CAN-CAL RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
2001
In September, 2001, the Board of Directors authorized the sale of 20,000 shares of its common stock to an individual.
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.
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.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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. CAN-CAL RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
During 2004, 87,388 restricted common shares were issued to Terry Brown, a Mexican resident, for technical consulting services amounting to $15,247. The price per share was based on the average closing share price for the period during which the services were rendered. These shares were sold pursuant to the exemption provided by Regulation S of the 1933 Act.
On 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.
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%. CAN-CAL RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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.
CAN-CAL RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 share converted. The total principal balance converted was $369,500 and was converted into 2,956,000 common shares. Total accrued interest converted was $29,093 or 232,741 common shares.
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.
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 in exchange for proceeds of $5,000. The warrants are exercisable over fifteen months at an exercise price of $0.15 per share.
On January 20, 2010, the Company received $25,000 in payment on a subscription receivable outstanding at December 31, 2009.
On March 17, 2010, the Company received $12,125 in payment on a rescission receivable outstanding at December 31, 2009.
On December 31, 2010, the Company cancelled 26,993 previously granted shares to related parties.
On December 31, 2010, the Company converted $128,800 of previously issued convertible debentures to a total of nine investors in exchange for a total of 2,146,666 shares, at $0.06 per share, and a total of 2,146,666 warrants exercisable at $0.08 per share over a two year term, that were not issued until January 5, 2011. The shares were presented as a subscription payable of $128,800 at December 31, 2010. A total of $3,598 of accrued interest was forgiven by the note holders, as presented in other income. The total estimated value of the warrants granted as an inducement for conversion using the Black-Scholes Pricing Model, based on a volatility rate of 179% and a call option value of $0.0347, was $74,403, as presented in the income statement as interest expense.
Finders acting in connection with the conversion are entitled to receive aggregate fees of $2,790 and 46,500 shares of common stock. The fair market value of the common stock payable based on the closing stock price at the grant date was $2,790.
2011
On January 4, 2011, the Company issued 680,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $40,800. The warrants are exercisable over two years at an exercise price of $0.08 per share.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
On January 4, 2011, the Company issued 170,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $10,200. The warrants are exercisable over two years at an exercise price of $0.08 per share.
On January 5, 2011, the Company issued 2,146,666 shares of its common stock to a total of nine investors in satisfaction for subscriptions payable on a total of $128,800 of previously converted debentures.
On January 26, 2011, the Company issued 85,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $5,100. The warrants are exercisable over two years at an exercise price of $0.08 per share.
On January 26, 2011, the Company issued 85,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $5,100. The warrants are exercisable over two years at an exercise price of $0.08 per share.
On February 25, 2011, the Company sold 170,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $10,200. The warrants are exercisable over two years at an exercise price of $0.08 per share. The shares were not issued until April 12, 2010, accordingly, they are presented as a subscription payable as of March 31, 2011 in the amount of $10,200.
On March 16, 2011, the Company sold 100,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $6,000. The warrants are exercisable over two years at an exercise price of $0.08 per share. The shares were not issued until April 12, 2010, accordingly, they are presented as a subscription payable as of March 31, 2011 in the amount of $6,000.
On March 16, 2011, the Company sold 85,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $5,100. The warrants are exercisable over two years at an exercise price of $0.08 per share. The shares were not issued until April 12, 2010, accordingly, they are presented as a subscription payable as of March 31, 2011 in the amount of $5,100.
On March 16, 2011, the Company sold 170,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $10,200. The warrants are exercisable over two years at an exercise price of $0.08 per share. The shares were not issued until April 12, 2010, accordingly, they are presented as a subscription payable as of March 31, 2011 in the amount of $10,200.
On March 16, 2011, the Company sold 343,334 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $20,600. The warrants are exercisable over two years at an exercise price of $0.08 per share. The shares were not issued until April 12, 2010, accordingly, they are presented as a subscription payable as of March 31, 2011 in the amount of $20,600.
Finders acting in connection with the conversion are entitled to receive aggregate fees of $3,115 and 51,917 shares of common stock. The fair market value of the common stock payable based on the closing stock price at the grant date was $3,115.
