Can Cal Resources (CCRE) 10-Q 2010 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

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

For the quarterly period ended March 31, 2010

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

Commission file number 000-26669

CAN-CAL RESOURCES LTD.

(Exact name of registrant as specified in its charter)

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

8205 Aqua Spray

Las Vegas, Nevada

(Address of principal executive offices)

(702) 243-1849

(Registrant’s telephone number, including area code)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    xYes   ¨ No

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data Filed required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period the registrant was requires to submit and post such files)           xYes   ¨ No

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

Large accelerated filer ¨                                                                                                           Accelerated filer ¨

Non-accelerated filer ¨  

(Do not check if a smaller reporting company)                                                                      Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).          Yes ¨       No x

The number of shares of Common Stock, $0.001 par value, outstanding on May 14, 2010 was 29,647,196.

CAN-CAL RESOURCES LTD.

FORM 10-Q

TABLE OF CONTENTS

			Page
PART I – FINANCIAL INFORMATION
	Item 1. Financial Statements		3
		Condensed Balance Sheets	3
		Condensed Statements Of Operations	4
		Condensed Statements Of Cash Flows	11
		Notes To Condensed Financial Statements	12
	Item 2. Management’s Discussion and Analysis		29
	Item 3. Quantitative and Qualitative Disclosures about Market Risk		32
	Item 4T. Controls and Procedures		32
PART II – OTHER INFORMATION
	Item 1. Legal Proceedings		33
	Item 1A. Risk Factors		34
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
	Item 3. Defaults Upon Senior Securities		35
	Item 4. Submission of Matters to a Vote of Security Holders		35
	Item 5. Other Information		35
	Item 6. Exhibits		35

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CAN-CAL RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
	March 31,			December 31,
	2010			2009
ASSETS	(Unaudited)
Current assets:
Cash	$	18,580		$	17,507
Other current assets		1,016			1,300
Total current assets		19,596			18,807
Fixed assets (net of accumulated depreciation of $149,238 and $146,743)		45,372			47,100
Total assets	$	64,968		$	65,907
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	88,225		$	55,598
Accrued interest		430,219			417,008
Accrued officer salary		311,504			282,004
Notes payable, related parties		360,550			360,550
Unearned revenues		32,083			11,458
Total current liabilities		1,222,581			1,126,618
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding		-			-
Common stock, $0.001 par value, 100,000,000 shares authorized,
30,738,196 and 30,698,196 shares issued and outstanding
as of March 31, 2010 and December 31, 2009, respectively		30,738			30,698
Subscription receivable		-			(25,000	)
Recission liability receivable		-			(12,125	)
Additional paid-in capital		8,633,404			8,628,444
(Deficit) accumulated during exploration stage		(9,821,755	)		(9,682,728	)
Total stockholders' (deficit)		(1,157,613	)		(1,060,711	)
Total liabilities and stockholders' (deficit)	$	64,968		$	65,907
The accompanying notes are an integral part of the financial statements.

3

CAN-CAL RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
	For the three			For the three			March 22, 1995
	months ended			months ended			(inception) to
	March 31,			March 31,			March 31,
	2010			2009			2010
Material sales	$	-		$	-		$	245,500
Cost of sales		-			-			263,400
Gross profit		-			-			(17,900	)
Operating expenses:
General and administrative		90,188			50,492			6,473,814
Exploration costs		7,997			3,403			544,366
Depreciation		2,495			2,613			243,668
Officer salary		30,000			30,000			871,176
Impairment of operating assets		-			-			443,772
Total operating expenses		130,680			86,508			8,576,796
Net operating loss		(130,680	)		(86,508	)		(8,594,696	)
Other income (expense):
Other income from legal judgment		-			-			47,200
Interest income		15			8			52,937
Rental revenue		6,875			7,375			332,992
Gain on sale of fixed assets		-			-			26,801
Interest expense		(15,237	)		(21,932	)		(1,213,389	)
Total other income (expense)		(8,347	)		(14,549	)		(753,459	)
Loss before provision for income taxes		(139,027	)		(101,057	)		(9,348,155	)
Provision for income taxes		-			-			-
Net loss from continuing operations		(139,027	)		(101,057	)		(9,348,155	)
Income from discontinued operations
Income from discontinued operations		-			-			116,400
Loss on disposal of operations (net of taxes)		-			-			(590,000	)
Net (loss)	$	(139,027	)	$	(101,057	)	$	(9,821,755	)
Weighted average number of common shares
outstanding - basic and fully diluted		30,728,863			24,587,753
Net (loss) per share - basic and fully diluted	$	-		$	-
The accompanying notes are an integral part of the financial statements.

