to the rental contracts not being renewed.

 

No rental revenues have been realized in any interim period in 2017.

 

Exploration Costs:

 

For the year ended December 31, 2016, exploration costs were $17,096, $10,929 in 2015, and $10,161 for the year ended December 31, 2014. The increase in exploration costs is due to higher property taxes paid on our locations in 2016.

 

We incurred about $5,000 in exploration costs in the 2017 interim period ended June 30, 2017 and none in the other periods.

 

General and Administrative:

 

General and administrative expenses were $147,346 for the year ended December 31, 2016, $115,359 for 2015 and $129,453 for the year ended December 31, 2014. This increase in general and administrative expense in 2016 was primarily due to legal expenses incurred as a result of the lawsuit brought forward by our shareholders. The decrease in costs in 2015 was largely due to the resignation of the Controller whose position has not been filled.

 

In the interim periods in 2017 we incurred about $7,000 in G&A each quarter except the three month period ended June of 2017 when G&A totalled about $60,000 primarily in professional fees. Subsequent to September 30, 2017, a Board resolution was passed, made effective as of January 1, 2017, that For Life Financial Ltd., which is owned by Casey Douglass, and provides management services to the Company, would have an increase in remuneration to $75,000 per annum. This increase in remuneration will be recognized in the fourth quarter of 2017.

 

Officer Salary:

 

Officer Salaries was $Nil for the year ended December 31, 2016, $76,333 for 2015, and $120,000 for 2014. The CEO’s compensation was fixed at $10,000 per month. All salaries payable in 2015 and 2014 were accrued, but not paid, and remain an outstanding obligation of the Company as at December 31, 2016. The CEO had resigned in mid-2015 and has not been replaced during this reporting timeframe.

 

 

 

 22 

 

 

Net Operating Gain or Loss:

 

Net operating loss for the year ended December 31, 2016 was $155,275 or $0.00 per share, there was a net operating loss of $169,803 or $0.00 per share for 2015, and $232,484 for the year ended December 31, 2014, or $0.01 per share. This operating loss decrease is primarily due to decrease in Exploration Costs and General and Administrative expense as explained above.

 

Other Income:

 

There was other non-recurring revenue for the year ended December 31, 2016 of $268, $2,626 in 2015 and $19,224 for the year ended December 31, 2014. The other income in 2016 was due to the write-off of charges incurred, the other income in 2015 and 2014 was due to the write-off of accounts payable for stale-dated payables confirmed as no longer owed.

 

In the interim periods in 2017 other income consisted of gain on sale of assets of $9,000 in the three months ended June 30, 2017.

 

Interest Expense:

 

Interest expense for the year ended December 31, 2016 was $13,243, $13,399 in 2015, and $9,706 for the year ended December 31, 2014. The increase in interest expense is due to the higher average carrying amounts on the notes payable throughout the year.

 

In the interim periods in 2017 interest expense remained steady at about $3,000 per quarter.

 

Net Loss:

 

See the explanation of Net Operating Loss above.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The following table summarizes total assets, accumulated deficit, stockholders’ equity (deficit) and working capital at December 31, 2016, 2015, and 2014.

 

($ dollars)  December 31, 
   2016   2015   2014 
Total Assets   1,290    3,195    867 
Accumulated (Deficit)   (11,263,792)   (11,095,687)   (10,915,507)
Stockholders’ Equity (Deficit)   (654,928)   (486,823)   (1,162,976)
Working Capital (Deficit)   (654,928)   (486,823)   (1,163,258)

 

At December 31, 2016, we had total assets of $1,290, consisting of prepaid expenses, compared to assets of $3,195 in 2015, and $867 in 2014. We have implemented financial controls in the business to ensure each expense is warranted and needed. Our cash on hand at December 31, 2016 was $Nil.

 

No significant changes have taken place in the three quarters of 2017 as Noted below:

 

($ thousands of dollars)  December 31, 
    9/30/2017    6/30/2017    3/31/2017 
Total Assets   3    2    1 
Accumulated (Deficit)   (11,345)   (11,333)   (10,566)
Stockholders’ Equity (Deficit)   (736)   (725)   (665)
Working Capital (Deficit)   (736)   (725)   (665)

 

Off Balance Sheet Arrangements

 

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

 

 

 

 23 

 

 

Contractual Obligations

 

We have no significant changes in contractual obligations as of December 31, 2016 and there were no significant changes in contractual obligations as at December 31, 2015.

 

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 years ended December 31, 2016 and 2015 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.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Index to Financial Statements

 

Reports of Independent Registered Public Accounting Firm F-1
   
Balance Sheets as of December 31, 2016, 2015 and 2014 F-2
   
Statements of Operations for the years ended December 31, 2016, 2015 and 2014 F-3
   
Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 F-4
   
Statements of Stockholders' (Deficit) for Years Ended December 31, 2016, 2015 and 2014 F-5
   
Notes to Financial Statements F-6

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None

 

 

 

 24 

 

 

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, 2016.

 

Limitations on the Effectiveness of Controls

 

Our management, including our CEO, 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 Certification

 

Appearing immediately following the Signatures section of this report there are Certifications of the CEO. The Company currently has no CFO. The Certification 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, 2016, 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.

 

 

 

 25 

 

 

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.

 

None.

 

 

 

 

 

 

 

 

 

 26 

 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

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

 

On August 19, 2015, Jonathan Legg and Tim J. Nakaska were elected to the Board of Directors of the Company. Michael Hogan resigned from the Board of Directors.

 

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

 

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

 

On May 1, 2016, Richard Singleton resigned from the Board of Directors.

