PINX:CCRE Can-Cal Resources Ltd Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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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 June 30, 2012


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


Commission file number 000-26669


CAN-CAL RESOURCES LTD.

(Exact name of registrant as specified in its charter)


Nevada

88-0336988

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)


8205 Aqua Spray Avenue

Las Vegas, Nevada

(Address of principal executive offices)


(702) 243-1849

(Registrant’s telephone number, including area code)


Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   ¨ No


Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data Filed required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period the registrant was requires to submit and post such files)

x Yes   ¨ No


Large accelerated filer

¨

 

Accelerated filer

¨

Non-accelerated filer

¨

(Do not check if a smaller reporting company)

Smaller reporting company

x


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨       No x


The number of shares of Common Stock, $0.001 par value, outstanding on August 13, 2012 was 42,027,060.

 

 

1

 




CAN-CAL RESOURCES LTD.

FORM 10-Q

TABLE OF CONTENTS







 

 

Page

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

ITEM 1. FINANCIAL STATEMENTS

 

3

 

 

Condensed Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011

 

3

 

 

Condensed Statements of Operations (Unaudited)

 

4

 

 

Condensed Statements of Cash Flows ( Unaudited )

 

5

 

 

Notes to Condensed Financial Statements (Unaudited)

 

6

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

 

16

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

22

 

ITEM 4. CONTROLS AND PROCEDURES

 

22

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

ITEM 1. LEGAL PROCEEDINGS

 

23

 

ITEM 1A. RISK FACTORS

 

23

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

23

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

23

 

ITEM 4. MINE SAFETY DISCLOSURES

 

23

 

ITEM 5. OTHER INFORMATION

 

24

 

ITEM 6. EXHIBITS

 

25

 

 

2

 




CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

CONDENSED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

2012

 

2011

ASSETS

 (Unaudited)

 

 

 

 

 

 

Current assets:

 

 

 

Cash

$

           359

 

 

$

       37,846

 

Prepaid expenses

 

       43,780

 

 

 

        21,499

 

Total current assets

 

       44,139

 

 

 

        59,345

 

 

 

 

 

 

 

 

 

Property and equipment (net of accumulated

 

 

 

 

 

 

 

depreciation of $30,297 and $26,971, respectively)

 

         3,862

 

 

 

          6,583

 

 

 

 

 

 

 

 

 

Total assets

$

      48,001

 

$

       65,928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

       35,492

 

 

$

        25,936

 

Accounts payable, related parties

 

     150,632

 

 

 

      120,632

 

Accrued expenses

 

         8,215

 

 

 

          4,967

 

Accrued expenses, related parties

 

     303,627

 

 

 

      243,869

 

Unearned rental revenues

 

       22,917

 

 

 

          9,167

 

Notes payable, related parties

 

       27,140

 

 

 

        53,062

 

Total current liabilities

 

     548,023

 

 

 

      457,633

 

 

 

 

 

 

 

 

 

Total liabilities

 

     548,023

 

 

 

      457,633

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

       

 

Stockholders' (deficit):

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares

 

 

 

 

 

 

 

authorized, no shares issued and outstanding

 

                 -

 

 

 

    -

 

Common stock, $0.001 par value, 100,000,000 shares authorized,

 

 

 

 

 

 

 

41,009,560 and 38,901,246 shares issued and outstanding

 

 

 

 

 

 

 

as of June 30, 2012 and December 31, 2011, respectively

 

      41,010

 

 

 

38,901

 

Subscriptions payable, 17,500, and 50,000 shares at

 

 

 

 

 

 

 

June 30, 2012 and December 31, 2011, respectively

 

         1,050

 

 

 

          1,500

 

Additional paid-in capital

 

  9,371,563

 

 

 

   9,248,673

 

(Deficit) accumulated during exploration stage

 

(9,913,645

)

 

 

 (9,680,779

)

Total stockholders' (deficit)

 

   (500,022

)

 

 

    (391,705

)

 

 

 

 

 

 

 

 

Total liabilities and stockholders' (deficit)

$

       48,001

 

 

$

65,928

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

3

 



CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 22, 1995

 

For the three months ended

 

For the six months ended

 

(inception) to

 

June 30,

 

June 30,

 

June 30,

 

2012

 

 

2011

 

 

2012

 

 

2011

 

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Material sales

 $                     -

 

 

 $                   -

 

 

 $                    -

 

 

 $                    -

 

 

 $          245,500

 

Cost of sales

-

 

 

-

 

 

-

 

 

-

 

 

263,400

 

Gross loss

-

 

 

-

 

 

-

 

 

-

 

 

(17,900

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration costs

14,983

 

 

12,158

 

 

23,361

 

 

20,006

 

 

619,210

 

General and administrative

79,495

 