4

CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

															(Deficit)
											Foreign				accumulated			Total
	Common stock						Recission		Unamortized		currency		Additional		during			stockholders'
	Number				Subscription		liability		equity		translation		paid-in		exploration			equity
	of shares		Amount		receivable		receivable		grants		adjustment		capital		stage			(deficit)
Balance, March 22, 1995		-	$	-	$	-	$	-	$	-	$	-	$	-	$	-		$	-
Common shares issued for services		-		-		-		-		-		-		-		-			-
Net loss																(1,000	)		(1,000	)
Balance, December 31, 1995		-		-		-		-		-		-		-		(1,000	)		(1,000	)
Common shares issued for services		3,441,217		3,400		-		-		-		-		625,000		-			628,400
Prior period adjustment, investment in joint venture		-		-		-		-		-		-		-		497,900			497,900
Net loss																(497,000	)		(497,000	)
Balance, December 31, 1996		3,441,217		3,400		-		-		-		-		625,000		(100	)		628,300
Common shares issued for services		3,006,435		3,000		-		-		-		-		1,051,400		-			1,054,400
Net loss																(1,044,700	)		(1,044,700	)
Balance, December 31, 1997		6,447,652		6,400		-		-		-		-		1,676,400		(1,044,800	)		638,000
Common shares issued for cash		557,509		600		-		-		-		-		211,200		-			211,800

5

Foreign currency translation adjustment	-	-	-	-	-	8,500		-	-		8,500
Net loss									(353,000	)	(353,000	)
Balance, December 31, 1998	7,005,161	7,000	-	-	-	8,500		1,887,600	(1,397,800	)	505,300
Common shares issued for cash	1,248,621	1,200	-	-	-	-		572,600	-		573,800
Foreign currency translation adjustment	-	-	-	-	-	(11,800	)	-	-		(11,800	)
Realized foreign currency translation loss	-	-	-	-	-	3,300		-	-		3,300
Prior period Adjustment	-	-	-	-	-	-		-	15,000		15,000
Elimination of subsidiary upon disposal	-	-	-	-	-	-		-	116,400		116,400
Net loss									(1,038,500	)	(1,038,500	)
Balance, December 31, 1999	8,253,782	8,200	-	-	-	-		2,460,200	(2,304,900	)	163,500
Common shares issued for cash	1,119,009	1,200	-	-	-	-		948,400	-		949,600
Net loss									(962,500	)	(962,500	)
Balance, December 31, 2000	9,372,791	9,400	-	-	-	-		3,408,600	(3,267,400	)	150,600
Common shares issued for cash	785,947	800	-	-	-	-		81,500	-		82,300
Net loss									(704,500	)	(704,500	)
Balance, December 31, 2001	10,158,738	10,200	-	-	-	-		3,490,100	(3,971,900	)	(471,600	)
Common shares issued for cash	1,093,280	1,100	-	-	-	-		269,900	-		271,000
Common shares issued for services	92,292	100	-	-	-	-		23,800	-		23,900
Options granted for services	-	-	-	-	-	-		7,100	-		7,100
Common shares issued for repayment of note payable, related party in the amount of $119,800, including accrued interest of $71,800	309,677	300	-	-	-	-		119,500	-		119,800