Note 6 – Options and Warrants
Options
There were no options issued during the three months ended March 31, 2011 and 2010, respectively.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes the Company’s option activity related to employees and consultants:
| | | Options Outstanding | | | Weighted Average Exercise Price | |
| | | | | | | |
| Balance, January 1, 2010 | | | 1,000,000 | | | $ | 0.18 | |
| Granted | | | - | | | | - | |
| Cancelled | | | - | | | | - | |
| Exercised | | | - | | | | - | |
| Expired | | | - | | | | 0.18 | |
| Balance, December 31, 2010 | | | 1,000,000 | | | | 0.18 | |
| Granted | | | - | | | | - | |
| Cancelled | | | - | | | | - | |
| Exercised | | | - | | | | - | |
| Expired | | | - | | | | - | |
| Balance, March 31, 2011 | | | 1,000,000 | | | $ | 0.18 | |
Warrants
On January 22, 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 relating to stock sold on January 22, 2010. These warrants were exercisable upon issuance and expire on March 31, 2011.
On December 31, 2010, the Company granted 2,146,666 stock warrants with an exercise price of $0.08 per share for its common stock. These stock warrants were granted in connection with the conversion of $128,800 of previously issued convertible debentures on December 31, 2010 to a total of nine investors in exchange for a total of 2,146,666 shares. These warrants were exercisable upon issuance and expire on December 31, 2012.
A total of 1,024,000 and 1,935,100 warrants expired during the three months ended March 31, 2011 and the year ended December 31, 2010, respectively.
The following table summarizes the Company’s warrant activities:
| | | Warrants Outstanding | | | Weighted Average Exercise Price | |
| | | | | | | |
| Balance, January 1, 2010 | | | 9,336,596 | | | $ | 0.15 | |
| Granted | | | 2,186,666 | | | | 0.08 | |
| Cancelled | | | - | | | | - | |
| Exercised | | | - | | | | - | |
| Expired | | | (1,935,100 | ) | | | (0.17 | ) |
| Balance, December 31, 2010 | | | 9,588,162 | | | | 0.13 | |
| Granted | | | 1,888,334 | | | | 0.08 | |
| Cancelled | | | - | | | | - | |
| Exercised | | | - | | | | - | |
| Expired | | | (1,024,000 | ) | | | (0.15 | ) |
| Balance, March 31, 2011 | | | 10,452,496 | | | $ | 0.12 | |
Note 7 – 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.
CAN-CAL RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8 – Subsequent Events
On April 1, 2011, the Company issued 85,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $5,100. The warrants are exercisable over two years at an exercise price of $0.08 per share.
On April 1, 2011, the Company issued 85,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $5,100. The warrants are exercisable over two years at an exercise price of $0.08 per share.
On April 1, 2011, the Company issued 150,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for proceeds of $9,000. The warrants are exercisable over two years at an exercise price of $0.08 per share.
On April 12, 2011, the Company issued a total of 868,334 shares of its common stock to a total of five investors in satisfaction for subscriptions payable on a total of $52,100 of previously converted debentures.
In accordance with ASC 855, all subsequent events have been reported through the filing date.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW AND OUTLOOK
The following discussion of the business, financial condition and results of operation of the Company should be read in conjunction with the financial statements of the Company for the years ended December 31, 2010 and 2009 and the and the notes to those statements that are included their respective Annual Reports on Form 10-K, as well as the financial statements and notes the financial statements included in this Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statement, including, but not limited to, the risk factors described in this Form 10-Q and in Item 1A of our Form 10-K for the year ended December 31, 2010 to which reference is made herein.
Overview
Can-Cal Resources Ltd. is a publicly traded exploration stage company engaged in seeking the acquisition and exploration of metals mineral properties. As part of its growth strategy, the Company will focus its future activities in the USA, with an emphasis on the Pisgah Mountain, California property and the Wikieup, Arizona property.
At March 31, 2011, we had cash on hand of approximately $54,000 available to sustain operations. Accordingly, we are uncertain as to whether the Company may continue as a going concern. While we may seek additional investment capital, or possible funding or joint venture arrangements with other mining companies, we have no assurance that such investment capital or additional funding and joint venture arrangements will be available to the Company.
We expect in the near term to continue to rely on outside financing activities to finance our operations. We used investment proceeds realized during 2010 for (i) completion of work-up of two potential extraction processes to determine which process we will employ to potentially prove up any precious metals, platinum groups elements and/or other base metals on the Pisgah, California property and the Wikieup, Arizona property, if any; (ii) the development of a drill program to potentially prove up any tonnages and precious metals and/or other base metals on the Wikieup, Arizona property, if any; (iii) the continued development a comprehensive research and development program to ascertain the potential for any rare earth elements on the Owl Canyon, California property; (iv) strategic working capital reserve and (v) to finance our operations. We expect that any additional funds received from financing activities that may occur in 2011 will be similarly deployed.