 

85,603

 

 

159,864

 

 

147,906

 

 

7,173,835

 

Depreciation

1,674

 

 

2,192

 

 

3,326

 

 

4,385

 

 

262,110

 

Officer salary

30,000

 

 

30,000

 

 

60,000

 

 

60,000

 

 

1,141,176

 

Impairment of operating assets

-

 

 

-

 

 

-

 

 

-

 

 

443,772

 

Total operating expenses

126,152

 

 

129,953

 

 

246,551

 

 

232,297

 

 

9,640,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

(126,152

)

 

(129,953

)

 

(246,551

)

 

(232,297

)

 

(9,658,003

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

750

 

 

3,000

 

 

3,100

 

 

6,000

 

 

69,798

 

Interest income

-

 

 

-

 

 

-

 

 

-

 

 

52,945

 

Interest expense

(475

)

 

(76,671

)

 

(3,165

)

 

(96,835

)

 

(1,468,610

)

Rental revenue

6,875

 

 

7,375

 

 

13,750

 

 

24,250

 

 

408,658

 

Gain on disposal of fixed assets

-

 

 

-

 

 

-

 

 

-

 

 

3,128

 

Gain on extinguishment of debts

-

 

 

-

 

 

-

 

 

-

 

 

1,152,039

 

Total other income (expense)

7,150

 

 

(66,296

)

 

13,685

 

 

(66,585

)

 

217,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

(119,002

)

 

(196,249

)

 

(232,866

)

 

(298,882

)

 

(9,440,045

)

Provision for income taxes

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Net loss from continuing operations

(119,002

)

 

(196,249

)

 

(232,866

)

 

 (298,882

)

 

(9,440,045

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

-

 

 

-

 

 

-

 

 

-

 

 

116,400

 

Loss on disposal of operations (net of taxes)

-

 

 

-

 

 

-

 

 

-

 

 

(590,000

)

Net (loss)

 $        (119,002

)

 

 $      (196,249

)

 

 $      (232,866

)

 

 $      (298,882

)

 

 $     (9,913,645

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

outstanding - basic and fully diluted

40,952,784

 

 

35,260,847

 

 

40,018,224

 

 

34,470,674

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) per share - basic and fully diluted

 $             (0.00

)

 

 $           (0.01

)

 

 $            (0.01

)

 

 $            (0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

4

 



CAN-CAL RESOURCES LTD.

(AN EXPLORATION STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

March 22, 1995

 

For the six months ended

 

(inception) to

 

June 30,

 

June 30,

 

2012

 

 

2011

 

 

2012

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net loss

 $           (232,866

)

 

 $          (298,882

)

 

 $          (9,913,645

)

Adjustments to reconcile net loss

 

 

 

 

 

 

 

 

to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

3,326

 

 

4,385

 

 

262,110

 

Bad debts

-

 

 

-

 

 

207,100

 

Gain on sale of fixed assets

-

 

 

-

 

 

(3,128

 

Gain on extinguishment of debts

 

 

 

 

 

 

(1,152,039

)

Stock based compensation granted for services

1,050

 

 

6,684

 

 

563,952

 

Stock based compensation granted for financing and interest

-

 

 

57,626

 

 

734,190

 

Beneficial conversion feature on convertible debenture

-

 

 

-

 

 

25,200

 

Loss on disposal of investment property

-

 

 

-

 

 

764,300

 

Undistributed earnings of affiliate

-

 

 

-

 

 

(174,300

)

Gain on discontinued operations

-

 

 

-

 

 

(116,400

)

Loss on foreign currency translation

-

 

 

-

 

 

8,500

 

Impairment of operating assets

-

 

 

-

 

 

443,772

 

Decrease (increase) in assets:

 

 

 

 

 

 

 

 

Prepaid expenses

(22,281

)

 

5,315

 

 

77,120

 

Increase (decrease) in liabilities:

 

 

 

 

 

 

 

 

Accounts payable

9,556

 

 

(56,128

)

 

(32,420

)

Accounts payable, related parties

30,000

 

 

30,632

 

 

150,632

 

Accrued expenses

3,248

 

 

85,098

 

 

546,793

 

Accrued expenses, related parties

59,758

 

 

1,032

 

 

585,631

 

Unearned revenues

13,750

 

 

13,750

 

 

22,917

 

Net cash used in operating activities

(134,459

)

 

(150,488

)

 

(6,999,715

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchase of investment property

-

 

 

-

 

 

(1,083,600

)

Proceeds from sale of investment property

-

 

 

-

 

 

319,300

)

Purchase of property and equipment

(605

)

 

-

 

 

(770,016

)

Proceeds from sale of property and equipment

-

 

 

-

 

 

26,100

)

Net cash used in investing activities

(605

)