6

Warrants granted for loan fees on convertible notes payable, related party	-	-	(16,700	)		(16,700	)	(16,700	)	-	16,700	-		(33,400	)
Common shares issued for loan fees on convertible notes payable, related party	30,000	-	(13,500	)		(13,500	)	(13,500	)	-	13,500	-		(27,000	)
Deemed interest on beneficial conversion feature of notes payable, related party	-	-	-			-		-		-	20,500	-		20,500
Amortization of loan fees	-	-	8,200			8,200		8,200		-	-	-		24,600
Net loss												(709,300	)	(709,300	)
Balance, December 31, 2002	11,683,987	11,700	(22,000	)		(22,000	)	(22,000	)	-	3,961,100	(4,681,200	)	(774,400	)
Common shares issued for cash	823,410	800	-			-		-		-	163,900	-		164,700
Common shares issued for services	381,260	400	-			-		-		-	63,800	-		64,200
Options granted for services	-	-	-			-		-		-	61,300	-		61,300
Common shares issued for repayment of note payable, related party common shares issued for repayment of note payable, related party in the amount of $78,300, including accrued interest of $43,300	364,305	400	-			-		-		-	77,900	-		78,300
Deemed interest on beneficial conversion feature of notes payable, related party	-	-	-			-		-		-	38,300	-		38,300
Amortization of loan fees	-	-	15,000			15,000		15,000		-	-	-		45,000
Net loss												(711,100	)	(711,100	)
Balance, December 31, 2003	13,252,962	13,300	(7,000	)		(7,000	)	(7,000	)	-	4,366,300	(5,392,300	)	(1,033,700	)
Common shares issued for cash	1,564,311	1,600	-			-		-		-	306,400	-		308,000
Common shares issued for exercise of warrants	701,275	700	-			-		-		-	124,900	-		125,600
Common shares issued for services	390,224	400	-			-		-		-	73,800	-		74,200
Warrants granted for services	-	-	-			-		-		-	12,200	-		12,200
Interest expense for warrants granted	-	-	-		��	-		-		-	280,200	-		280,200
Common shares issued in satisfaction of accounts payable and accrued liabilities in the amount of $229,400	917,747	900	-			-		-		-	228,500	-		229,400

7

Common shares issued for repayment of note payable in the amount of $99,700, including accrued interest of $14,700	702,760	700	-	-	-	-	99,000	-		99,700
Common shares issued for repayment of note payable, related party in the amount of $82,700	330,747	300	-	-	-	-	82,400	-		82,700
Deemed interest on beneficial conversion feature of notes payable, related party	-	-	-	-	-	-	17,600	-		17,600
Amortization of loan fees	-	-	7,000	7,000	7,000	-	-	-		21,000
Net loss								(1,030,500	)	(1,030,500	)
Balance, December 31, 2004	17,860,026	17,900	-	-	-	-	5,591,300	(6,422,800	)	(813,600	)
Common shares issued for cash	762,500	800	-	-	-	-	152,700	-		153,500
Common shares issued for exercise of warrants	349,545	300	-	-	-	-	69,500	-		69,800
Net loss								(421,800	)	(421,800	)
Balance, December 31, 2005	18,972,071	19,000	-	-	-	-	5,813,500	(6,844,600	)	(1,012,100	)
Common shares issued for cash	2,448,213	2,400	-	-	-	-	642,100	-		644,500
Common warrants exercised for cash	174,000	200	-	-	-	-	43,300	-		43,500
Common shares issued for services	19,500	-	-	-	-	-	5,000	-		5,000
Common shares issued in satisfaction of accounts payable and accrued liabilities	385,714	400	-	-	-	-	80,600	-		81,000
Common shares issued in satisfaction of notes payable-related parties	56,821	100	-	-	-	-	11,800	-		11,900
Common shares issued in satisfaction of convertible debenture, (including accrued interest of $1,895)	206,767	200	-	-	-	-	41,700	-		41,900
Common shares issued for asset acquisition	1,000,000	1,000	-	-	-	-	399,000	-		400,000
Option granted to officers and directors	-	-	-	-	-	-	123,500	-		123,500
Warrants granted for services	-	-	-	-	-	-	2,200	-		2,200
Warrants granted in satisfaction of accounts payable and accrued liabilities	-	-	-	-	-	-	65,400	-		65,400

8

Warrants granted in satisfaction of notes payable-related parties	-		-		-		-		-	-	9,600		-		9,600
Warrants granted in satisfaction of convertible debenture	-		-		-		-		-	-	40,000		-		40,000
Net loss													(621,000	)	(621,000	)
Balance, December 31, 2006 (Restated)	23,263,086		23,264		-		-		-	-	7,277,736		(7,465,600	)	(164,600	)
Common shares issued for cash	492,795		492		-		-		-	-	188,698		-		189,190
Common warrants exercised for cash	745,372		745		-		-		-	-	185,598		-		186,343
Common shares issued for services	4,000		4		-		-		-	-	2,010		-		2,014
Common shares issued in satisfaction of accrued wages of $22,000, related party	50,000		50		-		-		-	-	21,950		-		22,000
Debt forgiveness, related party	-		-		-		-		-	-	147,419		-		147,419
Net loss													(604,913	)	(604,913	)
Balance, December 31, 2007 (Restated)	24,555,253		24,555		-		-		-	-	7,823,411		(8,070,513	)	(222,547	)
Common shares issued for cash	32,500		33		-		-		-	-	8,091		-		8,124
Net loss													(1,016,661	)	(1,016,661	)
Balance, December 31, 2008	24,587,753		24,588		-		-		-	-	7,831,502		(9,087,174	)	(1,231,084	)
Common shares issued for cash	2,926,600		2,926		(25,000	)	-		-	-	362,899		-		340,825
Common shares issued for debt conversion to related parties of $398,593, including accrued interest of $29,093	3,188,741		3,189		-		-		-	-	395,404		-		398,593
Warrants granted in connection with debt conversion	-		-		-		-		-	-	78,961		-		78,961
Common shares issued for services	122,000		122		-		-		-	-	15,338		-		15,460
Common shares cancelled per recission order	(126,898	)	(127	)	-		-		-	-	(55,660	)	-		(55,787	)
Recission liability receivable					-		(12,125	)	-	-	-		-		(12,125	)