 

On June 10, 2016, Casey Douglass was elected to the Board of Directors.

 

On September 10, 2016, Tim J. Naskaska and Jonathan Legg resigned from the Board of Directors. Gary Oosterhoff and Cornelus (Case) Korver were elected to the Board of directors. Casey Douglass was elected as Chairman of the Board.

 

The new Officers and directors of the Company are listed below. Directors are elected to hold offices until the next nnual meeting of shareholders or 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
Casey Douglass   57   Director and Chairman of the Board.
         
Gary Oosterhoff   60   Director.
         
Cornelus (Case) Korver   72   Director.

 

Mr. Casey Douglass of Red Deer, Alberta, was elected as a Director as of June 10, 2016. Mr. Douglass has owned and managed farming and agribusinesses for over 15 years in Canada and Russia. Mr. Douglass’ expertise in Russia involved: market analysis; business design; finance; importing and staff training on new equipment. His expertise also included corporate structuring and strong management skills. During the past 10 years, Mr. Douglass has specialized in providing insurance and finance solutions to the exempt corporate marketplace of Western Canada, the majority of which occurred in Alberta. Mr. Douglass has studied Agricultural Economics and Rural Sociology at University of Alberta and is a strong community player in Red Deer, Alberta as well as other global communities. Mr. Douglass looks forward to assisting Can-Cal Resources from its previous difficult times to upcoming positive and new business activities within North America.

 

Mr. Gary Oosterhoff of Red Deer, Alberta, was appointed as a Director as of September 10, 2016. During the majority of his working career, Mr. Oosterhoff has been in the general insurance industry where he achieved the “Chartered Insurance Broker” designation, which at the time was the highest level attainable for general insurance brokers. He was the senior leader and majority shareholder of a thriving general insurance brokerage in Red Deer, Alberta which was sold in 2001. Afterward, Gary continued in a teaching capacity throughout Alberta until 2009. Additionally, from 2001, to date, Gary has used his outstanding entrepreneurial experience and background talents in ground floor opportunities and went on to pursue the real estate business, which also has become very successful. Today, Mr. Oosterhoff leads a syndication of high wealth investors for acquisition, development, construction, management and marketing of both residential and commercial holdings in central Alberta. Mr. Oosterhoff has also been a Board member providing regional governance under Alberta Housing Act.

 

Mr. Cornelus (Case) Korver of Rocky Mountain House, Alberta, was appointed as a director as of September 10, 2016. Since 1962, Mr. Korver has been involved in thriving agricultural businesses near Rocky Mountain House, Alberta, initially with a prosperous family owned diary operations. In 1972, he expanded and diversified into several other successful business operations, including beef cattle, hay, grains, and oilseeds. In 2008, Mr. Korver further transitioned into specialized custom grazing and hay for the Alberta equine market. Mr. Korver has used his successful business savvy in various capital markets investments. The majority of which are private companies. He has continuously provided active service on various boards at both the Alberta Provincial and County levels including the Alberta Government Loan Appeal Board; County Police Advisory Committee; County Agriculture Service Board; Rocky Mountain Agriculture Society; Chair of Grey Wooded Forage Association; Counsel Member with Clearwater County; Chair of Central Alberta Milk Producers Association and Director, Rocky Natural Gas Co-op.

 

 

 

 27 

 

 

 (a) Director Compensation

 

The Company has not compensated outside (non-employee) directors for service but has reimbursed them for travel costs to attend Board meetings. Our former director, Mr. G. Michael Hogan, who served as CEO and President during 2015, was entitled to receive compensation for his services as CEO and President in the amount of $120,000 annually. His salaries for 2015 and 2014 were accrued, but not paid.

 

Subsequent to September 30, 2017, passed by Board resolution, the three directors of the Company were each issued 100,000 shares and 100,000 stock options.

 

(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, 2015 through December 31, 2015 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 sent by email to Casey Douglass, President (casey@forlifefinancial.com).

 

 

 

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ITEM 11. EXECUTIVE COMPENSATION.

 

The following table sets forth summary compensation information for the years ended December 31, 2016, 2015, 2014 and 2013 for our chief executive officers and directors.

 

Summary Compensation Table
Name and Principal Position   

Fiscal Year

    

Salary ($)

    

Bonus ($)

    Option Awards ($)    All Other Compensation ($)    

Total ($)

 
Casey Douglass   2016   $-0-   $-0-   $-0-   $-0-   $-0- 
Director                              
                               
G Michael Hogan   2016   $-0-   $-0-   $-0-   $-0-   $-0- 
Former President, CEO, Director   2015   $76,333   $-0-   $-0-   $-0-   $76,333 
    2014   $120,000   $-0-   $-0-   $-0-   $120,000 
    2013   $120,000   $-0-   $-0-   $-0-   $120,000 
                               
Officers as a Group   2016   $-0-   $-0-   $-0-   $-0-   $-0- 
    2015   $76,333   $-0-   $-0-   $-0-   $76,333 
    2014   $120,000   $-0-   $-0-   $-0-   $120,000 
    2013   $120,000   $-0-   $-0-   $-0-   $120,000 

 

The Company has no executives or employees, however, beginning September 2016, For Life Financial Ltd., a company owned by Casey Douglass, was engaged for management services. Please refer to Item 13 for additional details.

 

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 included 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 $Nil, $Nil, and $600,000 at December 31, 2016, 2015, and 2014, respectively. The salaries owing amount was settled with an agreement to issue 600,000 shares in lieu of cash as described above.

 

Grants of Plan-Based Awards

 

We did not grant any plan-based awards to our named executive officer during the fiscal year ended December 31, 2016, or 2015.