 

-

 

 

(1,508,216

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from convertible debentures

-

 

 

-

 

 

128,800

 

Proceeds from notes payable

-

 

 

-

 

 

948,400

 

Principal payments on notes payable

-

 

 

-

 

 

(689,900

)

Proceeds from notes payable, related parties

27,140

 

 

-

 

 

934,931

 

Principal payments on notes payable, related parties

(53,062

)

 

(4,000

)

 

(436,241

)

Proceeds from the issuance of common stock

123,499

 

 

281,435

 

 

7,622,300

 

Net cash provided by financing activities

97,577

 

 

277,435

 

 

8,508,290

 

 

 

 

 

 

 

 

 

 

Net increase in cash

(37,487

)

 

126,947

 

 

359

 

Cash, beginning of period

37,846

 

 

17,202

 

 

-

 

Cash, end of period

 $                   359

 

 

 $           144,149

 

 

 $                     359

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Interest paid

 $                       -

 

 

 $                      -

 

 

 

 

Income taxes paid

 $                       -

 

 

 $                      -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements

 

5

 


 

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, 2011 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 June 30, 2012 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 $9,913,645 and used net cash in operations of $6,999,715 for the period from inception (March 22, 1995) through June 30, 2012. An entity remains in the exploration stage until such time as proven or probable reserves have been established for its deposits. Upon the location of commercially mineable reserves, the Company plans to prepare for mineral extraction and enter the development stage. To date, the exploration stage of the Company’s operations consists of contracting with geologists who sample and assess the mining viability of the Company’s claims.



Note 2 – Going Concern


The Company incurred a net loss of $232,866 for the six months ended June 30, 2012. Also, the Company’s current liabilities exceed its current assets by $503,884 as of June 30, 2012. These factors create substantial doubt about the Company’s ability to continue as a going concern. The Company’s management plans to continue to fund its operations in the short term with a combination of debt and equity financing and with revenue from operations in the long term.


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

 

 

6

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)



Note 3 – Related Party


We received proceeds of $15,000, $5,000 and $2,000 in exchange for unsecured promissory notes to our CEO, G. Michael Hogan on May 9, 2012, June 5, 2012 and June 22, 2012, respectively. The promissory notes are due on demand and bearing interest at 10%.

 

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


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


On April 2, 2012, we repaid $28,062 on an unsecured note payable due to our CEO, G. Michael Hogan.


On April 2, 2012, we repaid $28,260, including $3,260 of interest, on an unsecured note payable due to a Board of Director’s consulting firm, Futureworth Capital Corp.


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


On January 9, 2012, we reimbursed $632 of previously incurred expenses to one of our board members.


On September 15, 2011, we repaid $129 on an unsecured note payable due to our CEO, G. Michael Hogan.


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


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


During the year ended December 31, 2010, we received a total of $28,191 in exchange for an unsecured note payable to our CEO, G. Michael Hogan, due on demand, bearing interest at 8%.


On November 12, 2010, we received a short term loan of $9,000 in exchange for a non-interest bearing, unsecured note payable to an employee, due on demand. On December 30, 2010 the Company repaid $5,000, and the remaining $4,000 was repaid in February of 2011.

 

 

7

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


On July 1, 2010, the Company entered into a twelve month employment agreement, subject to automatic monthly renewals, with the Company’s CEO, G. Michael Hogan. The terms of the agreement include a fixed annual salary of $120,000. The Company may elect to satisfy payment in shares of common stock in lieu of cash at a market value equal to $0.10 above the average closing trading price of the common stock for the preceding five (5) days from the date of such election. No payments have been made in cash or stock as of December 31, 2011.


We owed accrued salaries to our CEO of $300,000 and $240,000 at June 30, 2012 and December 31, 2011, respectively.


On June 30, 2010, the Company entered into a twelve month consulting agreement, with a Board of Director’s consulting firm, Futureworth Capital Corp. The terms of the agreement include annual compensation of $60,000, payable monthly. The Company may elect to satisfy payment in shares of common stock in lieu of cash at a market value equal to $0.10 above the average closing trading price of the common stock for the preceding five (5) days from the date of such election. No payments have been made in cash or stock as of December 31, 2011. As of June 30, 2012 we owed Futureworth Capital Corp. $150,000, as included in accounts payable, related parties, for service prior to, and during the service period under the consulting agreement.


On September 1, 2010, we received $25,000 in exchange for an unsecured note payable to a Board of Director’s consulting firm, Futureworth Capital Corp, due on demand, bearing interest at 8.25%.