9

Net loss															-		(595,554	)		(595,554	)
Balance December 31, 2009	30,698,196		30,698		(25,000	)		(12,125	)		-		-		8,628,444		(9,682,728	)		(1,060,711	)
Common shares issued for cash	40,000		40		25,000			-			-		-		4,960		-			30,000
Receipt of payment on recission liability receivable								12,125												12,125
Net loss																	(139,027	)		(139,027	)
Balance March 31, 2010 (Unaudited)	30,738,196	$	30,738	$	-		$	-		$	-	$	-	$	8,633,404	$	(9,821,755	)	$	(1,157,613	)
The accompanying notes are an integral part of the financial statements.

10

CAN-CAL RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
							March 22, 1995
	For the three months ended						(inception) to
	March 31,						March 31,
	2010			2009			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(139,027	)	$	(101,057	)	$	(9,821,755	)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization		2,495			2,613			260,668
Bad debts		-			-			207,100
Gain on sale of fixed assets		-			-			(6,501	)
Stock based compensation		-			-			548,274
Stock issued for financing and interest		-			-			602,161
Beneficial conversion feature on convertible debenture		-			-			25,200
Loss on disposal of investment property		-			-			938,600
Undistributed earnings of affiliate		-			-			(174,300	)
Gain on discontinued operations		-			-			(116,400	)
Loss on foreign currency translation		-			-			8,500
Impairment of operating assets		-			-			445,667
Decrease (increase) in assets:
Accounts receivable		1,300			-			-
Other current assets		(1,016	)		-			(93,611	)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses		32,627			(9,505	)		20,313
Accrued interest		13,211			21,577			459,312
Accrued officer salary		29,500			25,793			311,504
Unearned revenues		20,625			(6,875	)		32,083
Net cash used in operating activities		(40,285	)		(67,454	)		(6,353,185	)

11

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment property		-			-			(1,083,600	)
Proceeds from sale of investment property		-			-			319,300
Puchase of fixed assets		(767	)		-			(769,411	)
Proceeds from sale of fixed assets		-			-			26,100
Net cash used in investing activities		(767	)		-			(1,507,611	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable		-			-			948,400
Principal payments on notes payable		-			-			(689,900	)
Proceeds from notes payable, related parties		-			25,000			845,600
Principal payments on notes payable, related parties		-			-			(374,050	)
Proceeds from the issuance of common stock		42,125			-			7,149,326
Net cash provided by financing activities		42,125			25,000			7,879,376
Net increase (decrease) in cash		1,073			(42,454	)		18,580
Cash, beginning of period		17,507			45,848			-
Cash, end of period	$	18,580		$	3,394		$	18,580
Supplemental disclosures:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-
Non-cash investing and financing activities:
Shares issued for services	$	-		$	67,913
The accompanying notes are an integral part of the financial statements.

12

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

Note 1 – Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the Form 10-K for the year ended December 31, 2009 of Can-Cal Resources Ltd. (“the Company”).

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

The interim financial information is unaudited. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2009 and the results of operations and cash flows presented herein have been included in the financial statements. Interim results are not necessarily indicative of results of operations for the full year.

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

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

Exploration Stage Company

The Company is currently an exploration stage company. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date. The Company has incurred net losses of $9,821,755 and used net cash in operations of $6,353,185 for the period from inception (March 22, 1995) through March 31, 2010. 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.

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.