 

Outstanding Equity Awards

 

There were no unexercised stock options, stock that has not vested, and equity incentive plan awards held by our executive officers at December 31, 2016, or 2015.

 

Option Exercises

 

There were no options issued or exercised by our executive officers during fiscal 2016, or 2015.

 

Equity Compensation Plan Information

 

There are no outstanding Options and Warrants as of the year ended December 31, 2016, or 2015.

 

 

 29 

 

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following tables presents information, to the best of Can-Cal’s knowledge, about the ownership of Can-Cal’s common stock on December 31, 2016 and 2015, 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 tables are based on 42,867,060 shares of common stock outstanding as of December 31, 2016 and 2015 (including the share issuances to Michael Hogan and William J. Hogan for the settlements of their debts). The percentage of beneficial ownership for the following table is based on 42,867,060 shares of common stock outstanding as of December 31, 2016 and 2015.

 

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, 2016 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.

 

   2016 
Name and Address of Beneficial Owner, Officer or Director Notes (1) & (3)  Number of Shares  

Percentage of Outstanding

Common Stock

Note (2)

 
Beneficial Owners, Officers and Directors:          
G Michael Hogan, Former CEO, President and Director   2,960,419    6.9% 
Casey Douglass, Director   263,000    0.6% 
Gary Oosterhoff, Director   100,000    0.2% 
Cornelus (Case) Korver, Director   100,000    0.2% 
All Beneficial Owners, Directors and Executives as a Group   3,423,419    7.9% 

 

(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: 42 Springfield Avenue, Red Deer, Alberta, Canada T4N 0C7.

 

   2015 
Name and Address of Beneficial Owner, Officer or Director Notes (1) & (3)  Number of Shares  

Percentage of Outstanding

Common Stock

Note (2)

 
Beneficial Owners, Officers and Directors:          
G Michael Hogan, Former CEO, President and Director   2,960,419    6.9% 
Thompson MacDonald, Chairman   850,579    2.0% 
Ron Schinnour, Director   416,650    1.0% 
All Beneficial Owners, Current Directors and Executives as a Group   4,227,648    9.9% 

 

(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: 42 Springfield Avenue, Red Deer, Alberta, Canada T4N 0C7.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Starting June 10, 2016, For Life Financial Ltd., a company owned by Casey Douglass, one of the directors, was hired to manage the day-to-day operations of the Company. The agreement was signed for a monthly rate of $2,100 CAD per month. On September 20, 2016, a second agreement to wholly manage the Company was added at a rate of $50,000 USD per annum. Effective January 1, 2017, a Board resolution was passed to increase the remuneration of the second agreement to a rate of $75,000 USD per annum.

 

 

 

 30 

 

 

Casey Douglass, a director of the Company has a 2% ownership in Candeo Lava Products Inc. The Company has a material supply agreement with Candeo Lava Products Inc. for the Pisgah Property, pursuant to which Candeo will pay for and acquire 30,000 tons, and then it will pre-purchase a minimum of ten thousand (10,000) tons per year at a purchase price of fifteen dollars ($15.00 USD) per ton for a total payment of $150,000 USD per year in each of the first three years of the term.

 

Since August 2012, G. Michael Hogan, the former CEO and former Chairman of the Board, has been providing funds to the Company to pay for ongoing operations. The amount received is a note payable, is unsecured, bears interest at 10%, and is due on demand. At December 31, 2016, the amount outstanding, including interest, is $122,239.

 

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.

 

Until his resignation, the Board of Directors delegated management of the Company to Mr. G. Michael Hogan and the Board of Directors. The responsibility was then passed on to the Chairman of the Board to manage 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 preapproval 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) Thayer O’Neal Company, LLC, was retained as our auditing firm by the Board of Directors for the fiscal years ended December 31, 2014, 2015, and 2016. Thayer O’Neal Company, LLC billed us as follows for the years ended December 31, 2016, 2015, and 2014, respectively:

 

($ dollars)  For the Fiscal Years Ended December 31, 
   2016   2015   2014 
Audit Fees(a)   25,443    22,500     
Audit-Related Fees(b)            
Tax Fees(c)            
All Other Fees(d)            
Total fees paid or accrued   25,443    22,500     

  

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, 2016 and 2015.
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, 2016, 2015, and 2014, respectively.
d)For services in respect of any and all other reports as required by the SEC and other governing agencies.

 

 

 

 

 31 

 

 

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 25
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Cash Flow F-4
Statements of Stockholders’ (Deficit) F-5
Notes to Financial Statements F-6

 

(b) 2. Financial Statement Schedules

 

None.

 

(c) 3. Exhibit Index

 

           Incorporated by reference
 

Exhibit

   Exhibit Description  Filed herewith  Form   Period  ending    

Exhibit

   Filing date
                         
 3.1   Articles of Incorporation     Form 10-SB   N/A    3.0   7/9/1999
 3.2   Amendment to the Articles of Incorporation     Form 10-SB   N/A    3.1   7/9/1999
 3.3   By-laws     Form 10-SB   N/A    3.2   7/9/1999
 10.1   Form of Mineral Lease Agreement     10-K   12/31/2014    10.1   1/7/2016
 10.2   Form of Promissory Note with FutureWorth Capital     10-K   12/31/2014    10.2   1/7/2016
 10.3   Form of Subscription Agreement for Promissory Note with FutureWorth Capital     10-K   12/31/2014    10.3   1/7/2016
 10.4   Form of Warrant Certificate with FutureWorth Capital     10-K   12/31/2014    10.4   1/7/2016

 

 

 

 32 

 

 

 

Exhibit

   Exhibit Description  Filed herewith  Form   Period  ending    

Exhibit

   Filing date
 31.1   Certification pursuant to Section 302 of the Sarbanes-Oxley Act  X                
 32.1   Certification pursuant to Section 906 of the Sarbanes-Oxley Act  X                
 99.1   Summary of Significant Details Regarding Pisgah, Wikieup, Cerbat and the Owl Canyon Properties     10-KSB/A   12/31/07    99.1   03/11/09
 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                

 

 

 

 

 33 

 

 

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/ Casey Douglass  

 

Casey Douglass, Chairman of the Board of Directors

 

Date: March 9, 2018

 

POWER OF ATTORNEY

 

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.