Note 4 – Prepaid Expenses


As of June 30, 2012 and December 31, 2011 prepaid expenses consisted of the following:

 

 

            June 30,             December 31,    

2012

2012

Prepaid portion of UNLV research project as disclosed below                                                         

$

30,882

$

-

Annual Bureau of Land Management fees

8,246

   16,492

Securities and Exchange Commission filing fees (XBRL)

-

1,750

Rental fees

-

2,400

Health and auto insurance premiums

690

857

Directors and officers insurance

3,962

-

$

43,780

$

21,499

 


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

 

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

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


For the six months ended June 30, 2012, the Company expensed $4,118 of these project fees.

 

 

8

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)



Note 5  – Notes Payable, Related Parties


Notes payable, related parties consisted of the following as of June 30, 2012 and December 31, 2011, respectively:


 

June 30,

 

December 31,

 

2012

 

2011

 

 

 

 

 

 

Note payable to a member of the Board of Directors, unsecured, due on demand, bearing interest at 8.25%, related party.

$

-

 

$

25,000

 

 

 

 

 

 

Note payable to the CEO, unsecured, due on demand, bearing interest at 10% per annum, related party.

 

22,000

 

 

-

 

 

 

 

 

 

Note payable to an employee, unsecured, due on demand, non-interest bearing, related party.

 

5,140

 

 

-

 

 

 

 

 

 

Note payable to the CEO, unsecured, non-interest bearing, due on demand, related party.

 

-

 

 

28,062

 

 

 

 

 

 

Total notes payable

 

27,140

 

 

53,062

 

 

 

 

 

 

Less: current portion

 

27,140

 

 

53,062

 

 

 

 

 

 

Notes payable, less current portion

$

-

 

$

-


The following presents components of interest expense by instrument type at June 30, 2012 and 2011, respectively:


 

June 30,

 

June 30,

 

2012

 

2011

 

 

 

 

 

 

Notes payable, related parties

$

768

 

$

1,032

Notes payable

 

-

 

 

26,422

Fair value of extended warrants

 

-

 

 

57,626

Fair value of common stock granted as commissions

 

2,100

 

 

11,254

Vendor finance charges, accounts payable

 

297

 

 

501

 

$

3,165

 

$

96,835

 

 

9

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 


Note  6 – Changes in Securities


2012


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


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


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


On March 20, 2012, the Company granted a total of 17,500 shares of its common stock as commissions on the sale of securities. The total fair value of the common stock was $1,050 based on the fair market value of the Company’s common stock on the date of grant. The Company elected not to net these commissions against the proceeds received from the sales and recognized the $1,050 of finance costs as interest expense within the statement of operations. The shares were authorized, but unissued and recognized as a subscription payable as of June 30, 2012. The shares were subsequently issued in April of, 2012.


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


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

 

 

10

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


2011


On December 29, 2011 the Company granted 50,000 shares of common stock to an employee for services rendered. The fair value of the common stock was $1,500 based on the closing price of the Company’s common stock on the date of grant. The shares were authorized, but unissued and recognized as a subscription payable as of December 31, 2011. The shares were subsequently issued on March 20, 2012.


On October 24, 2011, the Company issued a total of 218,793 shares of its common stock as commissions on the sale of securities amongst three different sales persons. The total fair value of the common stock was $12,078 based on the fair market value of the Company’s common stock on the date of grant. The Company elected not to net these commissions against the proceeds received from the sales and recognized the $12,078 of finance costs as interest expense within the statement of operations.


On October 18, 2011, the Company sold a total of 200,000 shares of its common stock and an equal number of warrants pursuant to a unit offering in exchange for total proceeds of $12,000 from two investors. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.


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


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


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

 

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


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

 

 

11

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


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


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


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


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


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


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


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


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


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


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

 

 

12

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)



Note 7  – Options and Warrants


Options


There were no options issued during the six months ended June 30, 2012 and 2011, respectively.


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


 

 

 

 

Weighted

 

 

Options

 

Average

 

 

Outstanding

 

Exercise Price

 

 

 

 

 

 

Balance, January 1, 2011

 

1,000,000 

 

$

0.18 

Granted

 

 

 

Cancelled

 

 

Exercised

 

 

 

Expired

 

(1,000,000)

 

 

(0.18)

Balance, December 31, 2011

 

 

 

Granted

 

 

 

Cancelled

 

 

 

Exercised

 

 

 

Expired

 

 

 

Balance, June 30, 2012

 

 

$

 

 

 

13

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


Warrants


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


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


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


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


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


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


During the year ended December 31, 2011, the Company granted a total of 5,824,584 common stock warrants with an exercise price of $0.08 per share for its common stock amongst a total of thirty six investors. These stock warrants were granted in connection with financing activities related to the sale of common stock sold at various dates between January 4, 2011 and October 18, 2011. These warrants were exercisable upon issuance and expire two years from the date of grant, consisting of maturity dates between January 4, 2013 and October 18, 2011.