In addition to our historic exploration activities, we are currently analyzing potential, alternative revenue producing opportunities at our properties. The nature of such opportunities, if available, we hope would provide relatively short term revenue to sustain our operating costs and supplement the costs of testing to potentially prove tonnages and precious metals the Pisgah, California property and the Wikieup, Arizona property, if any. At Pisgah, for example, we are evaluating surface material that may have commercial use in connection with environmentally favorable agricultural applications. We are currently advancing discussions with a potential partner for the production and sale of these materials.
Results of Operations for the Three Months Ended March 31, 2011 and 2010:
| | | Three Months Ended March 31, | | | | |
| | | 2011 | | | 2010 | | | Increase / (Decrease) | |
| | | Amount | | | Amount | | | $ | | | % | |
| Expenses: | | | | | | | | | | | | |
| General & administrative | | $ | 62,303 | | | $ | 90,188 | | | $ | (27,885 | ) | | | (31 | )% |
| Exploration costs | | | 7,848 | | | | 7,997 | | | | (149 | ) | | | (2 | )% |
| Depreciation | | | 2,193 | | | | 2,495 | | | | (302 | ) | | | (12 | )% |
| Officer salary | | | 30,000 | | | | 30,000 | | | | - | | | | - | |
| Total operating expenses | | | 102,344 | | | | 130,680 | | | | (28,336 | ) | | | (22 | )% |
| | | | | | | | | | | | | | | | | |
| Loss from operations | | | (102,344 | ) | | | (130,680 | ) | | | (28,336 | ) | | | (22 | )% |
| | | | | | | | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | | | | | | |
| Other income | | | 3,000 | | | | - | | | | 3,000 | | | | 100 | % |
| Interest income | | | - | | | | 15 | | | | (15 | ) | | | (100 | )% |
| Rental revenue | | | 16,875 | | | | 6,875 | | | | 10,000 | | | | 145 | % |
| Interest expense | | | (20,164 | ) | | | (15,237 | ) | | | 4,927 | | | | 32 | % |
| Total other income (expense) | | | (289 | ) | | | (8,347 | ) | | | (8,058 | ) | | | (97 | )% |
| | | | | | | | | | | | | | | | | |
| Net loss | | $ | (102,633 | ) | | $ | (139,027 | ) | | $ | (36,394 | ) | | | (26 | )% |
General and administrative expenses
General and administrative expenses for the three months ended March 31, 2011 decreased by $27,885 (or 31%) from $90,188 for the three months ended March 31, 2010 to $62,303 for the three months ended March 31, 2011. The decrease is principally due to decreased professional fees associated with our securities offerings with the British Columbia Securities Commission (“BCSC”), and better controls over our office expenditures in 2011, compared to the same period in 2010.
Exploration costs
Exploration costs for the three months ended March 31, 2011 decreased by $149 (or 2%) from $7,997 for the three months ended March 31, 2010 to $7,848 for the three months ended March 31, 2011. The decrease is due to minimal reductions in exploration activities at our Pisgah and Wikieup locations; however, we expect to significantly increase our exploration activities over the next 12 months.
Unless the Company is able to establish the economic viability of its mining properties, the Company will continue writing off its expenses of exploration and testing of its properties. Therefore, losses will continue unless the Company sells one or more of its properties or locates and delineates reserves and initiates mining operations. If that occurs, the Company may capitalize certain of those expenses.
The Company has no material commitments for capital expenditures other than expenditures it chooses or may choose to make, if funds are available, with respect to testing and or exploration of its mineral properties.
Depreciation
Depreciation for the three months ended March 31, 2011 decreased by $302 (or 12%) from $2,495 for the three months ended March 31, 2010 to $2,193 for the three months ended March 31, 2011. 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 for the three months ended March 31, 2011 and 2010 was $30,000 in accordance with the annual compensation of $120,000 to our Chief Executive Officer. No bonuses or stock awards were granted, and all compensation was accrued. No payments have been made in either cash or shares of the Company’s stock in either period.
Total operating expenses
Total operating expenses for the three months ended March 31, 2011 decreased by $28,336 (or 22%) from $130,680 for the three months ended March 31, 2010 to $102,344 for the three months ended March 31, 2011. The decrease in total operating expenses was mainly a result of decreased professional fees associated with our securities offerings with the British Columbia Securities Commission (“BCSC”), and better controls over our office expenditures in 2011, compared to the same period in 2010.