 

/s/ Gary Oosterhoff, Director

 

March 9, 2018

 

Gary Oosterhoff

 

/s/ Cornelus Korver, Director

 

March 9, 2018

 

Cornelus Korver

 

 34 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors of

Can-Cal Resources Ltd.

 

We have audited the accompanying consolidated balance sheets of Can-Cal Resources Ltd. (collectively, "the Company") as of December 31, 2016, 2015 and 2014 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Can-Cal Resources Ltd. as of December 31, 2016, 2015 and 2014 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 /s/ Thayer O’Neal Company, LLC

 

Thayer O’Neal Company, LLC

Houston, Texas

February 14, 2018

 

 

 

 F-1 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

BALANCE SHEETS

 

   December 31, 2016   December 31, 2015   December 31, 2014 
ASSETS               
Current assets:               
    Cash  $   $1,905   $585 
    Other current assets   1,290    1,290     
        Total current assets   1,290    3,195    585 
Property and equipment, net of accumulated depreciation (See Note 5)           282 
            Total assets  $1,290   $3,195   $867 
                
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)               
Current liabilities:               
    Accounts payable  $157,366   $67,650   $56,932 
    Accounts payable, related parties   506    506    180,506 
    Accrued expenses   6,880    3,400    7,588 
    Accrued expenses, related parties   105,462    92,960    680,665 
    Unearned rental revenues       9,167    9,167 
    Unearned revenues, related party   253,765    199,659    115,650 
    Notes payable, related parties   132,239    116,676    113,335 
        Total current liabilities   656,218    490,018    1,163,843 
Total liabilities   656,218    490,018    1,163,843 
Commitments and contingencies (See Note 8)               
Stockholders’ (deficit):               
    Preferred stock(1)            
    Common stock(2)   42,867    42,867    42,027 
    Additional paid-in capital   10,565,997    10,565,997    9,710,504 
    (Deficit) accumulated during exploration stage   (11,263,792)   (11,095,687)   (10,915,507)
        Total stockholders’ (deficit)   (654,928)   (486,823)   (1,162,976)
                
            Total liabilities and stockholders’ (deficit)  $1,290   $3,195   $867 

_____________

(1)Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding
(2)Common stock, $0.001 par value, 100,000,000 shares authorized, 42,867,060 issued and outstanding as of December 31, 2016 and 2015, 42,027,060 issued and outstanding as of December 31, 2014

 

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

 

 

 

 F-2 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENT OF OPERATIONS

For the years ended December 31, 2016, 2015, and 2014

 

   2016    2015   2014 
Rental Income  $9,167    $33,100   $27,500 
                 
Operating expenses:                
    Exploration costs   17,096     10,929    10,161 
    General and administrative   147,346     115,359    129,453 
    Depreciation        282    370 
    Officer salary        76,333    120,000 
        Total operating expenses  $164,442    $202,903    259,984 
                 
Net operating loss  $(155,275)   $(169,803)  $(232,484)
                 
Other income (expense):                
    Interest expense   (13,243)    (13,399)   (9,706)
    Foreign exchange gain (loss)   145     396     
    Non-recurring income   268     2,626    19,224 
        Total other income (expense)  $(12,830)   $(10,377)  $9,518 
                 
Loss before provision for income taxes   (168,105)    (180,180)   (222,966)
Provision for income taxes             
Net loss  $(168,105)   $(180,180)  $(222,966)
                 
Weighted average number of common shares outstanding – basic and fully diluted   42,867,060     42,867,060    42,027,060 
                 
Net loss per share – basic and fully diluted   (0.00) (1)     (0.00) (1)   $(0.01)

_____________

(1)Value is a negative amount less than 0.01.

 

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

 

 

 

 F-3 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CASH FLOW

 

   Year ended 
   2016   2015   2014 
CASH FLOWS FROM OPERATING ACTIVITIES               
    Net loss  $(168,105)  $(180,180)  $(222,966)
Adjustments to reconcile net loss to net cash used in operating activities:               
            Depreciation and amortization       282    370 
            Decrease (increase) in assets:               
                Prepaid expenses       (1,290)   8,122 
            Increase (decrease) in liabilities:               
                Accounts payable   89,716    10,717    (5,075)
                Accrued expenses   3,480    (4,188)   (10,015)
                Accrued expenses, related parties   12,502    88,628    138,965 
                Unearned revenues   (9,167)        
                Unearned revenues, related party   54,106    84,009    52,190 
                    Net cash used in operating activities  $(17,468)  $(2,022)  $(38,409)
                
CASH FLOWS FROM FINANCING ACTIVITIES               
            Proceeds from notes payable, related parties   15,563    3,342    37,606 
            Net cash provided by (used in) financing activities  $15,563   $3,342   $(38,409)
                
Net increase (decrease) in cash   (1,905)   1,320    (803)
    Cash, beginning of period   1,905    585    1,388 
    Cash, end of period  $   $1,905   $585 
                