On December 31, 2010, the Company granted 2,146,666 common stock warrants with an exercise price of $0.08 per share. 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.


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 expired on March 31, 2011.


A total of -0- and 1,064,000 warrants expired during the six months ended June 30, 2012 and the year ended December 31, 2011, respectively.

 

 

14

 


 

CAN-CAL RESOURCES LTD.

(An Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


The following table summarizes the Company’s warrant activities:


 

 

 

 

Weighted

 

 

Warrants

 

Average

 

 

Outstanding

 

Exercise Price

 

 

 

 

 

 

Balance, January 1, 2011

 

9,588,162 

 

$

0.13 

Granted

 

5,824,584 

 

 

0.08 

Cancelled

 

 

 

Exercised

 

 

 

Expired

 

(1,064,000)

 

 

(0.15)

Balance, December 31, 2011

 

14,348,746 

 

 

0.11 

Granted

 

2,058,314 

 

 

0.08 

Cancelled

 

 

 

Exercised

 

 

 

Expired

 

 

 

Balance, June 30, 2012

 

16,407,060 

 

$

0.11 



Note  8 – Commitments and Contingencies


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



Note  9 – Subsequent Events


Debt Repayments, Related Parties

On August 1, 2012, the Company repaid a short term loan of $5,140 from an employee of the Company.


Common Stock Issuances

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


On August 6, 2012 the Company issued 17,500 shares of its common stock to satisfy a subscription payable in the amount of $1,050 realized pursuant to common stock granted to a sales person for commissions on the sale of securities on February 15, 2012 and March 20, 2012.

 

 

15

 


 


 

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, 2011 and 2010 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, 2011 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 June 30, 2012, we had cash on hand of $359 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 the first six months of 2012 for (i) completion of work-up of two potential extraction processes to determine which process we will employ to potentially prove up any precious metals, platinum groups elements and/or other base metals on the Pisgah, California property and the Wikieup, Arizona property, if any; (ii) the development of a drill program to potentially prove up any tonnages and precious metals and/or other base metals on the Wikieup, Arizona property, if any; (iii) the continued development a comprehensive research and development program to ascertain the potential for any rare earth elements on the Owl Canyon, California property; (iv) strategic working capital reserve and (v) to finance our operations.


In addition to our historic exploration activities, we are currently under taking alternative revenue producing opportunities at our Pisgah property.  On January 23, 2012 we entered into a mineral lease agreement with a partner who will purchase up to 100,000 tons of resources derived from the property to produce commercial products for resale.  The agreement is for an initial period of ten (10) years, with an additional five (5) year extension at the option of the lessee.  We will receive fees for the removal of minerals at diminishing prices in $0.50 increments between $12 per ton and $10 per ton for each 20,000 tons of material removed.  As of the date of this filing, we have not yet sold any minerals under this agreement.

 

 

16

 


 


With reference to the Wikieup Property, Can-Cal has commissioned a Geologist to perform a three-phased project to evaluate the property and its surrounding areas.  The use of Satellite Imaging Interpretation software will provide regional, geological mapping.  The next phase is to take surface samplings from various areas and have the samples analyzed.  The results will determine the potential for any commercially viable mineral deposits as well as prospective drilling locations.


Results of Operations for the Three Months Ended June 30, 2012 and 2011:


 

Three Months Ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

Increase / (Decrease)

 

Amount

 

Amount

 

$

%

Expenses:

 

 

 

 

 

 

 

 

 

Exploration costs

$

14,983

 

$

12,158

 

$

2,825 

23%

General & administrative

 

79,495

 

 

85,603

 

 

(6,108)

(7%)

Depreciation

 

1,674

 

 

2,192

 

 

(518)

(24%)

Officer salary

 

30,000

 

 

30,000

 

 

-

-

Total operating expenses

 

126,152

 

 

129,953

 

 

(3,801)

(3%)

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(126,152)

 

 

(129,953)

 

 

( 3,801 )

(3%)

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Other income

 

750 

 

 

3,000 

 

 

(2,250)

(75%)

Rental revenue

 

6,875 

 

 

7,375 

 

 

(500)

(7%)

Interest expense

 

(475)

 

 

(76,671)

 

 

(76,196)

(99%)

Total other income (expense)

 

7,150 

 

 

(66,296)

 

 

(73,446)

(111%)

 

 

 

 

 

 

 

 

 

 

Net loss

$

(119,002)

 

$

(196,249)

 

$

(77,247)

(39%)


Exploration costs


Exploration costs for the three months ended June 30, 2012 increased by $2,825 (or 23%) from $12,158 for the three months ended June 30, 2011 to $14,983 for the three months ended June 30, 2012.  The increase is due to annual price increases on our Bureau of Land Management (BLM) fees related to 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 or may choose to make, if funds are available, with respect to testing and or exploration of its mineral properties.