13

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements.  Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated.  This ASU is effective upon the issuance of this ASU.  The adoption of this ASU did not have a material impact on our financial statements.

In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”).  Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.  Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors.  The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010.  The amendments are to be applied prospectively.  Early adoption is permitted.  We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.

Note 2 – Going Concern

The Company incurred a net loss of $139,027 for the three months ended March 31, 2010. Also, the Company’s current liabilities exceed its current assets by $1,202,985 as of March 31, 2010. These factors create substantial doubt about the Company’s ability to continue as a going concern. The Company’s management plans to continue to fund its operations in the short term with a combination of debt and equity financing and with revenue from operations in the long term.

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

14

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

Note 3 – Notes Payable and Accrued Officer Salary, Related Parties

Notes payable consisted of the following as of March 31, 2010 and December 31, 2009, respectively:

	March 31, 2010		December 31, 2009
Note payable to a stockholder, secured by real property, bearing interest at 16.0% per annum, interest only payments payable in semi-annual payments, matured November 2005 (Note: The Company is in default of interest payments totaling $340,000 and $300,000 of principal, but is currently negotiating forbearance on the collection of interest)	$	300,000	$	300,000
Note payable to a stockholder, secured by real property, bearing interest at 8.0% per annum, matured July 2008, and is currently in default		25,114		25,114
Note payable to a stockholder, secured by real property, bearing interest at 8.0% per annum, matured June 2008, and is currently in default		35,436		35,436
Current portion of notes payable	$	360,550	$	360,550

The Company is in default of its semi-annual interest payments of $24,000 from 2002 through 2009 (total of $400,000 as of March 31, 2009), in addition to the total principal of $300,000. The Company is currently negotiating forbearance on collection of the principle and interest.

As of March 31, 2010 and as of December 31, 2009 we owed $282,004 and $282,004 of accrued salaries to our former CEO, on such respective dates. In addition, we owed $29,500 of accrued salaries to our current CEO as of March 31, 2010.

Note 4 – Changes in Securities

1996

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

1997

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

15

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

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

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

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

1998

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

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

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

1999

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

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

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

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

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

16

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

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

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

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

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

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

2000

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

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

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

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

2001

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

17

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

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

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

2002

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

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

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

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

18

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

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

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

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

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

2003

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

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

19

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

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

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

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

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

2004

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

20

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

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

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

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

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

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

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

21

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

2005

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

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

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

2006

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

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

22

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

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

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

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

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

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

23

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

2007

During the twelve months ended December 31, 2007, we sold 1,238,167 restricted common shares to 72 Canadian residents and 4 US residents for a total of $375,534 and issued warrants to purchase 492,795 restricted common shares, exercisable between $0.35 and $.65 per share. These securities were issued in private transactions, with respect to the Canadian residents, in reliance on the exemption from registration with the SEC provided by Regulation S, and with respect to the U.S. citizen, in reliance on the exemption available under Section 4(2) of the 1933 Act.

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

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

2008

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

2009

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

On June 30, 2009, certain note holders elected to convert the principal balance of their notes together with accrued interest into shares of the Company’s common stock at a rate of $0.125 per share. In addition, the Company agreed to issue a warrant to purchase two shares of the Company’s common stock for each dollar converted (see Note 6). The total principal balance converted was $369,500 and was converted into 2,956,000 common shares. Total accrued interest converted was $29,093 or 232,741 common shares.  As of the date of this filing the shares remain unissued.

24

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

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

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

2010

On January 20, 2010, the company issued 40,000 shares of its common stock and an equal number of warrants pursuant to a unit offering whereby each recipient received one share of common stock and one warrant certificate for a unit price of $0.125. The Company recorded proceeds from the sale of $5,000.

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

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

Note 5 – Options and Warrants

Options

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.

In June 2006, the Company granted options to buy 750,000 shares of the Company’s common stock at an exercise price of $0.20 with terms ranging from two to five years from the date of issuance to the Directors of the Company, of these options, 250,000 expired in June 2008. Additionally, the Company granted options to purchase 250,000 shares of the Company’s common stock at an exercise price of $0.20 with a term of three years from the date of issuance to an unrelated consultant. On June 19, 2006, the consultant exercised 100,000 options in exchange for cash of $20,000. In June of 2009, the remaining 150,000 options expired.

25

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

In accordance with ASC 505, Share-Based Payment”; the Company recognized the fair value of the options in the statement of operations on the date of grant. There were no options issued during the three months ended March 31, 2010.