SUPPLEMENTAL CASH FLOW INFORMATION               
  Issuance of shares for settlement of related party debt       856,333     
  Accrued salaries settled form the issuance of shares       (676,333)    
  Related party accounts payable settled form the issuance of shares       (180,000)    

 

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

 

 

 

 F-4 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

December 31, 2016, 2015, 2014 and 2013

 

   Common stock   Additional   (Deficit) Accumulated during   Total 
   Number of Shares   Amount  

Paid-in

Capital

   Exploration Stage   Stockholders’ Deficit 
Balance, December 31, 2013   42,027,060   $42,027   $9,710,504   $(10,692,541)  $(940,010)
                          
Net loss               (222,966)   (222,966)
Balance, December 31, 2014   42,027,060   $42,027   $9,710,504   $(10,915,507)  $(1,162,976)
                          
Issuance of shares in exchange for   write-off of debt   840,000    840    855,493        856,333 
Net loss               (180,180)   (180,180)
Balance, December 31, 2015   42,867,060   $42,867   $10,565,997   $(1,095,687)  $(486,823)
                          
Net loss                (168,105)   (168,105)
Balance, December 31, 2016   42,867,060   $42,867   $10,565,997   $(11,263,792)  $(654,928)

 

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

December 31, 2016, 2015, and 2014

 

 

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 mineral exploration projects. We have examined various prospective mineral properties for precious metals and acquired those deemed promising. We currently own, lease or have mining interest in two mineral properties in the southwestern United States (California and Arizona, as follows: Cerbat, Arizona; and Pisgah, California). The Company previously had mineral rights in Owl Canyon, California and Wikieup, Arizona, which have now been abandoned.

 

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

 

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 an accumulated deficit of $11,263,792 for the period from inception (March 22, 1995) through December 31, 2016. 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.

 

Revenue

 

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

 

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.

 

 

 

 F-6 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

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.

 

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 2017, 2016, 2015, and 2014, 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. There have been no stock and stock options issued for services and compensation for the years ended December 31, 2017, 2016, 2015, and 2014.

 

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.

 

 

 

 F-7 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

There has been no recognition of any stock-based finance charges for the years ended December 31, 2016, 2015, or 2014.

 

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.

 

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, 2016, 2015, and 2014. 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. Expenditures 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

 

Intangibles - Goodwill and Other (Topic 350). In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04. The update simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the amendment an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Effective for public business entities that are SEC filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are currently evaluating whether the adoption of this new guidance will have a significant impact on our consolidated financial statements and related disclosures.

 

 

 

 F-8 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

Cash Flows: Statement of Cash Flows (Topic 230) - Restricted Cash. In November 2016, ASU 2016-18 was issued. The update requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating whether the adoption of this new guidance will have a significant impact on our consolidated financial statements and related disclosures.

 

Leases (Topic 842). In February 2016, ASU 2016-02, Leases, was issued. This standard will require all lessees to recognize a right of use asset and a lease liability on the balance sheet, except for leases with durations that are less than twelve months. Effective for Public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 (i.e., January 1, 2020, for a calendar year entity), and interim periods within fiscal years beginning after December 15, 2020. We are currently evaluating whether the adoption of this new guidance will have a significant impact on our consolidated financial statements and related disclosures.

 

Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, ASU 2016-01 was issued to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The ASU supersedes the guidance to classify equity securities with readily determinable fair values into different categories and requires equity securities (except those that are accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in the fair value recognized through net income. It also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period. Effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently evaluating whether the adoption of this new guidance will have a significant impact on our consolidated financial statements and disclosures.

 

Revenue Recognition (Topic 606): Revenue from Contracts with Customers. In May 2014, ASU 2014-09 was issued. Under this ASU and subsequently issued amendments, an entity is required to recognize the amount of revenue it expects to be entitled to for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP. This ASU provides alternative methods of transition, a full retrospective and a modified restrospective approach. The modified retrospective approach would result in recognition of the cumulative impact of a retrospective application as of the beginning of the period of initial application. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.

 

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 $168,105 for the year ended December 31, 2016, has used net cash in operating activities of $8,061,955 from inception and had a working capital deficit of $654,928 at December 31, 2016. 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.

 

 

 

 F-9 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

Material Supply Agreement

 

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

 

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

 

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

 

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 $Nil, $Nil, and $600,000 at December 31, 2016, 2015, and 2014, respectively. The salaries owing amount was settled with an agreement to issue 600,000 shares in lieu of cash.

 

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, 2016, the Company owed FutureWorth Capital Corp. $506, (2015 - $506) 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.

 

 

 

 F-10 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

Share-Based Compensation

 

All warrants previously issued by the Company have expired as of the fiscal year ending December 31, 2014. No new warrants have been issued as of December 31, 2016.

 

NOTE 4 – PREPAID EXPENSES

 

Prepaid expenses consisted of the following as of December 31, 2016, 2015, and 2014, respectively:

 

   December 31, 
   2016   2015   2014 
County taxes  $1,290   $1,290   $ 
Total prepaid expenses  $1,290   $1,290   $ 

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and Equipment consists of the following:

 

   December 31, 
   2016   2015   2014 
Machinery and equipment  $1,000   $1,000   $1,000 
Transportation equipment   31,787    31,787    31,787 
Furniture and fixtures   1,372    1,372    1,372 
Total property cost  $34,159   $34,159   $34,159 
Less accumulated depreciation   (34,159)   (34,159)   (33,877)
Net book value  $   $   $282 

 

Depreciation expense totaled $Nil, $282, and $370 for the years ended December 31, 2016, 2015, and 2014, respectively.