 

 

17

 


 


 

General and administrative expenses


General and administrative expenses for the three months ended June 30, 2012 decreased by $6,108 (or 7%) from $85,603 for the three months ended June 30, 2011 to $79,495 for the three months ended June 30, 2012.  The decrease is principally due to decreased legal fees during the three months ended June 30, 2012 compared to the three months ended June 30, 2011.


Depreciation


Depreciation for the three months ended June 30, 2012 decreased by $518 (or 24%) from $2,192 for the three months ended June 30, 2011 to $1,674 for the three months ended June 30, 2012.  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 June 30, 2012 and 2011 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 June 30, 2012 decreased by $3,801 (or 3%) from $129,953 for the three months ended June 30, 2011 to $126,152 for the three months ended June 30, 2012.  The decrease in total operating expenses was mainly a result of reductions in General and Administrative expenses related to decreased legal fees during the three months ended June 30, 2012 compared to the three months ended June 30, 2011.


Other income (expense)


Other income for the three months ended June 30, 2012 decreased by $2,250 (or 75%) from $3,000 for the three months ended June 30, 2011 to $750 for the three months ended June 30, 2012 due to diminished collection of proceeds received in settlement of misappropriated funds by our former bookkeeper during the three months ended June 30, 2012 compared to the three months ended June 30, 2011.


Rental revenue for the three months ended June 30, 2012 decreased by $500 (or 7%) from $7,375 for the three months ended June 30, 2011 to $6,875 for the three months ended June 30, 2012.  Rental revenue relates to income derived from the rental of the Company’s land for the purposes of mineral extraction, filming movies or conducting photo shoots.  Our land was leased for $500 related to a photo shoot that was held during the three months ended June 30, 2011 that was not realized in three months ended June 30, 2012.


Interest expense for the three months ended June 30, 2012 decreased by $76,196 (or 99%) from $76,671 for the three months ended June 30, 2011 compared to $475 for the three months ended June 30, 2012.  The decrease in interest expense was due to substantial extinguishment of debts during the fourth quarter of 2011 that significantly relieved our debt burden, and associated interest obligations in the current year.

 

 

18

 


 


Net loss


Our net loss for the three months ended June 30, 2012 decreased by $77,247 (or 39%) from $196,249 for the three months ended June 30, 2011 compared to $119,002 for the three months ended June 30, 2012.  Our decreased net loss for the three months ended June 30, 2012 was primarily a result of decreased general and administrative expenses related to decreased legal fees and decreased interest expenses related to substantial extinguishment of debts during the fourth quarter of 2011 that significantly relieved our debt burden, and associated interest obligations in the current year.


Results of Operations for the Six Months Ended June 30, 2012 and 2011:


 

Six Months Ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

Increase / (Decrease)

 

Amount

 

Amount

 

$

%

Expenses:

 

 

 

 

 

 

 

 

 

Exploration costs

$

23,361

 

$

20,006

 

$

3,355 

17%

General & administrative

 

159,864

 

 

147,906

 

 

11,958 

8%

Depreciation

 

3,326

 

 

4,385

 

 

(1,059)

(24%)

Officer salary

 

60,000

 

 

60,000

 

 

-

-

Total operating expenses

 

246,551

 

 

232,297

 

 

14,254 

6%

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(246,551)

 

 

(232,297)

 

 

14,254 

6 %

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Other income

 

3,100 

 

 

6,000 

 

 

(2,900)

(48%)

Rental revenue

 

13,750 

 

 

24,250 

 

 

(10,500)

(43%)

Interest expense

 

(3,165)

 

 

(96,835)

 

 

(93,670)

(97%)

Total other income (expense)

 

13,685 

 

 

(66,585)

 

 

(80,270)

(121%)

 

 

 

 

 

 

 

 

 

 

Net loss

$

(232,866)

 

$

(298,882)

 

$

(66,016)

(22%)


Exploration costs


Exploration costs for the six months ended June 30, 2012 increased by $3,355 (or 17%) from $20,006 for the six months ended June 30, 2011 to $23,361 for the six months ended June 30, 2012.  The increase is due to annual price increases on our Bureau of Land Management (BLM) fees related to 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 or may choose to make, if funds are available, with respect to testing and or exploration of its mineral properties.

 

 

19

 


 


General and administrative expenses


General and administrative expenses for the six months ended June 30, 2012 increased by $11,958 (or 8%) from $147,906 for the six months ended June 30, 2011 to $159,864 for the six months ended June 30, 2012.  The increase is principally due to increased office salaries and the establishment of directors and officers insurance during the six months ended June 30, 2012 compared to the six months ended June 30, 2011.