The following table summarizes the Company’s option activity related to employees and consultants:

	Options Outstanding		Weighted Average Exercise Price
Balance, January 1, 2009		1,150,000	$	0.20
Granted		-		-
Cancelled		-		-
Exercised		-		-
Expired		150,000		0.20
Balance, December 31, 2009		1,000,000		0.20
Granted		-		-
Cancelled		-		-
Exercised		-		-
Expired		-		-
Balance, March 31, 2010		1,000,000	$	0.20

Warrants

During the period ended March 31, 2010, the Company granted 40,000 stock warrants with an exercise price of $0.15 per share for its common stock. These stock warrants were granted in connection with financing activities and stock sold during the three months ended March 31, 2010. These warrants were exercisable upon issuance and expire on March 31, 2011. The following table summarizes the Company’s warrant activities:

	Warrants Outstanding			Weighted Average Exercise Price
Balance, January 1, 2009		525,295		$	0.50
Granted		3,723,806			0.15
Cancelled		(298,083	)		0.61
Exercised		-			-
Expired		-			0.20
Balance, December 31, 2009		3,951,018			0.16
Granted		40,000			0.15
Cancelled		-			-
Exercised		-			-
Expired		(32,500	)		0.35
Balance, March 31, 2010		3,958,518		$	0.16

26

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

 (UNAUDITED)

Note 6 – Commitments and Contingencies

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

Revocation order – On April 24, 2009 the Company received a Partial Revocation Order from the British Columbia Securities Commission. Pursuant to the order, the Company agreed to offer a full rescission for shares purchased or warrants exercised during the period of October 2004 to December 2007. The Company had recorded a rescission liability totaling $67,913, representing the total amount of cash required to repurchase 263,748 shares in accordance with the order. During 2009, we cancelled 126,698 shares and refunded $55,787 for previously issued common stock pursuant to this order. The remaining balance of the amount reserved to repurchase these shares of $12,125 was returned to the Company on March 17, 2010. No liability has been recorded for shareholders that did not elect to exercise their right to a refund of their original investment.

Rental payments - The Company operates a leased facility in Nevada under a month to month operating lease. The lease calls for a monthly base rent of approximately $1,695.

Note 7 – Subsequent Events

The Company concluded that no subsequent events have occurred that would require recognition or disclosure in the financial statements.

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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 Quarterly Report on Form 10-Q, Annual Report on Form 10-K 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:

·   deterioration in general or regional economic, market and political conditions;

·   our ability to diversify our operations;

·   actions and initiatives taken by both current and potential competitors;

·   inability to raise additional financing for working capital;

·   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;

·   inability to efficiently manage our operations;

·   inability to achieve future operating results;

·   the unavailability of funds for capital expenditures;

·   our ability to recruit and hire key employees;

·   the inability of management to effectively implement our strategies and business plans; and

·   the other risks and uncertainties detailed in this report.

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For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Risk Factors” in this document and in our Annual Report on Form 10-K for the year ended December 31, 2008.

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

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW AND OUTLOOK

Can-Cal Resources Ltd. is a public company engaged in the exploration and potential acquisition of precious metals.  As part of its growth strategy, the Company will focus its future activities in the United States, with an emphasis on the Pisgah Mountain, California property and the Wikieup, Arizona property.

The Company has discontinued all industrial sales for the volcanic materials located on the Pisgah property in California, in accordance with certain terms within a non-compete agreement with one of our customers that extends until 2018.

At March 31, 2010, we had approximately $18,500 cash available to sustain operations. Accordingly, we are uncertain as to whether the Company may continue as a going concern. While we intend to seek additional investment capital, or possible funding or joint venture arrangements with other mining companies, we have no assurance that that such investment capital or additional funding and joint venture arrangements will be available to the Company.

Results of Operations for the Three Months Ended March 31, 2010 and 2009:

	Three Months Ended March 31,
	2010			2009			Increase / (Decrease)
	Amount			Amount			$			%
Expenses:
General & administrative	$	90,188		$	50,492		$	39,696			79	%
Exploration costs		7,997			3,403			4,594			135	%
Depreciation		2,495			2,613			(118	)		(5	%)
Officer compensation		30,000			30,000			-			-
Total operating expenses		130,680			86,508			44,172			51	%
Net operating loss		(130,680	)		(86,508	)		44,172			51	%
Other income (expense):
Interest income		15			8			7			88	%
Rental revenue		6,875			7,375			(500	)		(7	%)
Interest expense		(15,237	)		(21,932	)		(6,695	)		(31	%)
Total other income (expense)		(8,347	)		(14,549	)		(6,202	)		(43	%)
Net loss	$	(139,027	)	$	(101,057	)	$	37,970			38	%

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General and administrative expenses

General and administrative expenses for the three months ended March 31, 2010 increased by $39,696 (or 79%) from $50,492 for the three months ended March 31, 2009 to $90,188 for the three months ended March 31, 2010. The increase is principally due to increased legal and professional fees associated with our SEC filings.