 

NOTE 6 – NOTES PAYABLE, RELATED PARTIES

 

Notes payable, related parties consisted of the following as of December 31, 2016, 2015, and 2014, respectively:

 

   December 31, 
   2016   2015   2014 
Note payable (1)  $122,239   $106,676   $108,335 
Promissory note payable (2)   10,000    10,000    5,000 
Total related party notes payable  $132,239   $116,676   $113,335 

 

(1)Note payable to the former CEO, unsecured, bearing interest at 10% and due on demand.
(2)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 expired on November 29, 2014.

 

 

 

 

 F-11 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

The following presents components of interest expense by instrument type for the years ended December 31, 2016, 2015, and 2014, respectively:

 

   December 31, 
   2016   2015   2014 
Interest on notes payable, related parties  $13,243   $13,399   $9,370 
Accounts payable related vendor finance charges           336 
Finance Costs (Equity based)            
Total interest expense  $13,243   $13,399   $9,706 

 

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, 2016, 2015, and 2014, we had unearned revenue from this agreement totaling $Nil, $9,167, and $9,167, respectively.

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

A) 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.

 

B) 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.

 

C) Litigation

 

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

 

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

 

 

 

 F-12 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

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

 

NOTE 9 – SHAREHOLDERS’ EQUITY

 

In 2015, in exchange for total accrued salaries of $676,333, an agreement was signed to issue 600,000 common shares (worth approximately $18,000 based on August 19, 2015 share prices). This transaction had been accepted and recorded although the shares had not yet been issued due to the lawsuit. The common shares were issued December 31, 2017.

 

In 2015, in exchange for accounts payable owing of $180,000, an agreement was signed to issue 240,000 common shares (worth approximately $7,200 based on August 19, 2015 share prices). This transaction had been accepted and recorded although the shares had not yet been issued due to the lawsuit. The common shares were issued December 31, 2017.

 

While the above shares were not officially issued until December 31, 2017, as the debt was written off in 2015, we have included the issuance of the shares in the financial statements starting in 2015. No shares of common stock were issued by the Company during 2016.

 

NOTE 10 – OPTIONS

 

Option Plan

 

Options granted for employee and consulting services - The 2003 Non-Qualified Option Plan was established by the Board of Directors in June 2003 and approved by shareholders in October 2003. A total of 1,500,000 shares of common stock are reserved for issuance under this plan. There were no options issued during the year ended December 31, 2016.

 

Forward Look at Incentive Plan

 

Outside of the plan, by Board resolutions, the following Stock Options were issued in Q4, 2017 with an exercise price of $0.06 per share, each to the following for director and/or consultant services rendered to Can-Cal Resources:

 

Recipient Name  Stock Options Granted 
Sandra Rogoza   100,000 
Red To Black Inc.   250,000 
Gary Oosterhoff, Director   100,000 
Revrok Farm, a company owned by Cornelus Korver   100,000 
For Life Financial Ltd., a company owned by Casey Douglass   100,000 
Total   650,000 

 

 

 

 F-13 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

The following shares were issued in Q4, 2017 for director and/or consultant services rendered as follows:

 

Recipient Name  Shares Issued 
William J. Hogan   240,000 
Michael Hogan   600,000 
Thompson MacDonald   250,000 
Ronald Schinnour   250,000 
Gary Oosterhoff   100,000 
Revrok Farm Ltd., a corporation owned by Cornelus Korver   100,000 
For Life Financial Ltd., a corporation owned by Casey Douglass   100,000 
Total   1,640,000 

 

NOTE 11 – WARRANTS

 

Warrants Expired

 

In years previous to 2013, warrants were granted which have subsequently expired.

 

The following is a summary of the common stock warrant activity as of December 31, 2016, 2015, and 2014:

 

    Warrants Outstanding   Weighted Average Exercise Price 
 Balance, January 1, 2014   $9,455,810   $0.11 
   Granted         
   Cancelled         
   Exercised         
   Expired    (9,455,810)   (0.11)
 Balance, December 31, 2014         
   Granted         
   Cancelled         
   Exercised         
   Expired         
 Balance, December 31, 2015         
   Granted         
   Cancelled         
   Exercised         
   Expired         
 Balance, December 31, 2016   $   $ 

 

 F-14 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

NOTE 12 – INCOME TAXES

 

The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

 

As of December 31, 2016, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. The Company had approximately $9,308,403, $9,140,298  and $8,960,118 of federal net operating losses at December 31, 2016, 2015, and 2014, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2029.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

 

   December 31, 
   2016   2015   2014 
Deferred tax asset (tax rate 21%)               
    Net operating loss carry forwards  $1,954,765   $1,919,463   $1,881,265 
Total deferred tax assets:   1,954,765    1,919,463    1,881,265 
    Less: Valuation allowance   (1,954,765)   (1,919,463)   (1,881,265)
Net deferred tax assets  $   $   $ 

 

Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2016, 2015, and 2014.

 

In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

 

NOTE 13 – SUBSEQUENT EVENTS

 

Upon the resignation of G. Michael Hogan as an officer and director of the Company on August 19, 2015, all accrued and unpaid salaries to that date of $676,333 ($600,000 as at December 31, 2014) were settled with an agreement to issue 600,000 common shares (worth approximately $18,000 based on August 19, 2015 share prices). This transaction had been recorded during the quarter ended September 30,2015 although the shares had yet to be issued. The shares were issued on December 31, 2017.