Other income (expense)
Other income for the three months ended March 31, 2011 increased by $3,000 (or 100%) from $-0- for the three months ended March 31, 2010 to $3,000 for the three months ended March 31, 2011 due to the collection of proceeds received in settlement of misappropriated funds by our former bookkeeper that were not recognized in the previous comparative period.
Interest income for the three months ended March 31, 2011 and 2010 was $-0- and $15, respectively, due to the lack of interest bearing assets on hand during the respective periods.
Rental revenue for the three months ended March 31, 2011 increased by $10,000 (or 145%) from $6,875 for the three months ended March 31, 2010 to $16,875 for the three months ended March 31, 2011. 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. Rental revenue increased during the three months ended March 31, 2011 compared to the same period in 2010 due to the receipt of $10,000 received in exchange for leasing our land for a photo shoot on our Pisgah property in March of 2011.
Interest expense for the three months ended March 31, 2011 increased by $4,927 (or 32%) from $15,237 for the three months ended March 31, 2010 compared to $20,164 for the three months ended March 31, 2011. The increase in interest expense was a result of debt conversions on December 31, 2010 that alleviated certain interest accruals during the three months ended March 31, 2011, combined with finance charges of $6,230, consisting of $3,115 of cash and $3,115 of common stock subscriptions payable, related to commissions on stock sales during the three months ended March 31, 2011 that were not present in the comparative three month period ending March 31, 2010.
Net loss
Our net loss was $102,633 for the three months ended March 31, 2011 compared to a net loss of $139,027 for the three months ended March 31, 2010. We expect to continue 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. Our improved net loss for the three months ended March 31, 2011 was primarily a result of decreased professional fees associated with our securities offerings with the British Columbia Securities Commission (“BCSC”), and better controls over our office expenditures in 2011, compared to the same period in 2010, as well as, the receipt of $10,000 received in exchange for leasing our land for a photo shoot on our Pisgah property in March of 2011.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes total current assets, total current liabilities and working capital at March 31, 2011 compared to December 31, 2010.
| | | March 31, | | | December 31, | | | Increase / (Decrease) | |
| | | 2011 | | | 2010 | | | $ | | | % | |
| | | | | | | | | | | | | |
| Current Assets | | $ | 67,239 | | | $ | 35,629 | | | $ | 31,610 | | | | 89 | % |
| | | | | | | | | | | | | | | | | |
| Current Liabilities | | $ | 1,475,198 | | | $ | 1,459,563 | | | $ | 15,635 | | | | 1 | % |
| | | | | | | | | | | | | | | | | |
| Working Capital (deficit) | | $ | (1,407,959 | ) | | $ | (1,423,934 | ) | | $ | 15,975 | | | | (1 | )% |
Internal and External Sources of Liquidity
During the three months ended March 31, 2011 and 2010, our operating and investing activities used cash of $72,798 and $40,285, respectively, while our financing activities provided cash of $109,300 and $42,125, respectively. The cash used in operating activities was principally a result of the net loss we incurred.
Investing Activities. During the three months ended March 31, 2011 we have raised a total of $113,300 through the sale of common stock to a total of nine accredited investors under a private placement offering. The terms of the private placement allow us to raise up to $1,000,000 through a private placement of units of securities (each, a “Unit��) of the Company, at a price of US$0.06 per Unit. Each Unit consists of one share of common stock (“Common Share”) and one Common Share purchase warrant (“Warrant”). Finders acting in connection with the private placement are entitled to receive aggregate fees of $3,115 and 51,917 Common Shares. The shares have not yet been issued and were recorded as subscriptions payable in the amount of $3,115 at March 31, 2011. During the three months ended March 31, 2011, Can-Cal completed the sales of a second and third tranche of the private placement, including 1,888,334 Units of the Company at a price of US$0.06 per Unit, under the terms detailed, above. The Company received total aggregate gross proceeds of US$113,300 in the sale, of which, 1,020,000 shares were issued during the three months ended March 31, 2011 and 868,334 shares were issued on April 12, 2011, as recorded under a subscriptions payable of $52,100 at March 31, 2011.
Cash Flow. Since inception, we have primarily financed our cash flow requirements through the issuance of common stock and the issuance of notes. With the expected growth of our current business we may, during our normal course of business, experience net negative cash flows from operations until some of our mining activities begin to produce revenues. Further, we may be required to obtain financing to fund operations, both during periods of growth and/or contraction, through additional common stock offerings and bank or other debt borrowings, to the extent available, or to obtain additional financing to the extent necessary to augment our available working capital.