Depreciation


Depreciation for the six months ended June 30, 2012 decreased by $1,059 (or 24%) from $4,385 for the six months ended June 30, 2011 to $3,326 for the six months ended June 30, 2012.  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 six months ended June 30, 2012 and 2011 was $60,000 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 six months ended June 30, 2012 increased by $14,254 (or 6%) from $232,297 for the six months ended June 30, 2011 to $246,551 for the six months ended June 30, 2012.  The increase in total operating expenses was mainly a result of increased General and Administrative expenses related to increased office salaries and the establishment of directors and officers insurance during the six months ended June 30, 2012 compared to the six months ended June 30, 2011.


Other income (expense)


Other income for the six months ended June 30, 2012 decreased by $2,900 (or 48%) from $6,000 for the six months ended June 30, 2011 to $3,100 for the six months ended June 30, 2012 due to diminished collection of proceeds received in settlement of misappropriated funds by our former bookkeeper during the six months ended June 30, 2012 compared to the six months ended June 30, 2011.


Rental revenue for the six months ended June 30, 2012 decreased by $10,500 (or 43%) from $24,250 for the six months ended June 30, 2011 to $13,750 for the six months ended June 30, 2012.  Rental revenue relates to income derived from the rental of the Company’s land for the purposes of mineral extraction, filming movies or conducting photo shoots.  Our land was leased for $10,500 related to photo shoots that were held during the six months ended June 30, 2011 that were not realized in six months ended June 30, 2012.


Interest expense for the six months ended June 30, 2012 decreased by $93,670 (or 97%) from $96,835 for the six months ended June 30, 2011 compared to $3,165 for the six months ended June 30, 2012.  The decrease in interest expense was due to substantial extinguishment of debts during the fourth quarter of 2011 that significantly relieved our debt burden, and associated interest obligations in the current year.


Net loss


Our net loss for the six months ended June 30, 2012 decreased by $66,016 (or 22%) from $298,882 for the six months ended June 30, 2011 compared to $232,866 for the six months ended June 30, 2012.  Our decreased net loss for the six months ended June 30, 2012 was primarily a result of decreased interest expenses related to substantial extinguishment of debts during the fourth quarter of 2011 that significantly relieved our debt burden, and associated interest obligations in the current year, as offset by increased general and administrative expenses related to increased office salaries and the establishment of directors and officers insurance during the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

 

 

20

 


 


LIQUIDITY AND CAPITAL RESOURCES


The following table summarizes total current assets, total current liabilities and working capital at June 30, 2012 compared to December 31, 2011.


 

June 30,

 

December 31,

 

Increase / (Decrease)

 

2012

 

2011

 

$

%

 

 

 

 

 

 

 

 

 

 

Current Assets

$

44,139 

 

$

59,345 

 

$

(15,206)

(26%)

 

 

 

 

 

 

 

 

 

 

Current Liabilities

$

548,023 

 

$

457,633 

 

$

90,390 

20%

 

 

 

 

 

 

 

 

 

 

Working Capital (deficit)

$

(503,884)

 

$

(398,288)

 

$

105,596 

27%


Internal and External Sources of Liquidity


During the six months ended June 30, 2012 and 2011, our operating and investing activities used cash of $135,064 and $150,488, respectively, while our financing activities provided cash of $97,577 and $277,435, respectively.  The cash used in operating activities was principally a result of the net loss we incurred.


Financing Activities. During the six months ended June 30, 2012 we raised a total of $123,499 from the sale of common stock to a total of ten (10) accredited investors under a private placement offering through the sale of 2,058,314 Units of the Company ’s common stock at a price of US$0.06 per Unit.  The terms of the private placement allowed us to raise up to $1,000,000 through the private placement of units of securities (“Unit”) 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 (“Warrant”) exercisable over two years at a strike price of $0.08 per share.  Finders acting in connection with the private placement are entitled to receive aggregate fees of $1,050 and 17,500 Common Shares.  The shares were recorded as subscriptions payable in the amount of $1,050 at June 30, 2012.  The Company has since terminated this offering, and commenced a new non-brokered private placement of units ("Units") at a price of $0.10 per Unit for gross proceeds of up to US$250,000.  Each Unit will consist of one common share ("Common Share") and one Common Share purchase warrant ("Warrant").  Each Warrant will be exercisable into one additional Common Share at an exercise price of US$0.15 per share until the date that is two years from the date of issuance.


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


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

 

 

21

 


 


Satisfaction of our cash obligations for the next twelve months.

 

As of June 30, 2012, our cash balance was $359.  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 December 31, 2012, but do not anticipate generating sufficient amounts of positive cash flow from operations to meet our working capital requirements.  Consequently, we intend to make appropriate plans in order to obtain sources of additional capital in the future to fund growth and expansion through the issuance of additional equity or debt financing or credit facilities.  We also are considering possible funding through joint venture arrangements with other mining companies or other natural resource companies.  However, there can be no assurance that we will raise capital through any of these means.