 

Mr. William Hogan resigned from the Board of Directors on February 27, 2013, and his compensation via his FutureWorth Capital Corp. consulting agreement terminated as of December 31, 2012. On August 19, 2015, FutureWorth Capital Corp. settled all accrued and unpaid compensation of $180,000 to that date ($180,000 as at December 31,2015) with an agreement to issue 240,000 common shares (worth approximately $7,200 based on August 19, 2015 share prices). This transaction had been recorded during the quarter ended September 30, 2015 although the shares had yet to be issued. The shares were issued on December 31, 2017.

 

Can-Cal Resources Ltd., as one of several Defendants in Derivative Lawsuit reached “Settlement Agreement in Principle” mid-November 2017. As of January 8, 2018, all Parties are progressing toward a more detailed Definitive Agreement.

 

Terms of the Agreement include:

 

·A new Board of 5 comprised of 2 Directors nominated by Plaintiffs and 2 from Defendants. These 4 will select the 5th Director.
·Sale of minimum tonnage of lava material to Candeo Lava Products within certain time frames.
·Proceeds from lava material sales are budgeted towards Plaintiff’s legal costs, acute Accounts Payables and Management Fees. An annual minimum was established to cover base costs of keeping Can-Cal from insolvency.
·As Candeo develops its marketing, it expects to substantially increase volumes of lava material sales and thus future purchases from Can-Cal. After the first 60-75,000 tons are purchased, then Can-Cal will begin to receive 20% of gross revenues, or ORI (Overriding Royalty Interest) from Candeo’s sales of lava material.
·Can-Cal Resources will be able to focus on developing any other resource potential.

 

 F-15 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

 

NOTE 14 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

 

CAN-CAL RESOURCES LTD.

BALANCE SHEETS

(Unaudited)

 

  

September 30,

2017

  

June 30,

2017

  

March 31,

2017

 
ASSETS               
Current assets:               
    Cash  $1,724   $412   $ 
    Other current assets   1,290    1,290    1,290 
        Total current assets   3,014    1,702    1,290 
Property and equipment, net of accumulated depreciation (See Note 5)            
Total assets  $3,014   $1,702   $1,290 
                
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)               
Current liabilities:               
    Accounts payable  $152,335   $168,293   $163,416 
    Accounts payable, related parties   506    506    506 
    Accrued expenses   6,880    6,880    6,880 
    Accrued expenses, related parties   114,041    111,150    108,290 
    Unearned rental revenues            
    Unearned revenues, related party   327,348    302,718    253,765 
    Notes payable, related parties   138,291    136,738    133,891 
        Total current liabilities   739,401    726,285    666,748 
Total liabilities   739,401    726,285    666,748 
Commitments and contingencies (See Note 8)               
Stockholders’ (deficit):               
    Preferred stock(1)            
    Common stock(2)   42,867    42,867    42,867 
    Additional paid-in capital   10,565,997    10,565,997    10,565,997 
    (Deficit) accumulated during exploration stage   (11,345,251)   (11,333,447)   (11,274,322)
Total stockholders’ (deficit)   (736,387)   (724,583)   (665,458)
                
            Total liabilities and stockholders’ (deficit)  $3,014   $1,702   $1,290 

__________

(1)Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding.
(2)Common stock, $0.001 par value, 100,000,000 shares authorized, 42,867,060 issued and outstanding as of September 30, 2017, June 30, 2017 and March 31, 2017.

 

 

 

 

 F-16 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

CAN-CAL RESOURCES LTD.

BALANCE SHEETS

(Unaudited)

 

  

September 30,

2016

  

June 30,

2016

  

March 31,

2016

 
ASSETS               
Current assets:               
    Cash  $   $   $1,899 
    Other current assets   1,290    1,290    1,290 
        Total current assets   1,290    1,290    3,189 
Property and equipment, net of accumulated depreciation (See Note 5)            
Total assets  $1,290   $1,290   $3,189 
                
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)               
Current liabilities:               
    Accounts payable   147,868    106,139    85,003 
    Accounts payable, related parties   506    506    506 
    Accrued expenses   6,005    6,005    6,005 
    Accrued expenses, related parties   102,321    99,180    96,070 
    Unearned rental revenues           2,292 
    Unearned revenues, related party   228,895    224,125    199,719 
    Notes payable, related parties   120,634    118,761    116,676 
Total current liabilities   606,229    554,716    506,271 
Total liabilities   606,229    554,716    506,271 
Commitments and contingencies (See Note 8)               
Stockholders’ (deficit):               
    Preferred stock(1)            
    Common stock(2)   42,867    42,867    42,867 
    Additional paid-in capital   10,565,997    10,565,997    10,565,997 
    (Deficit) accumulated during exploration stage   (11,213,803)   (11,162,290)   (11,111,946)
Total stockholders’ (deficit)   (604,939)   (553,426)   (503,082)
                
            Total liabilities and stockholders’ (deficit)  $1,290   $1,290   $3,189 

__________

(1)Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding
(2)Common stock, $0.001 par value, 100,000,000 shares authorized, 42,867,060 issued and outstanding as of September 30, 2016, June 30, 2016 and March 31, 2016

 

 

 

 

 F-17 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

CAN-CAL RESOURCES LTD.