Exploration costs

Exploration costs for the three months ended March 31, 2010 increased by $4,594 (or 135%) from $3,403 for the three months ended March 31, 2009 to $7,997 for the three months ended March 31, 2010. The increase is due to continuing and further exploration costs at our Pisgah and Wikieup locations.

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

The Company has no material commitments for capital expenditures other than expenditures it chooses to make with respect to testing and or exploration of its mineral properties.

Depreciation

Depreciation for the three months ended March 31, 2010 decreased by $118 (or 5%) from $2,613 for the three months ended March 31, 2009 to $2,495 for the three months ended March 31, 2009. The decrease is principally due to certain assets reaching the end of their depreciable life cycle. We anticipate the replacement of these assets in the near future.

Officer salary

Officer salary for the three months ended March 31, 2010 and 2009 was $30,000 in accordance with the annual compensation of $120,000. No bonuses or stock awards were granted.

Total operating expenses

Total operating expenses for the three months ended March 31, 2010 increased by $44,172 (or 51%) from $86,508 for the three months ended March 31, 2009 to $130,680 for the three months ended March 31, 2010. The increase in total operating expenses was mainly a result of increased legal and professional fees related to our compliance efforts, and additional exploration costs incurred.

Other income (expense)

Interest income for the three months ended March 31, 2010 increased by $7 (or 88%) from $8 for the three months ended March 31, 2009 to $15 for the three months ended March 31, 2010. Interest income relates to interest earned on cash received as a result of financing activities, of which more was on hand during the three months ended March 31, 2010 compared to the same period in 2009.

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Rental revenue for the three months ended March 31, 2010 decreased by $500 (or 7%) from $7,375 for the three months ended March 31, 2009 to $6,875 for the three months ended March 31, 2010. Rental revenue relates to income derived from the rental of the Company’s land for the purposes of filming movies or photo shoots. These activities were comparable during the three months ended March 31, 2010 compared to the same period in 2009.

Interest expense for the three months ended March 31, 2010 decreased by $6,695 (or 31%) from $21,932 for the three months ended March 31, 2009 compared to $15,237 for the three months ended March 31, 2010. The decrease in interest expense was a result of debt conversions subsequent to March 31, 2009 that alleviated certain interest accruals during the three months ended March 31, 2010.

Net loss

Our net loss was $139,027 for the three months ended March 31, 2010 compared to a net loss of $101,057 for the three months ended March 31, 2009. We expect to improve our results of operations through the attainment of sufficient working capital and a focus on generating revenues from the subcontracting of mining activities, and a reduction of general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes total current assets, total current liabilities and working capital at March 31, 2010 compared to December 31, 2009.

				December 31,				Increase / (Decrease)
	March 31, 2010			2009				$	%
Current Assets	$	19,596		$	18,807		$	789	4	%
Current Liabilities	$	1,222,581		$	1,126,618		$	95,963	9	%
Working Capital (deficit)	$	(1,202,985	)	$	(1,107,811	)	$	95,174	9	%

Internal and External Sources of Liquidity

During the three months ended March 31, 2010 and 2009, our operating and investing activities used cash of $41,052 and $67,454, respectively, while our financing activities provided cash of $42,125 and $25,000, respectively. The cash used in operating activities was principally a result of the net loss we incurred.

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

Satisfaction of our cash obligations for the next twelve months.

As of March 31, 2010, our cash balance was $18,580. Our plan for satisfying our cash requirements for the next twelve months is through additional and/or debt or credit financing.  We anticipate our current cash reserves will be sufficient to support operations through June 30, 2010, but do not anticipate generating sufficient amounts of positive cash flow to meet our working capital requirements. Consequently, we intend to make appropriate plans in order to obtain sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities. We also are considering possible funding through joint venture arrangements with other mining companies. However, there can be no assurance that we will raise capital through any of these means.