As we maintain or expand our current operational activities, we may continue to experience net negative cash flows from operations, and unless we generate sufficient sales through our operations, will be required to obtain additional financing to fund operations through common stock offerings and debt borrowings to the extent necessary to provide working capital.


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



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


Not applicable.



ITEM 4. CONTROLS AND PROCEDURES.


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


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


Changes in Internal Control over Financial Reporting


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

 

 

22

 




PART II--OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS.


The Company is not currently a party to litigation.

 

 

ITEM 1A. RISK FACTORS.


Our significant business risks are described in Item 1A of Form 10-K for the year ended December 31, 2011 to which reference is made herein.

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


During the quarter ended June 30, 2012 Can-Cal completed the following sales of unregistered securities under private placement exemptions pursuant to Section 4(2) and Regulation S of the Securities Act of 1933, as follows:

 

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


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


On August 6, 2012 the Company issued 17,500 shares of its common stock to satisfy a subscription payable in the amount of $1,050 realized pursuant to common stock granted to a sales person for commissions on the sale of securities on February 15, 2012 and March 20, 2012.


The Company plans to use the proceeds of the sale for: i) Exploration and development, and project work-out commissioning of Can-Cal’s current properties; ii) to update and complete all corporate governance, audit and management financial statements, and Canadian and U.S. securities commission's regulatory requirements; and iii) strategic working capital requirements.


Issuer Purchases of Equity Securities


We did not repurchase any of our equity securities during the six month period ended June 30, 2012.

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.


None.

 

 

ITEM 4. MINE SAFETY DISCLOSURES .


N/A

 

 

23

 


 

 

ITEM 5. OTHER INFORMATION.


On April 17, 2012, the Company appointed Ron Schinnour to the Board of Directors.  Mr. Schinnour, of Calgary, Alberta, Canada has held numerous executive, leadership and management roles in the agricultural industry, both domestically and globally, including, among others, positions with Monsanto, United Agri Products and Agrium (Cominco).  He recently moved back to Calgary and joined the UFA, holding the position of Executive VP of Agri Business.  Mr. Schinnour’s practical experience includes Strategic Planning, Financial Management, International Business and M&A Leadership.  Mr. Schinnour holds an MBA from Washington University with special recognition for Excellence in Team Process, Strategic Planning and Finance.  He also holds a CMA Designation from the University of Calgary/Society of Management Accountants.  Mr. Schinnour currently serves on the Board of Directors of FoodChek Systems Inc. (Calgary) and Universal Co-op Ltd. (Minneapolis).  He previously served as the Chairman and Director for RAPID & AEC, and on the Board of Directors for the Latin America Agricultural Development Bank, AgroBio & the Agricultural Future of America. He has been President, Treasurer and Director of numerous corporate entities at Monsanto and UAP.


Events Subsequent to the Quarter Ended June 30, 2012


Subsequent to the quarter ended June 30, 2012, Can-Cal completed the following sales of unregistered securities under private placement exemptions pursuant to Section 4(2) and Regulation S of the Securities Act of 1933, as follows:

 

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


On August 6, 2012 the Company issued 17,500 shares of its common stock to satisfy a subscription payable in the amount of $1,050 realized pursuant to common stock granted to a sales person for commissions on the sale of securities on February 15, 2012 and March 20, 2012.

 

 

24

 


 

 

ITEM 6.  EXHIBITS.


 

 

 

Incorporated by reference

Exhibit

Exhibit Description

Filed herewith

Form

Period ending

Exhibit

Filing date

 

 

 

 

 

 

 

31.1

Certification of Michael Hogan pursuant to Section 302 of the Sarbanes-Oxley Act

X

 

 

 

 

31.2

Certification of Michael Hogan pursuant to Section 302 of the Sarbanes-Oxley Act

X

 

 

 

 

32.1

Certification of Michael Hogan pursuant to Section 906 of the Sarbanes-Oxley Act

X

 

 

 

 

101.INS*

XBRL Instance Document

X

 

 

 

 

101.SCH*

XBRL Taxonomy Extension Schema Document

X

 

 

 

 

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

X

 

 

 

 

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

X

 

 

 

 

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

X

 

 

 

 

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

X

 

 

 

 


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

 

 

 

25

 


 


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)



/s/ Michael Hogan

By:

Michael Hogan, President and Chief Executive Officer

(On behalf of the Registrant and as Principal Financial

Officer)



Date: August 14, 2012

 

 

 




 

PINX:CCRE Can-Cal Resources Ltd Quarterly Report 10-Q Filling

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