STATEMENTS OF OPERATIONS

(Unaudited)

   For the Three Months Ended September 30, 2017   For the Nine Months Ended September 30, 2017  

For the Three Months Ended June 30,

2017

  

For the Six Months Ended June 30,

2017

  

For the Three Months Ended March 31,

2017

 
Rental Income  $   $   $   $   $ 
                          
Operating expenses:                         
    Exploration costs       4,953    4,953    4,953     
    General and administrative   7,392    74,586    59,679    67,194    7,515 
    Depreciation                    
    Officer salary                    
Total operating expenses   7,392    79,539    64,632    72,147    7,515 
                          
Net operating loss   (7,392)   (79,539)   (64,632)   (72,147)   (7,515)
                          
Other income (expense):                         
    Interest expense   (2,891)   (8,579)   (2,860)   (5,688)   (2,828)
    Gain on sale of assets       9,000    9,000    9,000     
    Foreign exchange gain (loss)   (1,521)   (3,042)   (1,333)   (1,521)   (188)
    Non-recurring income       700    700    700     
Total other income (expense)   (4,412)   (1,921)   5,507    2,491    (3,016)
                          
Loss before provision for income taxes   (11,804)   (81,460)   (59,125)   (69,656)   (10,531)
    Provision for income taxes                    
Net loss  $(11,804)  $(81,460)  $(59,125)  $(69,656)  $(10,531)
                          
Weighted average number of common shares outstanding – basic and fully diluted   42,867,060    42,867,060    42,867,060    42,867,060    42,867,060 
                          
Net loss per share – basic and fully diluted   (0.00) (1)    (0.00) (1)    (0.00) (1)    (0.00) (1)    (0.00) (1) 

__________

(1)Value is a negative amount less than 0.01.

 

 

 

 

 F-18 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

CAN-CAL RESOURCES LTD.

STATEMENTS OF OPERATIONS

(Unaudited)

 

   For the Three Months Ended September 30, 2016   For the Nine Months Ended September 30, 2016  

For the Three Months Ended June 30,

2016

  

For the Six Months Ended June 30,

2016

  

For the Three Months Ended March 31,

2016

 
Rental Income  $   $9,167   $2,292   $9,167   $6,875 
                          
Operating expenses:                         
    Exploration costs       13,383    13,383    13,383     
    General and administrative   48,796    103,706    35,574    54,910    19,336 
    Depreciation                    
    Officer salary                    
Total operating expenses   48,796    117,089    48,957    68,293    19,336 
                          
Net operating loss   (48,796)   (107,922)   (46,665)   (59,126)   (12,461)
                          
Other income (expense):                         
    Interest expense   (3,141)   (10,102)   (3,851)   (6,961)   (3,110)
    Foreign exchange gain (loss)   156    (360)   172    (516)   (688)
    Non-recurring income   268    268             
Total other income (expense)   (2,717)   (10,194)   (3,679)   (7,477)   (3,798)
                          
Loss before provision for income taxes   (51,513)   (118,116)   (50,344)   (66,603)   (16,259)
    Provision for income taxes                    
Net loss  $(51,513)  $(118,116)  $(50,344)  $(66,603)  $(16,259)
                          
Weighted average number of common shares outstanding – basic and fully diluted   42,867,060    42,867,060    42,867,060    42,867,060    42,867,060 
                          
Net loss per share – basic and fully diluted   (0.00) (1)    (0.00) (1)    (0.00) (1)    (0.00) (1)    (0.00) (1) 

 

__________

(1)Value is a negative amount less than 0.01.

 

 

 

 F-19 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

CAN-CAL RESOURCES LTD.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the Nine Months Ended September 30, 2017  

For the Six Months Ended June 30,

2017

  

For the Three Months Ended March 31,

2017

 
CASH FLOWS FROM OPERATING ACTIVITIES               
    Net loss  $(81,460)  $(69,656)  $(10,531)
Adjustments to reconcile net loss to net cash used in operating activities:               
            Depreciation and amortization            
            Decrease (increase) in assets:               
                Prepaid expenses            
            Increase (decrease) in liabilities:               
                Accounts payable   (5,031)   10,927    6,050 
                Accounts payable, related parties               
                Accrued expenses               
                Accrued expenses, related parties   8,579    5,688    2,828 
                Unearned revenues               
                Unearned revenues, related party   73,584    48,954     
Net cash used in operating activities   (4,328)   (4,087)   (1,653)
                
CASH FLOWS FROM FINANCING ACTIVITIES               
            Proceeds from notes payable, related parties   6,052    4,499    1,653 
                
Net increase in cash   1,724    412     
    Cash, beginning of period            
    Cash, end of period  $1,724   $412   $ 

 

 

 

 F-20 

 

 

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

December 31, 2016, 2015, and 2014

 

CAN-CAL RESOURCES LTD.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the Nine Months Ended September 30, 2016  

For the Six Months Ended June 30,

2016

  

For the Three Months Ended March 31,

2016

 
CASH FLOWS FROM OPERATING ACTIVITIES               
    Net loss  $(118,116)  $(66,603)  $(16,259)
Adjustments to reconcile net loss to net cash used in operating activities:               
            Depreciation and amortization            
            Decrease (increase) in assets:               
                Prepaid expenses            
            Increase (decrease) in liabilities:               
                Accounts payable   80,218    38,221    17,353 
                Accounts payable, related parties            
                Accrued expenses   2,605    2,605    2,605 
                Accrued expenses, related parties   9,361    6,220    3,110 
                Unearned revenues   (9,167)   (9,167)   (6,875)
                Unearned revenues, related party   29,326    24,466    60 
                    Net cash used in operating activities   (5,863)   (4,258)   (6)
                
CASH FLOWS FROM FINANCING ACTIVITIES               
            Proceeds from notes payable, related parties   3,958    2,085     
                
Net increase in cash   (1,905)   (2,173)   (6)
    Cash, beginning of period   1,905    1,905    1,905 
    Cash, end of period  $   $(268)(1)  $1,899 

 

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

 

(1)The negative cash balance is not shown on the Balance Sheet as it was included in the Accounts Payable as an amount owing to the bank.

 

 

 

 

 F-21