As we expand operational activities, we may continue to experience net negative cash flows from operations, pending receipt of sales and will be required to obtain additional financing to fund operations through common stock offerings and debt borrowings to the extent necessary to provide working capital.

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

Item 3.Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4T. Controls and Procedures.

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

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

Changes in Internal Control over Financial Reporting

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

PART II--OTHER INFORMATION

Item 1.  Legal Proceedings.

The Company is not currently a party to litigation. The British Columbia Securities Commission 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 is under order to supply such verification by a “qualified” third party consultant, and its stock may not trade in British Columbia until such verification is accepted by the BCSC. The BCSC has also requested documentation regarding all subscribers to the Company stock who are resident in British Columbia. The Company retained such a “qualified” third party consultant who prepared and filed the necessary reports with the BCSC.

On April 24, 2009, the BCSC notified the Company of its decision to partially revoke the cease trade order (the “CTO”) that the BCSC issued on February 4, 2008, as to all outstanding shares of the Company trading to, from or within British Columbia.  The BCSC had previously determined that the Company engaged in the sale on securities to various individuals and entities during the period between October 2004 through December 2007, and that a portion of these sales were sold without an exemption to the British Columbia, Canada, securities laws that require the delivery of a prospectus in connection with the sale of securities.

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In revoking the CTO, the BSCS required that Can-Cal rescind all sales to British Columbia residents who purchased the securities of Can-Cal without the required exemptions (“Non-accredited Purchasers”).  In meeting this condition, Can-Cal will rescind the sale of an approximate total of 263,748 shares of common stock of the Company and return a total of approximately $67,913 of investment funds to the Non-accredited Purchasers.  Through the date of this Quarterly Report, Can-Cal has rescinded of $55,789 if these investments.  The Company continues to affect the rescission of the remaining outstanding shares.

Item 1A. Risk Factors.

Our significant business risks are described in Item 1A to Form 10-K for the year ended December 31, 2009 to which reference is made herein.

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

On February 19, 2010, pursuant to a private placement exemptions under Section 4(2) and Regulation S of the Securities Act of 1933, completed the final tranche of is US$350,000 non-brokered private placement, which was oversubscribed.  The final tranche consisted of 1,144,000 units ("Units") at a price of US$0.125 per Unit for gross proceeds of US$143,000. Each Unit consists of one common share and one warrant to purchase one share of common stock of the Company ("Warrant"). Each Warrant is exercisable into one Common Share at US$0.15 per share until March 31, 2011.  Including this trance, the total gross proceeds that the Company received from the private placement, which commenced in May 2009 and ended February 19, 2010, was $370,825 in exchange for which the Company issued of a total of 2,966,600 shares of common stock and an equal number of Warrants.

The Company used the proceeds of the sale (i) for exploration and development of Can-Cal’s current properties, including ongoing laboratory processing and metallurgy testing in relation to precious metal extraction from Can-Cal’s Pisgah and Wikieup properties; (ii) to fund the rescission of certain prior sales of shares as detailed in Item 1 of this Quarterly Report, and; (iii) for general working capital requirements.

The recipients of the shares were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decisions, including the Company’s financial statements and 1934 Act reports. The Company reasonably concluded that the recipients, immediately prior to issuing the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their respective investments.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the quarter ended March 31, 2010.

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Item 3. Defaults Upon Senior Securities.

See Note 3 to our condensed financial statements included herein.

Item 4. Submission of Matters to a Vote of Security Holders.

We did not submit any matters to a vote of our security holders during the first quarter of 2010.

Item 5. Other Information.

None.

Item 6.  Exhibits.

			Incorporated by reference
Exhibit	Exhibit Description	Filed herewith	Form	Period ending	Exhibit	Filing date
31.1	Certification of Michael Hogan pursuant to Section 302 of the Sarbanes-Oxley Act	X
31.2	Certification of Michael Hogan pursuant to Section 302 of the Sarbanes-Oxley Act	X
32.1	Certification of Michael Hogan pursuant to Section 906 of the Sarbanes-Oxley Act	X
99.7	Press Release issued February 19, 2010 regarding Private Placement		8-K		99.7	02/25/10

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CAN-CAL RESOURCES LTD.

(Registrant)

By:  /s/ Michael Hogan              

Michael Hogan, President and Chief Executive Officer

(On behalf of the Registrant and as Principal Financial

Officer)

Date: May 17, 2010

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