Satisfaction of our cash obligations for the next twelve months.
As of March 31, 2011, our cash balance was $53,704. Our plan for satisfying our cash requirements for the next twelve months is through additional debt and/or equity financing. We anticipate our current cash reserves will be sufficient to support operations through May 31, 2011, 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 the issuance of additional equity or debt financing or credit facilities. We also are considering possible funding through joint venture arrangements with other mining companies or other natural resource companies. However, there can be no assurance that we will raise capital through any of these means.
As we maintain or expand our current operational activities, we may continue to experience net negative cash flows from operations, and unless we generate sufficient sales through our operations, will be required to obtain additional financing to fund operations through common stock offerings and debt borrowings to the extent necessary to provide working capital.
We anticipate incurring operating losses until we build our capital base. Our operating history makes predictions of future operating results difficult to ascertain and unreliable. In addition, since our cash position has fallen we are finding it increasingly difficult to support and expand our operations. Thus, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of commercial viability. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, implement and successfully execute our business and marketing strategy, continuously develop and upgrade technology and products, respond to competitive developments, and continue to attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations. 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.
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.
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 rescinded the sale of an approximate total of 263,748 shares of common stock of the Company and returned a total of approximately $67,913 of investment funds to the Non-accredited Purchasers. Through the date of this Annual Report, Can-Cal has rescinded of $55,788 of 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 of Form 10-K for the year ended December 31, 2010 to which reference is made herein.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On February 23, 2011, Can-Cal completed the sale of a second tranche of a private placement, which private placement commenced on December 31, 2010. The February sale, pursuant to exemptions under Section 4(2) and Regulation S of the Securities Act of 1933, included 1,020,000 Units of the Company at a price of US$0.06 per Unit. Each Unit consisted of one share of common stock (“Common Share”) and one Common Share purchase warrant, exercisable at the warrant holders’ option any time within two years of the date of issuance of such warrant at a price of $0.08 per Common Share (“Warrant”). The Company received total aggregate gross proceeds of US$61,200 in the February 2011 sale. Finders acting in connection with the private placement are entitled to receive aggregate fees of $510 and 8,500 Common Shares. The shares have not yet been issued and were recorded as subscriptions payable in the amount of $510 at March 31, 2011.
On March 31, 2011, Can-Cal completed the sale of a third tranche of a private placement, which private placement commenced on December 31, 2010. The March sale, pursuant to exemptions under Section 4(2) and Regulation S of the Securities Act of 1933, included 868,334 Units of the Company at a price of US$0.06 per Unit. Each Unit consisted of one share of common stock (“Common Share”) and one Common Share purchase warrant, exercisable at the warrant holders’ option any time within two years of the date of issuance of such warrant at a price of $0.08 per Common Share (“Warrant”). The Company received total aggregate gross proceeds of US$52,100 in the March 2011 sale. The shares were not issued until April 12, 2011. Accordingly, the $52,100 was recorded as a subscription payable at March 31, 2011. Finders acting in connection with the private placement are entitled to receive aggregate fees of $2,605 and 43,417 Common Shares. The shares have not yet been issued and were recorded as a subscriptions payable in the amount of $2,605 at March 31, 2011.
The Company plans to use the proceeds of the sale for: ( i) the completion of its work-up of two extraction processes to determine which process, if either, will be used in the Company’s efforts to potentially prove up any precious metals, platinum groups elements and/or other base metals on the Company’s Pisgah, California site and Wikieup, Arizona site; (ii) conducting a drill program to potentially prove up potential tonnages and subsequently any precious metals and/or other base metals on the Wikieup, Arizona property; (iii) the undertaking of a comprehensive research and development program to ascertain the potential for any rare earth elements on the Owl Canyon, California site; (iv) the potential engagement of a qualified and comprehensive US and Canadian investor relations and shareholder communications group, and; (v) strategic working capital reserve.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the three month period ended March 31, 2011.
Item 3. Defaults Upon Senior Securities.
See Note 4 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 three month period ending March 31, 2011.
Item 5. Other Information.
None.
| | | | | | | 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 | | | | | | | | |
| | | | | | | | | | | | | |
| 99.8 | | Press Release stated January 4, 2011 | | | | 8-K | | | | | | 01/04/11 |
| | | | | | | | | | | | | |
| 99.9 | | Press Release stated February 23, 2011 | | | | 8-K | | | | | | 03/03/11 |
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 18, 2011
